EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS
OF
CONVERTIBLE CUMULATIVE
PREFERRED STOCK
OF
R.H. DONNELLEY CORPORATION
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Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
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R.H. Donnelley Corporation (the "CORPORATION"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware (the "DGCL"), hereby certifies as follows:
FIRST: The Restated Certificate of Incorporation, as amended, of the
Corporation authorizes the issuance of up to 10,000,000 shares of Preferred
Stock, par value $1 per share (the "PREFERRED STOCK"), and further authorizes
the Board of Directors of the Corporation by resolution or resolutions to
provide for the issuance of Preferred Stock in series and to establish the
number of shares to be included in each such series and to fix the designation,
voting powers, preferences and relative rights and qualifications, limitations
or restrictions of each such series.
SECOND: On November 24, 2002, the Board of Directors of the Corporation
adopted the following resolution authorizing the creation and issuance of a
series of said Preferred Stock to be known as Series B-1 Convertible Cumulative
Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of its Restated
Certificate of Incorporation, as amended, a series of Preferred Stock of the
Corporation be, and it hereby is, created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as set forth in the Corporation's
Restated Certificate of Incorporation and in this Certificate of Designations as
follows:
1. DESIGNATION AND AMOUNT. The shares of such series of
Preferred Stock shall be designated as Series B-1 Convertible
Cumulative Preferred Stock (the "SERIES B-1 CONVERTIBLE PREFERRED
STOCK"), and the number of shares constituting such series shall be
70,000. The initial liquidation preference of the Series B-1
Convertible Preferred Stock shall be $1,000 per share or right (the
"LIQUIDATION VALUE").
2. RANK. The Series B-1 Convertible Preferred Stock shall, with
respect to dividend rights and rights on liquidation, winding up and
dissolution, rank (i) senior to both the Corporation's Common Stock and
to all classes and series of stock of the Corporation now or hereafter
authorized, issued or outstanding which by their terms expressly
provide that they are junior to the Series B-1 Convertible Preferred
Stock or which do not specify their rank (collectively with the Common
Stock, the "JUNIOR SECURITIES"); (ii) on a parity with each other class
of capital stock or series of preferred stock issued by the Corporation
after the date hereof the terms of which specifically provide that such
class or series will rank on a parity with the Series B-1 Convertible
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding up and dissolution of the Corporation
(collectively referred to as "PARITY SECURITIES"); and (iii) junior to
each other class of capital stock or other series of Preferred Stock
issued by the Corporation after the date hereof the terms of which
specifically provide that such class or series will rank senior to the
Series B-1 Convertible Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the
Corporation (collectively referred to as "SENIOR SECURITIES")
3. DIVIDENDS. (a) PAYMENT OF DIVIDENDS. The holders of shares of
Series B-1 Convertible Preferred Stock, in preference to the holders of
any shares of Common Stock or other capital stock of the Corporation,
shall be entitled to receive, when, as and if declared by the Board of
Directors, in their sole discretion, out of the assets of the
Corporation legally available therefor, distributions in the form of
cumulative cash dividends payable at an annual rate per share equal to
8% (the "DIVIDEND RATE") of the Convertible Preferred Amount from and
after the date of issuance of the shares of Series B-1 Convertible
Preferred Stock (the "ISSUE DATE"), as long as the shares of Series B-1
Convertible Preferred Stock remain outstanding. Dividends shall be (i)
computed on the basis of the aggregate Convertible Preferred Amount;
(ii) calculated and compounded quarterly; (iii) accrue and be payable
quarterly, in arrears, on January 31, April 30, July 31 and October 31
(each such date being referred to herein as a "QUARTERLY DIVIDEND
PAYMENT DATE"), except that if any Quarterly Dividend Payment Date is
not a Business Day then the Quarterly Dividend Payment Date shall be on
the first immediately succeeding Business Day, commencing on the first
Quarterly Dividend Payment Date following the Issue Date; and (iv)
payable in cash. Notwithstanding anything contained herein to the
contrary, on and after the Trigger Date, the Dividend Rate shall be
15%.
(b) ACCRUAL OF DIVIDENDS. Dividends payable pursuant to subsection
(a) of this Section 3 shall begin to accrue on a daily basis and be
cumulative from the Issue Date, whether or not declared by the Board of
Directors and whether or not there are profits, surplus or other funds
of the Corporation legally available for the payment of dividends, and
shall continue to accrue and be cumulative (and compound as provided in
(a) above) until paid in full in cash or until the date of conversion
or redemption of the Series B-1 Convertible Preferred Stock (such
dividends being referred to as the "CONVERTIBLE PREFERRED DIVIDENDS").
The amount of dividends so payable shall be determined on the basis of
twelve 30-day months and a 360-day year. Dividends paid on shares of
Series B-1 Convertible Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding.
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(c) RESTRICTED PAYMENTS. So long as any shares of Series B-1
Convertible Preferred Stock remain outstanding, the Corporation shall
not make any payment on account of, or set apart for payment money for
a sinking or other similar fund for, the purchase, redemption or other
retirement of, any Junior Securities or other capital stock of the
Corporation or any warrants, rights, calls or options exercisable for
or convertible into any shares of Junior Securities or other capital
stock of the Corporation, or make any distribution in respect thereof,
either directly or indirectly, and whether in cash, obligations or
shares of Junior Securities or other capital stock of the Corporation
or other property, and shall not permit any corporation or other entity
directly or indirectly controlled by the Corporation to purchase or
redeem any of the Junior Securities or other capital stock of the
Corporation or any warrants, rights, calls or options exercisable for
or convertible into any Junior Securities or other capital stock of the
Corporation, unless all dividends that have accrued since the Issue
Date on the shares of Series B-1 Convertible Preferred Stock shall have
been paid.
(d) DIVIDENDS ON COMMON STOCK. So long as any shares of Series B-1
Convertible Preferred Stock remain outstanding, if the Corporation pays
a dividend in cash, securities or other property on shares of Common
Stock, then at the same time the Corporation shall declare and pay a
dividend on shares of Series B-1 Convertible Preferred Stock (which
would be in addition to any dividends payable under Section 3(a) and
(b)) in the amount of dividends that would be paid with respect to
shares of Series B-1 Convertible Preferred Stock if such shares were
converted into shares of Common Stock on the record date for such
dividend (or if no record date is established, at the date such
dividend is declared).
4. LIQUIDATION PREFERENCE. (a) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of
the Corporation (each, a "LIQUIDATION EVENT"), the holders of shares of
Series B-1 Convertible Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash equal to the greater
of (i) the Convertible Preferred Amount, and (ii) the amount to which
such holder would be entitled to receive in connection therewith had
such holder converted such share into shares of Common Stock in
accordance with the terms hereof immediately prior to such event (such
greater amount of (i) and (ii) being referred to herein as the
"LIQUIDATION PREFERENCE"), in either case before any payment shall be
made or any assets distributed to the holders of any of the Junior
Securities. If the assets of the Corporation are not sufficient to pay
in full the liquidation payments payable to the holders of outstanding
shares of the Series B-1 Convertible Preferred Stock and any Parity
Securities, then the holders of all such shares shall share ratably in
such distribution of assets in accordance with the amount which would
be payable on such distribution if the amounts to which the holders of
outstanding shares of Series B-1 Convertible Preferred Stock and the
holders of outstanding shares of such Parity Securities are entitled
were paid in full.
