EXHIBIT 3.1
THIRD RESTATED
CERTIFICATE OF INCORPORATION
OF
AMERICAN TIRE DISTRIBUTORS, INC.
American Tire Distributors, Inc. (the "Corporation"), a corporation
formed under the General Corporation Law of the State of Delaware (as the same
may be amended, supplemented or repealed from time to time, the "Act"), hereby
certifies as follows:
1. The original Certificate of Incorporation of the Corporation
was filed on December 29, 1998. A Restated Certificate of Incorporation of the
Corporation was filed on April 3, 2001. A Second Restated Certificate of
Incorporation of the Corporation was filed on March 27, 2002. An amendment to
the Second Restated Certificate of Incorporation of the Corporation, changing
the name of the Corporation from Heafner Tire Group, Inc. to American Tire
Distributors, Inc., was filed in May 2002.
2. This Third Restated Certificate of Incorporation (hereinafter
referred to as the "Articles") was duly adopted in accordance with provisions
of Sections 242 and 245 of the Act by a resolution duly adopted at a meeting of
the Board of Directors and by written consent of the Stockholders of the
Corporation.
3. The Corporation's Second Restated Certificate of
Incorporation (as amended) is amended and restated in its entirety as follows:
ARTICLE 1
CORPORATE NAME.
The name of the Corporation is American Tire Distributors, Inc.
ARTICLE 2
REGISTERED AGENT.
The address, including street, number, city, and county, of the
registered office of the Corporation in the State of Delaware is 2711
Centerville Road, Suite 400, Wilmington, Delaware 19808, in the County of New
Castle, and the name of the registered agent of the Corporation in the State of
Wilmington at such address is Corporation Service Company.
ARTICLE 3
PURPOSE.
The purpose of the Corporation is to conduct any lawful business, to
promote any lawful purpose, and to engage in any lawful act or activity for
which a corporation may be organized under the Act.
ARTICLE 4
CAPITAL STOCK.
Section 4.1. Shares Authorized. The total number of shares of
capital stock which the Corporation shall have authority to issue is (i)
50,000,000 shares of Common Stock, par value of $.01 per share (the "Common
Stock"), and (ii) 10,982,426 shares of Preferred Stock with a par value of $.01
per share (the "Preferred Stock").
Section 4.2. Common Stock. The Common Stock shall have such
rights, powers and privileges as provided in these Articles, in any amendment
to these Articles and under applicable law.
Section 4.3. Preferred Stock. The Preferred Stock shall have such
voting powers, designations, preferences, such other relative, participating,
optional and other special rights, and such qualifications, limitations and
restrictions as provided in these Articles and in any amendment to these
Articles. Of the 10,982,426 shares of Preferred Stock authorized for issuance
by the Corporation, 7,000 shares shall initially be designated Series A
Cumulative Redeemable Preferred Stock (the "Series A Preferred Stock"), 4,500
shares shall initially be designated Series B Cumulative Redeemable Preferred
Stock (the "Series B Preferred Stock" and, together with the Series A Preferred
Stock, the "Kelly Preferred Stock"), 1,333,334 shares shall initially be
designated Series C Preferred Stock (the "Series C Preferred Stock") and
6,637,592 shares shall initially be designated Series D Preferred Stock (the
"Series D Preferred Stock"). The stated value of the Series A Preferred Stock
(the "Series A Liquidation Preference") shall be $1,000.00 per share. The
stated value of the Series B Preferred Stock (the "Series B Liquidation
Preference") shall initially be $1,000.00 per share and shall be adjusted from
time to time as provided in Section 6.3.
Section 4.4. Rank of Capital Stock. With respect to dividend
rights and other rights upon liquidation, dissolution or winding up of the
Corporation, (i) the Series A Preferred Stock and the Series B Preferred Stock
shall rank on a parity with each other and senior to the Series C Preferred
Stock, Series D Preferred Stock and Common Stock, (ii) the Series C Preferred
Stock and Series D Preferred Stock shall rank junior to the Series A Preferred
Stock and Series B Preferred Stock and senior to the Common Stock and (iii) the
Series C Preferred Stock and Series D Preferred Stock shall rank on a parity
with each other. Other classes or series of capital stock may, subject to the
provisions of these Articles and applicable law, be authorized by the Board of
Directors that rank (as to payment of dividends or distribution of assets upon
liquidation, dissolution or winding up) senior to ("Senior Stock"), on a parity
with ("Parity Stock") or junior to ("Junior Stock") other classes or series of
capital stock.
Section 4.5. No Preemptive Rights. No holder of shares of capital
stock of the Corporation shall have preemptive rights to acquire unissued
shares of capital stock of the Corporation under these Articles.
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ARTICLE 5
COMMON STOCK.
Section 5.1. Voting Rights. Each outstanding share of Common
Stock shall be entitled to vote on each matter on which the stockholders of the
Corporation shall be entitled to vote and each holder of Common Stock shall be
entitled to one vote for each share of Common Stock held by such holder.
Section 5.2. Dividends and Distributions. The holders of shares
of Common Stock shall be entitled to receive dividends or other distributions
out of the assets of the Corporation legally available therefor when, as and if
declared by the Board of Directors.
Section 5.3. Liquidation, Dissolution or Winding Up. In the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, holders of Common Stock shall be entitled to share ratably in the
net assets of the Corporation remaining after payment or provision for payment
of the debts and liabilities of the Corporation and all amounts payable to
holders of Senior Stock.
ARTICLE 6
KELLY PREFERRED STOCK.
The Kelly Preferred Stock shall have the following voting powers, preferences
and other rights, qualifications, limitations and restrictions:
Section 6.1. Series A Dividends and Distributions. (a) Holders of
shares of Series A Preferred Stock, in preference to the holders of shares of
Common Stock and any shares of other capital stock of the Corporation other
than shares of Parity Stock or Senior Stock with respect to the Series A
Preferred Stock, shall be entitled to receive, when, as and if declared by the
Board of Directors, out of the assets of the Corporation legally available
therefor, cumulative cash dividends (the "4% Series A Dividends") on the Series
A Liquidation Preference of such shares at an annual rate of 4.0%; provided
that, if as of December 31, 1997 (i) the Corporation and its subsidiaries are
not ordering all of their respective requirements of "Winston" brand tires from
The Kelly-Springfield Tire Company, a division of The Goodyear Tire and Rubber
Company (together with its affiliates, "Kelly-Springfield"), and (ii)
Kelly-Springfield is otherwise ready, willing and able to supply the
Corporation and its subsidiaries with such "Winston" brand tires in accordance
with the terms set forth in the Supply Agreement (as defined below in Section
6.5(c)), then, beginning immediately thereafter and continuing until such time
as the earlier of (1) the Corporation and its affiliates are ordering all of
such "Winston" brand tires from Kelly-Springfield and (2) the Kelly Preferred
Stock has been redeemed in full, the annual rate of the 4% Series A Dividends
shall be at the greater of (x) 4% and (y) 120% of the Prime Rate (as defined
below in Section 6.1(b)) (the "Adjusted Series A Dividend Rate"). The 4% Series
A Dividends shall be calculated on the basis of a 360-day year consisting of
twelve 30-day months, and shall accrue and be payable, in immediately available
funds, due on the last Business Day of each calendar month (each a "4% Dividend
Monthly Payment Date"). Payment of 4% Series A Dividends on shares of Series A
Preferred Stock shall commence on the first 4% Dividend Monthly Payment Date
following the date of original
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issue of such shares (the "Series A Issue Date"). The first payment of 4%
Series A Dividends on such shares shall be in an amount equal to the product of
(i) the quotient obtained by dividing (1) the product of the Series A
Liquidation Preference of such shares and 4.0% by (2) 12 and (ii) the quotient
obtained by dividing (x) the number of days from and including the Series A
Issue Date up to and excluding the initial 4% Dividend Monthly Payment Date by
(y) 30. If holders of shares of Series A Preferred Stock are entitled to
receive 4% Series A Dividends on a date other than a 4% Dividend Monthly
Payment Date (a "4% Dividend Special Payment Date"), such payment shall be in
an amount equal to the product of (i) the quotient obtained by dividing (1) the
product of the Series A Liquidation Preference of such shares and 4.0% or the
Adjusted Series A Dividend Rate, as applicable, by (2) 12 and (ii) the quotient
obtained by dividing (x) the number of days from and including the date of such
immediately preceding 4% Dividend Monthly Payment Date up to and excluding the
4% Dividend Special Payment Date by (y) 30. All other payments of 4% Series A
Dividends shall accrue from and including the immediately preceding 4% Dividend
Monthly Payment Date or 4% Dividend Special Payment Date, as applicable, to but
excluding the following 4% Dividend Monthly Payment Date or 4% Dividend Special
Payment Date, as applicable. "Business Day" means any day other than a
Saturday, Sunday or other day on which banks in Atlanta, Georgia are authorized
to close.
(b) In addition to the 4% Series A Dividends, holders of Series A
Preferred Stock, in preference to the holders of shares of Common Stock and any
shares of other capital stock of the Corporation other than shares of Parity
Stock or Senior Stock with respect to the Series A Preferred Stock, shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the assets of the Corporation legally available therefor, cumulative cash
dividends (the "Series A Additional Dividends" and, together with the 4% Series
A Dividends, the "Series A Dividends") in an amount equal to the product of the
Series A Liquidation Preference of such shares and the Applicable Rate (as
defined below). The Series A Additional Dividends shall accrue and be payable
in immediately available funds on the last Business Day of January of each year
(each an "Additional Dividend Payment Date"), with the first such Series A
Additional Dividend to accrue and be payable on the last Business Day of
January 1999; provided that, if in any calendar year immediately preceding an
Additional Dividend Payment Date a 4% Series A Dividend accrues and becomes
payable at the Adjusted Series A Dividend Rate, the amount of the Series A
Additional Dividend that accrues and becomes payable on such Additional
Dividend Payment Date shall be reduced by an amount equal to the excess, if
any, of (x) the aggregate amount of the 4% Series A Dividends that accrued and
became payable in such calendar year over (y) the aggregate amount of such
Series A Dividends that would have accrued and become payable in such calendar
year if the Adjusted Series A Dividend Rate had not applied in such calendar
year. The "Applicable Rate" for determining the amount of the Series A
Additional Dividend for each Additional Dividend Payment Date shall be the
percentage rate set forth opposite such date (and corresponding to the
applicable number of Units Purchased (as defined below)) set forth below:
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Additional Dividend
Payment Date Units Purchased Applicable Rate
- ------------------- --------------- ---------------
January 1999 Less than 1,000,000 Standard Rate
1,000,000-1,099,999 4.0
1,100,000-1,199,999 3.0
1,200,000-1,299,999 2.0
1,300,000-1,399,999 1.0
1,400,000 or more 0.0
January 2000 Less than 1,100,000 Standard Rate
1,100,000-1,199,999 4.0
1,200,000-1,299,999 3.0
1,300,000-1,399,999 2.0
1,400,000-1,499,999 1.0
1,500,000 or more 0.0
January 2001 Less than 1,144,000 Standard Rate
1,144,001-1,247,999 4.0
1,248,000-1,351,999 3.0
1,352,000-1,455,999 2.0
1,456,000-1,559,999 1.0
1,560,000 or more 0.0
January 2002 Less than 1,189,760 Standard Rate
1,189,761-1,297,919 4.0
1,297,920-1,406,079 3.0
1,406,080-1,514,239 2.0
1,514,240-1,622,399 1.0
1,622,400 or more 0.0
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Additional Dividend
Payment Date Units Purchased Applicable Rate
- ------------------- --------------- ---------------
January 2003 Less than 1,237,350 Standard Rate
1,237,351-1,349,836 4.0
1,349,837-1,462,322 3.0
1,462,323-1,574,809 2.0
1,574,810-1,687,295 1.0
1,687,296 or more 0.0
January 2004 Less than 1,286,844 Standard Rate
1,286,845-1,403,829 4.0
1,403,830-1,520,815 3.0
1,520,816-1,637,801 2.0
1,637,802-1,754,787 1.0
1,754,788 or more 0.0
January 2005 Less than 1,338,318 Standard Rate
1,338,319-1,459,982 4.0
1,459,983-1,581,648 3.0
1,581,649-1,703,313 2.0
1,703,314-1,824,978 1.0
1,824,979 or more 0.0
January 2006 Less than 1,391,851 Standard Rate
1,391,852-1,518,381 4.0
1,518,382-1,644,914 3.0
1,644,915-1,771,446 2.0
1,771,447-1,897,977 1.0
1,897,978 or more 0.0
January 2007 Less than 1,447,525 Standard Rate
1,447,526-1,579,116 4.0
1,579,117-1,710,711 3.0
1,710,712-1,842,304 2.0
1,842,305-1,973,896 1.0
1,973,897 or more 0.0
January 2008 Less than 1,505,426 Standard Rate
1,505,427-1,642,281 4.0
1,642,282-1,779,139 3.0
1,779,140-1,915,996 2.0
1,915,997-2,052,852 1.0
2,052,853 or more 0.0
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provided that, in no event shall the Applicable Rate be higher than the
Standard Rate. "Standard Rate" means the excess, if any, of (x) the Prime Rate
over (y) 4%. "Prime Rate" means the rate of interest publicly announced from
time to time by Fleet National Bank at its office at 100 Federal Street,
Boston, Massachusetts as its "base" rate as in effect on the Business Day
immediately preceding the applicable dividend payment date. "Units Purchased"
means, for any Additional Dividend Payment Date, the net number of tires (other
than "Monarch" brand tires) purchased by the Corporation and its subsidiaries
from Kelly-Springfield during the calendar year immediately preceding such
Additional Dividend Payment Date, which number of tires shall not include an
amount equal to the sum of (x) 250,000 and (y) an amount equal to the number of
premium tires purchased by the Corporation and its affiliates from
Kelly-Springfield in 1996.
