Exhibit 3.1(b)
CERTIFICATE OF DESIGNATIONS
OF
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
ON SEMICONDUCTOR CORPORATION
(PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW)
--------------
ON Semiconductor Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that the following resolutions were adopted by the Board of
Directors of the Corporation (the "Board of Directors") pursuant to authority of
the Board of Directors as required by Section 151 of the General Corporation Law
of the State of Delaware:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors in accordance with the provisions of the Amended and
Restated Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), the Board of Directors hereby creates a series of the
Corporation's previously authorized preferred stock, $0.01 par value (the
"Preferred Stock"), and hereby states the designation and number thereof, and
fixes the voting powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions
thereof, as follows:
Series A Cumulative Convertible Preferred Stock:
I. Designation and Amount
The designation of this series of shares shall be "Series A
Cumulative Convertible Preferred Stock" (the "Series A Preferred Stock"); the
stated value per share shall be $10,000 (the "Stated Value"); and the number of
shares constituting such series shall be 10,000. The number of shares of the
Series A Preferred Stock may be decreased from time to time by a resolution or
resolutions of the Board of Directors or a duly authorized committee of the
Board of Directors and by the filing of a certificate pursuant to the provisions
of the General Corporation Law of the State of Delaware stating that such
reduction has been so authorized; provided, however, that such number shall not
be decreased below the aggregate number of shares of the Series A Preferred
Stock then outstanding.
II. Rank
A. With respect to dividend rights, the Series A Preferred Stock
shall rank (i) junior to each other class or series of Preferred Stock which by
its terms ranks senior to the Series A Preferred Stock as to payment of
dividends, (ii) on a parity with each other class or series of Preferred Stock
which by its terms ranks on a parity with the Series A Preferred Stock as to
payment of dividends, and (iii) prior to the Corporation's Common Stock, par
value $0.01 per share (the "Common Stock"), and, except as specified above, all
other classes and series of capital stock of the Corporation hereafter issued by
the Corporation. With respect to dividends,
1
all equity securities of the Corporation to which the Series A Preferred Stock
ranks senior, including the Common Stock, are collectively referred to herein as
the "Junior Dividend Securities"; all equity securities of the Corporation with
which the Series A Preferred Stock ranks on a parity, if any, are collectively
referred to herein as the "Parity Dividend Securities"; and all equity
securities of the Corporation to which the Series A Preferred Stock ranks
junior, if any, are collectively referred to herein as the "Senior Dividend
Securities."
B. With respect to the distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the Series A Preferred Stock shall rank (i) junior to each other class or series
of Preferred Stock which by its terms ranks senior to the Series A Preferred
Stock as to distribution of assets upon liquidation, dissolution or winding up,
(ii) on a parity with each other class or series of Preferred Stock which by its
terms ranks on a parity with the Series A Preferred Stock as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation, and (iii)
prior to the Common Stock, and, except as specified above, all other classes and
series of capital stock of the Corporation hereinafter issued by the
Corporation. With respect to the distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
all equity securities of the Corporation to which the Series A Preferred Stock
ranks senior, including the Common Stock, are collectively referred to herein as
"Junior Liquidation Securities" (and together with the Junior Dividend
Securities are referred to herein as the "Junior Securities"); all equity
securities of the Corporation to which the Series A Preferred Stock ranks on
parity, if any, are collectively referred to herein as "Parity Liquidation
Securities" (and together with the Parity Dividend Securities are referred to
herein as the "Parity Securities"); and all equity securities of the Corporation
to which the Series A Preferred Stock ranks junior, if any, are collectively
referred to herein as "Senior Liquidation Securities" (and together with the
Senior Dividend Securities are referred to herein as the "Senior Securities").
C. The Series A Preferred Stock shall be subject to the creation of
Junior Securities and Parity Securities, but no Senior Securities or additional
Series A Preferred Stock shall be created except in accordance with the terms
hereof, including, without limitation, Article VII, Section E.
III. Dividends
A. Dividends. Shares of Series A Preferred Stock shall accumulate
dividends, payment of which shall be made in cash except as otherwise provided
in this Article III, at a rate of 8.00% per annum or, if greater in any
quarterly period, in an amount equal to the value of the dividends that would
have been paid with respect to the shares of Common Stock into which such shares
of Series A Preferred Stock could have been converted on the record date for the
payment of such dividends with respect to the Common Stock. Dividends are due
and shall be paid in four equal quarterly installments on the last day of March,
June, September and December of each year (commencing December 31, 2001, it
being understood that dividends shall be deemed to have accumulated from the
Closing Date through December 31, 2001), or if any such date is not a Business
Day, on the Business Day next preceding such day (each such date, regardless of
whether any dividends have been paid or declared and set aside for payment on
such date, a "Dividend Payment Date"), to holders of record (the "Registered
Holders") as they appear on the stock record books of the Corporation on the
fifteenth day prior to the
2
relevant Dividend Payment Date; provided, however, that the Corporation may
elect not to declare or make any dividend payment due hereunder on any Dividend
Payment Date (other than as required in connection with any redemption of shares
of Series A Preferred Stock or any liquidation, dissolution or winding up of the
Corporation), and any such amount then due in respect of dividends shall
constitute an Arrearage (as defined below). Dividends shall be paid only when,
as and if declared by the Board of Directors out of funds at the time legally
available for the payment of dividends. Dividends shall begin to accumulate on
outstanding shares of Series A Preferred Stock from the date of issuance and
shall be deemed to accumulate from day to day whether or not earned or declared
until paid. Dividends shall accumulate on the basis of a 360-day year consisting
of twelve 30-day months (four 90-day quarters) and the actual number of days
elapsed in the period for which payable.
B. Accumulation. Dividends on the Series A Preferred Stock shall be
cumulative, and from and after any Dividend Payment Date on which any dividend
that has accumulated or been deemed to have accumulated through such date has
not been paid in full or any payment date set for a redemption on which such
redemption payment has not been paid in full, additional dividends shall
accumulate in respect of the amount of such unpaid dividends or unpaid
redemption payment (such amount, the "Arrearage") as provided in Section A of
this Article III (or such lesser rate as may be the maximum rate that is then
permitted by applicable law). Such additional dividends in respect of any
Arrearage shall be deemed to accumulate from day to day whether or not earned or
declared until the Arrearage is paid, shall be calculated as of such successive
Dividend Payment Date and shall constitute an additional Arrearage from and
after any such successive Dividend Payment Date to the extent not paid on such
Dividend Payment Date. References in any Article herein to dividends that have
accumulated or that have been deemed to have accumulated with respect to the
Series A Preferred Stock shall include the amount, if any, of any Arrearage
together with any dividends accumulated or deemed to have accumulated on such
Arrearage pursuant to the immediately preceding two sentences. Additional
dividends in respect of any Arrearage may be declared and paid at any time, in
whole or in part, without reference to any regular Dividend Payment Date, to
Registered Holders as they appear on the stock record books of the Corporation
on such record date as may be fixed by the Board of Directors (which record date
shall be no less than 10 days prior to the corresponding payment date).
C. Method of Payment. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at the
time accumulated and payable on all outstanding shares of Series A Preferred
Stock shall be allocated pro rata on a share-by-share basis among all such
shares then outstanding. Any such partial payment shall be made in cash.
Dividends that are declared and paid in an amount less than the full amount of
dividends accumulated on the Series A Preferred Stock (and on any Arrearage)
shall be applied first to the earliest dividend which has not theretofore been
paid. All cash payments of dividends on the shares of Series A Preferred Stock
shall be made in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts.
IV. Liquidation Preference
In the event of a liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of then-outstanding
shares of Series A Preferred
3
Stock shall be entitled to receive out of the assets of the Corporation, whether
such assets are capital or surplus of any nature, an amount per share equal to
the greater of (i) the sum of (A) the dividends, if any, accumulated or deemed
to have accumulated thereon to the date of final distribution to such holders,
whether or not such dividends are declared, and (B) the Stated Value thereof,
and (ii) the amount that would be payable to holders of the Series A Preferred
Stock if the shares of Series A Preferred Stock had been converted into shares
of Common Stock immediately prior to such liquidation, dissolution or winding
up, and no more, before any payment shall be made or any assets distributed to
the holders of any Junior Liquidation Securities. After any such payment in
full, the holders of Series A Preferred Stock shall not, as such, be entitled to
any further participation in any distribution of assets of the Corporation. All
the assets of the Corporation available for distribution to stockholders after
the liquidation preferences of any Senior Liquidation Securities, if any, shall
be distributed ratably (in proportion to the full distributable amounts to which
holders of Series A Preferred Stock and Parity Liquidation Securities, if any,
are respectively entitled upon such dissolution, liquidation or winding up)
among the holders of the then-outstanding shares of Series A Preferred Stock and
Parity Liquidation Securities, if any, when such assets are not sufficient to
pay in full the aggregate amounts payable thereon.
