1
Exhibit 3.1
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CONLEY, CANITANO & ASSOCIATES, INC.
ARTICLE I
---------
The name of the corporation is Conley, Canitano & Associates, Inc.
(the "Corporation").
ARTICLE II
----------
The place in the State of Ohio where the Corporation's principal office
is located is the City of Mayfield Heights, Cuyahoga County.
ARTICLE III
-----------
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be formed under Sections 1701.01 to 1701.98,
inclusive, of the Ohio Revised Code.
ARTICLE IV
----------
A. Authorized Capital Stock.
-------------------------
The total number of shares of capital stock which the Corporation shall
have authority to issue is 55,500,800, of which (a) 500,800 shares shall be
preferred stock, par value $.01 per share, (b) 5,000,000 shares shall be
non-voting preferred stock, no par value ("Nonvoting Preferred Stock"), (c)
5,000,000 shares shall be voting preferred stock, no par value ("Voting
Preferred Stock") (Sections (a), (b) and (c) collectively referred to herein as
"Preferred Stock"), and (d) 45,000,000 shares shall be common stock, no par
value ("Common Stock").
B. Preferred Stock.
----------------
The Board of Directors shall have authority to issue Preferred Stock
from time to time in one or more classes or series. The express terms of shares
of a different series of any particular class shall be identical except for such
variations as may be permitted by law. Unless this provision is expressly
modified by a Preferred Stock Designation in accordance with then-applicable
law, the holders of Voting Preferred Stock will be entitled to one vote on each
matter submitted to a vote at a meeting of shareholders for each share of
Preferred Stock held of record by such holder as of the record date for such
meeting.
- 1 -
2
C. Convertible Preferred Stock
---------------------------
1. DESIGNATION. A total of 250,400 shares of the Corporation's
Preferred Stock shall be designated as a series known as Convertible Preferred
Stock, par value $.01 per share (the "Convertible Stock").
2. Election of Directors; Voting.
------------------------------
(a) ELECTION OF DIRECTORS. The holders of outstanding shares
of Convertible Stock shall, voting together as a separate class, be
entitled to elect three (3) Directors of the Corporation. Such
Directors shall be the candidates receiving the greatest number of
affirmative votes (with each holder of Convertible Stock entitled to
cast one vote for or against each candidate with respect to each share
of Convertible Stock held by such holder) of the outstanding shares of
Convertible Stock (the "Convertible Stock Director Designees"), with
votes cast against such candidates and votes withheld having no legal
effect. The election of the Convertible Stock Director Designees by the
holders of the Convertible Stock shall occur (i) at the annual meeting
of holders of capital stock, (ii) at any special meeting of holders of
capital stock, (iii) at any special meeting of holders of Convertible
Stock called by holders of a majority of the outstanding shares of
Convertible Stock or (iv) by the unanimous written consent of holders
of the outstanding shares of Convertible Stock. If at any time when any
share of Convertible Stock is outstanding any Convertible Stock
Director Designee should cease to be a Director for any reason, the
vacancy shall only be filled by the vote or written consent of the
holders of the outstanding shares of Convertible Stock, voting together
as a separate class, in the manner and on the basis specified above.
The holders of outstanding shares of Convertible Stock shall also be
entitled to vote for all other Directors of the Corporation together
with holders of all other shares of the Corporation's outstanding
capital stock entitled to vote thereon, voting as a single class, with
each outstanding share entitled to the same number of votes specified
in Section C.2(b). The holders of outstanding shares of Convertible
Stock, may, in their sole discretion, determine to elect only one or
two Convertible Stock Director Designees from time to time, and during
any such period the Board of Directors nonetheless shall be deemed duly
constituted.
(b) VOTING GENERALLY. The holder of each share of Convertible
Stock shall be entitled to the number of votes equal to the largest
number of full shares of Common Stock into which each share of
Convertible Stock could be converted pursuant to Section C.6 hereof
(other than by means of Section C.6(b)) on the record date for the vote
or for written consent of shareholders, if applicable, multiplied by
the number of shares of Convertible Stock held of record on such date.
The holder of each share of Convertible Stock shall be entitled to
notice of any shareholders' meeting in accordance with the Code of
Regulations of the Corporation and shall vote with holders of the
Common Stock, voting together as single class, upon all matters
submitted to a vote of shareholders, excluding those matters required
to be submitted to a class or series vote pursuant to the terms hereof
(including without limitation Section C.8) or by law. Fractional votes
shall not, however, be permitted and any fractional voting rights
resulting from the above formula (after aggregating all shares of
Common Stock into which shares of Convertible Stock held by each holder
could be converted) shall be
- 2 -
3
rounded to the nearest whole number (with any fraction equal or greater
than one-half rounded upward to one).
3. DIVIDENDS. The holders of Convertible Stock shall be entitled
to receive dividends out of funds legally available therefor at such times and
in such amounts as the Board of Directors may determine in its sole discretion;
PROVIDED, HOWEVER, that no such dividend may be declared or paid on any shares
of Convertible Stock unless at the same time a dividend is declared or paid on
all outstanding shares of Common Stock and vice versa, with holders of
Convertible Stock and Common Stock sharing in any such dividends as if they
constituted a single class of stock and with each holder of a share of
Convertible Stock entitled to receive such dividends based on the number of
shares of Common Stock into which such share of Convertible Stock is then
convertible hereunder. The right to dividends on shares of Convertible Stock
shall not be cumulative, and no right shall accrue to holders of Convertible
Stock by reason of the fact that dividends on said shares are not declared in
any prior period.
4. Liquidation.
------------
(a) LIQUIDATION PREFERENCE. Upon any liquidation, dissolution
or winding up of the Corporation and its subsidiaries, whether
voluntary or involuntary (a "Liquidation Event"), each holder of
outstanding shares of Convertible Stock shall be entitled to be paid
out of the assets of the Corporation available for distribution to
shareholders, whether such assets are capital, surplus or earnings, and
before any amount shall be paid or distributed to the holders of Common
Stock or of any other stock ranking on liquidation junior to the
Convertible Stock, an amount in cash equal to (i) $69.89 per share of
Convertible Stock held by such holder (adjusted appropriately for stock
splits, stock dividends, recapitalizations and the like with respect to
the Convertible Stock), plus (ii) any declared but unpaid dividends to
which such holder of outstanding shares of Convertible Stock is then
entitled pursuant to Sections C.3 and C.5(f) hereof (the sum of clauses
(i) and (ii) being referred to herein as the "Convertible Base
Liquidation Amount"), plus (iii) any interest accrued pursuant to
Section C.5(e) hereof to which such holder of Convertible Stock is
entitled, if any (the sum of clauses (i), (ii) and (iii) being referred
to herein as the "Convertible Liquidation Preference Amount");
PROVIDED, HOWEVER, that if, upon any Liquidation Event, the amounts
payable with respect to the Convertible Liquidation Preference Amount
are not paid in full, the holders of the Convertible Stock shall share
ratably in any distribution of assets in proportion to the full
respective preferential amounts to which they are entitled; and
PROVIDED FURTHER, HOWEVER, that if upon any Liquidation Event the
holders of the outstanding shares of Convertible Stock would receive
more than the Convertible Liquidation Preference Amount in the event
their shares were converted into Series A Redeemable Preferred Stock
(as defined in Section D.1 of this Article IV) and Common Stock
immediately prior to the record date for distributions in connection
with such Liquidation Event, then each holder of an outstanding share
of Convertible Stock shall receive an amount equal to such holder's
Series A Redeemable Liquidation Preference Amount (as defined in
Section D.4) under Section D.4 before any amount shall be paid or
distributed to the holders of Common Stock or of any other stock
ranking on liquidation junior to the Convertible Stock, and thereafter
shall share ratably with the holders of Common Stock in the assets
available for distribution, with such distributions to be made in cash
and as if each share of Convertible Stock had been converted into the
number of shares of Series A Redeemable
- 3 -
4
Preferred Stock and Common Stock issuable upon the conversion of such
holder's shares of Convertible Stock immediately prior to any such
Liquidation Event. The provisions of this Section C.4 shall not in any
way limit the right of the holders of Convertible Stock to elect to
convert their shares of Convertible Stock into Series A Redeemable
Preferred Stock and Common Stock pursuant to Section C.6 prior to or in
connection with any Liquidation Event.