(b) For the purposes of this Section 4, neither the
voluntary sale, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all
of the property or assets of the Corporation nor the consolidation or
merger of the Corporation with any one or more other corporations shall
be deemed to be a voluntary or involuntary liquidation, dissolution or
winding up of the Corporation,
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unless such voluntary sale, conveyance, exchange or transfer shall be
in connection with a plan of liquidation, dissolution or winding up of
the Corporation.
5. REDEMPTION. (a) OPTIONAL REDEMPTION. Subject to the rights
of holders of shares of Series B-1 Convertible Preferred Stock set
forth in Section 9 hereof, the Corporation may, at its option, redeem
at any time on or after the Redemption Trigger Date, in the manner
provided in Section 6 hereof, all but not less than all of the shares
of the Series B-1 Convertible Preferred Stock at a redemption price per
share in cash equal to 101% of the Liquidation Preference.
(b) REDEMPTION UPON CHANGE IN CONTROL. Upon the occurrence of
a Change in Control, each holder of Series B-1 Convertible
Preferred Stock may elect to cause the Corporation to redeem such
holder's Series B-1 Convertible Preferred Stock, in whole or in
part, at a redemption price per share in cash equal to 101% of the
Liquidation Preference.
6. PROCEDURE FOR REDEMPTION. (a) In the event that the
Corporation shall redeem shares of Series B-1 Convertible Preferred
Stock pursuant to Section 5(a) hereof, notice of such redemption shall
be mailed by first-class mail, postage prepaid, and mailed not less
than 30 days nor more than 60 days prior to the redemption date, to the
holders of record of the shares to be redeemed at their respective
addresses as they shall appear in the records of the Corporation;
PROVIDED, HOWEVER, that failure to give such notice or any defect
therein or in the mailing thereof shall not affect the validity of the
proceeding for the redemption of any shares so to be redeemed except as
to the holder to whom the Corporation has failed to give such notice or
except as to the holder to whom notice was defective. Each such notice
shall state: (i) the redemption date; (ii) the number of shares of
Series B-1 Convertible Preferred Stock to be redeemed; (iii) the
redemption price per share, including a calculation of such redemption
price; (iv) the place or places where certificates for such shares are
to be surrendered for payment of the redemption price; (v) that
dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) that the holder's right to convert such
shares into shares of Common Stock shall terminate on the close of
business on the second Business Day preceding such redemption date.
(b) If a Change in Control should occur, then, in any one or more
of such events the Corporation shall, within 10 days following the
occurrence of the Change in Control, give written notice by
first-class mail, postage prepaid, to each holder of Series B-1
Convertible Preferred Stock at its address as it appears in the
records of the Corporation, which notice shall describe such
Change in Control. Such notice shall also set forth: (i) each
holder's right to require the Corporation to redeem in whole or in
part shares of Series B-1 Convertible Preferred Stock held by such
holder as a result of such Change in Control; (ii) the redemption
price, including a calculation of such redemption price; (iii) the
redemption date (which date shall be no earlier than 30 days from
the date the notice in respect of such Change in Control is
mailed); (iv) the procedures to be followed by such holder in
exercising its right of redemption, including the place or places
where certificates for such shares are to be surrendered for
payment of the redemption price; (v) that dividends on the shares
to be redeemed will cease to accrue on the
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redemption date and (vi) that the holder's right to convert such
shares into shares of Common Stock shall terminate on the close of
business on the second Business Day preceding such redemption
date. In the event a holder of shares of Series B-1 Convertible
Preferred Stock elects to require the Corporation to redeem any or
all of such shares of Series B-1 Convertible Preferred Stock, such
holder shall deliver, not later than two Business Days prior to
the redemption date as set forth in the Corporation's notice
described in this Section 6(b), a written notice stating such
holder's election and specifying the number of shares to be
redeemed pursuant to Section 5(b) hereof.
(c) After notice by the Corporation has been mailed as provided in
Section 6(a) hereof, or notices of election have been mailed by
the holders as provided in Section 6(b) hereof, and PROVIDED that
on or before the applicable redemption date funds necessary for
such redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the pro rata
benefit of the holders of the shares so called for or entitled to
redemption, so as to be and to continue to be available therefor,
then, from and after the redemption date (unless the Corporation
defaults in the payment of the redemption price, in which case
such rights shall continue until the redemption price is paid),
dividends on the shares of Series B-1 Convertible Preferred Stock
so called for or entitled to redemption shall cease to accrue, and
said shares shall no longer be deemed to be outstanding and shall
not have the status of shares of Series B-1 Convertible Preferred
Stock, and all rights of the holders thereof as stockholders of
the Corporation (except the right to receive the applicable
redemption price and any accrued and unpaid dividends from the
Corporation to the date of redemption calculated pursuant to
Section 3 hereof and the right to convert such shares into shares
of Common Stock, which shall continue until the close of business
on the second Business Day preceding the date of redemption in
accordance with Section 9 hereof) shall cease. Upon surrender of
the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Board of Directors of the
Corporation shall so require and a notice by the Corporation shall
so state), such shares shall be redeemed by the Corporation at the
applicable redemption price as aforesaid. In case fewer than all
the shares represented by any such certificate are redeemed, a new
certificate or certificates representing the unredeemed shares
shall be issued to such holder within 5 days of the redemption
date.
7. REACQUIRED SHARES. Shares of Series B-1 Convertible Preferred
Stock that have been issued and reacquired in any manner, including
without limitation shares reacquired by purchase, redemption or
conversion pursuant to Section 9 hereof, shall (upon compliance with
any applicable provisions of the laws of the State of Delaware) have
the status of authorized and unissued shares of the class of Preferred
Stock undesignated as to series and may be redesignated and reissued as
part of any series of Preferred Stock other than Series B-1 Convertible
Preferred Stock.
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8. VOTING RIGHTS. In addition to any voting rights provided by
applicable law, the holders of Series B-1 Convertible Preferred Stock
shall have the following voting rights:
(a) GENERAL. Subject to Section 8(b) hereof, each share of
Series B-1 Convertible Preferred Stock shall entitle the holder
thereof to vote on all matters submitted to a vote of the
stockholders of the Corporation, voting together as a single class
with the holders of Common Stock. At any time, each share of
Series B-1 Convertible Preferred Stock shall be entitled to a
number of votes which is equal to the number of shares of Common
Stock that could be obtained upon conversion of one share of
Series B-1 Convertible Preferred Stock at the then applicable
Conversion Price (as such amount may be adjusted pursuant to
Section 9(f) hereof).
(b) VOTING RIGHTS FOR DIRECTORS.
(i) Subject to Section 8(b)(viii), in addition to any other
rights to elect directors which the holders of Series B-1
Convertible Preferred Stock may have, from and after the
Issue Date, the holders of all outstanding shares of Series
B-1 Convertible Preferred Stock, voting separately as a
class and to the exclusion of the holders of all other
classes of stock of the Corporation, shall be entitled to
elect one individual to serve as a member of the Board of
Directors. Such director shall placed into a class if and
to the same extent as the directors to be elected generally
by the stockholders of the Corporation.
(ii) The right to elect such director as described in Section
8(b)(i) hereof may be exercised either at a special meeting
of the holders of Series B-1 Convertible Preferred Stock,
called as hereinafter provided in Section 8(b)(iii) hereof,
at any annual meeting of stockholders held for the purpose
of electing directors, or by the written consent of the
holders of Series B-1 Convertible Preferred Stock without a
meeting pursuant to Section 228 of the DGCL and thereafter
at such annual meeting or by written consent.