Neither a consolidation or merger of the Corporation with or into
any other Person or Persons, nor a sale, conveyance, lease, exchange or transfer
of all or part of the Corporation's assets for cash, securities or other
property to a Person or Persons shall be deemed to be a liquidation, dissolution
or winding up of the Corporation for purposes of this Article IV entitling the
Series A Preferred Stock to a liquidation preference hereunder, but the holders
of shares of Series A Preferred Stock shall nevertheless be entitled from and
after any such consolidation, merger or sale, conveyance, lease, exchange or
transfer of all or part of the Corporation's assets to the rights in respect of
a liquidation provided by this Article IV following any such transaction. Notice
of any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when, and the place or places
where, the amounts distributable to each holder of shares of Series A Preferred
Stock in such circumstances shall be payable, shall be given by first-class
mail, postage prepaid, mailed not less than 45 days prior to any payment date
stated therein, to holders of record as they appear on the stock record books of
the Corporation as of the date such notices are first mailed.
V. Mandatory Redemption
A. Mandatory Redemption. The Series A Preferred Stock shall not be
redeemable except as provided in this Article V. At any time on or after the
eighth anniversary of the original issuance of the Series A Preferred Stock, the
Series A Preferred Stock, shall, to the extent that the Corporation shall have
funds legally available therefore, be redeemable in whole or in part at the
option of the holders of the Series A Preferred Stock at a redemption price per
share in cash (the "Mandatory Redemption Price") equal to the greater of (i)
Stated Value plus all unpaid dividends accumulated thereon to the date of actual
payment of the Mandatory Redemption Price, whether or not such dividends have
been declared and (ii) 50% of the Current Market Price of the Conversion Shares
and other assets and property, if any, into which one share of Series A
Preferred Stock is then convertible, in each case determined as of the Mandatory
Redemption Date.
4
B. Mandatory Redemption Notice and Redemption Procedures. If any
holder of Series A Preferred Stock desires to exercise such holder's redemption
right pursuant to Section A of this Article V, such holder shall give written
notice to the Corporation stating such holder's election and specifying the
number of shares to be redeemed pursuant to Section A of this Article V (the
"Mandatory Redemption Notice"). Within 10 days after the receipt of such
Mandatory Redemption Notice, the Corporation shall give written notice to such
holder, by first-class mail, postage prepaid, at such holder's address as it
appears on the records of the Company:
(i) notifying such holder of the date fixed for redemption (which
shall not be later than 30 days after the receipt by the Corporation of
the Mandatory Redemption Notice) (the "Mandatory Redemption Date");
(ii) stating that the Series A Preferred Stock may be converted
until the close of business on the Business Day prior to the Mandatory
Redemption Date by surrendering to the Corporation or its transfer agent
for the Series A Preferred Stock the certificate or certificates for the
shares to be converted, accompanied by written notice specifying the
number of shares to be converted, and stating the name and address of the
transfer agent of the Series A Preferred Stock, if any; and
(iii) stating that dividends shall cease to accrue on the Mandatory
Redemption Date unless the Corporation defaults in the payment of the
Mandatory Redemption Price.
The Corporation shall redeem the number of shares of Series A
Preferred Stock so specified in the Mandatory Redemption Notice on the Mandatory
Redemption Date.
C. Change of Control. In the event there occurs a Change of Control,
any holder of record of shares of Series A Preferred Stock, in accordance with
the procedures set forth in Section D of this Article V, may require the
Corporation to redeem any or all of the shares of Series A Preferred Stock held
by such holder in an amount per share equal to the sum of (i) the amount, if
any, of all unpaid dividends accumulated thereon to the date of actual payment
thereof, whether or not such dividends have been declared, and (ii) 101% of
Stated Value (the "Change of Control Price").
D. Change of Control Notice and Redemption Procedures. Notice of any
Change of Control shall be sent to the holders of record of the outstanding
shares of Series A Preferred Stock not more than ten days following a Change of
Control, which notice (a "Change of Control Notice") shall describe the
transaction or transactions constituting such Change of Control and set forth
each holder's right to require the Corporation to redeem any or all shares of
Series A Preferred Stock held by him or her out of funds legally available
therefor, the redemption date, which date shall be not more than 30 days from
the date of such Change of Control Notice (the "Change of Control Redemption
Date"), and the procedures to be followed by such holders in exercising his or
her right to cause such redemption; provided, however, that if shares of Series
A Preferred Stock are owned by more than 50 holders or groups of Affiliated
holders and if the Series A Preferred Stock is listed on any national securities
exchange or quoted on any national quotation system, the Corporation shall give
such Change of Control Notice by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York, within 30 days
following such Change of Control and, in any case, a similar notice shall be
5
mailed concurrently to each holder of shares of Series A Preferred Stock.
Failure by the Corporation to give the Change of Control Notice as prescribed by
the preceding sentence, or the formal insufficiency of any such Change of
Control Notice, shall not prejudice the rights of any holder of shares of Series
A Preferred Stock to cause the Corporation to redeem any such shares held by him
or her. In the event a holder of shares of Series A Preferred Stock shall elect
to require the Corporation to redeem any or all such shares of Series A
Preferred Stock pursuant to Section C of this Article V, such holder shall
deliver, prior to the Change of Control Redemption Date as set forth in the
Change of Control Notice, or, if the Change of Control Notice is not given as
required by this Section D, at any time following the last day the Corporation
was required to give the Change of Control Notice in accordance with this
Section D (in which case the Change of Control Redemption Date shall be the date
which is the later of (x) 30 days following the last day the Corporation was
required to give the Change of Control Notice in accordance with this Section D
and (y) 15 days following the delivery of such election by such holder), a
written notice, in the form specified by the Corporation (if the Corporation did
in fact give the notice required by this Section D), to the Corporation so
stating, and specifying the number of shares to be redeemed pursuant to Section
C of this Article V; provided, however, that if all of the shares of the Series
A Preferred Stock are owned by 50 or fewer holders or groups of Affiliated
holders, such holders or groups may deliver a notice or an election to redeem at
any time within 90 days following the occurrence of a Change of Control without
awaiting receipt of a Change of Control Notice or the expiration of the time
allowed for the delivery of a Change of Control Notice hereunder. The
Corporation shall redeem the number of shares so specified on the Change of
Control Redemption Date fixed by the Corporation or as provided in the preceding
sentence. The Corporation shall comply with the requirements of Rules 13e-4 and
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the shares of Series A Preferred Stock as a result of a
Change of Control. From and after the time the Change of Control Redemption
Price is paid in accordance with the terms hereof with respect to any share of
Series A Preferred Stock, all dividends on such share of Series A Preferred
Stock shall cease to accumulate and all rights of the holder thereof as a holder
of Series A Preferred Stock shall cease and terminate.
E. Deposit of Funds. The Corporation shall, no later than 11:00
a.m., New York City time, on any Mandatory Redemption Date or Change of Control
Redemption Date pursuant to this Article V, deposit with its transfer agent or
other redemption agent in the Borough of Manhattan, The City of New York having
a capital and surplus of at least $500,000,000, as a trust fund for the benefit
of the holders of the shares of Series A Preferred Stock to be redeemed, cash
that is sufficient in amount to redeem the shares to be redeemed in accordance
with the Mandatory Redemption Notice or Change of Control Notice, with
irrevocable instructions and authority to such transfer agent or other
redemption agent to pay to the respective holders of such shares, as evidenced
by a list of such holders certified by an officer of the Corporation, the
Mandatory Redemption Price or Change of Control Redemption Price, as the case
may be, upon surrender of their respective share certificates. Such deposit
shall be deemed to constitute full payment of such shares to the holders, and
from and after the date of such deposit, all rights of the holders of the shares
of Series A Preferred Stock that are to be redeemed as stockholders of the
Corporation with respect to such shares, except the right to receive the
Mandatory Redemption Price or Change of Control Price, as applicable, upon the
surrender of their respective certificates and all rights under Articles VIII
and X, shall cease and terminate. In case
6
holders of any shares of Series A Preferred Stock called for redemption shall
not, within two years after such deposit, claim the cash deposited for
redemption thereof, such transfer agent or other redemption agent shall, upon
demand, pay over to the Corporation the balance so deposited. Thereupon, such
transfer agent or other redemption agent shall be relieved of all responsibility
to the holders thereof and the sole right of such holders, with respect to
shares to be redeemed, shall be to receive the Mandatory Redemption Price or
Change of Control Price, as applicable, as general creditors of the Corporation.