(b) NOTICE. Prior to the occurrence of any Liquidation Event,
the Corporation will furnish each holder of Convertible Stock notice in
accordance with Section C.9 hereof, together with a certificate
prepared by the chief financial officer of the Corporation describing
in detail the facts of such Liquidation Event, stating in detail the
amount(s) per share of Convertible Stock each holder of Convertible
Stock would receive pursuant to the provisions of Section C.4(a) hereof
(both with respect to the amount a holder would receive pursuant to
clauses (i) and (ii) of Section C.4(a) and the amount a holder would
receive pursuant to the second proviso of Section C.4(a)) and stating
in detail the facts upon which such amounts were determined.
5. Redemption.
-----------
(a) Redemption Events.
------------------
(i) On or After October 15, 2001.
-----------------------------
(A) At any time after October 15, 2001, on
any one occasion any holder of Convertible Stock may
require the Corporation to redeem up to 50% of the
outstanding shares of Convertible Stock held by such
holder at such time.
(B) At any time after October 15, 2002, on
any one occasion any holder of Convertible Stock may
require the Corporation to redeem up to all of the
outstanding shares of Convertible Stock held by such
holder at such time.
(ii) EXTRAORDINARY TRANSACTIONS. Upon the election of
the holder or holders of not less than sixty-six and
two-thirds percent in voting power of the outstanding
Convertible Stock in connection with (A) a merger or
consolidation of the Corporation with or into another
corporation (with respect to which less than a majority of the
outstanding voting power of such surviving corporation is held
by shareholders of the Corporation immediately prior to such
event), (B) the sale or transfer of all or substantially all
of the properties and assets of the Corporation and its
subsidiaries, (C) any purchase by any party of shares of
capital stock of the Corporation (either through a negotiated
stock purchase or a tender for such shares), the effect of
which is that such party that did not beneficially own a
majority of the voting power of the outstanding shares of
capital stock of the Corporation immediately prior to such
purchase beneficially owns at least a majority of such voting
power immediately after such purchase, or (D) the redemption
or repurchase of shares representing a majority of the voting
power of the outstanding shares of capital stock of the
Corporation (each an
- 4 -
5
"Extraordinary Transaction"), then, as a part of and as a
condition to the effectiveness of such Extraordinary
Transaction, UNLESS the holders of Convertible Stock shall
have elected to convert their shares of Convertible Stock into
Series A Redeemable Preferred Stock and Common Stock in
accordance with the voluntary conversion provisions of Section
C.6 prior to the effective date of such Extraordinary
Transaction, the Corporation shall, on the effective date of
such Extraordinary Transaction, redeem all (but not less than
all) of the outstanding shares of Convertible Stock for an
amount equal to the Convertible Liquidation Preference Amount,
such amount to be payable in cash or, at the election of
holders of not less than sixty-six and two-thirds percent in
voting power of the outstanding Convertible Stock, in the same
form of consideration as is paid to the holders of Common
Stock in such Extraordinary Transaction; PROVIDED, HOWEVER,
that if upon any Extraordinary Transaction the holders of the
outstanding shares of Convertible Stock would receive more
than the Convertible Liquidation Preference Amount in the
event their shares were converted into Series A Redeemable
Preferred Stock and Common Stock immediately prior to such
Extraordinary Transaction, then each holder of Convertible
Stock shall receive with respect to each outstanding share of
Convertible Stock held by such holder an amount equal to the
per share liquidation preference for a share of Series A
Redeemable Preferred Stock under Section D.4 before any amount
shall be paid or distributed to the holders of Common Stock or
of any other stock ranking on liquidation junior to the
Convertible Stock, payable in cash, and thereafter shall share
ratably with the holders of the Common Stock in the proceeds
of such Extraordinary Transaction or, as applicable, shall
receive from the Corporation an amount equal to the amount per
share that would be paid if the shares of Common Stock
receivable upon conversion of the Convertible Stock were being
acquired in the Extraordinary Transaction at the same price
per share as is paid for Common Stock, which amount shall be
paid in the same form of consideration as is paid to holders
of Common Stock, as if each share of Convertible Stock had
been converted into the number of shares of Series A
Redeemable Preferred Stock and Common Stock issuable upon the
conversion of such share of Convertible Stock immediately
prior to such Extraordinary Transaction. The foregoing
election shall be made by such holders giving the Corporation
and each other holder of Convertible Stock not less than five
(5) business days prior written notice, which notice shall set
forth the date for such redemption. The provisions of this
Section C.5 shall not in any way limit the right of the
holders of Convertible Stock to elect to convert their shares
into shares of Series A Redeemable Preferred Stock and Common
Stock pursuant to Section C.6 prior to or in connection with
any Extraordinary Transaction.
(b) VALUATION OF DISTRIBUTION SECURITIES. Any securities
or other consideration to be delivered to the holders of the
Convertible Stock upon any Extraordinary Transaction in accordance with
the terms hereof shall be valued as follows:
(i) If traded on a nationally recognized securities
exchange or inter-dealer quotation system, the value shall be
deemed to be the average of the closing prices of the
securities on such exchange or system over the 30-day period
ending three (3) business days prior to the closing;
- 5 -
6
(ii) If traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the
30-day period ending three (3) business days prior to the
closing; and
(iii) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined
by the Corporation and the holders of not less than sixty-six
and two-thirds percent in voting power of the outstanding
shares of Convertible Stock, provided that if the Corporation
and the holders of sixty-six and two-thirds percent in voting
power of the outstanding shares of Convertible Stock are
unable to reach agreement, then by independent appraisal by a
mutually agreed to investment banker, the fees of which shall
be paid by the Corporation.
(c) NOTICE BY CORPORATION. Prior to the occurrence of any
Extraordinary Transaction, the Corporation will furnish each holder of
Convertible Stock notice in accordance with Section C.9 hereof,
together with a certificate prepared by the chief financial officer of
the Corporation describing in detail all material terms of such
Extraordinary Transaction, including without limitation the
consideration to be delivered in connection with such Extraordinary
Transaction and the identities of the parties to the Extraordinary
Transaction.
(d) REDEMPTION DATE; REDEMPTION PRICE. Any holder of
Convertible Stock may exercise such holder's right of redemption
pursuant to Section C.5(a)(i) by such holder giving the Corporation not
less than five (5) business days prior written notice, which notice
shall set forth the date for such redemption. Upon the election of the
holders of not less than sixty-six and two-thirds percent of the voting
power of the outstanding Convertible Stock to cause the Corporation to
redeem the Convertible Stock pursuant to Section C.5(a)(ii), all
holders of Convertible Stock shall be deemed to have elected to cause
the Convertible Stock to be so redeemed. Any date upon which a
redemption shall actually occur in accordance with Section C.5(a) shall
be referred to as a "Convertible Redemption Date." The redemption price
for each share of Convertible Stock redeemed pursuant to this Section
C.5 shall be the per share Convertible Liquidation Preference Amount or
such greater per share amount as may be payable pursuant to the proviso
to Section C.5(a)(ii), if applicable (the "Convertible Redemption
Price"). The aggregate Convertible Redemption Price shall be payable in
cash in immediately available funds to the respective holders of the
Convertible Stock on the fifteenth (15th) day (or if such day is not a
business day, the next business day after the 15th day) after the day
on which the Corporation receives the redemption election pursuant to
this Section C.5(d) (subject to Section C.5(e)) except to the extent
contemplated by the proviso to Section C.5(a)(ii); provided, however,
that such date may be postponed for up to an additional sixty (60)
calendar days to permit the appraisal process under Section
C.5(b)(iii). Until the aggregate Convertible Redemption Price has been
paid for all shares of Convertible Stock being redeemed: (A) no
dividend whatsoever shall be paid or declared, and no distribution
shall be made, on any capital stock of the Corporation; and (B) except
as permitted by Sections C.8(d)(i), (ii) and (iii), no shares of
capital stock of the Corporation (other than the Convertible Stock in
accordance with this Section C.5) shall be purchased, redeemed or
acquired by the
- 6 -
7
Corporation and no monies shall be paid into or set aside or made
available for a sinking fund for the purchase, redemption or
acquisition thereof.