(iii) The Secretary of the Corporation may, and upon the written
request of the holders of record of at least 10% of the
outstanding shares of Series B-1 Convertible 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 Series B-1 Convertible Preferred
Stock for the election of the director to be elected by
them as herein provided. Such call shall be made by notice
to the holders of record by first-class mail, postage
prepaid at their respective addresses as they shall appear
in the records of the Corporation, and such notice shall be
mailed at least 10 days but no more than 20 days before the
date of the special meeting, or as required by law. Such
meeting shall be held at the earliest practicable date upon
the notice required for special meetings of stockholders at
the place designated by the Secretary of the Corporation.
If such meeting shall not be called by a proper officer of
the Corporation within 15 days after receipt of such
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written request by the Secretary of the Corporation, then
the holders of record of at least 10% of the shares of
Series B-1 Convertible Preferred Stock then outstanding may
call such meeting at the expense of the Corporation, and
such meeting may be called by such holders upon the notice
required for special meetings of stockholders and shall be
held at the place designated in such notice. Any holder of
Series B-1 Convertible Preferred Stock that would be
entitled to vote at any such meeting shall have access to
the stock record books of the Corporation for the purpose
of causing a meeting of holders of Series B-1 Convertible
Preferred Stock to be called pursuant to the provisions of
this Section 8(b)(iii).
(iv) At any meeting held for the purpose of electing directors
at which the holders of Series B-1 Convertible Preferred
Stock shall have the right to elect a director as provided
in this Section 8(b), the presence in person or by proxy of
the holders of a majority of the then outstanding shares of
Series B-1 Convertible Preferred Stock shall be required
and be sufficient to constitute a quorum of such class for
the election of a director by such class. At any such
meeting or adjournment thereof, (x) the absence of a quorum
of the holders of Series B-1 Convertible Preferred Stock
shall not prevent the election of directors other than the
director to be elected by the holders of Series B-1
Convertible Preferred Stock, and the absence of a quorum or
quorums of the holders of capital stock entitled to elect
such other directors shall not prevent the election of the
director to be elected by the holders of Series B-1
Convertible Preferred Stock, and (y) in the absence of a
quorum of the holders of Series B-1 Convertible Preferred
Stock, a majority of the holders of Series B-1 Convertible
Preferred Stock present in person or by proxy shall have
the power to adjourn the meeting for the election of the
director which such holders are entitled to elect, from
time to time, without notice (except as required by law)
other than announcement at the meeting, until a quorum
shall be present.
(v) Except as provided in Section 8(b)(viii) hereof, the term
of office of any director elected by the holders of Series
B-1 Convertible Preferred Stock pursuant to Section 8(b)(i)
hereof in office at any time shall terminate upon the
election of his or her successor at the annual meeting of
stockholders held for the purpose of electing directors to
the class of directors to which such director belongs.
(vi) In case of a vacancy occurring in the office of any
director so elected pursuant to Section 8(b)(i) hereof, the
holders of a majority of the Series B-1 Convertible
Preferred Stock then outstanding may, at a special meeting
of the holders or by written consent as provided above,
elect a successor to hold office for the unexpired term of
such director.
(vii) At any annual or special meeting held for the purpose of
allowing the holders of the Series B-1 Convertible
Preferred Stock to take any action pursuant to this
Certificate of Designations, the November Letter Agreement
or the Registration Rights Agreement and where a majority
of
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the then outstanding shares of Series B-1 Convertible
Preferred Stock are present in person or by proxy, the
affirmative vote of the holders present in person or by
proxy at such meeting shall be sufficient for such action
to have received the approval of the holders of the Series
B-1 Convertible Preferred Stock.
(viii) Notwithstanding the foregoing, at such time as the
outstanding shares of Series B-1 Convertible Preferred
Stock then Beneficially Owned by the Initial Purchasers,
their respective Affiliates or any Designated Transferees
constitutes less than 15% of the number of shares of Common
Stock Beneficially Owned by them immediately after the
Issue Date (as such number may be adjusted for stock
dividends, stock splits, combinations and recapitalizations
and other similar events), the holders of Series B-1
Convertible Preferred Stock shall not be entitled to
designate or elect a director under this Section 8(b).
(c) ADDITIONAL DIRECTORS.
(i) In the event that a Trigger Date occurs, then the number of
directors constituting the Board of Directors of the
Corporation, without further action, shall be increased by
one person and the holders of the Series B-1 Convertible
Preferred Stock shall have the exclusive right, voting
separately as a class, to nominate and elect such director
(the "New Director") of the Corporation to fill such newly
created directorship at each meeting of stockholders held
for the purpose of electing directors to the class of
directors to which such director belongs.
(ii) Whenever such voting right shall have vested, such right
may be exercised at a special meeting of the holders of the
Series B-1 Convertible Preferred Stock called as
hereinafter provided, at any annual meeting of stockholders
held for the purpose of electing directors or by the
written consent of the holders of Series B-1 Convertible
Preferred Stock pursuant to Section 228 of the Delaware
General Corporation Law.
(iii) At any time when such voting right shall have vested in the
holders of Series B-1 Convertible Preferred Stock and if
such right shall not already have been initially exercised,
a proper officer of the Corporation shall, upon the written
request of any holder of record of Series B-1 Convertible
Preferred Stock then outstanding, call a special meeting of
holders of Series B-1 Convertible Preferred Stock. Such
meeting shall be held at the earliest practicable date upon
the notice required for annual meetings of stockholders. If
such meeting shall not be called within 20 days after such
written request, then the holders of record of 10% of the
shares of Series B-1 Convertible Preferred Stock then
outstanding may designate in writing a holder of Series B-1
Convertible Preferred Stock to call such meeting at the
expense of the Corporation, and such meeting may be called
by such person so designated upon the notice required for
annual meetings of stockholders. Any holder of Series B-1
Convertible Preferred
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Stock which would be entitled to vote at such meeting shall
have access to the stock books of the Corporation for the
purpose of causing a meeting of stockholders to be called
pursuant to the provisions of this paragraph.
Notwithstanding the provisions of this paragraph, however,
no such special meeting shall be called during a period
within 60 days immediately preceding the date fixed for the
next annual meeting of stockholders.
(iv) At any meeting at which the holders of Series B-1
Convertible Preferred Stock shall have the right to elect a
New Director as provided herein, the presence in person or
by proxy of the holders of at least a majority of the then
outstanding shares of Series B-1 Convertible Preferred
Stock shall be required and be sufficient to constitute a
quorum. At any such meeting or adjournment thereof, the
absence of a quorum of the holders of Series B-1
Convertible Preferred Stock shall not prevent the election
of directors other than the New Director and the absence of
a quorum or quorums of the holders of capital stock
entitled to elect such other directors shall not prevent
the election of any New Director.
(v) The term of office of the New Director shall terminate upon
the election of his successor by the holders of Series B-1
Convertible Preferred Stock. Upon any termination of the
aforesaid voting rights in accordance with Section
8(c)(viii), the term of office of any New Director shall
thereupon terminate and upon such termination the number of
directors constituting the Board of Directors shall,
without further action, be reduced by one.
(vi) In the case of any vacancy occurring with respect to the
New Director, the New Director who shall have been so
elected may appoint a successor to hold office until his
successor is elected at an annual or a special meeting of
the stockholders. If the New Director shall cease to serve
as a director before his term shall expire, the holders of
Series B-1 Convertible Preferred Stock then outstanding may
elect a successor (at any meeting of stockholders held for
the purpose of electing directors or by the written consent
of the holders of Series B-1 Convertible Preferred Stock
pursuant to Section 228 of the Delaware General Corporation
Law) to hold office until his successor is elected at an
annual or a special meeting of the stockholders. The New
Director may be removed, either for or without cause, by
the holders of a majority of the Series B-1 Convertible
Preferred Stock and any resulting vacancy may be filled as
provided for in this subsection (vi).