Any interest accrued on any funds so deposited shall belong to the Corporation,
and shall be paid to it from time to time on demand.
VI. Restrictions on Dividends
So long as any shares of the Series A Preferred Stock are
outstanding, the Board of Directors shall not declare, and the Corporation shall
not pay or set apart for payment any dividend on any Junior Securities or Parity
Securities or make any payment on account of, or set apart for payment money for
a sinking or other similar fund for, the repurchase, redemption or other
retirement of, any Junior Securities or Parity Securities or any warrants,
rights or options exercisable for or convertible into any Junior Securities or
Parity Securities (other than the repurchase, redemption or other retirement of
debentures or other debt securities that are convertible or exchangeable into
any Junior Securities or Parity Securities), or make any distribution in respect
of the Junior Securities or Parity Securities, either directly or indirectly,
and whether in cash, obligations or shares of the Corporation or other property
(other than distributions or dividends in Junior Securities to the holders of
Junior Securities), and shall not permit any Person directly or indirectly
controlled by the Corporation to purchase or redeem any Junior Securities or
Parity Securities or any warrants, rights, calls or options exercisable for or
convertible into any Junior Securities or Parity Securities (other than the
repurchase, redemption or other retirement of debentures or other debt
securities that are convertible or exchangeable into any Junior Securities or
Parity Securities) unless prior to or concurrently with such declaration,
payment, setting apart for payment, repurchase, redemption or other retirement
or distribution, as the case may be, all accumulated and unpaid dividends on
shares of the Series A Preferred Stock not paid on the dates provided for in
Section A of Article III (including Arrearages and accumulated dividends thereon
and regardless of whether the Corporation shall have had the right to elect to
defer such payments as provided for in Article III) shall have been paid, except
that when dividends are not paid in full as aforesaid upon the shares of Series
A Preferred Stock, all dividends declared on the Series A Preferred Stock and
any series of Parity Dividend Securities shall be declared and paid pro rata so
that the amount of dividends so declared and paid on Series A Preferred Stock
and such series of Parity Dividend Securities shall in all cases bear to each
other the same ratio that accumulated dividends (including interest accrued on
or additional dividends accumulated in respect of such accumulated dividends) on
the shares of Series A Preferred Stock and such Parity Dividend Securities bear
to each other. Notwithstanding the foregoing, this paragraph shall not prohibit
(i) the acquisition, repurchase, exchange, conversion, redemption or other
retirement for value of shares of Series A Preferred Stock or any Parity
Dividend Security by the Corporation in accordance with the terms of such
securities or (ii) the acquisition, repurchase, exchange, conversion, redemption
or other retirement for value by the Corporation of any Junior Dividend
Securities by the Corporation in accordance with obligations in existence at the
time of original issuance of the Series A Preferred Stock.
7
VII. Voting Rights
A. The holders of shares of Series A Preferred Stock shall have no
voting rights except as set forth below or as otherwise from time to time
required by law.
B. So long as any shares of the Series A Preferred Stock are
outstanding, each share of Series A Preferred Stock shall entitle the holder
thereof to vote on all matters voted on by holders of Common Stock, and the
shares of Series A Preferred Stock shall vote together with shares of Common
Stock as a single class. With respect to any such vote, each share of Series A
Preferred Stock shall entitle its holder to a number of votes equal to the
number of shares of Common Stock into which such share of Series A Preferred
Stock would be convertible at the time of the record date with respect to such
vote (assuming all conditions precedent to such conversion have been satisfied
and that such conversion had occurred as of the record date for such vote),
assuming for purposes of this Section B only, and without prejudice to any other
provision of this Certificate of Designations, that the Conversion Price for
purposes of determining such number of shares of Common Stock is $3.19, which
price shall be adjusted, mutatis mutandis, as set forth in Section B of Article
VIII.
C. So long as the Investor or any of its Affiliates Beneficially
Owns, in the aggregate, at least 50% of the Series A Preferred Stock, in the
event that one or more of the Investor Nominees required to be designated for
election to the Board of Directors pursuant to the Investment Agreement are not
so designated or are not elected to the Board of Directors, then the number of
directors constituting the Board of Directors shall, without further action, be
increased by the number of such Investor Nominees not elected to the Board of
Directors pursuant to the Investment Agreement, or if such requisite increase in
the number of directors constituting the Board of Directors would require the
approval of the Corporation's stockholders or is prohibited by the Investment
Agreement, then the number of directors constituting the Board of Directors
shall be increased to the extent the approval of the Corporation's stockholders
is not required and the Investment Agreement would not be breached and a number
of directors (other than Investor Nominees) shall resign from the Board of
Directors, so as to enable the Investor and its Affiliates to designate as
directors the number of Investor Nominees not elected to the Board of Directors
pursuant to the Investment Agreement, and the Investor and its Affiliates shall
have, in addition to the other voting rights set forth herein, the exclusive
right, voting separately as a single class, to elect a number of directors to
the Board of Directors equal to the number of such Investor Nominees not elected
to the Board of Directors. Directors elected pursuant to this Section C shall
continue as directors and such additional voting right shall continue until such
time as the requisite number of Investor Nominees are elected to the Board of
Directors pursuant to the Investment Agreement, at which time the directors
elected by the Investor and its Affiliates pursuant to this Section C shall
cease to be directors (unless elected as Investor Nominees), and such additional
voting rights shall terminate subject to revesting in the event of each and
every subsequent event of the character indicated above.
D. (a) The foregoing rights of holders of shares of Series A
Preferred Stock to take any action as provided in this Article VII may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of the minimum number of shares required to take
such action.
8
So long as such right to vote continues (and unless such right has been
exercised by written consent of the minimum number of shares required to take
such action), the Chairman of the Board of Directors may call, and upon the
written request of holders of record of 20% of the outstanding shares of Series
A Preferred Stock, addressed to the Secretary of the Corporation at the
principal office of the Corporation, shall call, a special meeting of the
holders of shares entitled to vote as provided herein. Such meeting shall be
held as soon as reasonably practicable after delivery of such request to the
Secretary, at the place and upon the notice provided by law and in the By-laws
for the holding of meetings of stockholders.
(b) Each director elected pursuant to Section C of this Article VII
shall serve until the next annual meeting or until his or her successor shall be
elected and shall qualify, unless the director's term of office shall have
terminated pursuant to the provisions of Section C hereof. In case any vacancy
shall occur among the directors elected pursuant to Section C hereof, such
vacancy shall be filled for the unexpired portion of the term by vote of the
remaining director or directors theretofore elected pursuant to Section C of
this Article VII (or such director's or directors' successor in office), if any.
If any such vacancy is not so filled within 20 days after the creation thereof
or if all of the directors so elected shall cease to serve as directors before
their term shall expire, the holders of the shares of Series A Preferred Stock
then outstanding and entitled to vote for such director pursuant to the
provisions of Section C of this Article VII may elect successors to hold office
for the unexpired terms of any vacant directorships, by written consent as
provided herein, or at a special meeting of such holders called as provided
herein. The holders of a majority of the shares entitled to vote for directors
pursuant to Section C of this Article VII shall have the right to remove with or
without cause at any time and replace any directors such holders have elected
pursuant to such section, by written consent as herein provided, or at a special
meeting of such holders called as provided herein.
E. Without the consent or affirmative vote of the holders of at
least a majority of the outstanding shares of Series A Preferred Stock, voting
separately as a class, the Corporation shall not: (i) authorize, create or
issue, or increase the authorized amount of, (a) any Senior Securities or
additional Series A Preferred Stock or (b) any class or series of capital stock
or any security convertible into or exercisable for any class or series of
capital stock, that is redeemable mandatorily or redeemable at the option of the
holder thereof at any time on or prior to the redemption of the Series A
Preferred Stock (whether or not only upon the occurrence of a specified event);
(ii) amend, alter or repeal any provision of the Certificate of Incorporation or
the By-laws, if the amendment, alteration or repeal alters or changes the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely; or (iii) authorize or take any other action if such
action would be inconsistent with the provisions of this Certificate of
Designations.