(e) REDEMPTION PROHIBITED. If, at a Convertible Redemption
Date, the Corporation is prohibited under Section 1701.35 of the Ohio
Revised Code ("Section 1701.35") from redeeming all shares of
Convertible Stock for which redemption is required hereunder, then it
shall redeem such shares on a pro-rata basis among the holders of
Convertible Stock in proportion to the full respective redemption
amounts to which they are entitled hereunder to the extent possible and
shall redeem the remaining shares to be redeemed as soon as the
Corporation is not prohibited from redeeming some or all of such shares
under Section 1701.35, subject to the last paragraph of Section C.8.
The shares of Convertible Stock not redeemed shall remain outstanding
and entitled to all of the rights and preferences provided in this
Article IV. In the event that the Corporation fails for any reason to
redeem shares for which redemption is required pursuant to this Section
C.5, including without limitation due to a prohibition of such
redemption under Section 1701.35, then during the period from the
applicable Convertible Redemption Date through the date on which such
shares are redeemed, the applicable Convertible Base Liquidation Amount
of such shares shall bear interest at the rate of 15% per annum, with
such interest to accrue daily in arrears and to be compounded annually;
PROVIDED, HOWEVER, that in no event shall such interest exceed the
maximum permitted rate of interest under applicable law (the "Maximum
Permitted Rate"). In the event that fulfillment of any provision hereof
results in such rate of interest being in excess of the Maximum
Permitted Rate, the obligation to be fulfilled shall automatically be
reduced to eliminate such excess; PROVIDED, HOWEVER, that any
subsequent increase in the Maximum Permitted Rate shall be
retroactively effective to the applicable Redemption Date.
(f) DIVIDEND AFTER CONVERTIBLE REDEMPTION DATE. From and after
a Convertible Redemption Date, no shares of Convertible Stock subject
to redemption shall be entitled to dividends, if any, as contemplated
by Section C.3; PROVIDED, HOWEVER, that in the event that shares of
Convertible Stock are unable to be redeemed and continue to be
outstanding in accordance with Section C.5(e), such shares shall
continue to be entitled to dividends and interest thereon as provided
in Sections C.3 and C.5(e) until the date on which such shares are
actually redeemed by the Corporation.
(g) SURRENDER OF CERTIFICATES. Upon receipt of the applicable
Convertible Preferred Redemption Price by certified check or wire
transfer, each holder of shares of Convertible Stock to be redeemed
shall surrender the certificate or certificates representing such
shares to the Corporation, duly assigned or endorsed for transfer (or
accompanied by duly executed stock powers relating thereto), or, in the
event the certificate or certificates are lost, stolen or missing,
shall deliver an affidavit or agreement satisfactory to the Corporation
to indemnify the Corporation from any loss incurred by it in connection
therewith (an "Affidavit of Loss") with respect to such certificates at
the principal executive office of the Corporation or the office of the
transfer agent for the Convertible Stock or such office or offices in
the continental United States of an agent for redemption as may from
time to time be designated by notice to the holders of Convertible
Stock, and each surrendered certificate shall be canceled and retired;
PROVIDED, HOWEVER, that if the holder has exercised its redemption
right pursuant to Section C.5(a)(i)(A) or the Corporation is prohibited
from redeeming all shares of
- 7 -
8
Convertible Stock as provided in Section C.5(e), the holder shall not
be required to surrender said certificate(s) to the Corporation until
said holder has received a new stock certificate for those shares of
Convertible Stock not so redeemed.
6. CONVERSION. The holders of the Convertible Stock shall have
the following conversion rights:
(a) AUTOMATIC CONVERSION UPON ELECTION OF HOLDERS. The holders
of shares of Convertible Stock shall be entitled, upon the written
election of the holder or holders of not less than sixty-six and
two-thirds percent in voting power of the outstanding shares of
Convertible Stock, without the payment of any additional consideration,
(i) immediately prior to and subject to the closing or happening of a
Liquidation Event or an Extraordinary Transaction and (ii) at any time
after October 15, 1999, to cause each (but not less than all) of the
outstanding shares of Convertible Stock to be automatically converted
into (i) the number of fully paid and nonassessable shares of Common
Stock which results from dividing the Conversion Price (as defined in
this Section C.6(a)) per share in effect for the Convertible Stock at
the time of conversion into the per share Conversion Value (as defined
in this Section C.6(a)) of the Convertible Stock (together with any
other shares of Common Stock held by the holders of Convertible Stock
(regardless of whether such holders continue to hold Convertible
Stock), the "Conversion Shares") and (ii) one (1) fully paid and
nonassessable share of Series A Redeemable Preferred Stock. Upon the
election to so convert in the manner and on the basis specified in the
preceding sentence, all holders of the Convertible Stock shall be
deemed to have elected to voluntarily convert all outstanding shares of
Convertible Stock pursuant to this Section C.6. Upon the filing of
these Second Amended and Restated Articles of Incorporation with the
Ohio Secretary of State's office, the "Conversion Price" per share of
Convertible Stock shall be $6.99, and the per share "Conversion Value"
of Convertible Stock shall be $69.89. The Conversion Price per share of
Convertible Stock and the Common Stock Conversion Rate (as defined in
this Section C.6(a)) shall be subject to adjustment from time to time
as provided in Section C.7 hereof. The number of shares of Common Stock
into which a share of a Convertible Stock is convertible is hereinafter
referred to as the "Common Stock Conversion Rate." The number of shares
of Series A Redeemable Preferred Stock into which a share of
Convertible Stock is convertible is hereinafter referred to as the
"Series A Redeemable Conversion Rate." If the holders of shares of
Convertible Stock elect to convert the outstanding shares of
Convertible Stock at a time when there are any declared but unpaid
dividends or other amounts due on or in respect of such shares, such
dividends and other amounts shall be paid in full in cash by the
Corporation in connection with such conversion.
(b) AUTOMATIC CONVERSION UPON QPO. Each share of Convertible
Stock shall automatically be converted, without the payment of any
additional consideration, into shares of Common Stock and Series A
Redeemable Preferred Stock as of, and in all cases subject to, the
closing of the Corporation's first underwritten offering to the public
pursuant to an effective registration statement under the Securities
Act of 1933, as amended, provided that (i) such registration statement
covers the offer and sale of Common Stock of which the aggregate net
proceeds attributable to sales for the account of the Corporation
exceed $35,000,000, at a price per share equal to at least $11.00 (as
appropriately adjusted for any stock split, combination,
reorganization, recapitalization,
- 8 -
9
stock dividend, or similar event), (ii) such Common Stock is listed for
trading on either the New York Stock Exchange or the Nasdaq National
Market and (iii) if a redemption election is made pursuant to Section
D.5(a)(i) or (a)(ii), either (A) all outstanding shares of Series A
Redeemable Preferred Stock which are outstanding or issuable upon such
automatic conversion are redeemed immediately upon and as of the
closing of such offering, (B) contemporaneously with such offering cash
in an amount sufficient to redeem all outstanding shares of Series A
Redeemable Preferred Stock is segregated and irrevocably held by the
Corporation for payment to holders of Series A Redeemable Preferred
Stock or (C) all outstanding shares of Series A Redeemable Preferred
Stock are exchanged for Series A Notes (as defined in Section
D.5(a)(i)) (a "QPO" or a "Qualified Public Offering"); PROVIDED that if
a closing of a QPO occurs, all outstanding shares of Convertible Stock
shall be deemed to have been converted into shares of Common Stock and
Series A Redeemable Preferred Stock immediately prior to such closing.