(vii) So long as any shares of Series B-1 Convertible Preferred
Stock are outstanding, the Corporation shall take such
action as may be necessary so that its By-laws shall
contain provisions ensuring that the number of directors of
the Corporation shall at all times be such that the
exercise, by the holders of the Series B-1 Convertible
Preferred Stock, of the right to elect a New Director will
not contravene any provisions of the Certificate of
Incorporation or By-laws.
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(viii) Notwithstanding the foregoing, at such time, if any, as the
outstanding shares of Series B-1 Convertible Preferred
Stock then Beneficially Owned by the Initial Purchasers,
their respective Affiliates or any Designated Transferees
constitutes less than 50% of the number of shares of Common
Stock Beneficially Owned by them immediately after the
Issue Date (as such number may be adjusted for stock
dividends, stock splits, combinations and recapitalizations
and other similar events), the holders of Series B-1
Convertible Preferred Stock shall not be entitled to
designate or elect any directors under this Section 8(c).
9. CONVERSION. (a) Any share of Series B-1 Convertible Preferred
Stock shall be convertible at the option of the holder thereof into
fully paid and nonassessable shares of Common Stock on the terms and
conditions set forth in this Section 9, at any time upon surrender to
the Corporation of the certificates for the shares to be converted,
into a number of fully paid and nonassessable shares of Common Stock
equal to the Convertible Preferred Amount per share as of the date of
conversion divided by the Conversion Price.
(b) Conversion of the Series B-1 Convertible Preferred Stock as
permitted by Section 9(a) hereof may be effected by any holder
thereof upon the surrender to the Corporation, at its principal
office or at such other office or agency maintained by the
Corporation for that purpose, of the certificate for the Series
B-1 Convertible Preferred Stock to be converted accompanied by a
written notice stating that such holder elects to convert all or a
specified whole number of such shares in accordance with the
provisions of this Section 9 and specifying the name or names in
which such holder wishes the certificate or certificates for
shares of Common Stock to be issued. In case such notice shall
specify a name or names other than that of such holder, such
notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name
or names. Other than such taxes, the Corporation will pay any and
all issue and other taxes (other than taxes based on income) that
may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series B-1 Convertible Preferred
Stock pursuant hereto. As promptly as practicable, and in any
event within 5 Business Days after the surrender of such
certificate or certificates and the receipt of such notice
relating thereto and, if applicable, payment of all transfer taxes
(or the demonstration to the reasonable satisfaction of the
Corporation that such taxes have been paid), the Corporation shall
deliver or cause to be delivered (i) certificates representing the
number of validly issued, fully paid and nonassessable shares of
Common Stock to which the holder of shares of Series B-1
Convertible Preferred Stock being converted shall be entitled,
(ii) if less than the full number of shares of Series B-1
Convertible Preferred Stock evidenced by the surrendered
certificate or certificates is being converted, a new certificate
or certificates, of like tenor, for the number of shares and
evidenced by such surrendered certificate or certificates less the
number of shares being converted, and (iii) payment of all amounts
to which a holder is entitled pursuant to Section 9(e) hereof.
Such conversion shall be deemed to have been made at the close of
business on the date of giving of such notice and of such
surrender of the certificate or certificates representing the
shares of Series B-1
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Convertible Preferred Stock to be converted so that the rights of
the holder thereof as to the shares being converted shall cease
except for the right to receive shares of Common Stock in
accordance herewith, and the Person entitled to receive the shares
of Common Stock shall be treated for all purposes as having become
the record holder of such shares of Common Stock at such time.
(c) In case any shares of Series B-1 Convertible Preferred Stock
are to be redeemed pursuant to Section 5 hereof, such right of
conversion shall cease and terminate as to such shares at the
close of business on the second Business Day preceding the date
fixed for redemption or exchange, unless the Corporation shall
default in the payment of the applicable redemption price, in
which case such right of conversion shall not cease as to any
share of Series B-1 Convertible Preferred Stock unless and until
the redemption price with respect to such share has been paid in
full.
(d) The Corporation shall at all times reserve and keep available,
free from liens, charges and security interests and not subject to
any preemptive rights, for issuance upon conversion of the Series
B-1 Convertible 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 B-1 Convertible Preferred Stock, and shall take all action
required to increase the authorized number of shares of Common
Stock if necessary to permit the conversion of all outstanding
shares of Series B-1 Convertible Preferred Stock.
(e) No fractional shares or scrip representing fractional shares
of Common Stock shall be issued upon the conversion of any shares
of Series B-1 Convertible Preferred Stock. Instead of any
fractional interest in a share of Common Stock which would
otherwise be deliverable upon the conversion of a share of Series
B-1 Convertible Preferred Stock, the Corporation shall pay to the
holder of such share an amount in cash equal to such fractional
interest multiplied by the Current Market Price of the Common
Stock on the day of conversion. If more than one share or right
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
Convertible Preferred Amount so surrendered.
(f) The Conversion Price shall be subject to adjustment as
follows:
(i) In case the Corporation shall at any time or from time to
time after the Issue Date (A) pay a dividend or make a
distribution in shares of Common Stock or securities convertible
into Common Stock, (B) subdivide or reclassify the outstanding
shares of Common Stock into a greater number of shares of Common
Stock, (C) combine or reclassify the outstanding shares of Common
Stock into a smaller number of shares, or (D) otherwise issue by
reclassification of the shares of Common Stock any shares of
capital stock of the Corporation, then, and in each such case, the
Conversion Price shall be adjusted so that the holder of any
shares of Series B-1 Convertible Preferred Stock and thereafter
surrendered for conversion shall be entitled to receive the number
of shares of Common Stock or other securities of the Corporation
which such holder would have owned or have been entitled to
receive after the happening of any of the events described above
had such shares of Series B-1 Convertible Preferred Stock been
surrendered for
11
conversion immediately prior to the happening of such event
or the record date therefor, whichever is earlier. An
adjustment made pursuant to this Section 9(f)(i) shall
become applicable (x) in the case of any such dividend or
distribution, immediately after the close of business on
the record date for the determination of holders of shares
of Common Stock entitled to receive such dividend or
distribution and (y) in the case of any such subdivision,
reclassification or combination, at the close of business
on the day upon which such corporate action becomes
effective. Such adjustment shall be made successively.