(c) If, as of the close of business on any 4% Dividend Monthly
Payment Date, there is a 4% Series A Dividend Arrearage (as hereinafter
defined), an additional dividend (the "4% Series A Makewhole Dividend") shall
accrue on each share of the Series A Preferred Stock for the period from and
including such 4% Dividend Monthly Payment Date to the earlier of (x) the date
on which such 4% Series A Dividend Arrearage is paid in full and (y) the next
succeeding 4% Dividend Monthly Payment Date, in an amount equal to the product
of (i) the Prime Rate (calculated for such period in accordance with Section
6.1(a)) and (ii) the amount of such 4% Series A Dividend Arrearage as of such
4% Dividend Monthly Payment Date. "4% Series A Dividend Arrearage" means, with
respect to each share of Series A Preferred Stock, as of any 4% Dividend
Monthly Payment Date, the excess, if any, of (i) all 4% Series A Dividends
accrued to (but excluding) such 4% Dividend Monthly Payment Date on such share
over (ii) all 4% Series A Dividends actually paid with respect to such share on
or before the close of business on such 4% Dividend Monthly Payment Date.
(d) If, as of the close of business on any Additional Dividend
Payment Date, there is a Series A Additional Dividend Arrearage (as hereinafter
defined), an additional dividend (the "Additional Series A Makewhole Dividend")
shall accrue on each share of the Series A Preferred Stock for the period from
and including such Additional Dividend Payment Date to the earlier of (x) the
date on which such Additional Series A Dividend Arrearage is paid in full and
(y) the next succeeding Additional Dividend Payment Date, in an amount equal to
the product of (i) the Prime Rate and (ii) the amount of such Additional Series
A Dividend Arrearage as of such Additional Dividend Payment Date. "Additional
Series A Dividend Arrearage" means, with
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respect to each share of Series A Preferred Stock, as of any Additional
Dividend Payment Date, the excess, if any, of (i) all Series A Additional
Dividends accrued to (but excluding) such Additional Dividend Payment Date on
such share over (ii) all Series A Additional Dividends actually paid with
respect to such share on or before the close of business on such Additional
Dividend Payment Date.
(e) The 4% Series A Dividends shall accrue, and shall be
cumulative from the Series A Issue Date of the underlying shares, whether or
not declared by the Board of Directors. The Series A Additional Dividends shall
accrue, and shall be cumulative from the first day on which such dividends are
due, whether or not declared by the Board of Directors. The 4% Series A
Makewhole Dividend and the Additional Series A Makewhole Dividend, if any,
shall accrue, and shall be cumulative from the date on which a 4% Series A
Dividend Arrearage or Series A Additional Dividend Arrearage arises, whether or
not declared by the Board of Directors. If the Corporation makes a dividend
payment on shares of Series A Preferred Stock in an amount less than the total
amount of accrued and payable dividends on the underlying shares at such time,
then the dividends paid shall be allocated ratably on a share-by-share basis
among all shares of Series A Preferred Stock then outstanding. The Board of
Directors may fix a record date that is no more than sixty days and no less
than ten days prior to any date fixed for payment of a dividend declared on
shares of Series A Preferred Stock to determine the holders of shares of Series
A Preferred Stock entitled to receive such payment. Accumulated but unpaid
dividends for any past dividend periods or payment dates may be declared and
paid at any time (without reference to any regular payment date) to holders of
record on a record date fixed by the Board of Directors that is no more than
sixty days and no less than ten days preceding the date fixed for payment of
such dividends.
(f) The holders of shares of Series A Preferred Stock shall not
be entitled to receive, and the Corporation shall not declare or pay thereon,
any dividends or other distributions except as provided herein. No interest or
sum of money in lieu of interest shall be payable in respect of any dividend
payment or payments on the shares of Series A Preferred Stock which may be in
arrears.
Section 6.2. Series B Dividends and Distributions. (a) If during
any calendar year beginning with 1998 the Corporation and its affiliates do not
purchase from Kelly-Springfield tires with an aggregate purchase price in an
amount equal to or greater than (i) for 1998, $60,000,000, (ii) for 1999,
$80,000,000, and (iii) for each calendar year thereafter, an amount averaging
at least 104% of the aggregate purchase price for tires purchased from
Kelly-Springfield in the prior calendar year, holders of shares of Series B
Preferred Stock, in preference to the holders of shares of Common Stock and any
shares of other capital stock of the Corporation other than shares of Parity
Stock or Senior Stock with respect to the Series B Preferred Stock, shall be
entitled to receive, when, as and if declared by the Board of Directors, out
the assets of the Corporation legally available therefor, cumulative cash
dividends (the "Series B Dividends") on the Series B Liquidation Preference of
such shares at the Prime Rate. The Series B Dividends shall accrue and be
payable in immediately available funds on the last Business Day of the month of
January following each such calendar year during which the applicable aggregate
purchase price threshold is not equaled or exceeded (each a "Series B Dividend
Payment Date").
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(b) If, as of the close of business on any Series B Dividend
Payment Date, there is a Series B Dividend Arrearage (as hereinafter defined),
an additional dividend (the "Series B Makewhole Dividend") shall accrue on each
share of the Series B Preferred Stock for the period from and including such
Series B Dividend Payment Date to the earlier of (x) the date on which such
Series B Dividend Arrearage is paid in full and (y) the next succeeding Series
B Dividend Payment Date, in an amount equal to the product of (i) the Prime
Rate and (ii) the amount of such Series B Dividend Arrearage as of such Series
B Dividend Payment Date. "Series B Dividend Arrearage" means, with respect to
each share of Series B Preferred Stock, as of any Series B Dividend Payment
Date, the excess, if any, of (i) all Series B Dividends accrued to (but
excluding) such Series B Dividend Payment Date on such share over (ii) all
Series B Dividends actually paid with respect to such share on or before the
close of business on such Series B Dividend Payment Date.
(c) Series B Dividends shall accrue, and shall be cumulative from
the first day on which such dividends are due, whether or not declared by the
Board of Directors. Series B Makewhole Dividends, if any, shall accrue, and
shall be cumulative from the date on which a Series B Dividend Arrearage
arises. If the Corporation makes a dividend payment on the shares of Series B
Preferred Stock in an amount less than the total amount of accrued and payable
dividends on the underlying shares at such time, then the dividends paid shall
be allocated ratably on a share-by-share basis among all shares of Series B
Preferred Stock then outstanding. The Board of Directors may fix a record date
that is no more than sixty days and no less than ten days prior to any date
fixed for payment of a dividend declared on shares of Series B Preferred Stock
to determine the holders of shares of Series B Preferred Stock entitled to
receive such payment. Accumulated but unpaid dividends for any past dividend
periods or payment dates may be declared and paid at any time (without
reference to any regular payment date) to holders of record on a record date
fixed by the Board of Directors that is no more than sixty days and no less
than ten days preceding the date fixed for payment of such dividends.
(d) The holders of shares of Series B Preferred Stock shall not
be entitled to receive, and the Corporation shall not declare or pay, any
dividends or other distributions except as provided herein. No interest or sum
of money in lieu of interest shall be payable in respect of any dividend
payment or payments on the shares of Series B Preferred Stock which may be in
arrears.
Section 6.3. Adjustment of Series B Liquidation Preference. After
the date of original issue of the shares of Series B Preferred Stock (the
"Series B Issue Date"), the Series B Liquidation Preference for the outstanding
shares of Series B Preferred Stock on any date (a "Series B Valuation Date")
shall be an amount per share equal to the excess, if any, of (i) $1,000 over
(ii) the quotient obtained by dividing (x) the aggregate Tire Purchase Credit
(as defined below) as of such Series B Valuation Date by (y) the total number
of shares of Series B Preferred Stock outstanding as of such Series B Valuation
Date. The "Tire Purchase Credit" as of any Series B Valuation Date shall be an
amount equal to (x) $1.00 per unit of "Broad Line" tires and (y) $2.00 per unit
of "HV&Z Performance" tires, in each case purchased by the Corporation and its
affiliates from and including the Series B Issue Date through such Series B
Valuation Date; provided that, for purposes of calculating the amount of the
Tire Purchase Credit, purchases of "Value Line" and "OPP" tires shall not be
counted.
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Section 6.4. Voting Rights.
(a) Ownership of shares of Kelly Preferred Stock shall entitle
the holders to no voting rights except as provided in this Section 6.4 and
under applicable law.
(b) So long as any shares of either Series A Preferred Stock or
Series B Preferred Stock shall be outstanding, the Corporation shall not,
without the affirmative vote or written consent of the holders of a majority of
the aggregate number of shares of Series A Preferred Stock or Series B
Preferred Stock then outstanding, as applicable, each considered as a separate
series, (i) alter or change the powers, preferences or rights given to the
Series A Preferred Stock or Series B Preferred Stock, as applicable, by these
Articles or (ii) amend these Articles to increase the authorized amount of
Series A Preferred Stock or Series B Preferred Stock or to authorize or create
any Senior Stock or Parity Stock with respect to the Series A Preferred Stock
or Series B Preferred Stock. The amendment of these Articles to authorize or
create, or to increase the authorized amount of, any Junior Stock shall not be
deemed to alter or change the powers, preferences or rights given to the Series
A Preferred Stock or the Series B Preferred Stock by these Articles.