Any such conversion shall be at the Common Stock Conversion Rate and
Series A Redeemable Conversion Rate in effect upon the closing of a
QPO, as applicable.
If the holders of shares of Convertible Stock are required to convert
the outstanding shares of Convertible Stock pursuant to this Section
C.6(b) at a time when there are any declared but unpaid dividends or
any amounts due on or in respect of such shares pursuant to Section
C.5(e) hereof, such dividends and other amounts shall be paid in full
in cash by the Corporation in connection with such conversion.
(c) PROCEDURE FOR VOLUNTARY CONVERSION. Upon election to
convert pursuant to Section C.6(a), each holder of Convertible Stock
shall surrender the certificate or certificates representing its
Convertible Stock, duly assigned or endorsed for transfer to the
Corporation (or accompanied by duly executed stock powers relating
thereto), at the principal executive office of the Corporation or the
offices of the transfer agent for the Convertible Stock or such office
or offices in the continental United States of an agent for conversion
as may from time to time be designated by notice to the holders of the
Convertible Stock by the Corporation, or shall deliver an Affidavit of
Loss with respect to such certificates. Upon surrender of a certificate
representing Convertible Stock for conversion, or delivery of an
Affidavit of Loss, the Corporation shall issue and send by hand
delivery, by courier or by first class mail (postage prepaid) to the
holder thereof or to such holder's designee, at the address designated
by such holder, certificates for the number of shares of Common Stock
and Series A Redeemable Preferred Stock to which such holder shall be
entitled upon conversion. The issuance of certificates for Common Stock
and Series A Redeemable Preferred Stock upon conversion of Convertible
Stock will be made without charge to the holders of such shares for any
issuance tax in respect thereof or other costs incurred by the
Corporation in connection with such conversion and the related issuance
of such stock. If a Liquidation Event or conversion of Convertible
Stock upon an Extraordinary Transaction or public offering not
constituting a QPO occurs, all outstanding shares of Convertible Stock
shall be deemed to have been converted into shares of Common Stock and
Series A Redeemable Preferred Stock immediately prior thereto, provided
that the Corporation shall make appropriate provisions (x) for the
Common Stock issued upon such conversion to be treated on the same
basis as all other Common Stock in such Liquidation Event,
Extraordinary Transaction or public offering not constituting a QPO and
(y) for the payment of the Series A Redeemable Liquidation Preference
Amount in connection with any Liquidation
- 9 -
10
Event or the redemption of the Series A Redeemable Preferred Stock
(issued upon such conversion) upon election of such redemption in
connection with any Extraordinary Transaction or public offering not
constituting a QPO, if applicable, as provided herein. In the event of
any public offering constituting a QPO, the provisions of Section
C.5(d) shall apply.
(d) PROCEDURE FOR AUTOMATIC CONVERSION. As of, and in all
cases subject to, the closing of a QPO (the "Automatic Conversion
Date"), all outstanding shares of Convertible Stock shall be converted
automatically into shares of Common Stock and Series A Redeemable
Preferred Stock at the applicable conversion rates specified in Section
C.6(a) and without any further action by the holders of such shares and
whether or not the certificates representing such shares of Convertible
Stock are surrendered to the Corporation or its transfer agent;
PROVIDED, HOWEVER, that all holders of Convertible Stock shall be given
prior written notice of the occurrence of a QPO in accordance with
Section C.9 hereof. The Corporation shall not be obligated to issue
certificates evidencing the shares of Series A Redeemable Preferred
Stock or Common Stock issuable on the Automatic Conversion Date (or the
cash payment or issuance of the Series A Notes for the shares of Series
A Redeemable Preferred Stock which are redeemed immediately after such
automatic conversion as provided below and in Section D.5(a)(i) or
D.5(a)(ii)) unless certificates evidencing such shares of the
Convertible Stock being converted, or an Affidavit of Loss with respect
to such certificates, are delivered to the Corporation or its transfer
agent. On the Automatic Conversion Date, all rights with respect to the
Convertible Stock so converted shall terminate, except any of the
rights of the holders thereof upon surrender of their certificate or
certificates therefor or delivery of an Affidavit of Loss thereof to
receive certificates for the number of shares of Common Stock and
Series A Redeemable Preferred Stock into which such Convertible Stock
has been converted (or the cash payment or Series A Notes to which such
holder is entitled as provided below and in Section D.5(a)(i) or
(a)(ii)). If so required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by written instrument
or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or by his, her or its attorney
duly authorized in writing. Upon surrender of such certificates or
Affidavit of Loss the Corporation shall issue and deliver to such
holder, promptly (and in any event in such time as is sufficient to
enable such holder to participate in such QPO) at such office and in
its name as shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common Stock
and number of shares of Series A Redeemable Preferred Stock or the
Series A Notes into which the shares of the Convertible Stock
surrendered were convertible on the Automatic Conversion Date.
Notwithstanding anything to the contrary set forth in this Section
C.6(d), the Corporation may deliver, in lieu of certificates for Series
A Redeemable Preferred Stock, cash in an amount determined pursuant to
Section D.5(b) hereof on account of the redemption of such Series A
Redeemable Preferred Stock, and upon payment of such cash the Series A
Redeemable Preferred Stock into which such Convertible Stock would have
been converted shall be deemed to have been issued and redeemed by the
Corporation.
(e) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock and Series A Redeemable
Preferred Stock solely for the purpose of effecting the
- 10 -
11
conversion of the shares of Convertible Stock such number of its shares
of Common Stock and Series A Redeemable Preferred Stock as shall from
time to time be sufficient to effect the conversion of all outstanding
shares of Convertible Stock; and if at any time the number of
authorized but unissued shares of Common Stock and Series A Redeemable
Preferred Stock shall not be sufficient to effect the conversion of all
then outstanding shares of Convertible Stock, the Corporation will take
such corporate action as may be necessary to increase its authorized
but unissued shares of Common Stock and Series A Redeemable Preferred
Stock to such number of shares as shall be sufficient for such purpose.
(f) NO CLOSING OF TRANSFER BOOKS. The Corporation shall not
close its books against the transfer of shares of Convertible Stock in
any manner which would interfere with the timely conversion of any
shares of Convertible Stock.
7. ADJUSTMENTS. The Conversion Price in effect from time to time
shall be subject to adjustment from and after October 10, 1997 and regardless of
whether any shares of Convertible Stock are then issued and outstanding as
follows:
(a) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. Upon the
issuance of additional shares of Common Stock as a dividend or other
distribution on outstanding Common Stock, the subdivision of
outstanding shares of Common Stock into a greater number of shares of
Common Stock, or the combination of outstanding shares of Common Stock
into a smaller number of shares of Common Stock, the Conversion Price
shall, simultaneously with the happening of such dividend, subdivision
or split be adjusted by multiplying the then effective Conversion Price
by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event. An adjustment made pursuant
to this Section C.7(a) shall be given effect, upon payment of such a
dividend or distribution, as of the record date for the determination
of shareholders entitled to receive such dividend or distribution (on a
retroactive basis) and in the case of a subdivision or combination
shall become effective immediately as of the effective date thereof.
