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EXHIBIT 4.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE RIGHTS AND LIMITATIONS
OF
SERIES B PREFERRED STOCK
OF
RENTERS CHOICE, INC.
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Pursuant to Section 151
of the General Corporation Law of the State of Delaware
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Renters Choice, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware, does by its Assistant
Secretary hereby certify that pursuant to the provisions of Section 151 of the
General Corporation Law of the State of Delaware, its Board of Directors, at a
meeting on August 4, 1998, duly adopted the following resolution establishing,
the rights, preferences, privileges and restrictions of a series of preferred
stock of the corporation which resolution remains in full force and effect as
of the date hereof:
WHEREAS, the Board of Directors of Renters Choice, Inc. (the
"Corporation") is authorized, within the limitations and restrictions stated in
its Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation"), to fix by resolution or resolutions adopted prior to the
issuance of any shares of each particular series of preferred stock and
incorporated in a certificate of designation filed with the Secretary of State
of the State of Delaware, the designation, powers (including voting powers and
voting rights), preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, as
may be fixed from time to time by the Board of the Directors in the resolution
or resolutions adopted pursuant to the authority granted under the Certificate
of Incorporation; and
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WHEREAS, it is the desire of the Board of Directors of the
Corporation, pursuant to its authority as aforesaid, to authorize and fix the
terms of a series of preferred stock and the number of shares constituting such
series;
NOW, THEREFORE, BE IT RESOLVED, that pursuant to Paragraph Fourth,
Section 1 of the Certificate of Incorporation, there is hereby authorized such
series of preferred stock on the terms and with the provisions herein set
forth:
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in
this Section 1 shall have, for all purposes of this resolution, the meanings
specified (with terms defined in the singular having comparable meanings when
used in the plural).
Affiliate. The term "Affiliate" shall mean, with respect to
any Person, any other Person directly or indirectly controlling or controlled
by or under direct or indirect common control with such specified Person and,
in the case of a Person who is an individual, shall include (i) members of such
specified Person's immediate family (as defined in Instruction 2 of Item 404(a)
of Regulation S-K under the Securities Act) and (ii) trusts, the trustee and
all beneficiaries of which are such specified Person or members of such
Person's immediate family as determined in accordance with the foregoing clause
(i). For the purposes of this definition, control when used with respect to
any person means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the foregoing. Notwithstanding
the foregoing, the holders of the Series B Preferred Shares and their
Affiliates shall not be deemed Affiliates of the Corporation.
Change of Control. The term "Change of Control" shall mean the
occurrence of any one of the following events (i) the acquisition after the
Initial Issue Date, in one or more transactions, of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) by (i) any person or
entity (other than any Permitted Holder) or (ii) any group of persons or
entities (excluding any Permitted Holders) who constitute a group (within the
meaning of Section 13(d)(3) of the Exchange Act), in either
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case, of any securities of the Corporation such that, as a result of such
acquisition, such person, entity or group beneficially owns (within the meaning
of Rule 13d-3 under the Exchange Act), directly or indirectly, 40% or more of
the then outstanding voting securities entitled to vote on a regular basis for
a majority of the Board of Directors of the Corporation (but only to the extent
that such beneficial ownership is not shared with any Permitted Holder who has
the power to direct the vote thereof); provided, however, that no such Change
of Control shall be deemed to have occurred if (A) the Permitted Holders
beneficially own, in the aggregate, at such time, a greater percentage of such
voting securities than such other person, entity or group or (B) at the time of
such acquisition, the Permitted Holders (or any of them) possess the ability
(by contract or otherwise) to elect, or cause the election of, a majority of
the members of the Corporation's Board of Directors; (II) the acquisition by
any person of all or substantially all of the assets of the Corporation; (III)
the determination by the Corporation's Board of Directors to recommend the
acceptance of any proposal set forth in a tender offer statement or proxy
statement filed by any person with the Securities and Exchange Commission which
indicates the intention on the part of that person to acquire, or acceptance of
which would otherwise have the effect of that person acquiring, control of the
Corporation; or (IV) upon, other than as a result of the death or disability of
one or more of the directors within a three-month period, a majority of the
members of the Board of Directors of the Corporation for any period of three
consecutive months not being persons who (a) had been directors of the
Corporation for at least the preceding 24 consecutive months or were elected by
the holders of the Series B Preferred Stock, voting separately as a class, or
(b) when they initially were elected to the Board of Directors of the
Corporation, (x) were nominated (if they were elected by the stockholders) or
elected (if they were elected by the directors) with the affirmative
concurrence of 66-2/3% of the directors who were Continuing Directors at the
time of the nomination or election by the Board of Directors of the Corporation
and (y) were not elected as a result of an actual or threatened solicitation of
proxies or consents by a person other than the Board or an agreement intended
to avoid or settle such a proxy solicitation (the directors described in
clauses (a) and (b) of this subsection (IV) being "Continuing Directors");
provided, however, that no Change of Control shall be deemed to have occurred
by virtue of any merger of the Corporation with any wholly-owned subsidiary of
the Corporation or any merger of two wholly-owned subsidiaries of the
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Corporation if, in any such merger, the proportionate ownership interests of
the stockholders of the Corporation remain unchanged.
Common Stock. The term "Common Stock" shall mean the voting
common stock, par value $.01 per share, of the Corporation.