Notwithstanding the foregoing provisions, the affirmative vote or consent of
the holders of the Series A Preferred Stock or the Series B Preferred Stock, as
applicable, shall not be required for any alteration or change on which the
holders would otherwise be entitled to vote if, at or prior to the time that
any such alteration or change takes effect, due provision is made for the
redemption of all such shares of Series A Preferred Stock or Series B Preferred
Stock at the time outstanding.
(c) So long as Kelly-Springfield holds (of record and
beneficially) all of the outstanding shares of Kelly Preferred Stock, if on any
date (1) any condition or event shall occur which results in the acceleration
of the maturity of the indebtedness evidenced by the Debt Documents or (2)
without the requisite vote or consent of the holders of Series A Preferred
Stock or Series B Preferred Stock, as applicable, the Corporation adversely
alters or changes the powers, preferences or rights given to such series by
these Articles, then the number of directors constituting the Board of
Directors shall, without further action, be increased by the Specified Number
(as defined below) and the holders of shares of Kelly Preferred Stock shall
have, in addition to the other voting rights set forth in these Articles, the
exclusive right, voting separately as a single class, to elect such Specified
Number of directors of the Corporation to fill such newly created
directorships, by written consent as provided herein, or at a special meeting
of such holders called as provided herein. Any such additional directors shall
continue as directors (subject to reelection or removal as provided in Section
6.4(d)(ii)) and the holders of Kelly Preferred Stock shall have such additional
voting rights until such time as (A) Kelly-Springfield no longer holds (of
record and beneficially) all of the outstanding shares of Kelly Preferred
Stock, (B) in the case of any event described in clause (1) above, such
acceleration of the indebtedness evidenced by the Debt Documents shall have
been rescinded or such indebtedness shall have been repaid in full, (C) in the
case of clause (2) above, such adverse alteration or change of the powers,
preferences or rights given to the Series A Preferred Stock or the Series B
Preferred Stock, as applicable, shall have been rescinded or (D) all of the
outstanding shares of Kelly Preferred Stock shall have been redeemed pursuant
to Section 6.5, whichever is earlier, at which time such additional directors
shall cease to be directors and such additional voting rights
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of the holders of Kelly Preferred Stock shall terminate subject to revesting in
the event of each and every subsequent event of the character indicated above.
"Specified Number" means a number of directors equal to the number required so
that the holders of Kelly Preferred Stock will have the right to elect, voting
separately as a single class, a majority of the Board of Directors at any time.
(d) (i) The right of holders of shares of Kelly Preferred Stock
to take any action as provided in Section 6.4(c) may be exercised at any annual
meeting of stockholders or at a special meeting of holders of shares of Kelly
Preferred Stock 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, which shall be a majority of the outstanding shares of Kelly
Preferred Stock unless otherwise required by law.
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 President of the Corporation may call, and upon the
written request of holders of record of at least 10% of the outstanding shares
of Kelly 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 within 30 days after delivery of such request to the Secretary, at the
place and upon the notice provided by law and in the by-laws of the Corporation
for the holding of meetings of stockholders.
(ii) At each meeting of stockholders at which the holders of
shares of Kelly Preferred Stock shall have the right, voting separately as a
single class, to elect the directors of the Corporation as provided in Section
6.4(c), the presence in person or by proxy of the holders of record of a
majority of the total number of shares of Kelly Preferred Stock then
outstanding and entitled to vote on the matter shall be necessary and
sufficient to constitute a quorum. At any such meeting or at any adjournment
thereof:
(A) the absence of a quorum of the holders of shares of
Kelly Preferred Stock shall not prevent the election of directors
other than those to be elected by the holders of shares of Kelly
Preferred Stock, and the absence of a quorum of the holders of shares
of any other class or series of capital stock shall not prevent the
election of directors to be elected by the holders of shares of Kelly
Preferred Stock; and
(B) in the absence of a quorum of the holders of shares
of Kelly Preferred Stock, a majority of the holders of such shares
present in person or by proxy shall have the power to adjourn the
meeting as to the actions to be taken by the holders of shares of
Kelly Preferred Stock from time to time and place to place without
notice other than announcement at the meeting until a quorum shall be
present.
For taking of any action as provided in Section 6.4(c) by the holders
of shares of Kelly Preferred Stock, each such holder shall have one vote for
each share of such stock standing in his name on the transfer books of the
Corporation as of any record date fixed for such purpose or, if
11
no such date be fixed, at the close of business on the Business Day next
preceding the day on which notice is given, or if notice is waived, at the
close of business on the Business Day next preceding the day on which the
meeting is held or, if action is taken by written consent, at the close of
business on the Business Day next preceding the day on which such consent is
entered into; provided that shares of Kelly Preferred Stock owned by the
Corporation or any Affiliate of the Corporation shall not be deemed to be
outstanding for purposes of taking any action as provided in Section 6.4(c).
Each director elected by the holders of shares of Kelly Preferred
Stock as provided in Section 6.4(c) shall, unless his or her term shall expire
earlier in accordance with the provisions hereof, hold office until the annual
meeting of stockholders next succeeding his or her election or until his or her
successor, if any, is elected and qualified.
If any director so elected by the holders of Kelly Preferred Stock
shall cease to serve as a director before his or her term shall expire (except
by reason of the termination of the voting rights accorded to the holders of
Kelly Preferred Stock with respect to the Specified Number of directors in
accordance with Section 6.4(c)), the holders of the Kelly Preferred Stock then
outstanding and entitled to vote for such director may, by written consent as
provided herein, or at a special meeting of such holders called as provided
herein, elect a successor to hold office for the unexpired term of the director
whose place shall be vacant.
Any director elected by the holders of shares of Kelly Preferred Stock
voting separately as a single class may be removed from office with or without
cause by the vote or written consent of the holders of at least a majority of
the then outstanding shares of Kelly Preferred Stock, at the time of removal.
Section 6.5. Redemption.
(a) Subject to the restrictions contained in Section 6.6,
beginning on the last Business Day of December 2002, and on the last Business
Day of each June and December thereafter ending on the last Business Day of
June 2007 (each a "Series A Fixed Redemption Date"), the Corporation shall
redeem, out of the assets of the Corporation legally available therefor, a
number of outstanding shares of Series A Preferred Stock equal to the lesser of
(x) 700 and (y) the total number of shares of Series A Preferred Stock
outstanding on such Series A Fixed Redemption Date at a price per share equal
to the sum of (1) 100% of the Series A Liquidation Preference and (2) an amount
per share equal to all accrued and unpaid Series A Dividends, 4% Series A
Makewhole Dividends and Additional Series A Makewhole Dividends on such shares,
whether or not declared or payable, to such Series A Fixed Redemption Date, in
immediately available funds. If less than all of the outstanding shares of
Series A Preferred Stock are to be redeemed pursuant to this Section 6.5(a),
shares shall be redeemed from all holders of outstanding Series A Preferred
Stock on the date the redemption notice specified in Section 6.5(g) is mailed,
pro rata in proportion (to the extent practicable) to the number of shares of
Series A Preferred Stock held by each such holder. No fractions of shares shall
be redeemed pursuant to this Section 6.5(a).
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(b) Subject to the restrictions contained in Section 6.6, on the
last business day of June 2007 (the "Series B Fixed Redemption Date"), the
Corporation shall redeem, out of the assets of the Corporation legally
available therefor, all of the outstanding shares of Series B Preferred Stock
at a price per share equal to the sum of (1) 100% of the Series B Liquidation
Preference and (2) an amount per share equal to all accrued and unpaid Series B
Dividends and Series B Makewhole Dividends on such shares, whether or not
declared or payable, to the Series B Fixed Redemption Date, in immediately
available funds.
(c) Subject to the restrictions contained in Section 6.6, no
later than 30 Business Days after the termination of the Supply Agreement (the
"Supply Agreement") to be entered into by and between the Corporation and
Kelly-Springfield in connection with Kelly-Springfield's purchase of the Kelly
Preferred Stock (the "Kelly Mandatory Redemption Date"), the Corporation shall
redeem, out of the assets of the Corporation legally available therefor, all of
the shares of Kelly Preferred Stock outstanding on the Kelly Mandatory
Redemption Date at a price per share equal to the sum of (1) the product of (x)
100% of the Series A Liquidation Preference or the Series B Liquidation
Preference, as applicable, and (y) the Applicable Premium then in effect as
provided in paragraph (f) below and (2) an amount per share equal to all
accrued and unpaid Series A Dividends, 4% Series A Makewhole Dividends and
Additional Series A Makewhole Dividends or Series B Dividends and Series B
Makewhole Dividends, as applicable, whether or not declared or payable, to the
Kelly Mandatory Redemption Date, in immediately available funds.
(d) Reserved.
(e) Subject to the restrictions contained in Section 6.6, at any
time after the Series A Issue Date, the Corporation may, in its sole
discretion, redeem all (but not less than all) of the outstanding shares of
Kelly Preferred Stock, out of the assets of the Corporation legally available
therefor, at a price per share equal to the sum of (1) the product of (x) 100%
of the Series A Liquidation Preference or the Series B Liquidation Preference,
as applicable, and (y) the Applicable Premium then in effect as provided in
paragraph (f) below and (2) an amount per share equal to all accrued and unpaid
Series A Dividends, 4% Series A Makewhole Dividends and Additional Series A
Makewhole Dividends or Series B Dividends and Series B Makewhole Dividends, as
applicable, whether or not declared or payable, to the Optional Redemption Date
(as defined below), in immediately available funds. "Optional Redemption Date"
means, with respect to a redemption pursuant to this Section 6.5(e), the date
specified for such redemption in the notice to the holders of the Kelly
Preferred Stock required under Section 6.5(g).
(f) The "Applicable Premium" for each of the following periods
shall be the number set forth opposite such period below:
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Period Applicable Premium
- -------------------------------------------------- ------------------
Series A Issue Date through first anniversary 1.22
After first anniversary through second anniversary 1.20
After second anniversary through third anniversary 1.18
After third anniversary through fourth anniversary 1.15
After fourth anniversary through fifth anniversary 1.10
After fifth anniversary 1.00
(g) Notice of any redemption of shares of Kelly Preferred Stock
pursuant to this Section 6.5 shall be mailed at least 10, but not more than 30,
days prior to the date fixed for redemption to each holder of shares of Kelly
Preferred Stock to be redeemed, at such holder's address as it appears on the
transfer books of the Corporation. Such notice shall include instructions for
the surrender of the Kelly Preferred Stock to be redeemed and the receipt of
payment therefor. In order to facilitate the redemption of shares of Kelly
Preferred Stock pursuant to this Section 6.5, the Board of Directors may fix a
record date for the determination of shares of Kelly Preferred Stock to be
redeemed, or may cause the transfer books of the Corporation for the Kelly
Preferred Stock to be closed, not more than 30 days or less than 10 days prior
to the date fixed for such redemption.
(h) Notice of redemption having been given as aforesaid, upon the
date fixed for redemption in respect of shares of Kelly Preferred Stock to be
redeemed pursuant to this Section 6.5, notwithstanding that any certificates
for such shares shall not have been surrendered for cancellation, from and
after the date of redemption designated in the notice of redemption, (i) the
shares of Kelly Preferred Stock represented thereby shall no longer be deemed
outstanding, (ii) the rights to receive dividends thereon shall cease to
accrue, and (iii) all rights of the holders of shares of Kelly Preferred Stock
to be redeemed shall cease and terminate, excepting only the right to receive
the applicable redemption price.
Section 6.6. Limitations on Mandatory Redemption and Dividends.