(b) SALE OF COMMON STOCK. In the event the Corporation shall
at any time, or from time to time, issue, sell or exchange any shares
of Common Stock (including shares held in the Corporation's treasury
but excluding up to 2,762,450 shares of Common Stock (as appropriately
adjusted for stock splits, stock dividends and the like) issued to
officers, directors or employees of the Corporation or upon the
exercise of options or other rights issued to such officers, directors
or employees pursuant to the stock option plans (the "Excluded
Shares"), for a consideration per share less than the Conversion Price
in effect immediately prior to the issuance, sale or exchange of such
shares, then, and thereafter successively upon each such issuance, sale
or exchange, the Conversion Price in effect immediately prior to the
issuance, sale or exchange of such shares shall forthwith be reduced to
an amount determined by multiplying such Conversion Price by a
fraction:
(i) the numerator of which shall be (X) the number of
shares of Common Stock of all classes outstanding immediately
prior to the issuance of
- 11 -
12
such additional shares of Common Stock (excluding treasury
shares but including all shares of Common Stock issuable upon
conversion or exercise of any outstanding Convertible Stock,
options, warrants, rights or convertible securities), plus (Y)
the number of shares of Common Stock which the net aggregate
consideration received by the Corporation for the total number
of such additional shares of Common Stock so issued would
purchase at the Conversion Price (prior to adjustment), and
(ii) the denominator of which shall be (X) the number
of shares of Common Stock of all classes outstanding
immediately prior to the issuance of such additional shares of
Common Stock (excluding treasury shares but including all
shares of Common Stock issuable upon conversion or exercise of
any outstanding Convertible Stock, options, warrants, rights
or convertible securities), plus (Y) the number of such
additional shares of Common Stock so issued.
(c) SALE OF OPTIONS, RIGHTS OR CONVERTIBLE SECURITIES. In the
event the Corporation shall at any time or from time to time, issue
options, warrants or rights to subscribe for shares of Common Stock, or
issue any securities convertible into or exchangeable for shares of
Common Stock (other than any options or warrants for Excluded Shares),
for a consideration per share (determined by dividing the Net Aggregate
Consideration (as determined below) by the aggregate number of shares
of Common Stock that would be issued if all such options, warrants,
rights or convertible securities were exercised or converted to the
fullest extent permitted by their terms) less than the Conversion Price
in effect immediately prior to the issuance of such options or rights
or convertible or exchangeable securities, the Conversion Price in
effect immediately prior to the issuance of such options, warrants or
rights or securities shall be reduced to an amount determined by
multiplying such Conversion Price by a fraction:
(i) the numerator of which shall be (X) the number of
shares of Common Stock of all classes outstanding immediately
prior to the issuance of such options, rights or convertible
securities (excluding treasury shares but including all shares
of Common Stock issuable upon conversion or exercise of any
outstanding Convertible Stock, options, warrants, rights or
convertible securities), plus (Y) the number of shares of
Common Stock which the total amount of consideration received
by the Corporation for the issuance of such options, warrants,
rights or convertible securities plus the minimum amount set
forth in the terms of such security as payable to the
Corporation upon the exercise or conversion thereof (the "Net
Aggregate Consideration") would purchase at the Conversion
Price prior to adjustment, and
(ii) the denominator of which shall be (X) the number
of shares of Common Stock of all classes outstanding
immediately prior to the issuance of such options, warrants,
rights or convertible securities (excluding treasury shares
but including all shares of Common Stock issuable upon
conversion or exercise of any outstanding Convertible Stock,
options, warrants, rights or convertible securities), plus (Y)
the aggregate number of shares of Common Stock that would be
issued if all such options, warrants, rights or convertible
securities were exercised or converted.
- 12 -
13
(d) EXPIRATION OR CHANGE IN PRICE. If the consideration per
share provided for in any options or rights to subscribe for shares of
Common Stock or any securities exchangeable for or convertible into
shares of Common Stock, changes at any time, the Conversion Price in
effect at the time of such change shall be readjusted to the Conversion
Price which would have been in effect at such time had such options or
convertible securities provided for such changed consideration per
share (determined as provided in Section C.7(c) hereof), at the time
initially granted, issued or sold; PROVIDED, that such adjustment of
the Conversion Price will be made only as and to the extent that the
Conversion Price effective upon such adjustment remains less than or
equal to the Conversion Price that would be in effect if such options,
rights or securities had not been issued. No adjustment of the
Conversion Price shall be made under this Section A.7 upon the issuance
of any additional shares of Common Stock which are issued pursuant to
the exercise of any warrants, options or other subscription or purchase
rights or pursuant to the exercise of any conversion or exchange rights
in any convertible securities if an adjustment shall previously have
been made upon the issuance of such warrants, options or other rights.
Any adjustment of the Conversion Price shall be disregarded if, as, and
when the rights to acquire shares of Common Stock upon exercise or
conversion of the warrants, options, rights or convertible securities
which gave rise to such adjustment expire or are canceled without
having been exercised, so that the Conversion Price effective
immediately upon such cancellation or expiration shall be equal to the
Conversion Price in effect at the time of the issuance of the expired
or canceled warrants, options, rights or convertible securities, with
such additional adjustments as would have been made to that Conversion
Price had the expired or canceled warrants, options, rights or
convertible securities not been issued.
(e) OTHER ADJUSTMENTS. In the event the Corporation shall make
or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation other than shares of Common
Stock, then and in each such event lawful and adequate provision shall
be made so that the holders of Convertible Stock shall receive upon
conversion thereof in addition to the number of shares of Common Stock
receivable thereupon, the number of securities of the Corporation which
they would have received had their Convertible Stock been converted
into Common Stock and Series A Redeemable Preferred Stock on the date
of such event and had they thereafter, during the period from the date
of such event to and including the date of conversion, retained such
securities receivable by them as aforesaid during such period, giving
application to all adjustments called for during such period under this
Section C.7 as applied to such distributed securities.
If the Common Stock issuable upon the conversion of the
Convertible Stock shall be changed into the same or different number of
shares of any class or classes of stock, whether by reclassification or
otherwise (other than a subdivision or combination of shares or stock
dividend provided for above, or a reorganization, merger, consolidation
or sale of assets provided for elsewhere in this Section C.7), then and
in each such event the holder of each share of Convertible Stock shall
have the right thereafter to convert such share into the kind and
amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification or other change, by holders
of the number of shares of Common Stock into which such shares of
Convertible Stock might
- 13 -
14
have been converted immediately prior to such reorganization,
reclassification or change, all subject to further adjustment as
provided herein.
(f) MERGERS AND OTHER REORGANIZATIONS. If at any time or from
time to time there shall be a capital reorganization of the Common
Stock (other than a subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this Section C.7) or a
merger or consolidation of the Corporation with or into another
Corporation or the sale of all or substantially all of the
Corporation's properties and assets to any other person, then, as a
part of and as a condition to the effectiveness of such reorganization,
merger, consolidation or sale, lawful and adequate provision shall be
made so that the holders of the Convertible Stock shall thereafter be
entitled to receive upon conversion of the Convertible Stock the number
of shares of stock or other securities or property of the Corporation
or of the successor Corporation resulting from such merger or
consolidation or sale, to which a holder of Common Stock deliverable
upon conversion would have been entitled on such capital
reorganization, merger, consolidation, or sale. In any such case,
appropriate provisions shall be made with respect to the rights of the
holders of the Convertible Stock after the reorganization, merger,
consolidation or sale to the end that the provisions of this Section
C.7 (including without limitation provisions for adjustment of the
Conversion Price and the number of shares purchasable upon conversion
of the Convertible Stock) shall thereafter be applicable, as nearly as
may be, with respect to any shares of stock, securities or assets to be
deliverable thereafter upon the conversion of the Convertible Stock.
(g) All calculations under this Section C.7 shall be made to
the nearest cent or to the nearest one hundredth (1/100) of a share, as
the case may be.