(ii) In case the Corporation shall at any time or from time to
time after the Issue Date declare, order, pay or make a
dividend or other distribution (including without limitation
any distribution of stock or other securities, evidences of
indebtedness, property or assets or rights or warrants to
subscribe for securities of the Corporation or any of its
Subsidiaries) on its Common Stock (other than (A) regular
quarterly dividends payable in cash or (B) dividends or
distributions of shares of Common Stock referred to in Section
9(f)(i) hereof) (any one of the foregoing other than the items
specified in clause (A) or (B) referred to as "SECURITIES OR
Assets"), then and in each such case, unless the Corporation
elects to reserve shares or other units of such Securities or
Assets for distribution to the holders of the Series B-1
Convertible Preferred Stock upon the conversion of the shares
of Series B-1 Convertible Preferred Stock so that any such
holder converting shares of Series B-1 Convertible Preferred
Stock will receive upon such conversion, in addition to the
shares of the Common Stock to which such holder is entitled,
the amount and kind of such Securities or Assets which such
holder would have received if such holder had, immediately
prior to the record date for the distribution of the
Securities or Assets, converted its shares of Series B-1
Convertible Preferred Stock into Common Stock, the Conversion
Price shall be adjusted so that such Conversion Price shall
equal the price determined by multiplying the Conversion Price
in effect immediately prior to the date of such distribution
by a fraction of which the numerator shall be the Current
Market Price of the Common Stock on such record date less the
then fair market value (as determined by the Board in good
faith) of the portion of the capital stock or assets or
evidences of indebtedness so distributed or of such rights or
warrants applicable to one share of Common Stock, and of which
the denominator shall be the Current Market Price of the
Common Stock on such record date; PROVIDED, HOWEVER, that if
the then fair market value (as so determined) of the portion
of the Securities or Assets so distributed applicable to one
share of Common Stock is equal to or greater than the Current
Market Price of the Common Stock on the record date mentioned
above, in lieu of the foregoing adjustment, adequate provision
12
shall be made so that each holder of shares of the Series B-1
Convertible Preferred Stock shall have the right to receive
the amount and kind of Securities or Assets which such holder
would have received had such holder converted each such share
of the Series B-1 Convertible Preferred Stock immediately
prior to the record date for the distribution of the
Securities or Assets. Such adjustment shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such distribution.
(iii) In case the Corporation shall issue or sell any
Common Stock (or rights, options, warrants or other securities
convertible into or exercisable or exchangeable for shares of
Common Stock) (collectively, "ADDITIONAL SHARES") at any time
from and after the Issue Date until the third anniversary of
the Issue Date without consideration or for a consideration
per share (or having a conversion, exchange or exercise price
per share) (such per share amount, the "SALE PRICE") less than
the greater of (A) the Current Market Price per share of
Common Stock on the date preceding the earlier of the issuance
or public announcement of the issuance of such Additional
Shares of Common Stock and (B) the Conversion Price as of the
date of such issuance of such shares (or, in the case of
convertible or exchangeable or exercisable securities, less
than the greater of the Current Market Price or the Conversion
Price, as the case may be, as of the date of issuance of the
rights, options, warrants or other securities in respect of
which shares of Common Stock were issued) then, and in each
such case, the Conversion Price shall be reduced to an amount
determined by multiplying (A) the Conversion Price in effect
on the day immediately prior to such date by (B) a fraction,
the numerator of which shall be the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such
sale or issuance multiplied by the greater of (a) the then
applicable Conversion Price per share and (b) the Current
Market Price per share of Common Stock on the date preceding
the earlier of the issuance or public announcement of the
issuance of such Additional Shares of Common Stock (the
greater of (a) and (b) above hereinafter referred to as the
"ADJUSTMENT PRICE") and (2) the aggregate consideration
receivable by the Corporation for the total number of shares
of Common Stock so issued (or into or for which the rights,
options, warrants or other securities are convertible,
exercisable or exchangeable), and the denominator of which
shall equal to the product of (I) the sum of (x) the total
number of shares of Common Stock outstanding immediately prior
to such sale or issue and (y) the number of additional shares
of Common Stock issued (or into or for which the rights,
options, warrants or other securities may be converted,
exercised or exchanged), multiplied by (II) the Adjustment
Price. In case any portion of the consideration to be received
by the Corporation shall be in a form other than cash, the
fair market value of such noncash consideration shall be
utilized in the foregoing computation. Such fair market value
shall be determined in good faith by the Board of Directors.
An adjustment made pursuant to this subsection (iii) shall be
made on the next Business Day following the date
13
on which any such issuance is made and shall be effective
retroactively to the close of business on the date of such
issuance. For purposes of this subsection (iii), the aggregate
consideration receivable by the Corporation in connection with
the issuance of shares of Common Stock or of rights, warrants
or other securities convertible into shares of Common Stock
shall be deemed to be equal to the sum of the aggregate
offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties) of all such
Common Stock, rights, warrants and convertible securities plus
the aggregate amount (as determined on the date of issuance),
if any, payable upon exercise or conversion of any such
rights, warrants and convertible securities into shares of
Common Stock. If, subsequent to the date of issuance of such
right, warrants or other convertible securities, the exercise
or conversion price thereof is reduced, such aggregate amount
shall be recalculated and the Conversion Price shall be
adjusted retroactively to give effect to such reduction. On
the expiration of any option or the termination of any right
to convert or exchange any securities into Additional Shares,
the Conversion Price then in effect hereunder shall forthwith
be increased to the Conversion Price which would have been in
effect at the time of such expiration or termination (but
taking into account other adjustments or potential made
following the time of issuance of such options or securities)
had such option or security, to the extent outstanding
immediately prior to such expiration or termination, never
been issued. If Common Stock is sold as a unit with other
securities, the aggregate consideration received for such
Common Stock shall be deemed to be net of the fair market
value (as determined by the Board of Directors in good faith)
of such other securities. The issuance or reissuance of (A)
any shares of Common Stock or rights, warrants or other
securities convertible into shares of Common Stock (whether
treasury shares or newly issued shares) (1) pursuant to a
dividend or distribution on, or subdivision, combination or
reclassification of, the outstanding shares of Common Stock
requiring an adjustment in the Conversion Price pursuant to
subsection (i) of this Section 9(f); (2) pursuant to any
restricted stock or stock option plan or program of the
Corporation involving the grant of options or rights to
acquire shares of Common Stock after the date hereof to
directors, officers and employees of the Corporation and its
Subsidiaries; (3) pursuant to any option, warrant, right, or
convertible security outstanding as of the Issue Date; (4)
pursuant to any securities issued to a bank or other similar
financial institution solely in connection with the Senior
Credit Facility or the Senior Subordinated Credit Facility or
(5) pursuant to an underwritten offering registered with the
SEC if the offering price is greater than the Conversion Price
then in effect; (B) the Series B-1 Convertible Preferred Stock
and any shares of Common Stock issuable upon conversion or
exercise thereof, (C) the Warrants and any shares of Common
Stock issuable upon exercise thereof, or (D) the Initial
Convertible Preferred Stock, shall not be deemed to constitute
an issuance of Common Stock or convertible securities by the
Corporation to which this subsection
14
(iii) applies. No adjustment shall be made pursuant to this
subsection (iii) in connection with any transaction to which
Section 9(g) applies.
(iv) For purposes of this Section 9(f), the number of shares of
Common Stock at any time outstanding shall not include any
shares of Common Stock then owned or held by or for the
account of the Corporation.
(v) All calculations of the Conversion Price pursuant to this
Section 9(f) shall be made to the nearest one one-hundredth
of a cent. Anything in this Section 9(f) to the contrary
notwithstanding, (A) the Corporation shall not be required
to give effect to any adjustment in the Conversion Price
unless and until the net effect of one or more adjustments
(each of which shall be carried forward), determined as
above provided, shall have resulted in a reduction of the
Conversion Price of at least 1%, and when the cumulative
net effect of more than one adjustment so determined shall
be to reduce the Conversion Price by at least 1%, such
reduction in Conversion Price shall thereupon be given
effect and (B) in no event shall the then current
Conversion Price be increased as a result of any
calculation made at any time pursuant to this Section 9(f).