Notwithstanding anything to the contrary in these Articles, so long as any
amounts are outstanding under any Debt Documents (as defined below) or any
commitments to lend under the Debt Documents have not been terminated, the
Corporation shall not make payment in respect of any redemption permitted or
otherwise required by Section 6.5, or declare, make or pay any dividend or
distribution in respect of any shares of Kelly Preferred Stock if any Event of
Default (as defined in the Debt Documents) or default under any of the Debt
Documents or any event which, upon notice or lapse of time, or both, would
constitute an Event of Default has occurred and is continuing or would result
therefrom and has not been cured or waived in writing by the requisite vote of
the holders of the indebtedness represented by the Debt Documents. "Debt
Documents" means the Loan and Security Agreement, dated as of the Series A
Issue Date between the Corporation, Oliver & Winston, Inc., the financial
institutions party thereto and BankBoston, N.A., as agent, and the Senior
Subordinated Note and Warrant Purchase Agreement, dated the Series A Issue
Date, by and among the Corporation and The 1818 Mezzanine Fund, L.P., and the
notes, mortgages, security documents, guaranties and other agreements entered
into in connection therewith (each as amended, modified, supplemented and/or
restated from time to time in
14
accordance with its terms, including any replacement agreement therefor and any
refinancing of the debt incurred thereunder, which refinancing may result in a
greater principal amount outstanding in connection therewith).
Section 6.7. Reacquired Shares. Any shares of Kelly Preferred
Stock exchanged, redeemed, purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares of Kelly Preferred Stock shall upon their
cancellation become authorized but unissued shares of preferred stock, par
value $.01 per share, of the Corporation and, upon the filing of an appropriate
charter amendment with the Secretary of State of the State of Delaware, may be
reissued as part of another series of preferred stock, par value $.01 per
share, of the Corporation subject to the conditions or restrictions on issuance
set forth herein, but in any event may not be reissued as shares of Kelly
Preferred Stock or other Parity Stock unless all of the shares of Kelly
Preferred Stock shall have already been redeemed.
Section 6.8. Liquidation, Dissolution or Winding Up. (a) If the
Corporation shall commence a voluntary case under the United States bankruptcy
laws or any applicable bankruptcy, insolvency or similar law of any other
country, or consent to the entry of an order for relief in an involuntary case
under any such law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any
applicable bankruptcy, insolvency or similar law of any other country, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of the Corporation or of any substantial part of
its property, or ordering the winding up or liquidation of its affairs, and on
account of any such event the Corporation shall liquidate, dissolve or wind up,
or if the Corporation shall otherwise liquidate, dissolve or wind up, no
distribution shall be made (i) to the holders of shares of Junior Stock with
respect to the Kelly Preferred Stock unless, prior thereto, the holders of
shares of Kelly Preferred Stock shall have received an amount equal to the
Series A Liquidation Preference or the Series B Liquidation Preference, as
applicable, plus all accrued and unpaid dividends, whether or not declared or
currently payable, to the date of distribution, with respect to each
outstanding share, or (ii) to the holders of shares of Parity Stock with
respect to the Kelly Preferred Stock, except distributions made ratably on the
Kelly Preferred Stock and all other Parity Stock in proportion to the total
amounts to which the holders of all shares of Kelly Preferred Stock and other
Parity Stock are entitled upon such liquidation, dissolution or winding up.
(b) Neither the consolidation or merger of the Corporation with or
into any other person or entity nor the sale, lease, exchange (for cash, shares
of stock, securities or other consideration) or other distribution to another
person or entity of all or substantially all the assets, property or business
of the Corporation shall be deemed to be a liquidation, dissolution or winding
up of the Corporation for purposes of this Section 6.8.
15
Section 6.9. Exercise of Rights. (a) The rights of holders of
shares of Kelly Preferred Stock to take any action as provided in Article 6
hereof may be exercised at any annual meeting of stockholders 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, which shall be a
majority of the outstanding shares of Series A Preferred Stock or Series B
Preferred Stock, as applicable, unless otherwise required by law.
(b) For taking of any action as provided in this Article 6 by the
holders of shares of Kelly Preferred Stock, each such holder shall have one
vote for each share of such stock standing in its name on the transfer books of
the Corporation as of any record date fixed for such purpose or, if no such
date be fixed, at the close of business on the Business Day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the Business Day next preceding the day on which the meeting is held.
ARTICLE 6A
SERIES C PREFERRED STOCK.
The Series C Preferred Stock shall have the following voting powers,
preferences and other rights, qualifications, limitations and restrictions:
Section 6A.1. Dividends and Distributions.
(a) Cumulative 12% Dividends. Holders of shares of Series C
Preferred Stock, in preference to the holders of shares of Common Stock and any
shares of other capital stock of the Corporation other than shares of Parity
Stock or Senior Stock with respect to the Series C Preferred Stock, shall be
entitled to receive, out of the assets of the Corporation legally available
therefor, cumulative cash dividends (the "Series C Dividends") on the Series C
Liquidation Preference of such shares at an annual rate of 12.0% (compounded
quarterly and calculated on the basis of a 365/366 day year and the actual
number of days elapsed), accruing in equal quarterly installments on the last
Business Day of each fiscal quarter of the Corporation, commencing on the last
Business Day of the second fiscal quarter of the Corporation's 2001 fiscal
year. Series C Dividends shall begin to accrue and shall be cumulative from
April 3, 2001 (the "Series C Issue Date") whether or not declared by the Board
of Directors. Subject in each case to Sections 4.4 and 6A.7, (i) accumulated
but unpaid dividends for any past quarterly dividend periods may be declared
and paid at any time, without reference to any regular quarterly dividend
payment date, to holders of record on any date fixed by the Board of Directors
in accordance with these Articles and applicable law and (ii) accumulated but
unpaid dividends for any current quarterly dividend period may be declared and
paid in cash by the Board of Directors (in which case such dividend payment
shall not accrue and be cumulative), to holders of record on any date fixed by
the Board of Directors in accordance with these Articles and applicable law.
The "Series C Liquidation Preference" is $9.00 per share of Series C Preferred
Stock as of March 27, 2002, and shall be adjusted appropriately from time to
time after the Series C Issue Date to reflect stock splits, combinations and
reclassifications with respect to the Series C Preferred Stock.
(b) Participating Dividends. Subject to Sections 4.4 and 6A.7, in
addition to the Series C Dividends, in the event that the Corporation shall
declare a dividend or make any other
16
distribution (including, without limitation, in cash, in capital stock (which
shall include, without limitation, any options, warrants, convertible
securities or other rights to acquire capital stock) of the Corporation,
whether or not pursuant to a shareholder rights plan, "poison pill" or similar
arrangement, or other property or assets) on or with respect to shares of
Common Stock other than a dividend paid solely in Common Stock, then the Board
of Directors shall declare, and the holder of each share of Series C Preferred
Stock shall be entitled to receive in respect of each share of Series C
Preferred Stock, a dividend or distribution in an amount equal to the amount of
such dividend or distribution received by a holder of the number of shares of
Common Stock for which such share of Series C Preferred Stock is convertible on
the record date for such dividend or distribution. Any such amount shall be
paid to the holders of shares of Series C Preferred Stock at the same time such
dividend or distribution is made to holders of Common Stock.
(c) Other Provisions. The holders of shares of Series C Preferred
Stock shall not be entitled to receive any dividends or other distributions
with respect to the Series C Preferred Stock except as provided in this Article
6A. No interest or sum of money in lieu of interest shall be payable in respect
of any dividend payment or payments on the shares of Series C Preferred Stock
which may be in arrears.
Section 6A.2. Conversion of Series C Preferred Stock.
(a) Conversion Right. Any holder of Series C Preferred Stock
shall have the right, at its option, at any time and from time to time, to
convert, subject to the terms and provisions of this Section 6A.2, any or all
of such holder's shares of Series C Preferred Stock into such number of fully
paid and non-assessable shares of Common Stock as is equal, subject to Section
6A.2(g), to the product of the number of shares of Series C Preferred Stock
being so converted multiplied by the quotient of (i) the Series C Liquidation
Preference then in effect divided by (ii) the Series C Conversion Price (as
defined below) then in effect. The "Series C Conversion Price" is $3.00 as of
March 27, 2002, and is subject to adjustment as set forth in Section 6A.2(d).
Such conversion right shall be exercised by the surrender of the shares to be
converted to the Corporation at any time during usual business hours at its
principal place of business, accompanied by a written notice in which the
holder elects to convert such shares and specifies the name or names (with
address) in which a certificate or certificates for shares of Common Stock are
to be issued and (if so required by the Corporation) by a written instrument or
instruments of transfer in form reasonably satisfactory to the Corporation duly
executed by the holder or its duly authorized legal representative and transfer
tax stamps or funds therefor, if required pursuant to Section 6A.2(j). All
shares surrendered for conversion shall be delivered to the Corporation for
cancellation and canceled by it and no shares of Series C Preferred Stock shall
be issued in lieu thereof.
(b) As promptly as practicable after the surrender of any shares
of Series C Preferred Stock for conversion pursuant to Section 6A.2(a), the
Corporation shall deliver to or upon the written order of the holder of the
shares of Series C Preferred Stock so surrendered a certificate or certificates
representing the number of fully paid and non-assessable shares of Common Stock
into which such shares of Series C Preferred Stock may be or have been
converted in accordance with the provisions of this Section 6A.2. Subject to
the following provisions of this paragraph and of Section 6A.2(d), such
conversion shall be deemed to have been made immediately prior
17
to the close of business on the date that such shares of Series C Preferred
Stock shall have been surrendered in satisfactory form for conversion, and the
person or persons entitled to receive the Common Stock deliverable upon
conversion of such shares of Series C Preferred Stock shall be treated for all
purposes as having become the record holder or holders of such Common Stock at
such appropriate time, and such conversion shall be at the Series C Conversion
Price in effect at such time; provided, however, that no surrender shall be
effective to constitute the person or persons entitled to receive the Common
Stock deliverable upon such conversion as the record holder or holders of such
Common Stock while the share transfer books of the Corporation shall be closed
(but not for any period in excess of five days), but such surrender shall be
effective to constitute the person or persons entitled to receive such Common
Stock as the record holder or holders thereof for all purposes immediately
prior to the close of business on the next succeeding day on which such share
transfer books are open, and such conversion shall be deemed to have been made
at, and shall be made at the Series C Conversion Price in effect at, such time
on such next succeeding day. In case of the redemption of any shares of Series
C Preferred Stock pursuant to Section 6A.4, the right of the holders of such
shares to convert such shares into Common Stock pursuant to this Section 6A.2
shall cease and terminate, as to the shares to be redeemed, at the close of
business on the date fixed for redemption, unless the Corporation shall default
in the payment of the applicable redemption price for the shares to be
redeemed. If the last day for the exercise of the conversion right with respect
to the Series C Preferred Stock shall not be a Business Day, then such
conversion right may be exercised on the next succeeding Business Day.