(h) Upon the occurrence of each adjustment or readjustment
pursuant to this Section C.7, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Convertible
Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment
is based. The Corporation shall, upon written request at any time of
any holder of Convertible Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Prices before and after such
adjustment or readjustment, and (iii) the number of shares of Common
Stock and Series A Redeemable Preferred Stock and the amount, if any,
of other property which at the time would be received upon the
conversion of such holder's shares of Convertible Stock.
8. COVENANTS. So long as any shares of Convertible Preferred
Stock (or Series A Redeemable Preferred Stock, as applicable) shall be
outstanding, the Corporation shall not, without first having provided written
notice of such proposed action to each holder of outstanding shares of
Convertible Preferred Stock (or Series A Redeemable Preferred Stock, as
applicable) and having obtained the affirmative vote or written consent of the
holders of not less than sixty-six and two-thirds percent in voting power of the
outstanding shares of Convertible Preferred Stock (or Series A Redeemable
Preferred Stock, as applicable), voting as a single class, with each share of
Convertible Preferred Stock (or Series A Redeemable Preferred Stock, as
applicable) entitling the holder thereof to one vote per share of Convertible
Preferred Stock (or Series A Redeemable Preferred Stock, as applicable) held by
such holder:
- 14 -
15
(a) sell, lease or otherwise dispose of (whether in one
transaction or a series of related transactions) all or a substantial portion of
its assets or business,
(b) merge with or into or consolidate with another entity or
enter into or engage in any other transaction or series of related transactions,
in any such case in connection with or as a result of which the Corporation is
not the surviving entity or the owners of the Corporation's outstanding equity
securities prior to the transaction or series of related transactions do not own
at least a majority of the outstanding equity securities of the surviving,
resulting or consolidated entity,
(c) dissolve, liquidate or wind up its operations,
(d) directly or indirectly redeem, purchase, or otherwise
acquire for consideration any shares of its Common Stock or any other class of
its capital stock except (i) for the redemption of Convertible Preferred Stock,
Series A Redeemable Preferred Stock or Conversion Shares pursuant to and as
provided in these Second Amended and Restated Articles of Incorporation, (ii)
for the exchange of Series A Redeemable Preferred Stock for Series A Notes as
contemplated by Section D.5(a)(i), (iii) as contemplated by Sections 1.2 and 4.5
of the Stock Purchase and Shareholders Agreement dated as of October 15, 1997 by
and among the Corporation and the shareholders of the Corporation (the "Purchase
Agreement"), or (iv) for the repurchase of shares of Common Stock from employees
and consultants pursuant to agreements entered into in connection with the
issuance of options and/or restricted stock, pursuant to the Corporation's 1997
Equity and Performance Incentive Plan,
(e) propose or adopt any amendment to this Article IV of these
Second Amended and Restated Articles of Incorporation, or any other amendment to
these Second Amended and Restated Articles of Incorporation or the Corporation's
regulations that eliminates, amends or restricts or otherwise adversely affects
the rights and preferences of the Convertible Preferred Stock or the Series A
Redeemable Preferred Stock, or increases the authorized shares of Convertible
Preferred Stock or Series A Redeemable Preferred Stock,
(f) declare or make dividend payments on any shares of its
Common Stock or any other class of its capital stock,
(g) create, or obligate itself to create, any class or series
of shares having preference over or being on a parity with the Convertible
Preferred Stock or the Series A Redeemable Preferred Stock,
(h) increase the size of the Board of Directors to more than
seven (7) members, or
(i) enter into or be a party to any transaction or agreement,
including without limitation any lease (other than the lease in effect as of the
date of filing these Second Amended and Restated Articles of Incorporation with
respect to the Company's new offices located in Mayfield Heights, Ohio as set
forth in the agreement by and between the Corporation and American National
Development, Ltd., dated May, 1996) or other rental or purchase agreement
providing for loans or extensions of credit by or to the Company with or for the
benefit of any person or entity which is a shareholder, officer or director of
the Company, a relative by blood or
- 15 -
16
marriage of, a trust or estate for the benefit of, or a person or entity which
directly or indirectly controls, is controlled by, or is under common control
with, any such person or entity, except (i) for normal compensation paid to
employees of the Company in the ordinary course of business and (ii)
transactions expressly disclosed in or contemplated by the Agreement and the
exhibits thereto.
Further, the Corporation shall not, by amendment of these Second
Amended and Restated Articles of Incorporation or through any Extraordinary
Transaction or other reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action,
knowingly or purposefully avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Corporation and
each subsidiary of the Corporation but shall at all times in good faith assist
in the carrying out of all the provisions of this Article IV and in the taking
of all such action as may be necessary or appropriate in order to protect the
rights of the holders of the Convertible Preferred Stock and the Series A
Redeemable Preferred Stock set forth in this Certificate against impairment. Any
successor to the Corporation or any subsidiary of the Corporation shall agree,
as a condition to such succession, to carry out and observe the obligations of
the Corporation hereunder with respect to the Convertible Preferred Stock and
the Series A Redeemable Preferred Stock.
9. Notice
------
(a) LIQUIDATION EVENTS, EXTRAORDINARY TRANSACTIONS, ETC. In
the event (i) the Corporation establishes a record date to determine
the holders of any class of securities who are entitled to receive any
dividend or other distribution or who are entitled to vote at a meeting
(or by written consent) in connection with any of the transactions
identified in clause (ii) hereof, or (ii) any Liquidation Event (as
defined in Section C.4), any Extraordinary Transaction (as defined in
Section C.5), any QPO (as defined in Section C.6) or any other public
offering becomes reasonably likely to occur, the Corporation shall mail
or cause to be mailed by first class mail (postage prepaid) to each
holder of Convertible Stock (or each holder of Series A Redeemable
Preferred Stock, as applicable) at least fifteen (15) days prior to
such record date specified therein or the expected effective date of
any such transaction, whichever is earlier, a notice specifying (A) the
date of such record date for the purpose of such dividend or
distribution or meeting or consent and a description of such dividend
or distribution or the action to be taken at such meeting or by such
consent, (B) the date on which any such Liquidation Event,
Extraordinary Transaction, QPO or other public offering is expected to
become effective, and (C) the date on which the books of the
Corporation shall close or a record shall be taken with respect to any
such event.
(b) WAIVER OF NOTICE. The holder or holders of not less than
sixty-six and two-thirds percent in voting power of the outstanding
shares of Convertible Stock (or Series A Redeemable Preferred Stock, as
applicable) may, at any time upon written notice to the Corporation,
waive any notice provisions specified herein for the benefit of such
holders, and any such waiver shall be binding upon all holders of such
securities.
(c) GENERAL. In the event that the Corporation provides any
notice, report or statement to any holder of Common Stock, the
Corporation shall at the same time provide
- 16 -
17
a copy of any such notice, report or statement to each holder of
outstanding shares of Convertible Stock (or Series A Redeemable
Preferred Stock, as applicable).
10. NO REISSUANCE OF CONVERTIBLE STOCK. No share or shares of
Convertible Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.
11. CONTRACTUAL RIGHTS OF HOLDERS. The various provisions set forth
herein for the benefit of the holders of the Convertible Stock and Series A
Redeemable Preferred Stock shall be deemed contract rights enforceable by them,
including without limitation, one or more actions for specific performance.
D. Series A Redeemable Preferred Stock
-----------------------------------
1. DESIGNATION. A total of 250,400 shares of the Corporation's
Preferred Stock shall be designated as a series known as Series A Redeemable
Preferred Stock, par value $.01 per share (the "Series A Redeemable Preferred
Stock").