F. Other Securities. Subject to Section G of Article X, the
Corporation shall not, from and after the date of the original issuance of the
Series A Preferred Stock, enter into any agreement, amend or modify any existing
agreement or obligation, or issue any security that prohibits, conflicts or is
inconsistent with, or would be breached by, the Corporation's performance of its
obligations hereunder.
9
VIII. Conversion
A. Conversion. (a) At the option and election of the holder thereof,
each share of Series A Preferred Stock, including all unpaid dividends
accumulated thereon to the Conversion Date (as defined below), whether or not
such dividends have been declared, may be converted in the manner provided
herein at any time into fully paid and nonassessable shares of Common Stock. As
of the Conversion Date with respect to a share of Series A Preferred Stock,
subject to subsections (d) and (e) of this Section A, such share shall be
converted into that number of shares of Common Stock equal to the quotient of
(i) the sum of (A) the Stated Value plus (B) all unpaid dividends accumulated on
such share of Series A Preferred Stock to the Conversion Date whether or not
such dividends have been declared, divided by (ii) the Conversion Price in
effect on the Conversion Date.
(b) Conversion of shares of the Series A Preferred Stock may be
effected by any holder thereof upon the surrender to the Corporation at the
principal office of the Corporation or at the office of any agent or agents of
the Corporation, as may be designated by the Board of Directors of the
Corporation and identified to the holders in writing upon such designation, of
the certificate for such shares of Series A Preferred Stock to be converted
accompanied by a written notice stating that such holder elects to convert all
or a specified whole number of shares represented by such certificate in
accordance with the provisions of this Section A and specifying the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. In case such notice shall specify a name or names
other than that of such holder, such notice shall be accompanied by payment of
all transfer taxes payable upon the issuance of shares of Common Stock in such
name or names. Other than such taxes, the Corporation will pay any and all issue
and other taxes (other than taxes based on income) that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
Series A Preferred Stock pursuant hereto. As promptly as practical, and in any
event within three Business Days after the Conversion Date, the Corporation
shall deliver or cause to be delivered as directed by the holder of shares of
Series A Preferred Stock being converted (i) certificates representing the
number of validly issued, fully paid and nonassessable full shares of Common
Stock to which such holder shall be entitled to, (ii) any cash that is required
to be paid pursuant to subsection (d) of this Section A, and (iii) if less than
the full number of shares of Series A Preferred Stock evidenced by the
surrendered certificate or certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares of Series A Preferred
Stock evidenced by such surrendered certificate or certificates less the number
of shares of Series A Preferred Stock being converted. Such conversion shall be
deemed to have occurred at the close of business on the date (the "Conversion
Date") of the giving of such notice by the holder of the Series A Preferred
Stock to be converted and of such surrender of the certificate or certificates
representing the shares of Series A Preferred Stock to be converted so that as
of such time the rights of the holder thereof as to the shares being converted
shall cease except for the right to receive shares of Common Stock and/or cash
in accordance herewith, and the person entitled to receive the shares of Common
Stock issued as a result of such conversion shall be treated for all purposes as
having become the holder of such shares of Common Stock at such time.
(c) In the event that the Series A Preferred Stock is to be redeemed
pursuant to Article V, from and after the Mandatory Redemption Date or Change of
Control Redemption
10
Date, as applicable, the right of a holder to convert shares of Series A
Preferred Stock pursuant to this Section A shall cease and terminate, except if
the Corporation shall default in payment of the Mandatory Redemption Price on
the Mandatory Redemption Date or the Change of Control Redemption Price on the
Change of Control Redemption Date, in which case all such rights shall continue
unless and until such shares are redeemed and such price is paid in full in
accordance with the terms hereof. Notwithstanding anything in the foregoing to
the contrary, if the Conversion Date shall occur with respect to any shares of
Series A Preferred Stock on or prior to any Mandatory Redemption Date or Change
of Control Redemption Date, such shares of Series A Preferred Stock shall be
converted by the Corporation into Common Stock in the manner provided in this
Section A.
(d) In connection with the conversion of any shares of Series A
Preferred Stock, no fractions of shares of Common Stock shall be issued, but in
lieu thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Closing Price per share of Common Stock on the Conversion Date (or on the
Trading Day immediately preceding the Conversion Date, if the Conversion Date is
not a Trading Day). If more than one share of Series A Preferred Stock shall be
surrendered for conversion by the same holder on the same Conversion Date, the
number of full shares of Common Stock issuable on conversion thereof shall be
computed on the basis of the total number of shares of Series A Preferred Stock
so surrendered.
(e) To the extent the Series A Shareholder Approval is required to
be obtained pursuant to applicable rules, interpretations, rulings or
determinations of Nasdaq, then notwithstanding anything to the contrary in this
Section A, in the event that a Conversion Date with respect to a share of Series
A Preferred Stock occurs on a date before which the Series A Shareholder
Approval has been obtained, the number of shares of Common Stock into which such
share of Series A Preferred Stock shall be converted shall not exceed the
quotient of (i) the number of shares of Common Stock that is equal to 19.9% of
the number of shares of Common Stock outstanding on the Closing Date (as
adjusted for any stock split, reverse stock split, stock dividend or similar
event) divided by (ii) 10,000, and upon delivery of such shares of Common Stock
in accordance with the terms hereof, the Corporation shall pay in cash to the
holder of such share of Series A Preferred Stock the amount, if any, equal to
the Closing Price of the Common Stock on the Conversion Date (or, if the
Conversion Date is not a Trading Day, the immediately preceding Trading Day)
multiplied by the number of shares of Common Stock that would have been received
upon conversion pursuant to this Article VIII that is in excess of the actual
number of shares of Common Stock received as a result of the operation of this
subsection (e).
(f) The Corporation shall at all times reserve and keep available
for issuance upon the conversion of the Series A Preferred Stock in accordance
with the terms hereof, such number of its authorized but unissued shares of
Common Stock as will from time to time be sufficient to permit the conversion of
all outstanding shares of Series A Preferred Stock, and shall take all action
required to increase the authorized number of shares of Common Stock if
necessary to permit the conversion of all outstanding shares of Series A
Preferred Stock.
B. Adjustment of Conversion Price. Except in connection with an
Organic Change, which shall be subject to Section C below, the Conversion Price
shall be subject to adjustment from time to time as follows:
11
(a) Stock Dividends. In case the Corporation after the date of the
original issuance of the Series A Preferred Stock shall pay a dividend or make a
distribution to all holders of shares of Common Stock in shares of Common Stock,
then in any such case the Conversion Price in effect at the opening of business
on the day following the record date for the determination of stockholders
entitled to receive such dividend or distribution shall be reduced to a price
obtained by multiplying such Conversion Price by a fraction of which (x) the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on such record date and (y) the denominator shall be the sum of such
number of shares of Common Stock outstanding and the total number of shares of
Common Stock constituting such dividend or distribution, such reduction to
become effective immediately after the opening of business on the day following
such record date. For purposes of this subsection (a), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Corporation but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of Common Stock. The
Corporation will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Corporation.
(b) Stock Splits and Reverse Splits. In case after the date of the
original issuance of the Series A Preferred Stock outstanding shares of Common
Stock shall be subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day following the
day upon which such subdivision becomes effective shall be proportionately
reduced, and, conversely, in case after the original issuance of the Series A
Preferred Stock outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision or
combination becomes effective.
(c) Issuances Below Market. (i) If the Corporation after the date of
the original issuance of the Series A Preferred Stock issues Common Stock
without consideration or at a price per share (such no consideration or price
per share, the "New Price Per Share") less than either (A) the Closing Price of
the Common Stock on the Trading Day immediately preceding the date of such
issuance of Common Stock or (B) the Conversion Price in effect immediately
preceding such issuance of Common Stock, then the Conversion Price shall be
adjusted effective immediately following such issuance of Common Stock to a
price obtained by multiplying such Conversion Price by a fraction of which (x)
the numerator shall be the number of shares of Common Stock outstanding
immediately preceding such issuance of Common Stock plus the number of shares of
Common Stock that the aggregate consideration received from such issuance of
Common Stock would purchase at (1) if the New Price Per Share is less than both
the Closing Price specified in clause (A) and the Conversion Price specified in
clause (B), the higher of such prices or (2) if the New Price Per Share is less
than either the Closing Price specified in clause (A) or the Conversion Price
specified in clause (B) but not both, such price that the New Price Per Share is
lower than, and (y) the denominator shall be the number of shares of Common
Stock outstanding immediately preceding such issuance of Common Stock plus the
number of additional shares of Common Stock so issued; provided, however, that
no adjustment shall be made if such Common Stock is issued to holders of Common
Stock and the Corporation issues or distributes to each holder of Series A
Preferred Stock the Common Stock that each such
12
holder would have been entitled to receive had the Series A Preferred Stock held
by such holder been converted prior to such issuance of such Common Stock. For
the purposes of this subsection (c)(i), the number of shares of Common Stock at
any time outstanding shall not include shares held in treasury of the
Corporation but shall include shares issuable in respect of scrip certificates
issued in lieu of fractional shares of Common Stock.