(c) To the extent permitted by law, when shares of Series C
Preferred Stock are converted, all dividends accrued and unpaid (whether or not
declared or currently payable) on the Series C Preferred Stock so converted to
the date of conversion shall be immediately due and payable, at the option of
the Corporation, in cash (subject to Section 6A.7 and to the last sentence of
this Section 6A.2(c)) or shares of Common Stock. If the Corporation elects to
issue shares of Common Stock in lieu of the cash payment of the accrued and
unpaid dividends, the holder of shares of Series C Preferred Stock shall be
entitled to receive that number of shares of Common Stock which the amount of
accrued and unpaid dividends would purchase at the Series C Liquidation
Preference, and such shares of Common Stock must accompany the shares of Common
Stock issued upon such conversion. If the Corporation elects to pay such
accrued and unpaid dividends in cash, such cash payment must accompany the
shares of Common Stock issued upon such conversion unless the Board of
Directors determines that such cash payment may not be made under the Other
Documents (as defined in Section 6A.7), in which case such cash payment shall
be made promptly after such time as the circumstances giving rise to such
inability to make such cash payment shall, in the sole judgment of the Board of
Directors, no longer exist; provided, however, that, at any time prior to such
payment, such holder may elect to receive shares of Common Stock in lieu of
such cash payment, and, upon such election, shall be entitled to receive that
number of shares of Common Stock that the amount of such cash payment would
purchase at the Series C Conversion Price on the date of such election.
(d) The Series C Conversion Price and the number of shares of
Common Stock issuable upon conversion of the Series C Preferred Stock shall be
subject to adjustment as provided in this Section 6A.2(d):
18
(i) In case the Corporation shall at any time or from
time to time (A) subdivide the outstanding shares of Common Stock into a larger
number of shares, (B) combine the outstanding shares of Common Stock into a
smaller number of shares or (C) issue any shares of its capital stock in a
reclassification of the Common Stock, then, and in each such case, the number
of shares of Common Stock issuable upon conversion of the Series C Preferred
Stock in effect immediately prior to such event shall be adjusted (and any
other appropriate actions shall be taken by the Corporation) so that the holder
of any share of Series C Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock or other
securities of the Corporation that such holder would have owned or would have
been entitled to receive upon or by reason of any of the events described
above, had such share of Series C Preferred Stock been converted immediately
prior to the occurrence of such event. An adjustment made pursuant to this
Section 6A.2(d)(i) shall become effective retroactively to the close of
business on the day upon which the corporate action giving rise to such
adjustment becomes effective.
(ii) In case the Corporation shall at any time or from
time to time issue or sell (other than in a Series C Exempt Issuance (as
defined in Section 6A.2(d)(iii) below)) shares of Common Stock (or securities
convertible into or exchangeable for Common Stock, or any options, warrants or
other rights to acquire shares of Common Stock), at a price per share less than
the Series C Conversion Price then in effect at the record date referred to in
the immediately following sentence (treating the price per share of any
security convertible or exchangeable or exercisable into Common Stock as equal
to (A) the sum of the price for such security convertible, exchangeable or
exercisable into Common Stock plus any additional consideration payable (without
regard to any anti-dilution adjustments) upon the conversion, exchange or
exercise of such security into Common Stock divided by (B) the number of shares
of Common Stock initially underlying such convertible, exchangeable or
exercisable security), then, and in each such case, the Series C Conversion
Price then in effect shall be adjusted by dividing the Series C Conversion Price
in effect on the day immediately prior to such record date by a fraction (x) the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding on such record date plus the number of additional shares of Common
Stock issued or to be issued (or the maximum number into which such convertible
or exchangeable securities initially may convert or exchange or for which such
options, warrants or other rights initially may be exercised) and (y) the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common Stock which
the aggregate consideration for the total number of such additional shares of
Common Stock so issued (or into which such convertible or exchangeable
securities may convert or exchange or for which such options, warrants
19
or other rights may be exercised plus the aggregate amount of any additional
consideration initially payable upon conversion, exchange or exercise of such
security) would purchase at the Series C Conversion Price in effect on such
record date. Such adjustment shall be made whenever such shares, securities,
options, warrants or other rights are issued, and shall become effective
retroactively to a date immediately following the close of business on the
record date for the determination of shareholders entitled to receive such
shares, securities, options, warrants or other rights; provided, however, that
the determination as to whether an adjustment is required to be made pursuant to
this Section 6A.2(d)(ii) shall only be made upon the issuance of such shares or
such convertible or exchangeable securities, options, warrants or other rights
and not upon the issuance of the security into which such convertible or
exchangeable security converts or exchanges, or the security underlying such
options, warrants or other rights; provided, further, that if any convertible or
exchangeable securities, options, warrants or other rights (or any portions
thereof) which shall have given rise to an adjustment pursuant to this Section
6A.2(d)(ii) shall have expired or terminated without the exercise thereof and/or
if by reason of the terms of such convertible or exchangeable securities,
options, warrants or other rights there shall have been an increase or
increases, with the passage of time or otherwise, in the price payable upon the
exercise or conversion thereof, then the Series C Conversion Price hereunder
shall be readjusted (but to no greater extent than originally adjusted with
respect to the related event) on the basis of (x) eliminating from the
computation any additional shares of Common Stock corresponding to such
convertible or exchangeable securities, options, warrants or other rights as
shall have expired or terminated, (y) treating the additional shares of Common
Stock, if any, actually issued or issuable pursuant to the previous exercise of
such convertible or exchangeable securities, options, warrants or other rights
as having been issued for the consideration actually received and receivable
therefor and (z) treating any of such convertible or exchangeable securities,
options, warrants or other rights which remain outstanding as being subject to
exercise or conversion on the basis of such exercise or conversion price as
shall be in effect at this time.
(iii) Notwithstanding Section 6A.2(d)(ii), no adjustment
to the Series C Conversion Price pursuant to Section 6A.2(d)(ii) or otherwise
shall be made in respect of any sale or issuance by the Corporation of (A)
shares of Common Stock (or options, warrants or other Common Stock purchase
rights, and the Common Stock issued pursuant to such options, warrants or other
equity incentive rights (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like)) issued or to be issued pursuant to the
conversion, exchange or exercise of the Series C Preferred Stock, the Series D
Preferred Stock or any other security, option, warrant, right or other
convertible security outstanding or in effect on the Series C Issue Date, (B)
shares of Common Stock (or options, warrants or other Common Stock purchase
rights, and the Common Stock issued pursuant to such options, warrants or other
equity incentive rights (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like)) issued or to be issued to employees,
officers or directors of, or consultants or advisors to the Corporation or any
subsidiary pursuant to any stock incentive or equity-based compensation, plan,
program, arrangement or agreement of the Corporation or any of its subsidiaries
in effect on the Series C Issue Date (as amended from time to time in
accordance with its terms) or any other stock incentive or equity-based
compensation plan, program, arrangement or agreement approved by the Board of
Directors; (C) securities issued pursuant to a registration statement filed
under the Securities Act of 1933; (D) securities issued pursuant to the
acquisition of another entity by the Corporation by merger, purchase of assets
or other form of reorganization; or (E) securities issued to landlords,
equipment lessors, banks, financial institutions, manufacturers, vendors,
suppliers or similar entities in transactions approved by the Board of
Directors (each, a "Series C Exempt Issuance").
(iv) In case the Corporation at any time or from time to
time shall take any action affecting its Common Stock, other than an action
described in any of Section 6A.2(d)(i) through Section 6A.2(d)(iii), inclusive,
then, and in each such case, the Series C Conversion Price shall be adjusted in
such manner and at such time as the Board of Directors of the Corporation in
its sole business judgment determines to be equitable in the circumstances.
20
(v) Notwithstanding anything herein to the contrary, no
adjustment under this Section 6A.2(d) need be made to the Series C Conversion
Price unless such adjustment would require an increase or decrease of at least
1% of the Series C Conversion Price then in effect. Any lesser adjustment shall
be carried forward and shall be made at the time of and together with the next
subsequent adjustment, which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least 1% of such
Series C Conversion Price. Any adjustment to the Series C Conversion Price
carried forward and not theretofore made shall be made immediately prior to the
conversion of any shares of Series C Preferred Stock pursuant hereto.
(e) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to shareholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Series C Conversion Price
then in effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Series C Conversion
Price, then, and in each such case, the Corporation shall deliver to each
registered holder of Series C Preferred Stock a certificate, signed by a
responsible officer of the Corporation, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Series C Conversion Price
then in effect following such adjustment.
(g) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any shares of Series C Preferred Stock.
If more than one share of Series C Preferred Stock shall be surrendered for
conversion at one time by the same holder, the number of full shares of Common
Stock issuable upon conversion thereof shall be computed on the basis of the
aggregate Series C Liquidation Preference of the shares of Preferred Stock so
surrendered. If the conversion of any share or shares of Series C Preferred
Stock results in a fraction, an amount equal to such fraction multiplied by the
Current Market Price of the Common Stock on the Business Day preceding the day
of conversion shall be paid to such holder in cash by the Corporation.
(h) In case at any time or from time to time:
(A) the Corporation shall declare a dividend (or any
other distribution) on or with respect to its Common Stock;
(B) the Corporation shall authorize the granting to the
holders of its Common Stock of rights or warrants to
subscribe for or purchase any shares of stock of any class or of any other
rights or warrants;
(C) there shall be any reclassification of the Common
Stock, or any consolidation or merger to which the Corporation is a party and
for which approval of any shareholders of the Corporation is required, or any
sale or other disposition of all or substantially all of the assets of the
Corporation; or
21
(D) there shall occur any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then the Corporation shall mail to each holder of shares of Series C Preferred
Stock at such holder's address as it appears on the transfer books of the
Corporation a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or warrants or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding up is expected to
become effective. Such notice also shall specify the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for shares of stock or other securities or property or cash
deliverable upon such reclassification, consolidation, merger, sale,
conveyance, dissolution, liquidation or winding up.
(i) The Corporation shall at all times reserve and keep available
for issuance upon the conversion of the Series C Preferred Stock, 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 C
Preferred Stock, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common Stock to permit such reservation or to
permit the conversion of all outstanding shares of Series C Preferred Stock.
(j) The issuance or delivery of certificates for Common Stock
upon the conversion of shares of Series C Preferred Stock shall be made without
charge to the converting holder of shares of Series C Preferred Stock for such
certificates or for any stamp or transfer tax in respect of the issuance or
delivery of such certificates or the securities represented thereby, and such
certificates shall be issued or delivered in the respective names of, or in
such names as may be directed by, the holders of the shares of Series C
Preferred Stock converted; provided, however, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate in a name other
than that of the holder of the shares of Series C Preferred Stock converted,
and the Corporation shall not be required to issue or deliver such certificate
unless or until the person or persons requesting the issuance or delivery
thereof shall have paid to the Corporation the amount of such tax or shall have
established to the reasonable satisfaction of the Corporation that such tax has
been paid.
Section 6A.3. Voting Rights. Ownership of shares of Series C
Preferred Stock shall entitle the holders to no voting rights except as
provided in this Section 6A.3 and under applicable law. So long as any shares
of the Series C Preferred Stock are outstanding, each outstanding share of
Series C Preferred Stock shall entitle the holder thereof to vote, in person or
by proxy, at a special or annual meeting of shareholders, on all matters voted
on by holders of Common Stock voting together as a single class with other
shares entitled to vote thereon (other than matters on which the holders of
Series C Preferred Stock are entitled by law or these Articles to vote as a
separate class). With respect to any such vote, each share of Series C
Preferred Stock shall entitle the holder thereof to cast that number of votes
per share of Series C Preferred Stock as is equal to the number of votes that
such holder would be entitled to cast had such holder converted his shares of
Series C Preferred Stock into Common Stock on the record
22
date for determining the shareholders of the Corporation eligible to vote on
any such matters. So long as any shares of Series C Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote or written
consent of the holders of a majority of the aggregate number of shares of
Series C Preferred Stock then outstanding, (i) alter or change the powers,
preferences or rights given to the Series C Preferred Stock by these Articles
or (ii) amend these Articles to increase the authorized amount of Series C
Preferred Stock. The amendment of these Articles to authorize or create, or to
increase the authorized amount of, any Junior Stock shall not be deemed to
alter or change the powers, preferences or rights given to the Series C
Preferred Stock by these Articles. Notwithstanding the foregoing provisions,
the affirmative vote or consent of the holders of the Series C Preferred Stock,
as applicable, shall not be required for any alteration or change on which the
holders would otherwise be entitled to vote if, at or prior to the time that
any such alteration or change takes effect, due provision is made for the
redemption of all such shares of Series C Preferred Stock at the time
outstanding.