(g) (i) In case of any capital reorganization or reclassification
of outstanding shares of Common Stock (other than a reclassification to
which Section 9(f)(i) hereof shall apply), or in case of any merger or
consolidation of the Corporation with or into another Person (as defined
below), or in case of any sale or conveyance to another Person of all or
substantially all of the assets of the Corporation or any compulsory
share exchange pursuant to which share exchange the shares of Common
Stock are converted into other securities, cash or other property (each
of the foregoing being referred to as a "TRANSACTION"), each share of
Series B-1 Convertible Preferred Stock then outstanding shall thereafter
be convertible into, in lieu of the Common Stock issuable upon such
conversion prior to consummation of such Transaction, the kind and amount
of shares of stock and other securities and property receivable
(including cash) upon the consummation of such Transaction by a holder of
that number of shares of Common Stock into which one share of Series B-1
Convertible Preferred Stock was convertible immediately prior to such
Transaction (including, on a pro rata basis, the cash, securities or
property received by holders of Common Stock in any tender or exchange
offer that is a step in such Transaction).
(ii) Notwithstanding anything contained herein to the
contrary, the Corporation will not effect any Transaction unless, prior
to the consummation thereof, (A) the Surviving Person (as defined below)
shall agree that the shares of Series B-1 Convertible Preferred Stock
shall be treated as provided in paragraph (i) of this Section 9(g) and
the agreements governing such Transaction shall so provide, (B) the
Surviving Person thereof shall assume, by written instrument mailed, by
first-class mail, postage prepaid, to each holder of shares of Series B-1
Convertible Preferred
15
Stock at such holder's address as it appears in the records of the
Corporation, the obligation to deliver to such holder such cash or other
securities to which, in accordance with the foregoing provisions, such
holder is entitled and such Surviving Person shall have mailed, by
first-class mail, postage prepaid, to each holder of shares of Series B-1
Convertible Preferred Stock at such holder's address as it appears in the
records of the Corporation, an opinion of independent counsel for such
Person stating that such assumption agreement is a valid, binding and
enforceable agreement of the Surviving Person, and (C) proper provision
is made to ensure that the holders of shares of Series B-1 Convertible
Preferred Stock will be entitled to receive the benefits afforded by
Section 5(b) hereof.
(h) In any case, if necessary, appropriate adjustment (as
determined in good faith by the Board of Directors) shall be made
in the application of the provisions set forth in this Section 9
with respect to rights and interests thereafter of the holders of
shares of Series B-1 Convertible Preferred Stock to the end that
the provisions set forth herein for the protection of the
conversion rights of Series B-1 Convertible Preferred Stock shall
thereafter be applicable, as nearly as reasonably may be, to any
such other shares of stock and other securities (other than the
Common Stock) and property deliverable upon conversion of the
shares of Series B-1 Convertible Preferred Stock remaining
outstanding with such adjustments in the Conversion Price and such
other adjustments in the provisions hereof as the Board of
Directors shall in good faith determine to be appropriate. In case
securities or property other than Common Stock shall be issuable
or deliverable upon conversion as aforesaid, then all references
in this Section 9 shall be deemed to apply, so far as appropriate
and as nearly as may be, to such other securities or property.
(i) If the Corporation shall pay any dividend or make any other
distribution to the holders of its Common Stock (other than
regular quarterly dividends payable in cash) or shall offer for
subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or any other right, or
there shall be any Transaction, or there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the
Corporation, then, in any one or more of said cases the
Corporation shall give at least 15 days prior written notice to
the holders of record of Series B-1 Convertible Preferred Stock by
first-class mail, postage prepaid, at their respective addresses
as they shall appear in the records of the Corporation of the
earlier of the dates on which (i) the books of the Corporation
shall close or a record shall be taken for such stock dividend,
distribution or subscription rights or (ii) such Transaction,
dissolution, liquidation or winding up shall take place. Such
notice shall also specify the date as of which the holders of the
Common Stock of record shall participate in said dividend,
distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification,
consolidation, merger, sale or conveyance or participate in such
dissolution, liquidation or winding up, as the case may be.
Failure to give such notice shall not invalidate any action so
taken.
(j) AUTOMATIC CONVERSION. On the Closing Date, each share of
Series B-1 Convertible Preferred Stock shall, without further
action, be automatically converted into a number of fully paid and
nonassessable shares of Initial Convertible Preferred Stock equal
to the Convertible Preferred Amount per share as of the Closing
Date divided by $1,000 (as adjusted for any split, subdivision,
combination, consolidation, recapitalization or similar event with
respect to the Series B-1 Convertible Preferred Stock). The
Corporation shall take, or cause to
16
be taken, all such further actions as shall be necessary to
effectuate such conversion, including, without limitation, issuing
shares of the Initial Convertible Preferred Stock to the holders
of shares of Series B-1 Convertible Preferred Stock on the Closing
Date. The provisions of Section 9(e) shall be applicable to any
conversion pursuant to this Section 9(j).
10. REPORTS AS TO ADJUSTMENTS. Upon the occurrence of any event
specified in Section 9(f) hereof that would result in any adjustment of
the Conversion Price, then, and in each such case, the Corporation shall
promptly deliver to the holders of record by first-class mail, postage
prepaid, at their respective addresses as they shall appear in the
records of the Corporation, a certificate signed by the President or a
Vice President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary 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 Conversion Price
then in effect following such adjustment. Where appropriate, such notice
to the holders of Series B-1 Convertible Preferred Stock may be given in
advance and included as part of the notice required pursuant to Section
9(i) hereof.
11. PURCHASE RIGHTS. If the Corporation issues any shares of
Common Stock, options, convertible securities, other equity securities or
securities containing options or rights to acquire any equity securities
or any securities convertible or exchangeable for equity securities, in
each case after the date hereof (other than a Permitted Issuance) to any
Person (the "OFFEREE"), such issuance (the "OFFER") will be subject to
the right of first offer and participation rights set forth in Section
11(a) and Section 11(b) below.
(a) PREFERRED STOCK ISSUANCES. If the securities to be issued in
the Offer include any class or series of preferred stock of the
Corporation whether by liquidation, dividend or voting rights, the
Corporation shall offer such securities (the "PREFERRED OFFERED
SECURITIES") to the holders of Series B-1 Convertible Preferred
Stock by delivery of written notice to such holders not less than
30 days prior to the date of the proposed issuance. Such notice
shall disclose in reasonable detail the proposed terms (including
price terms) and conditions of the Offer (the "PREFERRED OFFER
NOTICE"). Each holder of Series B-1 Convertible Preferred Stock
shall have the right to purchase its ratable portion of the
Preferred Offered Securities (determined by dividing the number of
shares of Series B-1 Convertible Preferred Stock held by such
holder by the total number of shares of Series B-1 Convertible
Preferred Stock then outstanding) on the terms as set forth in the
Preferred Offer Notice, by delivery of written notice to the
Corporation of such election within 15 days after delivery of the
Preferred Issuance Notice (the "PREFERRED ELECTION NOTICE"). If
any holder of Series B-1 Convertible Preferred Stock has elected
to purchase any Preferred Offered Securities, the sale of such
securities shall be consummated simultaneously with the
consummation of the sale to the Offeree. If the holders of Series
B-1 Convertible Preferred Stock elect to purchase less than all of
the Preferred Offered Securities as described above, the
Corporation may issue such remaining Preferred Offered Securities
to the Offeree at the same price and on the same terms as set
forth in the Preferred Issuance Notice during the 45-day period
beginning from the date on which the Preferred Election Notice has
been delivered to the Corporation. Any Preferred
17
Offered Securities not issued within such 45-day period will be
subject to this Section 11(a) upon subsequent proposed issuance.