2. ELECTION OF DIRECTORS; VOTING.
------------------------------
(a) ELECTION OF DIRECTORS. The holders of outstanding shares
of Series A Redeemable Preferred Stock shall, voting together as a
separate class, be entitled to elect one (1) Director. Such Director
shall be the candidate receiving the greatest number of affirmative
votes (with each holder of Series A Redeemable Preferred Stock entitled
to cast one vote for or against each candidate with respect to each
share of Series A Redeemable Preferred Stock held by such holder) of
the outstanding shares of Series A Redeemable Preferred Stock (the
"Series A Redeemable Preferred Stock Director Designee"), with votes
cast against such candidates and votes withheld having no legal
effect). The election of the Series A Redeemable Preferred Stock
Director Designee by the holders of the Series A Redeemable Preferred
Stock shall occur (i) at the annual meeting of holders of capital
stock, (ii) at any special meeting of holders of capital stock, (iii)
at any special meeting of holders of Series A Redeemable Preferred
Stock called by holders of a majority of the outstanding shares of
Series A Redeemable Preferred Stock or (iv) by the unanimous written
consent of holders of the outstanding shares of Series A Redeemable
Preferred Stock. Upon conversion of the Convertible Stock, the holder
or holders of not less than a majority in voting power of the
outstanding Series A Redeemable Preferred Stock shall designate one of
the Convertible Stock Director Designees then serving on the
Corporation's board of directors to continue in such capacity as the
Series A Redeemable Preferred Stock Designee. If at any time when any
share of Series A Redeemable Preferred Stock is outstanding the Series
A Redeemable Preferred Stock Director Designee should cease to be a
Director for any reason, the vacancy shall only be filled by the vote
or written consent of holders of the outstanding shares of Series A
Redeemable Preferred Stock, voting together as a separate class, in the
manner and on the basis specified above.
(b) VOTING GENERALLY. Except as set forth above with respect
to the election of the Series A Redeemable Preferred Stock Director
Designee, the holders of Series A
- 17 -
18
Redeemable Preferred Stock shall not be entitled to vote on any matters
except to the extent otherwise required under the Ohio Revised Code.
3. DIVIDENDS. The holders of outstanding shares of Series A Redeemable
Preferred Stock shall be entitled to receive, out of any funds legally available
therefor, cumulative (non- compounding) dividends on the Series A Redeemable
Preferred Stock in cash, at the per share rate per annum of seven percent (7%)
of $62.90 (adjusted appropriately for stock splits, stock dividends,
recapitalizations and the like with respect to the Series A Redeemable Preferred
Stock) (a "Series A Redeemable Cumulative Dividend"). Such dividends will accrue
quarterly in arrears commencing as of the date of issuance of the Series A
Redeemable Preferred Stock and be cumulative, to the extent unpaid, whether or
not they have been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of dividends.
Series A Redeemable Cumulative Dividends shall become due and payable with
respect to any share of Series A Redeemable Preferred Stock as provided in
Section D.4 and Section D.5. So long as any shares of Series A Redeemable
Preferred Stock are outstanding and the Series A Redeemable Cumulative Dividends
have not been paid in full in cash: (A) no dividend whatsoever shall be paid or
declared, and no distribution shall be made, on any Common Stock or other
capital stock of the Corporation ranking junior to the Series A Redeemable
Preferred Stock; and (B) except as provided in Sections C.8(d)(i), (ii) and
(iii), no shares of capital stock of the Corporation ranking junior to the
Series A Redeemable Preferred Stock shall be purchased, redeemed or acquired by
the Corporation and no monies shall be paid into or set aside or made available
for a sinking fund for the purchase, redemption or acquisition thereof. All
numbers relating to the calculation of dividends pursuant to this Section D.3
shall be subject to equitable adjustment in the event of any stock split,
combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the Series A Redeemable Preferred Stock. Nothing
herein contained shall in any way or under any circumstances be construed or
deemed to require the Board to declare, or the Corporation to pay or set apart
for payment, any cash dividends of the Series A Redeemable Preferred Stock.
Dividends payable on the Series A Redeemable Preferred Stock for any period less
than a year shall be computed on the basis of a 365 day (366 day if applicable)
year and the actual number of days elapsed.
4. LIQUIDATION. Upon any Liquidation Event, each holder of outstanding
shares of Series A Redeemable Preferred Stock shall be entitled to be paid out
of the assets of the Corporation available for distribution to shareholders,
whether such assets are capital, surplus, or earnings, and before any amount
shall be paid or distributed to the holders of Common Stock or of any other
stock ranking on liquidation junior to the Series A Redeemable Preferred Stock,
an amount in cash equal to the sum of (a) $62.90 per share of Series A
Redeemable Preferred Stock held by such holder (adjusted appropriately for stock
splits, stock dividends, recapitalizations and the like with respect to the
Series A Redeemable Preferred Stock), plus (b) any unpaid dividends to which
such holder of outstanding shares of Series A Redeemable Preferred Stock is
entitled pursuant to Sections D.3 and D.5(d) hereof (the sum of clauses (a) and
(b) being referred to herein as the"Series A Redeemable Base Liquidation
Amount"), plus (c) any interest accrued pursuant to Section D.5(c) to which such
holder of outstanding shares of Series A Redeemable Preferred Stock is entitled,
if any (the sum of clauses (a), (b) and (c) being referred to herein as
the"Series A Redeemable Liquidation Preference Amount"); PROVIDED, HOWEVER, that
if, upon any Liquidation Event, the amounts payable with respect to the Series A
Redeemable Liquidation Preference Amount are not paid in full, the holders of
the Series A Redeemable
- 18 -
19
Preferred Stock shall share ratably in any distribution of assets in proportion
to the full respective preferential amounts to which they are entitled.
5. Redemption.
-----------
(a) Redemption Events.
------------------
(i) UPON ELECTION OF HOLDERS UPON A QPO. Upon the
election of the holder or holders of not less than sixty-six
and two-thirds percent of the outstanding Convertible Stock,
the Corporation shall redeem all (and not less than all,
except as set forth in the third sentence of this Section
D.5(a)) of the outstanding shares of Series A Redeemable
Preferred Stock upon the closing of a QPO. The foregoing
election shall be made by such holders giving the Corporation
and each other holder of Series A Redeemable Preferred Stock
(or Convertible Stock, as applicable) written notice not less
than five (5) days prior to the closing of a QPO. In the event
that the principal underwriter for a QPO shall reasonably and
in good faith request in writing, or cause the Company to so
request in writing, that the holders of Series A Redeemable
Preferred Stock waive the holders' right to elect to have such
holder's shares of Series A Redeemable Preferred Stock
redeemed pursuant to this Section D.5(a)(i) and the holders of
sixty-six and two-thirds percent in voting power of the
outstanding shares of the Series A Redeemable Preferred Stock
agree to so waive such redemption election, then all
outstanding shares of Series A Redeemable Preferred Stock
shall be exchanged, without the payment of additional
consideration, for notes of the Company ("Series A Notes") in
an aggregate principal amount equal to the aggregate Series A
Redemption Price (as defined in Section D.5(b) below), which
Series A Notes shall (i) mature on the second anniversary of
the effective date of such QPO and (ii) bear interest on the
outstanding principal balance thereof at the rate of fifteen
percent (15%) per annum, which interest shall accrue daily in
arrears and be paid on the last day of each month, commencing
on the last day of the first month following the effective
date of such QPO.
(ii) UPON ELECTION OF CORPORATION UPON A QPO. The
Corporation may elect to redeem all (but not less than all,
other than pursuant to Section D.5(c) below) of the
outstanding shares of Series A Redeemable Preferred Stock at
any time upon the closing of a QPO. The foregoing election
shall be made by the Corporation giving each holder of Series
A Redeemable Preferred Stock written notice not less than five
(5) days prior to the closing of a QPO.
(iii) Lapse of Time.
--------------
(A) At any time after the later of the first
anniversary of the date of the conversion of the
Convertible Preferred Stock as set forth in Section
C.6 (other than in connection with an Extraordinary
Transaction) and October 15, 2001, on any one
occasion any holder of Series A Redeemable Preferred
Stock may require the Corporation to redeem up to 50%
of the outstanding shares of Series A Redeemable
Preferred Stock held by such holder at such time.