Section 6A.4. Redemption.
(a) Redemption at the Option of the Holder. The Series C
Preferred Stock shall not be redeemable by the Corporation at the request or
option of the Holder.
(b) Redemption at the Option of the Company. Subject to the
rights and preferences of any Senior Stock and subject to Sections 4.4 and
6A.7, at any time on or after the Series C Issue Date, the Corporation shall
have the right, exercisable by written notice to all holders of Series C
Preferred Stock (the "Series C Optional Redemption Notice"), to redeem all (but
not less than all) of the outstanding shares of Series C Preferred Stock, out
of the assets of the Corporation legally available therefor, at a price per
share equal to (x) the Series C Liquidation Preference then in effect plus (y)
the amount of all accrued and unpaid Series C Dividends on such share through
and including the date of redemption, on the date set forth in the Series C
Optional Redemption Notice (which date shall be no less than 10 Business Days
after the date of such Series C Optional Redemption Notice).
(c) Redemption Procedures. Each repurchase of shares of Series C
Preferred Stock under this Section 6A.4 shall be deemed to have been effected
on the date of redemption and repurchase by the Corporation pursuant to this
Section 6A.4(c). On the date specified in each Series C Optional Redemption
Notice, each holder of shares of Series C Preferred Stock to be redeemed shall
deliver to the Corporation a certificate or certificates representing the
shares of Series C Preferred Stock to be redeemed, duly endorsed and in proper
form for transfer, against payment in full by wire transfer of immediately
available funds in U.S. dollars to an account designated in writing by such
holder of an amount per share equal to (x) the Series C Liquidation Preference
then in effect plus (y) the amount of all accrued and unpaid Series C Dividends
on such share through and including the date of redemption.
Section 6A.5. Reacquired Shares. Any shares of Series C Preferred
Stock exchanged, redeemed, purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof.
23
Section 6A.6. Liquidation, Dissolution or Winding Up. If the
Corporation shall commence a voluntary case under the United States bankruptcy
laws or any applicable bankruptcy, insolvency or similar law of any other
country, or consent to the entry of an order for relief in an involuntary case
under any such law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any
applicable bankruptcy, insolvency or similar law of any other country, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of the Corporation or of any substantial part of
its property, or ordering the winding up or liquidation of its affairs, and on
account of any such event the Corporation shall liquidate, dissolve or wind up,
or if the Corporation shall otherwise liquidate, dissolve or wind up, no
distribution shall be made (i) to the holders of shares of Series C Preferred
Stock unless, prior thereto, the holders of shares of all Senior Stock shall
have received the total amounts to which such holders are entitled upon such
Liquidation Event, (ii) to the holders of shares of Junior Stock with respect
to the Series C Preferred Stock unless, prior thereto, the holders of shares of
Series C Preferred Stock shall have received an amount per share equal to the
greater of (A) the amount and type of proceeds that a holder of Series C
Preferred Stock would have been entitled to receive if such holder had
converted its shares of Series C Preferred Stock into Common Stock in
accordance with Section 6A.2 immediately prior to such liquidation, dissolution
or winding up or (B) the sum of (x) the Series C Liquidation Preference then in
effect plus (y) the amount of all accrued and unpaid Series C Dividends on such
share through and including the date of redemption or (iii) to the holders of
shares of Parity Stock with respect to the Series C Preferred Stock, except
distributions made ratably on the Series C Preferred Stock and all other Parity
Stock in proportion to the total amounts to which the holders of all shares of
Series C Preferred Stock and other Parity Stock are entitled upon such
liquidation, dissolution or winding up.
(b) Neither the consolidation or merger of the Corporation with
or into any other person or entity nor the sale, lease, exchange (for cash,
shares of stock, securities or other consideration) or other distribution to
another person or entity of all or substantially all the assets, property or
business of the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for purposes of this Article 6A.
Section 6A.7. Limitations on Redemption and Dividends.
Notwithstanding anything to the contrary in these Articles, for so long as any
shares of Series A Preferred Stock or Series B Preferred Stock are outstanding,
no dividend or redemption payments (it being understood that the accrual of
Series C Dividends shall not constitute the declaration or making of dividend
payments for purposes of this sentence) shall be declared or made by the
Corporation in respect of the Series C Preferred Stock under this Article 6A or
otherwise. Notwithstanding anything to the contrary in these Articles, from and
after the date on which no shares of Series A Preferred Stock or Series B
Preferred Stock are outstanding, no dividend or redemption payments (it being
understood that the accrual of Series C Dividends shall not constitute the
declaration or making of dividend payments for purposes of this sentence) shall
be declared or made by the Corporation in respect of the Series C Preferred
Stock under this Article 6A or otherwise unless due provision
24
can be made for the full amount of any dividend or liquidation preference or
redemption payment (if any) payable to which holders of any Senior Stock may be
entitled under these Articles. In addition, notwithstanding anything to the
contrary in these Articles, so long as any amounts are outstanding under any
Other Documents (as defined below) or any commitments to lend under the Other
Documents have not been terminated, the Corporation shall not make payment in
respect of any redemption permitted by this Article 6A, or declare, make or pay
any dividend or distribution in respect of any shares of Series C Preferred
Stock, to the extent that the making or declaration of such payment would
breach, conflict with, or result in any violation of or default or event of
default (with or without notice or lapse of time or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of any benefit under, or result in the creation or imposition of any
lien or encumbrance of any nature whatsoever upon any of the properties or
assets of the Corporation or any of its subsidiaries under, or result in the
Series C Preferred Stock constituting "Disqualified Stock" as defined under,
any provision of the Other Documents. "Other Documents" means (i) the Amended
and Restated Loan and Security Agreement, dated as of March 6, 2000, between
and among the Corporation, Winston Tire Company, The Speed Merchant, Inc., and
California Tire Company, as borrowers, the financial institutions party thereto
and Fleet Capital Corporation, as Administrative Agent, (ii) the Indenture,
dated as of May 15, 1998, between and among the Corporation, the Subsidiary
Guarantors party thereto and First Union National Bank, as Trustee, (iii) the
Indenture, dated as of December 1, 1998, between and among the Corporation, the
Subsidiary Guarantors party thereto and First Union National Bank, as Trustee,
(iv) all notes, mortgages, security documents, guaranties and other agreements,
documents and instruments entered into in connection therewith, in each case,
as extended, amended, modified, supplemented and/or restated from time to time
in accordance with its terms, including any replacement agreement for any
thereof and any refinancing of the debt incurred under any thereof, which
refinancing may result in a greater principal amount outstanding in connection
therewith. Any determination made by the Board of Directors, in its sole
judgment, that the making or declaration of any payment pursuant to this
Article 6A would breach, conflict with, or result in any violation of or
default or event of default (with or without notice or lapse of time or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of any benefit under, or result in the creation
or imposition of any lien or encumbrance of any nature whatsoever upon any of
the properties or assets of the Corporation or any of its subsidiaries under,
or result in the Series C Preferred Stock constituting "Disqualified Stock" as
defined under, any of the Other Documents, shall be conclusive and binding on
the Corporation and all holders of Series C Preferred Stock.
ARTICLE 6B
SERIES D PREFERRED STOCK.
The Series D Preferred Stock shall have the following voting powers,
preferences and other rights, qualifications, limitations and restrictions:
Section 6B.1. Dividends and Distributions.
(a) Cumulative 12% Dividends. Holders of shares of Series D
Preferred Stock, in preference to the holders of shares of Common Stock and any
shares of other capital stock of the
25
Corporation other than shares of Parity Stock or Senior Stock with respect to
the Series D Preferred Stock, shall be entitled to receive, out of the assets
of the Corporation legally available therefor, cumulative cash dividends (the
"Series D Dividends") on the Series D Liquidation Preference of such shares at
an annual rate of 12.0% (compounded quarterly and calculated on the basis of a
365/366 day year and the actual number of days elapsed), accruing in equal
quarterly installments on the last Business Day of each fiscal quarter of the
Corporation, commencing on the last Business Day of the second fiscal quarter
of the Corporation's 2002 fiscal year. Series D Dividends shall accrue and
shall be cumulative from the first date Series D Preferred Stock shall have
been issued by the Corporation (the "Series D Issue Date") whether or not
declared by the Board of Directors. Subject in each case to Sections 4.4 and
6B.7, (i) accumulated but unpaid dividends for any past quarterly dividend
periods may be declared and paid at any time, without reference to any regular
quarterly dividend payment date, to holders of record on any date fixed by the
Board of Directors in accordance with these Articles and applicable law and
(ii) accumulated but unpaid dividends for any current quarterly dividend period
may be declared and paid in cash by the Board of Directors (in which case such
dividend payment shall not accrue and be cumulative), to holders of record on
any date fixed by the Board of Directors in accordance with these Articles and
applicable law. The "Series D Liquidation Preference" shall initially be $3.00
per share of Series D Preferred Stock, and shall be adjusted appropriately from
time to time after the Series D Issue Date to reflect stock splits,
combinations and reclassifications with respect to the Series D Preferred
Stock.
(b) Participating Dividends. Subject to Sections 4.4 and 6B.7, in
addition to the Series D Dividends, in the event that the Corporation shall
declare a dividend or make any other distribution (including, without
limitation, in cash, in capital stock (which shall include, without limitation,
any options, warrants, convertible securities or other rights to acquire
capital stock) of the Corporation, whether or not pursuant to a shareholder
rights plan, "poison pill" or similar arrangement, or other property or assets)
on or with respect to shares of Common Stock other than a dividend paid solely
in Common Stock, then the Board of Directors shall declare, and the holder of
each share of Series D Preferred Stock shall be entitled to receive in respect
of each share of Series D Preferred Stock, a dividend or distribution in an
amount equal to the amount of such dividend or distribution received by a
holder of the number of shares of Common Stock for which such share of Series D
Preferred Stock is convertible on the record date for such dividend or
distribution. Any such amount shall be paid to the holders of shares of Series
D Preferred Stock at the same time such dividend or distribution is made to
holders of Common Stock.
(c) Other Provisions. The holders of shares of Series D Preferred
Stock shall not be entitled to receive any dividends or other distributions
with respect to the Series D Preferred Stock except as provided in this Article
6B. No interest or sum of money in lieu of interest shall be payable in respect
of any dividend payment or payments on the shares of Series D Preferred Stock
which may be in arrears.
Section 6B.2. Conversion of Series D Preferred Stock.
(a) Conversion Right. Any holder of Series D Preferred Stock
shall have the right, at its option, at any time and from time to time, to
convert, subject to the terms and provisions of this Section 6B.2, any or all
of such holder's shares of Series D Preferred Stock into such
26
number of fully paid and non-assessable shares of Common Stock as is equal,
subject to Section 6B.2(g), to the product of the number of shares of Series D
Preferred Stock being so converted multiplied by the quotient of (i) the Series
D Liquidation Preference then in effect divided by (ii) the Series D Conversion
Price (as defined below) then in effect. The "Series D Conversion Price" shall
initially be $3.00, and is subject to adjustment as set forth in Section
6B.2(d). Such conversion right shall be exercised by the surrender of the
shares to be converted to the Corporation at any time during usual business
hours at its principal place of business, accompanied by a written notice in
which the holder elects to convert such shares and specifies the name or names
(with address) in which a certificate or certificates for shares of Common
Stock are to be issued and (if so required by the Corporation) by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Corporation duly executed by the holder or its duly authorized legal
representative and transfer tax stamps or funds therefor, if required pursuant
to Section 6B.2(j). All shares surrendered for conversion shall be delivered to
the Corporation for cancellation and canceled by it and no shares of Series D
Preferred Stock shall be issued in lieu thereof.