Conversion Date. The term "Conversion Date" shall have the
meaning set forth in Sections 3(c) and 9(c) below, as applicable.
Conversion Price. The term "Conversion Price" shall mean the
"Conversion Price" as set forth in the Series A Certificate of Designations as
adjusted in accordance with Sections 9(d) and 9(e) hereof.
Conversion Release Date. The term "Conversion Release Date"
shall have the meaning set forth in Section 9(a) below.
Corporation Notice. The term "Corporation Notice" shall have
the meaning set forth in Section 6(a)(ii)(A) below.
Current Market Price. The term "Current Market Price" on any
date shall be the average of the last reported sale prices per share (the
"Quoted Price") of the Common Stock on each of the fifteen consecutive Trading
Days (as defined below) preceding the date of the computation. The Quoted Price
of the Common Stock on each day will be (A) the last reported sales price of
the Common Stock on the principal stock exchange on which the Common Stock is
listed, or (B) if the Common Stock is not listed on a stock exchange, the last
reported sales price of the Common Stock on the principal automated securities
price quotation system on which sale prices of the Common Stock are reported,
or (C) if the Common Stock is not listed on a stock exchange and sale prices of
the Common Stock are not reported on an automated quotation system, the mean of
the high bid and low asked price quotations for the Common Stock as reported by
National Quotation Bureau Incorporated if at least two securities dealers have
inserted both bid and asked quotations for the Common Stock on a day will be
the Quoted Price of the Common Stock on that day as determined by a member firm
of the New York Stock Exchange, Inc. selected by the Board of Directors. If no
two securities dealers have inserted such bid and ask quotations, or such
Quoted Prices otherwise are not available, the Current Market Price means the
fair market value of the Common Stock as of the date prior to the date on which
the Current Market
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Price is determined, which such fair market value shall be determined by the
Board of Directors of the Corporation. As used herein the term "Trading Day"
means (x) if the Common Stock is listed on at least one stock exchange, a day
on which there is trading on the principal stock exchange on which the Common
Stock is listed, (y) if the Common Stock is not listed on a stock exchange, but
sale prices of the Common Stock are reported on an automated quotation system,
a day on which trading is reported on the principal automated quotation system
on which sales of the Common Stock are reported, or (z) if the Common Stock is
not listed on a stock exchange and sale prices of the Common Stock are not
reported on an automated quotation system, a day on which quotations are
reported by National Quotation Bureau Incorporated.
Dividend Payment Date. The term "Dividend Payment Date" shall
have the meaning set forth in Section 4(a) below.
Dividend Rate. The term "Dividend Rate" shall have the
meaning set forth in Section 4(a) below.
Exchange Act. The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Initial Issue Date. The term "Initial Issue Date" shall mean
the date that shares of Series B Preferred Stock are first issued by the
Corporation.
IRR. The term "IRR" shall have the meaning set forth in
Section 5(a)(vi) below.
Junior Stock. The term "Junior Stock" shall mean any stock of
the Corporation, other than the Common Stock, ranking junior to the Series B
Preferred Stock as to dividends and upon liquidation. Junior Stock shall not
include the Series A Preferred Stock.
Liquidation. The term "Liquidation" shall mean any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary; provided, that neither the voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Corporation, nor the
consolidation or
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merger of the Corporation with one or more other entities, shall, by itself, be
deemed a Liquidation.
Liquidation Preference Amount. The term "Liquidation
Preference Amount" shall mean at any date a number equal to the product of (i)
$1,050 per share of Series B Preferred Stock, plus all accrued and unpaid
dividends thereon calculated in accordance with Sections 4(a) and 4(b) hereof,
multiplied by (ii) a fraction, the numerator of which shall be the number equal
to the Current Market Price as of such date, and the denominator of which shall
be the number equal to the Current Market Price as of the Initial Issue Date
(adjusted for stock splits, reorganizations, recapitalizations or similar
events); provided, however, that in no case shall the Liquidation Preference
Amount be an amount less than $1,050 per share of Series B Preferred Stock,
plus all accrued and unpaid dividends thereon calculated in accordance with
Sections 4(a) and 4(b) hereof.
Non-Voting Common Stock. The term "Non-Voting Common Stock"
shall mean the non-voting common stock, par value $.01 per share, of the
Corporation.
Permitted Holder. The term "Permitted Holder" shall mean (i)
Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P., or any
entity controlled by either of the foregoing or any of the partners of the
foregoing, (ii) an employee benefit plan of the Corporation or any subsidiary
of the Corporation, or any participant therein, (iii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Corporation
or any of its subsidiaries or (iv) any Permitted Transferee of any of the
foregoing persons.
Permitted Transferee. The term "Permitted Transferee" shall
mean, with respect to any Person, (i) any officer, director or partner of, or
Person controlling, such Person, (ii) any other Person that is (x) an Affiliate
of the general partner(s), investment manager(s) or investment advisor(s) of
such Person, (y) an Affiliate of such Person or a Permitted Transferee of an
Affiliate or (z) an investment fund, investment account or investment entity
whose investment manager, investment advisor or general partner thereof is such
Person or a Permitted Transferee of such Person or (iii) if a Permitted
Transferee of a Person set forth in the foregoing clauses (i) and (ii) is an
individual, (x) any spouse or issue of such individual, or any trust solely for
the benefit of such individual, spouse or issue, and (y) upon such individual's
death, any Person to whom Shares are transferred in accordance with the laws of
descent and/or testamentary distribution, in each case in a bona fide
distribution or other transaction not intended to avoid the provisions of this
Agreement.