(b) OTHER ISSUANCES. If the securities to be issued pursuant to
the Offer do not include any class or series of preferred stock of
the Corporation whether by liquidation, dividend or voting rights,
the Corporation shall offer to sell to each holder of Series B-1
Convertible Preferred Stock a number of such securities (the
"OFFERED SECURITIES") so that such holder's Ownership Ratio
immediately after the issuance of such securities would be equal
to such holder's Ownership Ratio immediately prior to such
issuance of securities. The Corporation shall give each holder of
Series B-1 Convertible Preferred Stock at least 30 days prior
written notice of any proposed issuance, which notice shall
disclose in reasonable detail the proposed terms and conditions of
such issuance (the "ISSUANCE NOTICE"). Each holder of Series B-1
Convertible Preferred Stock shall be entitled to purchase its
ratable portion of the Offered Securities at the same price, on
the same terms, and at the same time as the securities are issued
to the Offeree by delivery of written notice to the Corporation of
such election within 15 days after delivery of the Issuance Notice
(the "ELECTION NOTICE"); PROVIDED, that if more than one type of
security is proposed to be issued, such holder shall, if it
exercises its rights pursuant to this Section 11(b), purchase such
securities in the same ratio to be issued to the Offeree. If any
holder of Series B-1 Convertible Preferred Stock has elected to
purchase any Offered Securities, the sale of such securities shall
be consummated simultaneously with the consummation of the sale to
the Offeree. If the holders of Series B-1 Convertible Preferred
Stock elect to purchase less than all of the Offered Securities as
described above, the Corporation may issue such remaining Offered
Securities to the Offeree at the same price and on the same terms
as set forth in the Issuance Notice during the 45-day period
beginning from the date on which the Election Notice has been
delivered to the Corporation. Any Offered Securities not issued
within such 45-day period must be reoffered to the holders of
Series B-1 Convertible Preferred Stock in accordance with this
Section 11(b) prior to issuance.
(c) The election by any holder of Series B-1 Convertible Preferred
Stock not to exercise purchase rights under this Section 11 in any
one instance shall not affect such holders rights as to any
subsequent proposed issuance. Any sale of such securities by the
Corporation without first giving such holders the rights described
in this Section 11 shall be void and of no force and effect, and
the Corporation shall not register such sale or issuance on the
books and records of the Corporation.
12. CERTAIN COVENANTS. Any holder of Series B-1 Convertible
Preferred Stock may proceed to protect and enforce its rights and the
rights of such holders by any available remedy by proceeding at law or in
equity to protect and enforce any such rights, whether for the specific
enforcement of any provision in this Certificate of Designations or in
aid of the exercise of any power granted herein, or to enforce any other
proper remedy.
18
13. DEFINITIONS. For the purposes of this Certificate of
Designations, the following terms shall have the meanings indicated:
"AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act or any successor
provision. The terms "affiliated" and "non-affiliated" shall have meanings
correlative to the foregoing.
"BENEFICIALLY OWN" has the meaning set forth in Rules 13d-3 and 13d-5
promulgated under the Exchange Act.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"CHANGE IN CONTROL" shall mean (i) any sale, transfer, conveyance or
other disposition (other than by way of merger or consolidation) of all or
substantially all of the Corporation's assets, on a consolidated basis, in one
transaction or a series of related transactions, to any Person (including any
group that is deemed to be a Person); (ii) the consummation of any transaction
involving the Corporation, including, without limitation, any merger or
consolidation, whereby any Person (including any group that is deemed to be a
Person ) is or becomes the "beneficial owner," directly or indirectly, of more
than 40% of the aggregate voting equity securities of the Corporation or the
surviving entity or entities of such transaction if other than the Corporation;
(iii) the Continuing Directors cease for any reason to constitute a majority of
the members of the Board of Directors then in office; (iv) the approval by the
Corporation's stockholders of a merger or consolidation of the Corporation with
any other company and all other required governmental approvals have been
obtained, other than a merger or consolidation which would result in the Voting
Securities of the Corporation outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the Voting Securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; or (v) the Corporation adopts a
plan of liquidation.
"CLOSING DATE" shall have the meaning set forth in the Stock Purchase
Agreement.
"COMMON STOCK" shall mean the common stock, par value $1 per share, of
the Corporation, including any associated Right, as defined in and issued
pursuant to the Rights Agreement, dated as of October 27, 1998, as amended, by
and between the Corporation and The Bank of New York (as successor to First
Chicago Trust Company of New York), as Rights Agent.
"CONTINUING DIRECTORS" shall mean during any period of 12 consecutive
months, individuals who at the beginning of any such 12-month period constituted
the Board of Directors (together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders of the
Corporation was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved, including new
directors designated in or provided for in an agreement regarding the merger,
consolidation or sale,
19
transfer or other conveyance, of all or substantially all of the assets of the
Corporation, if such agreement was approved by a vote of such majority of
directors).
"CONVERTIBLE PREFERRED AMOUNT" shall mean an amount (as adjusted for
any split, subdivision, combination, consolidation, recapitalization or similar
event with respect to the Series B-1 Convertible Preferred Stock) equal to 100%
of the Liquidation Value for each share outstanding, plus an amount equal to all
accrued but unpaid dividends thereon, whether or not declared, to the date of,
as applicable, (i) liquidation, dissolution or winding up as calculated pursuant
to Section 4 hereof, (ii) redemption, as calculated pursuant to Section 5 hereof
or (iii) conversion, as calculated pursuant to Section 9 hereof; PROVIDED,
HOWEVER, for the purpose of determining the amount of accrued and unpaid
dividends as of any date after the Trigger Date, the calculation shall assume
that the Dividend Rate was 15% per annum from the date of issuance of the Series
B-1 Preferred Stock through, as applicable, (i) the date of liquidation,
dissolution or winding up as calculated pursuant to Section 4 hereof, (ii) the
date of redemption, as calculated pursuant to Section 5 hereof or (iii) the date
of conversion, as calculated pursuant to Section 9 hereof; provided that, for
the avoidance of doubt, in the event that the Corporation shall have previously
paid accrued dividends at the 8% Dividend Rate for any quarterly dividend
period, such 15% per annum Dividend Rate shall still be applicable to such
quarterly dividend period with the effect that the accrued and unpaid dividends
amount for such quarterly dividend period shall equal the amount of accrued
dividends calculated by using the 15% per annum Dividend Rate for such quarterly
dividend period less the dividends actually paid by the Corporation with respect
to such quarterly dividend period.
"CONVERSION PRICE" shall mean, $24.05, and shall be subject to
adjustment as provided for in Section 9(f).
"CURRENT MARKET PRICE," when used with reference to shares of Common
Stock or other securities on any date, shall mean the closing price per share of
Common Stock or such other securities on such date and, when used with reference
to shares of Common Stock or other securities for any period, shall mean the
average of the daily closing prices per share of Common Stock or such other
securities for such period. The closing price for each day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock or such other securities are not listed or admitted to
trading on the New York Stock Exchange, as reported, in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock or such
other securities are listed or admitted to trading or, if the Common Stock or
such other securities are not listed or admitted to trading on any national
securities exchange, the last quoted sale price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or such other system then in use, or, if on any such date the
Common Stock or such other securities are not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Stock or such other securities
selected by the Board of Directors of the Corporation. If the Common Stock or
such other securities are not publicly held or so listed or publicly traded,
"CURRENT MARKET PRICE" shall mean the fair market value per share of Common
Stock or of such other securities as determined by an independent
20
investment banking firm with an established national reputation as a valuer of
equity securities selected by the Corporation and reasonably acceptable to the
holders of a majority of the shares of Series B-1 Convertible Preferred Stock
outstanding at the time.