(b) As promptly as practicable after the surrender of any shares
of Series D Preferred Stock for conversion pursuant to Section 6B.2(a), the
Corporation shall deliver to or upon the written order of the holder of the
shares of Series D Preferred Stock so surrendered a certificate or certificates
representing the number of fully paid and non-assessable shares of Common Stock
into which such shares of Series D Preferred Stock may be or have been
converted in accordance with the provisions of this Section 6B.2. Subject to
the following provisions of this paragraph and of Section 6B.2(d), such
conversion shall be deemed to have been made immediately prior to the close of
business on the date that such shares of Series D Preferred Stock shall have
been surrendered in satisfactory form for conversion, and the person or persons
entitled to receive the Common Stock deliverable upon conversion of such shares
of Series D Preferred Stock shall be treated for all purposes as having become
the record holder or holders of such Common Stock at such appropriate time, and
such conversion shall be at the Series D Conversion Price in effect at such
time; provided, however, that no surrender shall be effective to constitute the
person or persons entitled to receive the Common Stock deliverable upon such
conversion as the record holder or holders of such Common Stock while the share
transfer books of the Corporation shall be closed (but not for any period in
excess of five days), but such surrender shall be effective to constitute the
person or persons entitled to receive such Common Stock as the record holder or
holders thereof for all purposes immediately prior to the close of business on
the next succeeding day on which such share transfer books are open, and such
conversion shall be deemed to have been made at, and shall be made at the
Series D Conversion Price in effect at, such time on such next succeeding day.
In case of the redemption of any shares of Series D Preferred Stock pursuant to
Section 6B.4, the right of the holders of such shares to convert such shares
into Common Stock pursuant to this Section 6B.2 shall cease and terminate, as
to the shares to be redeemed, at the close of business on the date fixed for
redemption, unless the Corporation shall default in the payment of the
applicable redemption price for the shares to be redeemed. If the last day for
the exercise of the conversion right with respect to the Series D Preferred
Stock shall not be a Business Day, then such conversion right may be exercised
on the next succeeding Business Day.
(c) To the extent permitted by law, when shares of Series D
Preferred Stock are converted, all dividends accrued and unpaid (whether or not
declared or currently payable)
27
on the Series D Preferred Stock so converted to the date of conversion shall be
immediately due and payable, at the option of the Corporation, in cash (subject
to Section 6B.7 and to the last sentence of this Section 6B.2(c)) or shares of
Common Stock. If the Corporation elects to issue shares of Common Stock in lieu
of the cash payment of the accrued and unpaid dividends, the holder of shares
of Series D Preferred Stock shall be entitled to receive that number of shares
of Common Stock which the amount of accrued and unpaid dividends would purchase
at the Series D Liquidation Preference, and such shares of Common Stock must
accompany the shares of Common Stock issued upon such conversion. If the
Corporation elects to pay such accrued and unpaid dividends in cash, such cash
payment must accompany the shares of Common Stock issued upon such conversion
unless the Board of Directors determines that such cash payment may not be made
under the Other Documents (as defined in Section 6B.7), in which case such cash
payment shall be made promptly after such time as the circumstances giving rise
to such inability to make such cash payment shall, in the sole judgment of the
Board of Directors, no longer exist; provided, however, that, at any time prior
to such payment, such holder may elect to receive shares of Common Stock in
lieu of such cash payment, and, upon such election, shall be entitled to
receive that number of shares of Common Stock that the amount of such cash
payment would purchase at the Series D Conversion Price on the date of such
election.
(d) The Series D Conversion Price and the number of shares of
Common Stock issuable upon conversion of the Series D Preferred Stock shall be
subject to adjustment as provided in this Section 6B.2(d):
(i) In case the Corporation shall at any time or from
time to time (A) subdivide the outstanding shares of Common Stock into a larger
number of shares, (B) combine the outstanding shares of Common Stock into a
smaller number of shares or (C) issue any shares of its capital stock in a
reclassification of the Common Stock, then, and in each such case, the number
of shares of Common Stock issuable upon conversion of the Series D Preferred
Stock in effect immediately prior to such event shall be adjusted (and any
other appropriate actions shall be taken by the Corporation) so that the holder
of any share of Series D Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of Common Stock or other
securities of the Corporation that such holder would have owned or would have
been entitled to receive upon or by reason of any of the events described
above, had such share of Series D Preferred Stock been converted immediately
prior to the occurrence of such event. An adjustment made pursuant to this
Section 6B.2(d)(i) shall become effective retroactively to the close of
business on the day upon which the corporate action giving rise to such
adjustment becomes effective.
(ii) In case the Corporation shall at any time or from
time to time issue or sell (other than in a Series D Exempt Issuance (as
defined in Section 6B.2(d)(iii) below)) shares of Common Stock (or securities
convertible into or exchangeable for Common Stock, or any options, warrants or
other rights to acquire shares of Common Stock), at a price per share less than
the Series D Conversion Price then in effect at the record date referred to in
the immediately following sentence (treating the price per share of any
security convertible or exchangeable or exercisable into Common Stock as equal
to (A) the sum of the price for such security convertible, exchangeable or
exercisable into Common Stock plus any additional consideration payable
(without regard to any anti-dilution adjustments) upon the conversion, exchange
or exercise of such security into Common Stock divided by (B) the number of
shares of Common
28
Stock initially underlying such convertible, exchangeable or exercisable
security), then, and in each such case, the Series D Conversion Price then in
effect shall be adjusted by dividing the Series D Conversion Price in effect on
the day immediately prior to such record date by a fraction (x) the numerator
of which shall be the sum of the number of shares of Common Stock outstanding
on such record date plus the number of additional shares of Common Stock issued
or to be issued (or the maximum number into which such convertible or
exchangeable securities initially may convert or exchange or for which such
options, warrants or other rights initially may be exercised) and (y) the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common Stock which
the aggregate consideration for the total number of such additional shares of
Common Stock so issued (or into which such convertible or exchangeable
securities may convert or exchange or for which such options, warrants or other
rights may be exercised plus the aggregate amount of any additional
consideration initially payable upon conversion, exchange or exercise of such
security) would purchase at the Series D Conversion Price in effect on such
record date. Such adjustment shall be made whenever such shares, securities,
options, warrants or other rights are issued, and shall become effective
retroactively to a date immediately following the close of business on the
record date for the determination of shareholders entitled to receive such
shares, securities, options, warrants or other rights; provided, however, that
the determination as to whether an adjustment is required to be made pursuant
to this Section 6B.2(d)(ii) shall only be made upon the issuance of such shares
or such convertible or exchangeable securities, options, warrants or other
rights and not upon the issuance of the security into which such convertible or
exchangeable security converts or exchanges, or the security underlying such
options, warrants or other rights; provided, further, that if any convertible
or exchangeable securities, options, warrants or other rights (or any portions
thereof) which shall have given rise to an adjustment pursuant to this Section
6B.2(d)(ii) shall have expired or terminated without the exercise thereof
and/or if by reason of the terms of such convertible or exchangeable
securities, options, warrants or other rights there shall have been an increase
or increases, with the passage of time or otherwise, in the price payable upon
the exercise or conversion thereof, then the Series D Conversion Price
hereunder shall be readjusted (but to no greater extent than originally
adjusted with respect to the related event) on the basis of (x) eliminating
from the computation any additional shares of Common Stock corresponding to
such convertible or exchangeable securities, options, warrants or other rights
as shall have expired or terminated, (y) treating the additional shares of
Common Stock, if any, actually issued or issuable pursuant to the previous
exercise of such convertible or exchangeable securities, options, warrants or
other rights as having been issued for the consideration actually received and
receivable therefor and (z) treating any of such convertible or exchangeable
securities, options, warrants or other rights which remain outstanding as being
subject to exercise or conversion on the basis of such exercise or conversion
price as shall be in effect at this time.
(iii) Notwithstanding Section 6B.2(d)(ii), no adjustment
to the Series D Conversion Price pursuant to Section 6B.2(d)(ii) or otherwise
shall be made in respect of any sale or issuance by the Corporation of (A)
shares of Common Stock (or options, warrants or other Common Stock purchase
rights, and the Common Stock issued pursuant to such options, warrants or other
equity incentive rights (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like)) issued or to be issued pursuant to the
conversion, exchange or exercise of the Series C Preferred Stock, the Series D
Preferred Stock or any other security, option, warrant, right or other
convertible security outstanding or in effect on the Series D Issue
29
Date, (B) shares of Common Stock (or options, warrants or other Common Stock
purchase rights, and the Common Stock issued pursuant to such options, warrants
or other equity incentive rights (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like)) issued or to be issued
to employees, officers or directors of, or consultants or advisors to the
Corporation or any subsidiary pursuant to any stock incentive or equity-based
compensation, plan, program, arrangement or agreement of the Corporation or any
of its subsidiaries in effect on the Series D Issue Date (as amended from time
to time in accordance with its terms) or any other stock incentive or
equity-based compensation plan, program, arrangement or agreement approved by
the Board of Directors; (C) securities issued pursuant to a registration
statement filed under the Securities Act of 1933; (D) securities issued
pursuant to the acquisition of another entity by the Corporation by merger,
purchase of assets or other form of reorganization; or (E) securities issued to
landlords, equipment lessors, banks, financial institutions, manufacturers,
vendors, suppliers or similar entities in transactions approved by the Board of
Directors (each, a "Series D Exempt Issuance").
(iv) In case the Corporation at any time or from time to time shall
take any action affecting its Common Stock, other than an action described in
any of Section 6B.2(d)(i) through Section 6B.2(d)(iii), inclusive, then, and in
each such case, the Series D Conversion Price shall be adjusted in such manner
and at such time as the Board of Directors of the Corporation in its sole
business judgment determines to be equitable in the circumstances.
(v) Notwithstanding anything herein to the contrary, no adjustment
under this Section 6B.2(d) need be made to the Series D Conversion Price unless
such adjustment would require an increase or decrease of at least 1% of the
Series D Conversion Price then in effect. Any lesser adjustment shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least 1% of such Series D
Conversion Price. Any adjustment to the Series D Conversion Price carried
forward and not theretofore made shall be made immediately prior to the
conversion of any shares of Series D Preferred Stock pursuant hereto.
(e) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to shareholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Series D Conversion Price
then in effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Series D Conversion
Price, then, and in each such case, the Corporation shall deliver to each
registered holder of Series D Preferred Stock a certificate, signed by a
responsible officer of the Corporation, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Series D Conversion Price
then in effect following such adjustment.
(g) No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any shares of Series D Preferred Stock.
If more than one share of Series D Preferred Stock shall be surrendered for
conversion at one time by the same holder, the
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number of full shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate Series D Liquidation Preference of the
shares of Preferred Stock so surrendered. If the conversion of any share or
shares of Series D Preferred Stock results in a fraction, an amount equal to
such fraction multiplied by the Current Market Price of the Common Stock on the
Business Day preceding the day of conversion shall be paid to such holder in
cash by the Corporation.