(ii) If the Corporation after the date of the original issuance of
the Series A Preferred Stock issues Derivative Securities entitling Persons to
subscribe for or acquire Common Stock, in each case at a New Price Per Share
less than either (A) the Closing Price of the Common Stock on the Trading Day
immediately preceding the date of such issuance of Derivative Securities or (B)
the Conversion Price in effect immediately preceding such issuance of Derivative
Securities, then the Conversion Price shall be adjusted effective immediately
following such issuance of Derivative Securities to a price obtained by
multiplying such Conversion Price by a fraction of which (x) the numerator shall
be the number of shares of Common Stock outstanding immediately preceding such
issuance of Derivative Securities plus the number of shares of Common Stock that
the aggregate consideration received from the exercise, conversion or exchange
of such Derivatives Securities would purchase at (1) if the New Price Per Share
is less than both the Closing Price specified in clause (A) and the Conversion
Price specified in clause (B), the higher of such prices or (2) if the New Price
Per Share is less than either the Closing Price specified in clause (A) or the
Conversion Price specified in clause (B) but not both, such price that the New
Price Per Share is lower than, and (y) the denominator shall be the number of
shares of Common Stock outstanding immediately preceding such issuance of
Derivative Securities plus the number of additional shares of Common Stock for
or into which such Derivative Securities are exercisable, convertible or
exchangeable; provided, however, that no adjustment shall be made if such
Derivative Securities are issued to holders of Common Stock and the Corporation
issues or distributes to each holder of Series A Preferred Stock the Derivative
Securities that each such holder would have been entitled to receive had the
Series A Preferred Stock held by such holder been converted prior to such
issuance of Derivative Securities. For the purposes of this subsection (c)(ii),
the number of shares of Common Stock at any time outstanding shall not include
shares held in treasury of the Corporation but shall include shares issuable in
respect of scrip certificates issued in lieu of fractional shares of Common
Stock. The Corporation shall not issue any Derivative Securities in respect of
shares of Common Stock held in the treasury of the Corporation. Rights or
warrants issued by the Corporation to all holders of Common Stock entitling the
holders thereof to subscribe for or purchase Equity Securities, which rights or
warrants (A) are deemed to be transferred with such shares of Common Stock, (B)
are not exercisable and (C) are also issued in respect of future issuances of
Common Stock, including shares of Common Stock issued upon conversion of shares
of Series A Preferred Stock, in each case in clauses (A) through (C) until the
occurrence of a specified event or events (a "Trigger Event"), shall for
purposes of this subsection (c)(ii) not be deemed issued until the occurrence of
the earliest Trigger Event.
(iii) If (A) the exercise price provided for in any Derivative
Securities referred to in subsection (c)(ii) above, (B) the additional
consideration, if any, payable upon the conversion or exchange of any Derivative
Securities referred to in subsection (c)(ii) above or (C) the rate at which any
such Derivative Securities referred to in subsection (c)(ii) above are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution upon an event which results in a
13
related adjustment pursuant to this Article VIII), the Conversion Price then in
effect shall forthwith be readjusted (effective only with respect to the
conversion of Series A Preferred Stock after such readjustment) to the
Conversion and Price that would then be in effect had the adjustment made upon
the issuance, sale, distribution or granting of such Derivative Securities been
made based upon such changed purchase price, additional consideration or
conversion rate, as the case may be, but only with respect to such Derivative
Securities as then remain outstanding.
(d) Special Dividends. In case the Corporation after the date of the
original issuance of the Series A Preferred Stock shall distribute to all
holders of shares of Common Stock evidences of its indebtedness or assets
(excluding any regular periodic cash dividend but including any extraordinary
cash dividend), Equity Securities (other than Common Stock) or rights to
subscribe (excluding those referred to in subsection (c) above) for Equity
Securities other than Common Stock, in each such case the Conversion Price in
effect immediately prior to the close of business on the record date for the
determination of stockholders entitled to receive such distribution shall be
adjusted to a price obtained by multiplying such Conversion Price by a fraction
of which (x) the numerator shall be the Closing Price per share of Common Stock
on such record date, less the then-current fair market value as of such record
date (as determined by the Board of Directors in its good faith judgment) of the
portion of assets or evidences of indebtedness or Equity Securities or
subscription rights so distributed applicable to one share of Common Stock, and
(y) the denominator shall be such Closing Price, such adjustment to become
effective immediately prior to the opening of business on the day following such
record date; provided, however, that no adjustment shall be made (1) if the
Corporation issues or distributes to each holder of Series A Preferred Stock the
subscription rights referred to above that each such holder would have been
entitled to receive had the Series A Preferred Stock held by such holder been
converted prior to such record date or (2) if the Corporation grants to each
such holder the right to receive, upon the conversion of the Series A Preferred
Stock held by such holder at any time after the distribution of the evidences of
indebtedness or assets or Equity Securities referred to above, the evidences of
indebtedness or assets or Equity Securities that such holder would have been
entitled to receive had such Series A Preferred Stock been converted prior to
such record date. The Corporation shall provide any holder of Series A Preferred
Stock, upon receipt of a written request therefor, with any indenture or other
instrument defining the rights of the holders of any indebtedness, assets,
subscription rights or Equity Securities referred to in this subsection (d).
Rights or warrants issued by the Corporation to all holders of Common Stock
entitling the holders thereof to subscribe for or purchase Equity Securities,
which rights or warrants (i) are deemed to be transferred with such shares of
Common Stock, (ii) are not exercisable and (iii) are also issued in respect of
future issuances of Common Stock, including shares of Common Stock issued upon
conversion of shares of Series A Preferred Stock, in each case in clauses (i)
through (iii) until the occurrence of a Trigger Event, shall for purposes of
this subsection (d) not be deemed issued until the occurrence of the earliest
Trigger Event.
(e) Tender or Exchange Offer. In case a tender or exchange offer
made by the Corporation or any subsidiary of the Corporation for all or any
portion of the Common Stock shall be consummated and such tender offer shall
involve an aggregate consideration having a fair market value (as determined by
the Board of Directors in its good faith judgment) at the last time (the "Offer
Time") tenders may be made pursuant to such tender or exchange offer (as it
14
may be amended) that, together with the aggregate of the cash plus the fair
market value (as determined by the Board of Directors in its good faith
judgment), as of the Offer Time, of consideration payable in respect of any
tender or exchange offer by the Corporation or any such subsidiary for all or
any portion of the Common Stock consummated within the 12 months preceding the
Offer Time and in respect of which no Conversion Price adjustment pursuant to
this subsection (e) has been made, exceeds 5% of the product of the Closing
Price of the Common Stock at the Offer Time multiplied by the number of shares
of Common Stock outstanding (including any tendered shares) at the Offer Time,
the Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the Offer Time by a fraction of which (x) the numerator shall be (i) the product
of the Closing Price of the Common Stock at the Offer Time multiplied by the
number of shares of Common Stock outstanding (including any tendered shares) at
the Offer Time minus (ii) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the acceptance (up to
any maximum specified in the terms of the tender or exchange offer) of all
shares validly tendered and not withdrawn as of the Offer Time (the shares
deemed so accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the denominator shall be the product of (i) such Closing Price
at the Offer Time multiplied by (ii) such number of outstanding shares at the
Offer Time minus the number of Purchased Shares, such reduction to become
effective immediately prior to the opening of business on the day following the
Offer Time. For purposes of this subsection (e), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Corporation but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock.