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Person. The term "Person" shall mean an individual or a
corporation, limited liability company, partnership, trust, or any other entity
or organization, including a government or political subdivision or an agency
or instrumentality thereof.
Quarterly Dividend Period. The term "Quarterly Dividend
Period" shall have the meaning set forth in Section 4(a) below.
Redemption Event. A Redemption Event will be deemed to occur
at the earliest of (i) the date upon which there is a Change of Control of the
Corporation, (ii) the date upon which the Corporation's Common Stock is not
listed for trading on a United States national securities exchange or the
NASDAQ National Market System, or (iii) the eleventh anniversary of the Initial
Issue Date.
Repurchase Date. The term "Repurchase Date" shall have the
meaning set forth in Section 6(a)(i) below.
Repurchase Price. The term "Repurchase Price" shall have the
meaning set forth in Section 6(a)(i) below.
Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder.
Series A Certificate of Designations. The term "Series A
Certificate of Designations" shall mean the Certificate of Designations,
Preferences, and Relative Rights and Limitations relating to the Series A
Preferred Stock, in the form filed with the Delaware Secretary of State.
Series A Preferred Stock. The term "Series A Preferred Stock"
shall mean the Series A Preferred Stock, par value $.01 per share, of the
Corporation.
Series B Preferred Stock. The term "Series B Preferred Stock"
shall mean the Series B Preferred Stock authorized hereby.
Stockholders Agreement. The term "Stockholders Agreement"
shall mean that certain stockholders agreement of the Corporation dated as of
August 5, 1998, as in effect on the Initial Issue Date, a copy of which shall
be maintained by the Secretary of the Corporation and which shall be available
to any stockholder of the Corporation upon request.
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2. Designation.
The series of preferred stock authorized hereby shall be
designated as the "Series B Preferred Stock." The number of shares constituting
such series shall initially be Four Hundred Thousand (400,000). The par value
of the Series B Preferred Stock shall be $.01 per share.
3. Conversion to Series A Preferred Stock.
(a) If the stockholders of the Corporation shall on or
before the day that is 120 calendar days following the Initial
Issue Date approve the proposal to allow the Series B
Preferred Stock to be converted into shares of the Series A
Preferred Stock (the "Series A-to-B Conversion"), then each
outstanding share of Series B Preferred Stock shall, without
any action on the part of the holder thereof or the
Corporation, be automatically converted into one fully-paid
and non-assessable share of Series A Preferred Stock.
ii. If the stockholders of the
Corporation shall approve the Series
A-to-B Conversion during the period
commencing on the date that is 121
calendar days following the Initial
Issue Date and continuing up to and
including the date that is 150
calendar days following the Initial
Issue Date, then each outstanding
share of Series B Preferred Stock
shall, without any action on the
part of the holder thereof or the
Corporation, be automatically
converted into 1.15 fully-paid and
non-assessable shares of Series A
Preferred Stock.
iii. If the stockholders of the
Corporation shall approve the Series
A-to-B Conversion on or after the
date that is 151 days following the
Initial Issue Date, the conversion
of the shares of Series B Preferred
Stock into shares of Series A
Preferred Stock shall be at the sole
option and discretion of each holder
of the Series B Preferred Stock, and
each outstanding share of Series B
Preferred Stock shall be convertible
into 1.2 fully-paid and
non-assessable shares of Series A
Preferred Stock.
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(b) Promptly following the conversion of Series B
Preferred Stock to Series A Preferred Stock pursuant to
Sections 3(a)(i) and (ii) above, the holder of the Series B
Preferred Stock shall (i) surrender the certificates or
certificates evidencing the shares of Series B Preferred
Stock, duly endorsed in a form reasonably satisfactory to the
Corporation, at the office of the Corporation or of the
transfer agent for the Series B Preferred Stock and (ii) state
in writing the name or names in which the certificate or
certificates for shares of Series A Preferred Stock are to be
issued. As soon as practical following receipt of the
foregoing, the Corporation shall deliver to such former holder
of Series B Preferred Stock, a certificate or certificates in
denominations acceptable to the holders representing the
shares of Series A Preferred Stock. Such conversion shall be
deemed to have been effected as of the close of business on
the date on which the stockholders of the Corporation approved
the Series A-to-B Conversion.
(c) To convert Series B Preferred Stock into Series A
Preferred Stock at the option of the holder pursuant to
Section 3(a)(iii) above, a holder must give written notice to
the Corporation at such office that such holder elects to
convert Series B Preferred Stock into Series A Preferred
Stock, and the number of shares to be converted. Such
conversion shall be deemed to have been effected as of the
close of business on the date on which the holder delivers
such notice to the Corporation (such date is referred to
herein as the "Conversion Date" for purposes of any conversion
of Series B Preferred Stock pursuant to Section 3(a)(iii)).