"DESIGNATED TRANSFEREE" shall mean any Person to whom the Initial
Purchasers or any Designated Transferee shall have sold or otherwise transferred
at least 10,000 shares of Series B-1 Convertible Preferred Stock (as such number
may be adjusted from time to time for any stock split, stock dividend, reverse
split, combination, recapitalization, merger, or otherwise); PROVIDED, HOWEVER,
that no Person primarily engaged in the business of publishing, printing or
marketing yellow page directories (the "DIRECTORIES BUSINESS") and no Person
which owns more than 40% of the outstanding voting equity securities of any
Person primarily engaged in the Directories Business shall be a Designated
Transferee unless the Corporation gives its written consent to such Person being
a Designated Transferee.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934.
"INITIAL CONVERTIBLE PREFERRED STOCK" shall mean the Convertible
Preferred Stock, and any shares of Common Stock issuable upon conversion or
exercise thereof, issuable pursuant to the Stock Purchase Agreement.
"INITIAL PURCHASERS" shall mean GS Capital Partners 2000, L.P., a
Delaware limited partnership; GS Capital Partners 2000 Offshore, L.P., a Cayman
Islands exempted limited partnership; GS Capital Partners 2000 Employee Fund
2000, L.P., a Delaware limited partnership; GS Capital Partners 2000 GmbH & Co.
Beteiligungs KG, a German limited partnership; and Goldman Sachs Direct
Investment Fund 2000, L.P. a Delaware limited partnership.
"ISSUE DATE" shall mean November 25, 2002.
"JUNIOR SECURITIES" shall have the meaning set forth in Section 2
hereof.
"NOTES CLOSING" shall mean the closing of the offering of Senior Notes
and Senior Subordinated Notes by R.H. Donnelley Finance Corporation I, pursuant
to the Preliminary Offering Memorandum, dated November 12, 2002.
"NOVEMBER LETTER AGREEMENT" shall mean that certain Letter Agreement,
dated November 25, 2002, by and among the Corporation, R.H. Donnelley, Inc. and
the Purchasers named therein, as such agreement may be amended from time to
time.
"OWNERSHIP RATIO" shall mean, as to any Person at any time of
determination, the percentage obtained by dividing the amount of shares of
Common Stock held by such Person on a fully diluted, as-if-converted basis at
such time by the aggregate amount of shares of Common Stock outstanding on a
fully diluted, as-if-converted basis at such time. For purposes of this
definition, "fully diluted" shall exclude shares of Common Stock issuable
pursuant to out-of-the-money options, warrants or other rights and options,
warrants or other rights which are not exercisable by the holder thereof on the
date of determination.
"PARITY SECURITIES" shall have the meaning set forth in Section 2
hereof.
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"PERMITTED ISSUANCE" shall mean (i) the issuance or granting of Common
Stock (including restricted, deferred or performance shares), options or
convertible securities to employees of the Corporation and its Subsidiaries or
the exercise thereof pursuant to a stock-based incentive plan, (ii) the issuance
of Common Stock hereunder, (iii) the issuance of Common Stock by the Corporation
for consideration other than cash pursuant to a consummated merger,
consolidation, acquisition, or similar business combination, (iv) the issuance
of Common Stock pursuant to any securities issued to a bank or other similar
financial institution solely in connection with the Senior Credit Facility or
the Senior Subordinated Credit Facility, (v) the issuance of Common Stock upon
exercise of Warrants or (vi) the issuance of shares of the Initial Convertible
Preferred Stock.
"PERSON" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"REDEMPTION TRIGGER DATE" shall mean the date which is the earliest of
(a) the date that the Sprint Purchase Agreement is terminated prior to the
closing of the transactions contemplated thereby, (b) the date that the Stock
Purchase Agreement is terminated prior to the Closing Date, (c) December 16,
2002, if the money to be funded into escrow (the "Escrow") pursuant to the Notes
Closing has not been so funded on or before December 16, 2002 and (d) the date
on which the Escrow is terminated (other than in connection with the Closing (as
such term is defined in the Stock Purchase Agreement)).
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration
Rights Agreement, dated November 25, 2002, by and among the Corporation and the
Purchasers named therein.
"SENIOR CREDIT FACILITY" shall have the meaning set forth in the Stock
Purchase Agreement.
"SENIOR SUBORDINATED CREDIT FACILITY" shall have the meaning set forth
in the Stock Purchase Agreement.
"SPRINT PURCHASE AGREEMENT" shall mean the Stock Purchase Agreement,
dated as of September 21, 2002, by an among Sprint Corporation, a Kansas
corporation, Centel Directories LLC, a Delaware limited liability company, and
the Corporation, as such agreement may be amended from time to time.
"STOCK PURCHASE AGREEMENT" shall mean that certain Preferred Stock and
Warrant Purchase Agreement, dated September 21, 2002, by and among the
Corporation and the Purchasers named therein, as such agreement may be amended
from time to time.
"SUBSIDIARIES" shall have the meaning ascribed to the term "Company
Subsidiaries" in the Stock Purchase Agreement.
"SURVIVING PERSON" shall mean the continuing or surviving Person of a
merger, consolidation or other corporate combination, the Person receiving a
transfer of all or a substantial part of the properties and assets of the
Corporation, or the Person consolidating with or merging into the Corporation in
a merger, consolidation or other corporate combination in which the Corporation
is the continuing or surviving Person, but in connection with which the Series
B-1 Convertible Preferred Stock or Common Stock of the Corporation is exchanged
or
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converted into the securities of any other Person or the right to receive
cash or any other property.
"TRADING DAY" shall mean a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, a Business Day.
"TRIGGER DATE" shall mean the date which is the earliest of (a) 30 days
after the Redemption Trigger Date, (b) the day after the first Quarterly
Dividend Payment Date that (i) dividends due to be paid to the holders of shares
of the Series B-1 Convertible Preferred Stock on such Quarterly Dividend Payment
Date are not paid, in cash, in full on such Quarterly Dividend Payment Date and
(ii) such dividend payment is not prohibited by any covenant restricting such
payments contained in the Corporation's bank credit facility or public
indentures, and (c) the date on which the Sprint Purchase Agreement or any
agreement contemplated thereby is amended, modified, waived or terminated in any
material respect without the prior written consent of the holders of at least
51% of the shares of Series B-1 Convertible Preferred Stock.
"VOTING EQUITY INTERESTS" shall mean any Voting Securities, securities
of the Corporation convertible into Voting Securities, and options, warrants or
other rights to acquire Voting Securities.
"VOTING SECURITIES" shall mean the Common Stock, the Series B-1
Convertible Preferred Stock and any other securities of the Corporation having
the voting power under ordinary circumstances with respect to the election of
directors of the Corporation.
"WARRANTS" shall mean the warrants to purchase shares of Common Stock
issued pursuant to the Stock Purchase Agreement.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed in its name and on its behalf and attested on this 25th day of November,
2002 by duly authorized officers of the Corporation.
R.H. DONNELLEY CORPORATION
By: /s/ Steven M. Blondy
--------------------------------------
Name: Steven M. Blondy
Title: Senior Vice President and Chief
Financial Officer
ATTEST:
By: /s/ Robert J. Bush
-----------------------
Name: Robert J. Bush
Title: Secretary
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