(f) Closing Price Determination. For the purpose of any computation
under subsections (c) and (d) of this Section B, the Closing Price of Common
Stock on any date shall be deemed to be the average of the Closing Prices for
the five consecutive Trading Days ending on the day in question (or if such day
is not a Trading Day, the next preceding Trading Day), provided, however, that
(i) if the "ex" date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion Price
pursuant to this Section B occurs on or after the 20th Trading Day prior to the
day in question and prior to the "ex" date for the issuance or distribution
requiring such computation, the Closing Price for each Trading Day prior to the
"ex" date for such other event shall be adjusted by multiplying such Closing
Price by the same fraction which the Conversion Price is so required to be
adjusted as a result of such other event, (ii) if the "ex" date for any event
(other than the issuance or distribution requiring such computation) that
requires an adjustment to the Conversion Price pursuant to this Section B occurs
on or after the "ex" date for the issuance or distribution requiring such
computation and on or prior to the day in question, the Closing Price for each
Trading Day on and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such other event,
and (iii) if the "ex" date for the issuance or distribution requiring such
computation is on or prior to the day in question, after taking into account any
adjustment required pursuant to clause (ii) of this proviso, the Closing Price
for each Trading Day on or after such "ex" date shall be adjusted by adding
thereto the fair market value on the day in question (as determined by the Board
of Directors in a manner consistent with any determination of such value for the
purposes of subsection (d) of this Section B) of the assets, evidences of
indebtedness, Equity Securities or subscription rights being distributed
applicable to
15
one share of Common Stock as of the close of business on the day before such
"ex" date. For the purposes of any computation under subsection (e) of this
Section B, the Closing Price on any date shall be deemed to be the average of
the daily Closing Prices for the five consecutive Trading Days ending at the
Offer Time; provided, however, that if the "ex" date for any event (other than
the tender or exchange offer requiring such computation) that requires an
adjustment to the Conversion Price pursuant to this Section B occurs on or after
the date of commencement of such tender or exchange offer and prior to the Offer
Time for such tender or exchange offer, the Closing Price for each Trading Day
prior to the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction by which the Conversion Price is so
required to be adjusted as a result of such other event. For purposes of this
subsection (f), the term "ex" date, (i) when used with respect to any issuance
or distribution, means the first date on which the Common Stock trades regular
way on the Nasdaq or on the relevant exchange or in the relevant market from
which the Closing Price was obtained without the right to receive such issuance
or distribution, (ii) when used with respect to any subdivision or combination
of shares of Common Stock, means the first date on which the Common Stock trades
regular way on the Nasdaq or such exchange or in such market after the time at
which such subdivision or combination becomes effective, and (iii) when used
with respect to any tender or exchange offer means the first date on which the
Common Stock trades regular way on the Nasdaq or such exchange or in such market
after the Offer Time of such tender or exchange offer.
(g) Other Adjustments. The Corporation may, but shall not be
required to, make such reductions in the Conversion Price, in addition to those
required by clauses (a), (b), (c), (d), (e) and (f) of this Section B, as it
considers to be advisable, including without limitation in order to avoid or
diminish any income tax to holders of Common Stock or rights to purchase Common
Stock resulting from any dividend or distribution of stock, from any event
treated as such for income tax purposes, from any subdivision, reclassification
or combination of stock, from any issuance of rights or warrants or from any
other transaction having an effect similar to any of the above. Whenever the
Conversion Price is reduced pursuant to the preceding sentence, the Corporation
shall mail to the holders of then-outstanding shares of Series A Preferred Stock
a notice of the reduction at least 15 days prior to the date the reduced
Conversion Price takes effect, and such notice shall state the reduced
Conversion Price and the period it will be in effect.
(h) Minimum Adjustment Requirement. No adjustment shall be required
unless such adjustment would result in an increase or decrease of at least $0.01
in the Conversion Price then subject to adjustment; provided, however, that any
adjustments that are not made by reason of this subsection (h) shall be carried
forward and taken into account in any subsequent adjustment. In case the
Corporation shall at any time issue shares of Common Stock by way of dividend on
any stock of the Corporation or subdivide or combine the outstanding shares of
Corporation Stock, said amount of $0.01 specified in the preceding sentence (as
therefore increased or decreased, if said amount shall have been adjusted in
accordance with the provisions of this subsection (h)) shall forthwith be
proportionately increased in the case of such a combination or decreased in the
case of such a subdivision or stock dividend so as appropriately to reflect the
same.
(i) Minimum Permissible Conversion Price. Notwithstanding any other
provision of this Section B, no adjustment to the Conversion Price shall reduce
the Conversion Price below $0.01, and any such purported adjustment shall
instead reduce the Conversion Price to $0.01.
16
The Corporation hereby covenants not to take any action that would or does
result in any adjustment in the Conversion Price that, if made without giving
effect to the previous sentence, would cause the Conversion Price to be less
than $0.01.
(j) Notice. Whenever the Conversion Price is adjusted as herein
provided, a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall promptly be mailed by the
Corporation to the holders of the Series A Preferred Stock.
(k) No Adjustment. Anything to the contrary herein notwithstanding,
no adjustment to the Conversion Price shall be made pursuant to this Section B
as a result of, or in connection with, the issuance of Common Stock or
Derivative Securities (i) to directors, employees or consultants of the
Corporation or its Subsidiaries pursuant to an existing or future stock option,
stock purchase or other similar plan adopted by the Board of Directors, an
employment agreement approved by the Board of Directors, a consulting agreement
or arrangement approved by the Board of Directors, or the modification, renewal
or extension of any such plan, agreement or arrangement if approved by the Board
of Directors; provided, however, that with respect to the issuance of Common
Stock and/or Derivative Securities to consultants other than Bain & Company,
only the issuance of Common Stock and/or Derivative Securities to such
consultants pursuant to such plans, agreements or arrangements in any one
calendar year that would otherwise cause an adjustment to the Conversion Price
pursuant to this Section B and represents in the aggregate 1% or less of the
Corporation's outstanding Common Stock as of the first day of such calendar year
shall be covered by this subsection (k) and any such subsequent issuance after
such 1% threshold has been exceeded shall not be covered by this subsection (k)
and there shall be an adjustment to the Conversion Price as a result of any such
subsequent issuance if otherwise required pursuant to this Section B, (ii) as
consideration for the acquisition of a business or of assets, in each case,
approved by the Board of Directors, (iii) in a firm commitment underwritten
public offering in which both (x) the underwriting discount is less than 7% and
(y) the offering price per share is greater than the Conversion Price in effect
immediately preceding the execution of the underwriting agreement for such
offering, (iv) to the Corporation's joint venture partners in exchange for
interests in the relevant joint venture if such exchange is approved by the
Board of Directors, or (v) upon exercise, conversion or exchange of any
Derivative Securities the issuance of which caused an adjustment hereunder or
the issuance of which did not require adjustment hereunder.
C. Organic Change.
(a) Corporation Survives. Upon the consummation of an Organic Change
(other than a transaction in which the Corporation is not the surviving entity),
lawful provision shall be made as part of the terms of such transaction whereby
the terms hereof shall be modified, without payment of any additional
consideration by any holder, so as to provide that upon the conversion of shares
of Series A Preferred Stock following the consummation of such Organic Change,
the holder of Series A Preferred Stock shall have the right to acquire and
receive (in lieu of or in addition to the shares of Common Stock acquirable and
receivable prior to the Organic Change), without payment of additional
consideration therefor, such securities, cash and other property as such holder
would have received if such holder had converted such shares of Series A
Preferred Stock into Common Stock immediately prior to such Organic Change.
Lawful
17
provision also shall be made as part of the terms of the Organic Change so that
all other terms hereof shall remain in full force and effect following such an
Organic Change. The provisions of this subsection (a) shall similarly apply to
successive Organic Changes of the character described in this subsection (a).
(b) Corporation Does Not Survive. The Corporation shall not enter
into an Organic Change that is a transaction in which the Corporation is not the
surviving entity unless lawful provision shall be made as part of the terms of
such transaction whereby the surviving entity shall issue new securities to each
holder of Series A Preferred Stock, without payment of any additional
consideration by such holder, with terms that provide that upon the conversion
of such securities, the holder of such securities shall have the right to
acquire and receive (in lieu of or in addition to the shares of Common Stock
acquirable and receivable prior to the Organic Change), without payment of
additional consideration therefor, such securities, cash and other property (the
"New Securities") as such holder would have received if such holder had
converted such shares of Series A Preferred Stock into Common Stock immediately
prior to such Organic Change. The certificate or articles of incorporation or
other constituent document of the surviving entity shall provide for such
adjustments which, for events subsequent to the effective date of such
certificate or articles of incorporation or other constituent document, shall be
equivalent to the adjustments provided for in Section B of this Article VIII.