Promptly thereafter, the holder of the Series B Preferred
Stock shall (i) surrender the certificate or certificates
evidencing the shares of Series B Preferred Stock to be
converted, duly endorsed in a form reasonably satisfactory to
the Corporation, at the office of the Corporation or of the
transfer agent for the Series B Preferred Stock and (ii) state
in writing the name or names in which the certificate or
certificates for shares of Series A Preferred Stock are to be
issued. As soon as practical
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following receipt of the foregoing, the Corporation shall
deliver to such former holder of Series B Preferred Stock, a
certificate representing the shares of Series A Preferred
Stock, together with a new certificate representing the
unconverted portion, if any, of the shares of Series B
Preferred Stock formerly represented by the certificate or
certificates surrendered for conversion.
4. Dividends.
(a) The holders of the shares of Series B Preferred Stock
shall be entitled to receive cumulative quarterly dividends at
a dividend rate equal to 3 3/4% per annum (the "Dividend
Rate") computed on the basis of $1,000 per share, when and as
declared by the Board of Directors of the Corporation, out of
funds legally available for the payment of dividends;
provided, however, on and after the earlier of the day that is
121 calendar days following the Initial Issue Date or the date
of a stockholders meeting convened for the purpose of
obtaining the approval described in Section 3(a) of this
Certificate of Designations, the dividend rate shall be equal
to 7% per annum computed on the basis of $1,000 per share.
Notwithstanding the foregoing, for the five-year period
commencing with the Initial Issue Date, payments of dividends
shall be made, at the election of the Corporation, either (i)
in cash or (ii) by issuing a number of additional fully paid
and nonassessable shares (and/or fractional shares) of Series
B Preferred Stock for each such share (or fractional share) of
Series B Preferred Stock then outstanding equal to the
dividend then payable on each such share (or fractional share)
of Series B Preferred Stock (expressed as a dollar amount)
divided by 1,000. Quarterly dividend periods (each a
"Quarterly Dividend Period") shall commence on January 1,
April 1, July 1 and October 1, in each year, except that the
first Quarterly Dividend Period shall commence on the date of
issuance of the Series B Preferred Stock, and shall end on and
include the day immediately preceding the first day of the
next Quarterly Dividend Period. Dividends on the shares of
Series B Preferred Stock shall be payable on March 31, June
30, September 30, December 31 of each year (a "Dividend
Payment Date"), commencing September 30, 1998. Each such
dividend shall be paid to the holders of record of the Series
B Preferred Stock as they shall appear on the stock register
of the Corporation on such record date, not exceeding 45 days
nor less than 10 days preceding such Dividend Payment Date, as
shall be fixed by the Board of Directors of the Corporation or
a duly authorized committee thereof.
If, on any Dividend Payment Date, the full dividends provided
for in this Section 4(a) are not declared and paid to the holders of the Series
B Preferred Stock, whether in cash or in additional shares of Series B
Preferred Stock, then such dividends shall cumulate with additional dividends
thereon, compounded quarterly, at the dividend rate applicable to the Series B
Preferred Stock as provided in this Section 4(a), for each succeeding full
Quarterly Dividend Period during
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which such dividends shall remain unpaid. In the event the Corporation elects
to pay dividends in additional shares of Series B Preferred Stock, the
Corporation shall on the Dividend Payment Date deliver to the holders
certificates representing such shares.
Notwithstanding anything to the contrary in this Certificate
of Designations, in the event any conversion (including into Series A Preferred
Stock or Non-Voting Common Stock), redemption or liquidation occurs as of a
date other than on a Dividend Payment Date, the holder of Series B Preferred
Stock shall be paid a pro rata dividend equal to the dividend payable for that
Quarterly Dividend Period multiplied by a fraction, the numerator of which is
the number of days that have elapsed since the last Dividend Payment Date and
the denominator of which is the number of days in the Quarterly Dividend Period
in which the conversion, redemption or liquidation occurs.
(b) The amount of any dividends accrued on any share of
the Series B Preferred Stock on any Dividend Payment Date
shall be deemed to be the amount of any unpaid dividends
accumulated thereon to and including such Dividend Payment
Date, whether or not earned or declared. The amount of
dividends accrued on any share of the Series B Preferred Stock
on any date other than a Dividend Payment Date shall be deemed
to be the sum of (i) the amount of any unpaid dividends
accumulated thereon to and including the last preceding
Dividend Payment Date, whether or not earned or declared, and
(ii) an amount determined by multiplying (x) the Dividend Rate
by (y) a fraction, the numerator of which shall be the number
of days from the last preceding Dividend Payment Date to and
including the date on which such calculation is made and the
denominator of which shall be the full number of days in such
Quarterly Dividend Period.
(c) Immediately prior to authorizing or making any
distribution in redemption or liquidation with respect to the
Series B Preferred Stock (other than a purchase or acquisition
of Series B Preferred Stock pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding
Series B Preferred Stock), the Board of Directors shall, to
the extent of any funds legally available therefor, declare a
dividend in cash on the Series B Preferred Stock payable on
the distribution date in an amount equal to any accrued and
unpaid dividends on the Series B Preferred Stock as of such
date.