(h) In case at any time or from time to time:
(A) the Corporation shall declare a dividend (or any
other distribution) on or with respect to its Common Stock;
(B) the Corporation shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe for or purchase
any shares of stock of any class or of any other rights or warrants;
(C) there shall be any reclassification of the Common
Stock, or any consolidation or merger to which the Corporation is a party and
for which approval of any shareholders of the Corporation is required, or any
sale or other disposition of all or substantially all of the assets of the
Corporation; or
(D) there shall occur any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then the Corporation shall mail to each holder of shares of Series D Preferred
Stock at such holder's address as it appears on the transfer books of the
Corporation a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or warrants or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding up is expected to
become effective. Such notice also shall specify the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for shares of stock or other securities or property or cash
deliverable upon such reclassification, consolidation, merger, sale,
conveyance, dissolution, liquidation or winding up.
(i) The Corporation shall at all times reserve and keep available
for issuance upon the conversion of the Series D Preferred Stock, 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 D
Preferred Stock, and shall take all action required to increase the authorized
number of shares of Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common Stock to permit such reservation or to
permit the conversion of all outstanding shares of Series D Preferred Stock.
(j) The issuance or delivery of certificates for Common Stock
upon the conversion of shares of Series D Preferred Stock shall be made without
charge to the converting holder of shares of Series D Preferred Stock for such
certificates or for any stamp or transfer tax in respect of the issuance or
delivery of such certificates or the securities represented thereby, and such
certificates shall be issued or delivered in the respective names of, or in
such names as
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may be directed by, the holders of the shares of Series D Preferred Stock
converted; provided, however, that the Corporation shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than that of the
holder of the shares of Series D Preferred Stock converted, and the Corporation
shall not be required to issue or deliver such certificate unless or until the
person or persons requesting the issuance or delivery thereof shall have paid
to the Corporation the amount of such tax or shall have established to the
reasonable satisfaction of the Corporation that such tax has been paid.
Section 6B.3. Voting Rights. Ownership of shares of Series D
Preferred Stock shall entitle the holders to no voting rights except as
provided in this Section 6B.3 and under applicable law. So long as any shares
of the Series D Preferred Stock are outstanding, each outstanding share of
Series D Preferred Stock shall entitle the holder thereof to vote, in person or
by proxy, at a special or annual meeting of shareholders, on all matters voted
on by holders of Common Stock voting together as a single class with other
shares entitled to vote thereon (other than matters on which the holders of
Series D Preferred Stock are entitled by law or these Articles to vote as a
separate class). With respect to any such vote, each share of Series D
Preferred Stock shall entitle the holder thereof to cast that number of votes
per share of Series D Preferred Stock as is equal to the number of votes that
such holder would be entitled to cast had such holder converted his shares of
Series D Preferred Stock into Common Stock on the record date for determining
the shareholders of the Corporation eligible to vote on any such matters. So
long as any shares of Series D Preferred Stock are outstanding, the Corporation
shall not, without the affirmative vote or written consent of the holders of a
majority of the aggregate number of shares of Series D Preferred Stock then
outstanding, (i) alter or change the powers, preferences or rights given to the
Series D Preferred Stock by these Articles or (ii) amend these Articles to
increase the authorized amount of Series D Preferred Stock. The amendment of
these Articles to authorize or create, or to increase the authorized amount of,
any Junior Stock shall not be deemed to alter or change the powers, preferences
or rights given to the Series D Preferred Stock by these Articles.
Notwithstanding the foregoing provisions, the affirmative vote or consent of
the holders of the Series D Preferred Stock, as applicable, shall not be
required for any alteration or change on which the holders would otherwise be
entitled to vote if, at or prior to the time that any such alteration or change
takes effect, due provision is made for the redemption of all such shares of
Series D Preferred Stock at the time outstanding.
Section 6B.4. Redemption.
(a) Redemption at the Option of the Holder. The Series D
Preferred Stock shall not be redeemable by the Corporation at the request or
option of the Holder.
(b) Optional Redemption. Subject to the rights and preferences of
any Senior Stock and subject to Sections 4.4 and 6B.7, at any time on or after
the Series D Issue Date, the Corporation shall have the right, exercisable by
written notice to all holders of Series D Preferred Stock (the "Series D
Optional Redemption Notice"), to redeem all (but not less than all) of the
outstanding shares of Series D Preferred Stock, out of the assets of the
Corporation legally available therefor, at a price per share equal to (x) the
Series D Liquidation Preference then in effect plus (y) the amount of all
accrued and unpaid Series D Dividends on such share through and including the
date of redemption, on the date set forth in the Series D Optional Redemption
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Notice (which date shall be no less than 10 Business Days after the date of
such Series D Optional Redemption Notice).
(c) Redemption Procedures. Each repurchase of shares of Series D
Preferred Stock under this Section 6B.4 shall be deemed to have been effected
on the date of redemption and repurchase by the Corporation pursuant to this
Section 6B.4(c). On the date specified in each Series D Optional Redemption
Notice, each holder of shares of Series D Preferred Stock to be redeemed shall
deliver to the Corporation a certificate or certificates representing the
shares of Series D Preferred Stock to be redeemed, duly endorsed and in proper
form for transfer, against payment in full by wire transfer of immediately
available funds in U.S. dollars to an account designated in writing by such
holder of an amount per share equal to (x) the Series D Liquidation Preference
then in effect plus (y) the amount of all accrued and unpaid Series D Dividends
on such share through and including the date of redemption.
Section 6B.5. Reacquired Shares. Any shares of Series D Preferred
Stock exchanged, redeemed, purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof.
Section 6B.6. Liquidation, Dissolution or Winding Up. If the
Corporation shall commence a voluntary case under the United States bankruptcy
laws or any applicable bankruptcy, insolvency or similar law of any other
country, or consent to the entry of an order for relief in an involuntary case
under any such law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the United States bankruptcy laws or any
applicable bankruptcy, insolvency or similar law of any other country, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of the Corporation or of any substantial part of
its property, or ordering the winding up or liquidation of its affairs, and on
account of any such event the Corporation shall liquidate, dissolve or wind up,
or if the Corporation shall otherwise liquidate, dissolve or wind up, no
distribution shall be made (i) to the holders of shares of Series D Preferred
Stock unless, prior thereto, the holders of shares of all Senior Stock shall
have received the total amounts to which such holders are entitled upon such
Liquidation Event, (ii) to the holders of shares of Junior Stock with respect
to the Series D Preferred Stock unless, prior thereto, the holders of shares of
Series D Preferred Stock shall have received an amount per share equal to the
greater of (A) the amount and type of proceeds that a holder of Series D
Preferred Stock would have been entitled to receive if such holder had
converted its shares of Series D Preferred Stock into Common Stock in
accordance with Section 6B.2 immediately prior to such liquidation, dissolution
or winding up or (B) the sum of (x) the Series D Liquidation Preference then in
effect plus (y) the amount of all accrued and unpaid Series D Dividends on such
share through and including the date of redemption or (iii) to the holders of
shares of Parity Stock with respect to the Series D Preferred Stock, except
distributions made ratably on the Series D Preferred Stock and all other Parity
Stock in proportion to the total amounts to which the holders of all shares of
Series D Preferred Stock and other Parity Stock are entitled upon such
liquidation, dissolution or winding up.
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(b) Neither the consolidation or merger of the Corporation with
or into any other person or entity nor the sale, lease, exchange (for cash,
shares of stock, securities or other consideration) or other distribution to
another person or entity of all or substantially all the assets, property or
business of the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for purposes of this Article 6B.
Section 6B.7. Limitations on Redemption and Dividends.
Notwithstanding anything to the contrary in these Articles, for so long as any
shares of Series A Preferred Stock or Series B Preferred Stock are outstanding,
no dividend or redemption payments (it being understood that the accrual of
Series D Dividends shall not constitute the declaration or making of dividend
payments for purposes of this sentence) shall be declared or made by the
Corporation in respect of the Series D Preferred Stock under this Article 6B or
otherwise. Notwithstanding anything to the contrary in these Articles, from and
after the date on which no shares of Series A Preferred Stock or Series B
Preferred Stock are outstanding, no dividend or redemption payments (it being
understood that the accrual of Series D Dividends shall not constitute the
declaration or making of dividend payments for purposes of this sentence) shall
be declared or made by the Corporation in respect of the Series D Preferred
Stock under this Article 6B or otherwise unless due provision can be made for
the full amount of any dividend or liquidation preference or redemption payment
(if any) payable to which holders of any Senior Stock may be entitled under
these Articles. In addition, notwithstanding anything to the contrary in these
Articles, so long as any amounts are outstanding under any Other Documents (as
defined below) or any commitments to lend under the Other Documents have not
been terminated, the Corporation shall not make payment in respect of any
redemption permitted by this Article 6B, or declare, make or pay any dividend
or distribution in respect of any shares of Series D Preferred Stock, to the
extent that the making or declaration of such payment would breach, conflict
with, or result in any violation of or default or event of default (with or
without notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of
any benefit under, or result in the creation or imposition of any lien or
encumbrance of any nature whatsoever upon any of the properties or assets of
the Corporation or any of its subsidiaries under, or result in the Series D
Preferred Stock constituting "Disqualified Stock" as defined under, any
provision of the Other Documents (as defined in Section 6A.7). Any
determination made by the Board of Directors, in its sole judgment, that the
making or declaration of any payment pursuant to this Article 6B would breach,
conflict with, or result in any violation of or default or event of default
(with or without notice or lapse of time or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to the
loss of any benefit under, or result in the creation or imposition of any lien
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Corporation or any of its subsidiaries under, or result in the Series D
Preferred Stock constituting "Disqualified Stock" as defined under, any of the
Other Documents, shall be conclusive and binding on the Corporation and all
holders of Series D Preferred Stock.
ARTICLE 7
CORPORATE EXISTENCE.
The Corporation is to have perpetual existence.
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ARTICLE 8
CORPORATE GOVERNANCE.
For the management of the business and for the conduct of the affairs of the
Corporation, and in further definition, limitation, and regulation of the
powers of the Corporation and of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided:
Section 8.1. Management. The management of the business and the
conduct of the affairs of the Corporation shall be vested in its Board of
Directors. The number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the By-laws. The
election of directors need not be by written ballot except and to the extent
provided in the By-laws of the Corporation.
Section 8.2. Amendment of Articles. From time to time any of the
provisions of these Articles may be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation
by these Articles are granted subject to the provisions of this Section 8.2.
Section 8.3. Amendment of By-laws. The Board of Directors shall,
subject to Section 109 of the Act, have the power to adopt, amend, or repeal
the By-laws of the Corporation.
Section 8.4. Indemnification of Directors. To the fullest extent
permitted by the Act, no director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. No amendment, modification or repeal of this Section 8.4
shall adversely affect any right or protection of a director that exists at the
time of such amendment, modification or repeal.
Section 8.5. Indemnification of Authorized Persons. The
Corporation shall, to the fullest extent permitted by the Act, indemnify any
and all persons whom it shall have power to indemnify thereunder from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by the Act and may advance funds to such persons in respect of
such expenses, liabilities or other matters. The indemnification provided for
herein shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any By-law, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent, and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
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IN WITNESS WHEREOF, American Tire Distributors, Inc. has caused this
Third Restated Certificate of Incorporation to be executed by its duly
authorized officer on June 12, 2002.
AMERICAN TIRE DISTRIBUTORS, INC.
By: /s/ Richard P. Johnson
----------------------------------------
Name: Richard P. Johnson
Title: President & CEO
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