All other terms of such New Securities shall be substantially equivalent to the
terms provided herein. The provisions of this subsection (b) shall similarly
apply to successive Organic Changes of the character described in of this
subsection (b).
D. Certain Events. If any event similar to or of the type
contemplated by the provisions of Section B or Section C of this Article VIII,
but not expressly provided for by such provisions, occurs, then the Board of
Directors of the Corporation, will make an appropriate and equitable adjustment
in the Conversion Price so as to protect the rights of the holders of Series A
Preferred Stock; provided, however, that no such adjustment will decrease the
number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock.
IX. Additional Definitions
For the purposes of this Certificate of Designations of Series A
Preferred Stock, the following terms shall have the meanings indicated:
"Affiliate" has the meaning set forth in Rule 12b-2 under the
Exchange Act as in effect on the date of the Investment Agreement. The term
"Affiliated" has a correlative meaning.
"Beneficially Own" with respect to any securities means having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act as in effect on the date of the Investment Agreement,
except that a Person shall be deemed to Beneficially Own all such securities
that such Person has the right to acquire whether such right is exercisable
immediately or after the passage of time). The terms "Beneficial Ownership" and
"Beneficial Owner" have correlative meanings.
18
"Business Day" means any day, other than a Saturday, Sunday or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"By-laws" means the By-laws of the Corporation, as amended from time
to time.
"Change of Control" shall be deemed to have occurred if (a) any
person or group (within the meaning of Rule 13d-5 under the Exchange Act as in
effect on the date of the Investment Agreement) shall own directly or
indirectly, beneficially or of record, shares representing more than 35% of the
aggregate ordinary voting power represented by the issued and outstanding Equity
Securities of the Corporation, other than any TPG Person or any Person or Group
that owned at least 5% of such Equity Securities on the Closing Date; (b) a
majority of the seats (other than vacant seats) on the board of directors of the
Corporation shall at any time be occupied by persons who were neither (i)
nominated by the board of directors of the Corporation nor (ii) appointed by
directors so nominated; (c) any change in control (or similar event, however
denominated) with respect to the Corporation shall occur under and as defined in
any indenture or agreement in respect of Indebtedness for borrowed money in
excess of the aggregate principal amount of $10,000,000 to which the Corporation
or any Subsidiary thereof is a party; or (d) a "Change in Control" or "Change of
Control" (or similar event) shall have occurred under the Credit Agreement or
the Indenture, unless, in the case of a "Change of Control" under the Indenture,
the aggregate principal amount outstanding under the Senior Subordinated Notes
is less than $10,000,000. Notwithstanding the foregoing, no event described
above shall constitute a "Change of Control" if such event resulted directly
from any action taken by the Investor or any of its Affiliates.
"Closing" has the meaning set forth in the Investment Agreement.
"Closing Date" has the meaning set forth in the Investment
Agreement.
"Closing Price" with respect to a share of Common Stock on any day
means, subject to subsection (f) of Section B of Article VIII if applicable, the
last reported sale price on that day or, in case no such reported sale takes
place on such day, the average of the last reported bid and asked prices,
regular way, on that day, in either case, as reported in the consolidated
transaction reporting system with respect to securities quoted on Nasdaq or, if
the shares of Common Stock are not quoted on Nasdaq, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares of Common Stock
are not quoted on Nasdaq and not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices on such other nationally recognized quotation
system then in use, or, if on any such day the shares of Common Stock are not
quoted on any such quotation system, the average of the closing bid and asked
prices as furnished by a professional market maker selected by the Board of
Directors in good faith making a market in the shares of Common Stock. If the
shares of Common Stock are not publicly held, or so listed, quoted or publicly
traded, the "Closing Price" means the fair market value of a share of Common
Stock, as determined in good faith by the Board of Directors.
19
"Conversion Price" shall mean $2.82, as adjusted from time to time
pursuant to Section B of Article VIII.
"Conversion Shares" has the meaning set forth in the Investment
Agreement.
"Credit Agreement" has the meaning set forth in the Investment
Agreement.
"Current Market Price" means, in respect of any share of Common
Stock as of any date, the average Closing Price for the 30 Trading Days
immediately preceding the date in question. In case any event that would require
an adjustment to the Conversion Price pursuant to Section B of occurs with an
"ex" date or an effective date occurring during the foregoing 30 Trading Day
period, the Closing Prices used in determining the Current Market Price shall be
appropriately adjusted to take such event into account.
"Derivative Securities" means any subscriptions, options, conversion
rights, warrants, or other agreements, securities or commitments of any kind
obligating the Company to issue, grant, deliver or sell, or cause to be issued,
granted, delivered or sold, Common Stock.
"Equity Securities" of any Person, means any and all common stock,
preferred stock and any other class of capital stock of, and any partnership or
limited liability company interests in, such Person or any other similar
interests of any Person that is not a corporation, partnership or limited
liability company.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, from time to
time.
"Governmental Entity" means any government or political subdivision
or department thereof, any governmental or regulatory body (including without
limitation the NASD and the Nasdaq), commission, board, bureau, agency or
instrumentality, or any court or arbitrator or alternative dispute resolution
body, in each case whether federal, state, local or foreign.
"Group" has the meaning set forth in Rule 13d-5 under the Exchange
Act.
"Guarantee" means any direct or indirect obligation, contingent or
otherwise, to guarantee (or having the economic effect of guaranteeing)
Indebtedness in any manner, including, without limitation, any monetary
obligation to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness (whether arising by agreement to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise).
"Indebtedness" means, with respect to any Person, without
duplication, (i) all obligations of such Person for money borrowed, (ii) all
obligations of such Person evidenced by bonds, debentures, notes, or other
similar instruments, (iii) all obligations of such Person upon which interest
charges are customarily paid, (iv) all obligations of such Person under
conditional sale or other title retention agreements relating to property or
assets purchased by such Person, (v) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding (x)
trade accounts payable and accrued obligations incurred in the ordinary
20
course of business and (y) deferred earn-out and other performance-based payment
obligations incurred in connection with any Permitted Acquisition (as such term
is defined in the Credit Agreement as in effect on the date of the Investment
Agreement), (vi) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (vii) all Guarantees by
such Person of Indebtedness of others, (viii) all capital lease obligations of
such Person, (ix) all obligations (determined on the basis of actual, not
notional, obligations) of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements or other interest or exchange
rate hedging arrangements and (x) all obligations of such Person as an account
party in respect of letters of credit and bankers' acceptances issued in support
of obligations that constitute Indebtedness under any other clause of this
definition (unless such obligations are fully cash collateralized), provided,
however, that all obligations in respect of letters of credit shall be deemed
Indebtedness to the extent drawings thereunder are unreimbursed (after any
applicable grace period) regardless of the purpose for which such letter of
credit was issued. The Indebtedness of any Person shall include the recourse
Indebtedness of any partnership in which such Person is a general partner.
Notwithstanding the foregoing, no portion of Indebtedness that becomes the
subject of a defeasance (whether a legal defeasance or a "covenant" or "in
substance" defeasance) shall, at any time that such defeasance remains in
effect, be treated as Indebtedness for purposes hereof.
"Indenture" has the meaning set forth in the Investment Agreement.
"Investment Agreement" means the Investment Agreement, dated on or
about the date hereof, by and between the Investor and the Corporation, as
amended, supplemented or otherwise modified from time to time.
"Investor" has the meaning set forth in the Investment Agreement.
"Investor Group" means, collectively, the Investor and its
Affiliates.
"Investor Nominee" means a person designated for election to the
Board of Directors by the Investor pursuant to the Investment Agreement.
"Law" means any law, treaty, statute, ordinance, code, rule,
regulation, judgment, decree, order, writ, award, injunction or determination of
any Governmental Entity.
"Lien" means any mortgage, pledge, lien , security interest, claim,
voting agreement, conditional sale agreement, title retention agreement,
restriction, option or encumbrance of any kind, character or description
whatsoever.
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" means The Nasdaq Stock Market's National Market.
"Organic Change" means, with respect to any Person, any transaction
(including without limitation any recapitalization, capital reorganization or
reclassification of any class of capital stock, any consolidation or
amalgamation of such Person with, or merger of such Person
21
into, any other Person, any merger of another Person into such Person (other
than a merger which does not result in a reclassification, conversion, exchange
or cancellation of outstanding shares of capital stock of such Person), any sale
or transfer or lease of all or substantially all of the assets of such Person or
any compulsory share exchange) pursuant to which any class of capital stock of
such Person is converted into the right to receive other securities, cash or
other property.