5. Consent Rights.
(a) Commencing on the day that is 121 calendar days
following the Initial Issue Date and for so long as any shares
of Series B Preferred Stock are outstanding, the Corporation
will not, directly or indirectly, including through a merger
or consolidation with any other corporation or otherwise,
without the consent of
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holders of at least a majority of the outstanding shares of
Series B Preferred Stock, (i) increase the number of
authorized shares of Series B Preferred Stock or authorize the
issuance or issue of any shares of Series B Preferred Stock
other than to existing holders of Series B Preferred Stock,
(ii) amend, alter or repeal, in any manner whatsoever, the
designations, preferences and relative rights and limitations
and restrictions of the Series B Preferred Stock or the Series
A Preferred Stock; (iii) amend, alter or repeal any of the
provisions of the Certificate of Incorporation or By-Laws of
the Corporation in a manner that would negatively impact the
holders of the Series B Preferred Stock, including (but not
limited to) any amendment that is in conflict with the consent
rights set forth in this Section 5; (iv) directly or
indirectly, redeem, purchase or otherwise acquire for value
(including through an exchange), or set apart money or other
property for any mandatory purchase or other analogous fund
for the redemption, purchase or acquisition of any shares of
Common Stock or Junior Stock, except for the repurchase by the
Corporation of up to $25,000,000 in Common Stock from J.
Ernest Talley, declare or pay any dividend or make any
distribution (whether in cash, shares of capital stock of the
Corporation, or other property) on shares of Common Stock or
Junior Stock; (v) effect a voluntary liquidation, dissolution
or winding up of the Corporation; (vi) sell or agree to sell
all or substantially all of the assets of the Corporation,
unless such transaction (1) occurs after the fourth
anniversary of the Initial Issue Date, (2) is a sale for cash
and (3) results in an internal rate of return ("IRR") of 30%
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compounded quarterly or greater to the holder of the Series B
Preferred Stock with respect to each share of Series B
Preferred Stock issued on the Initial Issue Date, or (vii)
enter into any merger or consolidation or other business
combination involving the Corporation (except a merger of a
wholly-owned subsidiary of the Corporation into the
Corporation in which the Corporation's capitalization is
unchanged as a result of such merger) unless such transaction
(1) occurs after the fourth anniversary of the Initial Issue
Date, (2) is for cash and (3) results in an IRR of 30%
compounded quarterly or greater to the holder of the Series B
Preferred Stock with respect to each share of Series B
Preferred Stock issued on the Initial Issue Date.
(b) While any shares of Series B Preferred Stock are
outstanding, the Corporation will not, directly or indirectly,
without the majority affirmative vote of the Finance
Committee, issue debt securities of the Corporation with a
value in excess of $10 million (including any refinancing of
existing indebtedness).
(c) While any shares of Series B Preferred Stock are
outstanding, the Corporation will not, directly or indirectly,
without the unanimous affirmative vote of the Finance
Committee, issue equity securities of the Corporation with a
value in excess of $10 million (including any refinancing of
existing indebtedness); provided, however, that the following
equity issuances shall require only a majority affirmative vote
of the Finance Committee: (A) a Common Stock offering within
24 months of the Initial Issue Date that is equal to
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or less than $75 million of gross proceeds to the Corporation
and the selling price is equal to or greater than the
Conversion Price, (B) a Common Stock offering in which the
selling price (1) at any time prior to the third anniversary
of the Initial Issue Date is equal to or greater than two
times the Conversion Price and (2) thereafter, equal to or
greater than the price that would imply a 25% or greater IRR
compounded quarterly on the Conversion Price and (C) an
issuance of equity in connection with an acquisition if the
issuance is equal to or less than 10% of the outstanding
Common Stock (calculated post-issuance of such shares of
Common Stock).
6. Redemption
(a) Mandatory Redemption.
(i) Right to Require Redemption.
If at any time there shall occur any
Redemption Event of the Corporation, then
each holder of Series B Preferred Stock shall
have the right, at such holder's option, to
require the Corporation to redeem, and upon
the exercise of such right the Corporation
shall redeem, all or any part of such
holder's Series B Preferred Stock on the date
(the "Repurchase Date") that is 45 days after
the date of the Corporation Notice (as
defined below). The redemption price per
share (the "Repurchase Price") for such
shares of Series B Preferred Stock so
redeemed shall equal the Liquidation
Preference Amount on the Repurchase Date.
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(ii) Notices; Method of Exercising
Redemption Right, etc.
(A) Within 15 days after the occurrence
of a Redemption Event, the Corporation shall mail to all holders of record of
the Series B Preferred Stock a notice (the "Corporation Notice") of the
occurrence of the Redemption Event and of the redemption right set forth herein
arising as a result thereof. Each Corporation Notice of a redemption right
shall state: (i) the Repurchase Date; (II) the date by which the redemption
right must be exercised; (III) the Repurchase Price; (IV) a description of the
procedure which a holder must follow to exercise a redemption right including a
form of the irrevocable written notice referred to in Section 6(a)(ii)(B)
hereof; and (V) the place or places where such Series B Preferred Stock may be
surrendered for redemption.
No failure of the Corporation to give the
foregoing notices or any defect therein shall limit any holder's right to
exercise a redemption right or affect the validity of the proceedings for the
redemption of Series B Preferred Stock.
(B) To exercise a redemption right, a
holder must deliver to the Corporation on or before the 15th day after the date
of the Corporation Notice (i) irrevocable written notice of the holder's
exercise of such rights, which notice shall set forth the name of the holder,
the amount of the Series B Preferred Stock to be redeemed, a statement that an
election to exercise the redemption right is being made thereby, and (ii) the
Series B Preferred Stock with respect to which the redemption right is being
exercised, duly endorsed for transfer to the Corporation. Such written notice
shall be irrevocable. Subject to the provisions of Section 6(a)(ii)(D) below,
Series B Preferred Stock surrendered for redemption together with such
irrevocable written notice shall cease to be convertible from the date of
delivery of such notice. If the Repurchase Date falls after the record date
and before the following Dividend Payment Date, any Series B Preferred Stock to
be redeemed must be accompanied by payment of an amount equal to the dividends
thereon which the registered holder thereof is to receive on such Dividend
Payment Date, and, notwithstanding such redemption, such dividend payment will
be made by the Corporation to the registered holder thereof on the applicable
record date; provided that any quarterly payment of dividends becoming due on
the Repurchase Date shall be payable to the holders of such Series
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B Preferred Stock registered as such on the relevant record date subject to the
terms of Section 4(b) hereof.
(C) In the event a redemption right
shall be exercised in accordance with the terms hereof, the Corporation shall
pay or cause to be paid the Repurchase Price in cash, to the holder on the
Repurchase Date.
(D) If any Series B Preferred Stock
surrendered for redemption shall not be so redeemed on the Repurchase Date,
such Series B Preferred Stock shall be convertible at any time from the
Repurchase Date until redeemed and, until redeemed, continue to accrue
dividends to the extent permitted by applicable law from the Repurchase Date at
the same rate borne by such Series B Preferred Stock. The Corporation shall
pay to the holder of such Series B Preferred Stock the additional amounts
arising from this Section 6(a)(ii)(D) at the time that it pays the Repurchase
Price, and if applicable such Series B Preferred Stock shall remain convertible
into Non-Voting Common Stock until the Repurchase Price plus any additional
amounts owing on such Series B Preferred Stock shall have been paid or duly
provided for.
(E) Any Series B Preferred Stock which
is to be redeemed only in part shall be surrendered at any office or agency of
the Corporation designated for that purpose pursuant to Section 6(a)(ii)(A)(V)
hereof and the Corporation shall execute and deliver to the holder of such
Series B Preferred Stock without service charge, a new certificate or
certificates representing the Series B Preferred Stock, of any authorized
denomination as requested by such holder, in aggregate amount equal to and in
exchange for the unredeemed portion of the Series B Preferred Stock so
surrendered.
7. Priority.
(a) Priority as to Dividends. Holders of the
shares of the Series B Preferred Stock shall be
entitled to receive the dividends provided for in
Section 4 hereof in preference to and in priority
over any Junior Stock or Common Stock.
(b) Series A Preferred Stock. The Series B
Preferred Stock shall rank on parity with the Series
A Preferred Stock with respect to dividends and
redemption.
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8. Liquidation Preference.
(a) In the event of any Liquidation, holders of
the Series B Preferred Stock will be entitled to
receive out of the assets of the Corporation whether
such assets are capital or surplus and whether or not
any dividends as such are declared, the Liquidation
Preference Amount to the date fixed for distribution,
and no more, (i) pari passu with any distribution to
the holders of Series A Preferred Stock with respect
to the distribution of assets and (ii) before any
distribution shall be made to the holders of Junior
Stock or Common Stock with respect to the
distribution of assets. If the assets of the
Corporation are not sufficient to pay in full the
Liquidation Preference Amount payable to the holders
of outstanding shares of the Series B Preferred
Stock, then the holders of all such shares shall
share ratably in such distribution of assets in
accordance with the amount which would be otherwise
payable on such distribution to the holders of Series
B Preferred Stock were such Liquidation Preference
Amount paid in full. Except as provided, in this
Section 8(a), in the event of any Liquidation of the
Corporation, the holders of shares of Series B
Preferred Stock shall not be entitled to any
additional payments.
(b) The consolidation or merger of the
Corporation with or into such corporation or
corporations shall not itself be deemed to be a
Liquidation of the Corporation within the meaning of
this Section 8.
(c) Written notice of any Liquidation of the
Corporation, stating a payment date and the place
where the distributive amounts shall be payable,
shall be given by mail, postage prepaid, not less
than 30 days prior to the payment date stated
therein, to the holders of record of the Series B
Preferred Stock at their respective addresses as the
same shall appear on the books of the Corporation.
(d) The Series B Preferred Stock shall rank on
parity with the Series A Preferred Stock with respect
to liquidations.
9. Conversion.
(a) The Series B Preferred Stock shall not be
convertible into any other class or series of stock
of the Corporation until the earlier to occur of the
day that is 121 calendar days following the Initial
Issue Date or the date of the first stockholders
meeting following the Initial Issue Date, the earlier
date of which shall constitute the "Conversion
Release Date." After the Conversion Release Date,
each share of Series B Preferred Stock shall be
convertible at any time and from time to time, at the
option of the holder thereof into validly issued,
fully paid and nonassessable shares of Non-Voting
Common Stock, in an amount determined in accordance
with
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Section 9(d) below; provided, however, if after the
Conversion Release Date any holder of Series B
Preferred Stock elects to convert but it is
determined that the Corporation cannot issue
Non-Voting Common Stock, such holder shall be
entitled to receive Common Stock in lieu of
Non-Voting Common Stock.