"Other Credit Facilities" means, with respect to the Company, such
agreements (other than the Credit Agreement and the Indenture) to which the
Company now is, or hereafter becomes, a party, which agreements evidence
obligations of the Company that are included within clauses (i) or (ii) of the
definition of "Indebtedness", as the same may be amended, restated,
supplemented, extended, renewed or increased from time to time, replaced,
substituted, refunded or refinanced or otherwise modified from time to time, in
whole or in part, and any successive replacements, substitutions, refundings or
refinancings..
"Person" means any individual, corporation, company, association,
partnership, limited liability company, joint venture, trust or unincorporated
organization, or Governmental Entity.
"Securities Act" means the U.S. Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, from time to time.
"Senior Subordinated Notes" means the Senior Subordinated Notes
issued pursuant to the Indenture.
"Series A Shareholder Approval" has the meaning set forth in the
Investment Agreement.
"Subsidiary" means as to any Person, any other Person of which more
than 50% of the shares of the voting stock or other voting interests are owned
or controlled, or the ability to select or elect more than 50% of the directors
or similar managers is held, directly or indirectly, by such first Person or one
or more of its Subsidiaries or by such first Person and one or more of its
Subsidiaries; provided, however, that no Joint Venture (as such term is defined
in the Investment Agreement) shall be considered (i) a "Subsidiary" of the
Corporation or (ii) a "Subsidiary" of any Subsidiary of the Corporation.
"TPG Person" means the Investor, and each Person controlled by,
controlling or under common control with the Investor.
"Trading Day" means any day on which the Nasdaq is open for trading,
or if the shares of Common Stock are not quoted on the Nasdaq any day on which
the principal national securities exchange or national quotation system on which
the shares of Common Stock are listed, admitted to trading or quoted is open for
trading, or if the shares of Common Stock are not so listed, admitted to trading
or quoted, any Business Day.
22
X. Miscellaneous
A. Notices. Any notice referred to herein shall be in writing and
shall be deemed to have been duly given (and shall be effective when received),
if delivered personally, by facsimile or sent by overnight courier or by first
class mail, postage prepaid, as follows:
(i) if to the Corporation, to its office at 5005 East McDowell Road,
Phoenix, Arizona 85008 (Attention: General Counsel);
(ii) if to a holder of the Series A Preferred Stock, to such holder
at the address of such holder as listed in the stock record books of the
Corporation (which may include the records of any transfer agent for the
Series A Preferred Stock); or
(iii) to such other address as the Corporation or such holder, as
the case may be, shall have designated by notice similarly given.
B. Reacquired Shares. Any shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation, directly or
indirectly, in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof (and shall not be deemed to be outstanding for any
purpose) and, if necessary to provide for the lawful redemption or purchase of
such shares, the capital represented by such shares shall be reduced in
accordance with the Delaware General Corporation Law. All such shares of Series
A Preferred Stock shall upon their cancellation and upon the filing of an
appropriate certificate with the Secretary of State of the State of Delaware,
become authorized but unissued shares of Preferred Stock, $0.01 par value, of
the Corporation and may be reissued as part of another series of Preferred
Stock, $0.01 par value, of the Corporation subject to the conditions or
restrictions on issuance set forth herein.
C. Enforcement. Any registered holder of shares of Series A
Preferred Stock may proceed to protect and enforce its rights and the rights of
such holders by any available remedy by proceeding at law or in equity to
protect and enforce any such rights, whether for the specific enforcement of any
provision in this Certificate of Designations or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
D. Transfer Taxes. Except as otherwise agreed upon pursuant to the
terms of this Certificate of Designations, the Corporation shall pay any and all
documentary, stamp or similar issue or transfer taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
any issue or delivery of Common Stock on conversion, or other securities or
property issued on account of, shares of Series A Preferred Stock pursuant
hereto or certificates representing such shares or securities. The Corporation
shall not, however, be required to pay any such tax or other charge that may be
imposed in connection with any transfer involved in the issue or transfer and
delivery of any certificate for Common Stock or other securities or property in
a name other than that in which the shares of Series A Preferred Stock so
converted, or on account of which such securities were issued, were registered
and no such issue or delivery shall be made unless and until the Person
requesting such issue has paid to the Corporation the amount
23
of any such tax or has established to the satisfaction of the Corporation that
such tax has been paid or is not payable.
E. Transfer Agent. The Corporation may appoint, and from time to
time discharge and change, a transfer agent for the Series A Preferred Stock.
Upon any such appointment or discharge of a transfer agent, the Corporation
shall send notice thereof by first-class mail, postage prepaid, to each holder
of record of shares of Series A Preferred Stock.
F. Record Dates. In the event that the Series A Preferred Stock
shall be registered under either the Securities Act or the Exchange Act, the
Corporation shall establish appropriate record dates with respect to payments
and other actions to be made with respect to the Series A Preferred Stock.
G. Subordination to Credit Agreement and Senior Subordinated Notes.
Notwithstanding anything to the contrary herein, by accepting a share of Series
A Preferred Stock, the holder thereof shall be deemed to have acknowledged and
agreed that (a) such holder's right to receive payments in respect of the Series
A Preferred Stock is subject and subordinated in right of payment to the payment
in full and discharge of all amounts of principal, interest and fees (however
denominated) then outstanding under the Credit Agreement, the Senior
Subordinated Notes and then existing Other Credit Facilities and (b) until (i)
either payment in full of all such amounts (however denominated) under the
Credit Agreement, the Senior Subordinated Notes and then existing Other Credit
Facilities has been made in cash, or (ii) if earlier than such payment, all
necessary waivers and consents have been obtained with respect to the relevant
document as contemplated by the proviso to the last sentence of this Section G,
no payment, whether directly or indirectly, by exercise of any right of set off
or otherwise in respect of the Series A Preferred Stock shall be made by the
Corporation, and no deposit in respect of the Series A Preferred Stock shall be
made pursuant to the terms hereof. In the event that any payment by, or
distribution of the assets of, the Corporation of any kind or character (whether
in cash, property or securities, whether directly or indirectly, by exercise of
any right of set-off or otherwise and whether as a result of a bankruptcy
proceeding with respect to the Corporation or otherwise) shall be received by a
holder of Series A Preferred Stock at any time when such payment is prohibited
by this Section G, such payment shall be held in trust for the benefit of, and
shall be paid over to, the lenders under the Credit Agreement, the holders of
Senior Subordinated Notes and the lenders under Other Credit Facilities, as the
case may be, as their interests may appear. The preceding two sentences address
the relative rights of holders of Series A Preferred Stock, on the one hand, and
the lenders under the Credit Agreement, the holders of Senior Subordinated Notes
and the lenders under Other Credit Facilities, as the case may be, on the other
hand, and nothing in this Certificate of Designations shall impair, as between
the Corporation and the holders of Series A Preferred Stock, the obligation of
the Corporation, which is absolute and unconditional, to pay amounts due in
respect of the Series A Preferred Stock in accordance with their terms. Without
limiting the foregoing, upon a Change of Control, the Corporation shall pay all
amounts outstanding under the Credit Agreement, the Indenture and the Other
Credit Facilities to the extent necessary, but only if permitted under the
relevant document, in order to permit the payment of the Change of Control Price
hereunder or, if such payment is not so permitted under any such document, the
Corporation shall exercise any right of defeasance it has under such document
(provided that all conditions precedent to the exercise of such right of
defeasance have been satisfied, which conditions the Corporation shall
24
use its reasonable best efforts to satisfy) to the extent necessary in order to
permit the payment of the Change of Control Price hereunder; provided, that the
Corporation shall not be required to make such payments or exercise such right
of defeasance under the Credit Agreement, the Indenture or an Other Credit
Facility if the Corporation has received all necessary waivers and consents from
the applicable lenders or holders of notes permitting the Corporation to pay the
Change of Control Price hereunder.
25
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its Chief Financial Officer and attested by its
Assistant Secretary, this 6th day of September, 2001.
ON SEMICONDUCTOR CORPORATION
By: /s/ Dario Sacomani
-------------------------------
Name: Dario Sacomani
Title: Chief Financial Officer,
Senior Vice President:
[Corporate Seal]
ATTEST:
/s/ Judith A. Boyle
- -------------------------------
Name: Judith A. Boyle
Title: Assistant Secretary
26