(b) Immediately following the conversion of
Series B Preferred Stock into Non-Voting Common Stock
on the Conversion Date (i) such converted shares of
Series B Preferred Stock shall be deemed no longer
outstanding and (ii) the Persons entitled to receive
the Non-Voting Common Stock upon the conversion of
such converted Series B Preferred Stock shall be
treated for all purposes as having become the owners
of record of such Non-Voting Common Stock. Upon the
issuance of shares of Non-Voting Common Stock upon
conversion of Series B Preferred Stock pursuant to
this Section 9, such shares of Non-Voting Common
Stock shall be deemed to be duly authorized, validly
issued, fully paid and nonassessable.
Notwithstanding anything to the contrary in this
Section 9, any holder of Series B Preferred Stock may
convert shares of such Series B Preferred Stock into
Non-Voting Common Stock in accordance with Section 9
on a conditional basis, such that such conversion
will not take effect unless the conditions set forth
in Section 9(c) are satisfied, and the Corporation
shall make such arrangements as may be necessary or
appropriate to allow such conditional conversion and
to enable the holder to satisfy such other
conditions.
(c) To convert Series B Preferred Stock into
Non-Voting Common Stock at the option of the holder
pursuant to Section 9(a), a holder must give written
notice to the Corporation at such office that such
holder elects to convert Series B Preferred Stock
into Non-Voting Common Stock, and the number of
shares to be converted. Such conversion, to the
extent permitted by law, regulation, rule or other
requirement of any governmental authority
(collectively, "Laws") and the provisions hereof,
shall be deemed to have been effected as of the close
of business on the date on which the holder delivers
such notice to the Corporation (such date is
referred to herein as the "Conversion Date" for
purposes of any
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conversion of Series B Preferred Stock pursuant to
Section 9(a)). Promptly thereafter the holder shall
(i) surrender the certificates or certificates
evidencing the shares of Series B Preferred Stock to
be converted, duly endorsed in a form reasonably
satisfactory to the Corporation, at the office of the
Corporation or of the transfer agent for the Series B
Preferred Stock, (ii) state in writing the name or
names in which the certificate or certificates for
shares of Non-Voting Common Stock are to be issued,
(iii) provide evidence reasonably satisfactory to the
Corporation that such holder has satisfied any
conditions, contained in any agreement or any legend
on the certificates representing the Series B
Preferred Stock, relating to the transfer thereof, if
shares of Non-Voting Common Stock are to be issued in
a name or names other than the holder's, and (iv) pay
any transfer or similar tax if required as provided
in Section 9(j) below. As soon as practical following
receipt of the foregoing, the Corporation shall
deliver to such former holder of Series B Preferred
Stock, a certificate representing the shares of
Non-Voting Common Stock issued upon the conversion,
together with a new certificate representing the
unconverted portion, if any, of the shares of Series
B Preferred Stock formerly represented by the
certificate or certificates surrendered for
conversion.
(d) For the purposes of the conversion of Series
B Preferred Stock into Non-Voting Common Stock
pursuant to Section 9(a), the number of shares of
Non-Voting Common Stock issuable upon conversion for
each share of Series B Preferred Stock shall be
determined by dividing (i) the number of shares of
Common Stock issuable as if the Series B Preferred
Stock had been first converted into Series A
Preferred Stock pursuant to Section 3(a)(iii) hereof
(whether or not the stockholder approval referenced
therein has actually occurred) and then converted
into Common Stock by (ii) (A) 1.00, in the event the
shares of Series B Preferred Stock are converted
during the period commencing on the date that is 121
calendar days following the Initial Issue Date and
continuing up to and including the date that is 150
calendar days following the Initial Issue Date, or
(B) .75, in the event the shares of Series B
Preferred Stock
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are converted on or after the date that is 151
calendar days following the Initial Issue Date.
(e) In order to prevent dilution of the
conversion rights granted hereunder, the number of
shares of Non-Voting Common Stock issuable upon
conversion and the Conversion Price shall each be
adjusted from time to time in the same manner as the
number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock and the
"Conversion Price" as set forth in the Series A
Certificate of Designations are adjusted pursuant to
the Series A Certificate of Designations.
(f) No fractional shares of Non-Voting Common
Stock shall be issued upon the conversion of Series B
Preferred Stock. If any fractional interest in a
share of Non-Voting Common Stock would, except for
the provisions of this Section 9(f), be deliverable
upon the conversion of any Series B Preferred Stock,
the Corporation shall, in lieu of delivering the
fractional share therefor, adjust such fractional
interest by payment to the holder of such converted
Series B Preferred Stock of an amount in cash equal
(computed to the nearest cent) to the Current Market
Price of such fractional interest as of the end of
the Corporation's last fiscal year as determined in
good faith in the sole discretion of the Board of
Directors of the Corporation.
(g) Whenever the Conversion Price is adjusted,
as herein provided, the Corporation shall promptly
mail a notice of the adjustment to holders of Series
B Preferred Stock by first class mail. The
Corporation shall forthwith maintain at its principal
executive office and file with the transfer agent, if
any, for Series B Preferred Stock, a statement,
signed by the Chairman of the Board, or the
President, or a Vice President of the Corporation and
by its chief financial officer or an Assistant
Treasurer, showing in reasonable detail the facts
requiring such adjustment and the Conversion Price
after such adjustment. Such transfer agent shall be
under no duty or responsibility with respect to any
such statement except to exhibit the same from time
to time to any holder of Series B Preferred Stock
desiring an inspection thereof.
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(h) If there shall occur any capital
reorganization or any reclassification of the capital
stock of the Corporation, consolidation or merger of
the Corporation with or into another entity, or the
conveyance of all or substantially all of the assets
of the Corporation to another person or entity, each
share of Series B Preferred Stock shall thereafter be
convertible into the number of shares or other
securities or property to which a holder of the
number of shares of Non-Voting Common Stock of the
Corporation deliverable upon conversion of such
Series B Preferred Stock would have been entitled
upon such reorganization, reclassification,
consolidation, merger or conveyance; and, in any such
case, appropriate adjustment (as determined in good
faith in the sole discretion of the Board of
Directors of the Corporation) shall be made in the
application of the provisions herein set forth with
respect to the rights and interests thereafter of the
holders of the Series B Preferred Stock, to the end
that the provisions set forth herein (including
provisions with respect to changes in and other
adjustments of the Conversion Price) shall be
applicable, as nearly as reasonably may be, in
relation to any shares or other property thereafter
deliverable upon the conversion of the Series B
Preferred Stock.
(i) The Corporation shall at all times reserve
and keep available, out of its authorized but
unissued shares of Series A Preferred Stock and
Non-Voting Common Stock or treasury shares thereof,
solely for the purpose of issuance upon the
conversion of Series B Preferred Stock, the full
number of shares of Series A Preferred Stock and
Non-Voting Common Stock deliverable upon the
conversion of all Series B Preferred Stock from time
to time outstanding. In addition, the Corporation
shall at all times reserve and keep available, out of
its authorized but unissued shares of Common Stock or
treasury shares thereof, solely for the purpose of
issuance upon the conversion of Series A Preferred
Stock, the full number of shares of Common Stock
deliverable upon the conversion of those shares of
Series A Preferred Stock deliverable upon the
conversion of all Series B Preferred Stock from time
to time outstanding. The Corporation shall from time
to time, in accordance with the laws of the State of
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Delaware, increase the authorized amount of its
Series A Preferred Stock or Non-Voting Common Stock
if at any time the authorized number of shares of
Series A Preferred Stock or Non-Voting Common Stock
remaining unissued shall not be sufficient to permit
the conversion of all of the Series B Preferred Stock
at the time outstanding.
(j) The Corporation shall pay any documentary,
stamp or similar issue or transfer tax due on the
issue of (i) shares of Series A Preferred Stock upon
conversion of the Series B Preferred Stock into
Series A Preferred Stock and (ii) shares of
Non-Voting Common Stock upon conversion of the Series
B Preferred Stock into Non-Voting Common Stock. The
Corporation shall not, however, be required to pay
any tax which may be payable in respect of any
transfer involved in the issue and delivery of any
security in a name other than that in which the
security so converted was registered, and no such
issue or delivery shall be made unless and until the
person requested such issue has paid to the
Corporation the amount of any such tax, or has
established to the satisfaction of the Corporation
that such tax has been paid.
10. Exclusion of Other Rights.
Except as otherwise required by law, shares of Series
B Preferred Stock shall not have any preferences or relative, participating,
optional or other special rights, other than those specifically set forth in
this resolution and in the Certificate of Designations filed pursuant hereto
(as such Certificate may be amended from time to time) and in the Certificate
of Incorporation. No shares of Series B Preferred Stock shall have any rights
of preemption or subscription whatsoever as to any securities of the
Corporation, except as expressly provided in any written agreement among the
Corporation and any holder or holders of Series B Preferred Stock.
11. Reissuance of Preferred Stock.
Shares of Series B Preferred Stock that have been
issued and reacquired in any manner, including shares purchased or redeemed or
exchanged, shall (upon compliance with any applicable
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provisions of the General Corporation Law of the State of Delaware) be canceled
and shall not be reissued.
12. Headings of Subdivisions.
The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the interpretation of any of
the provisions hereof.
13. Severability of Provisions.
If any right, preference or limitation of the Series B
Preferred Stock set forth in this resolution and in the Certificate of
Designations for the Series B Preferred Stock (as such Certificate may be
amended from time to time) is invalid, unlawful or incapable of being enforced
by reason of any rule or law or public policy, all other rights, preferences
and limitations set forth in such Certificate of Designations (as so amended)
which can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other such right, preference or limitation unless so
expressed herein.
14. Notice.
All notices and other communications required or permitted to
be given to the Corporation hereunder shall be made by hand delivery or
registered or certified mail, return receipt requested, to the Corporation at
its principal executive offices (currently located on the date of the adoption
of these resolutions at 13800 Montfort Drive, Suite 300, Dallas, Texas 75240,
Attention: Secretary. Minor imperfections in any such notice shall not affect
the validity thereof.
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IN WITNESS WHEREOF, Renters Choice, Inc. has caused this certificate
to be signed by _____________________, its __________________, this ____ day of
August, 1998.
RENTERS CHOICE, INC.
a Delaware corporation
By:
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Name:
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Title:
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