- 19 -
20
(B) At any time after the later of the
second anniversary of the date of the conversion of
the Convertible Preferred Stock as set forth in
Section C.6 (other than in connection with an
Extraordinary Transaction) and October 15, 2002, on
any one occasion any holder of Series A Redeemable
Preferred Stock may require the Corporation to redeem
up to all of the outstanding shares of Series A
Redeemable Preferred Stock held by such holder at
such time.
(iv) UPON EXTRAORDINARY TRANSACTIONS. Upon the
election of the holder or holders of not less than sixty-six
and two-thirds percent in voting power of the outstanding
Series A Redeemable Preferred Stock (or Convertible Stock, as
applicable, proposing to convert the same in order to effect a
redemption of the Series A Redeemable Preferred Stock received
upon such conversion hereunder), the Corporation shall redeem
all (and not less than all, other than pursuant to Section
D.5(c) below) of the outstanding shares of Series A Redeemable
Preferred Stock upon the occurrence of an Extraordinary
Transaction (as defined in Section C.5) or public offering not
constituting a QPO. The foregoing election shall be made by
such holders giving the Corporation and each other holder of
Series A Redeemable Preferred Stock (or Convertible Stock, as
applicable) not less than five (5) days prior written notice,
which notice shall set forth the date for such redemption.
(v) Upon Election of Corporation.
-----------------------------
(A) At any time after the later of the first
anniversary of the date of the conversion of the
Convertible Preferred Stock as set forth in Section
C.6 and October 15, 2001, the Corporation may redeem
50% (but not less than 50%) of the outstanding shares
of Series A Redeemable Preferred Stock. The foregoing
election shall be made by the Corporation giving each
holder of Series A Redeemable Preferred Stock written
notice not less than five (5) days prior to the date
for such redemption.
(B) At any time after the later of the
second anniversary of the date of the conversion of
the Convertible Preferred Stock as set forth in
Section C.6 and October 15, 2002, the Corporation may
redeem all (but not less than all) of the outstanding
shares of Series A Redeemable Preferred Stock. The
foregoing election shall be made by the Corporation
giving each holder of Series A Redeemable Preferred
Stock written notice not less than five (5) days
prior to such redemption.
(b) REDEMPTION DATE; REDEMPTION PRICE. Any holder of Series A
Redeemable Preferred Stock may exercise such holder's right of
redemption pursuant to Section D.5(a)(iii) by such holder giving the
Corporation not less than ten (10) days prior written notice, which
notice shall set forth the date for such redemption. Upon the election
of the holders of not less than sixty-six and two-thirds percent in
voting power of the outstanding Series A Redeemable Preferred Stock to
cause the Corporation to redeem the Series A Redeemable Preferred Stock
pursuant to Section D.5(a)(i) or (a)(iv), all holders of Series A
Redeemable Preferred Stock shall be deemed to have elected to cause the
- 20 -
21
Series A Redeemable Preferred Stock to be so redeemed. Any date upon
which a redemption shall actually occur in accordance with Section
D.5(a) shall be referred to as a "Series A Redemption Date." The
redemption price for each share of Series A Redeemable Preferred Stock
redeemed pursuant to this Section D.5 shall be the per share Series A
Redeemable Liquidation Preference Amount (the "Series A Redemption
Price"). The aggregate Series A Redemption Price shall be payable in
cash in immediately available funds on the Series A Redemption Date.
Until the aggregate Series A Redemption Price, including any interest
thereon, has been paid in cash for all shares of Series A Redeemable
Preferred Stock redeemed as of the applicable Series A Redemption Date
or Series A Notes have been issued pursuant to Section D.5(a)(i): (A)
no dividend whatsoever shall be paid or declared, and no distribution
shall be made, on any capital stock of the Corporation; and (B) except
as provided in Sections C.8(d)(i), (ii) and (iii), no shares of capital
stock of the Corporation (other than the Series A Redeemable Preferred
Stock in accordance with this Section D.5) shall be purchased, redeemed
or acquired by the Corporation and no monies shall be paid into or set
aside or made available for a sinking fund for the purchase, redemption
or acquisition thereof.
(c) REDEMPTION PROHIBITED. If, at a Series A Redemption Date,
the Corporation is prohibited under Section 1701.35 from redeeming all
shares of Series A Redeemable Preferred Stock for which redemption is
required hereunder, then it shall redeem such shares on a pro-rata
basis among the holders of Series A Redeemable Preferred Stock in
proportion to the full respective redemption amounts to which they are
entitled hereunder to the extent possible and shall redeem the
remaining shares to be redeemed as soon as the Corporation is not
prohibited from redeeming some or all of such shares under Section
1701.35, subject to the last paragraph of Section C.8. The shares of
Series A Redeemable Preferred Stock not redeemed shall remain
outstanding and entitled to all of the rights and preferences provided
in this Article III. In the event that the Corporation fails for any
reason to redeem shares for which redemption is triggered pursuant to
Section D.5 (other than pursuant to the third sentence of Section
D.5(a)(i)), including without limitation due to a prohibition of such
redemption under Section 1701.35, then during the period from the
applicable Series A Redemption Date through the date on which such
shares are redeemed, the applicable Series A Redeemable Base
Liquidation Amount of such shares shall bear interest at the rate of
15% per annum, with such interest to accrue daily in arrears and to be
compounded annually.
(d) DIVIDEND AFTER REDEMPTION DATE. From and after the closing
of a QPO or an Extraordinary Transaction or a public offering not
constituting a QPO (in the case of a redemption pursuant to Section
D.5(a)(i) or (iv)) or the date specified for redemption in the election
notice as set forth in Section D.5(a)(ii) or (v) or Section D.5(b), no
shares of Series A Redeemable Preferred Stock subject to redemption
shall be entitled to any further dividends pursuant to Section D.3
hereof; PROVIDED, HOWEVER, that in the event that shares of Series A
Redeemable Preferred Stock are unable to be redeemed and continue to be
outstanding in accordance with Section D.5(c), such shares shall
continue to be entitled to dividends and interest thereon as provided
in Sections D.3 and D.5(c) until the date on which such shares are
actually redeemed by the Corporation.
(e) SURRENDER OF CERTIFICATES. Upon receipt of the applicable
Series A Redemption Price by certified check or wire transfer or
receipt of the Series A Notes
- 21 -
22
pursuant to the third sentence of Section D.5(a)(i), each holder of
shares of Series A Redeemable Preferred Stock to be redeemed shall
surrender the certificate or certificates representing such shares to
the Corporation, duly assigned or endorsed for transfer (or accompanied
by duly executed stock powers relating thereto), or shall deliver an
Affidavit of Loss with respect to such certificates at the principal
executive office of the Corporation or the office of the transfer agent
for the Series A Redeemable Preferred Stock or such office or offices
in the continental United States of an agent for redemption as may from
time to time be designated by notice to the holders of Series A
Redeemable Preferred Stock (or the holders of Convertible Stock, as
applicable), and each surrendered certificate shall be canceled and
retired; PROVIDED, HOWEVER, that if the holder has exercised its
redemption right pursuant to Section D.5(a)(iii)(A), the holder shall
not be required to surrender said certificate(s) to the Corporation
until said holder has received a new stock certificate for those shares
of Series A Redeemable Preferred Stock not so redeemed.
6. NOTICE. In the event that the Corporation provides or is required to
provide notice to any holder of Convertible Stock or Common Stock in accordance
with the provisions of these Second Amended and Restated Articles of
Incorporation (including the provisions of Sections C.5(c) and C.9) and/or the
Corporation's regulations, the Corporation shall at the same time provide a copy
of any such notice to each holder of outstanding shares of Series A Redeemable
Preferred Stock.
7. NO REISSUANCE OF SERIES A REDEEMABLE PREFERRED STOCK. No share or
shares of Series A Redeemable Preferred Stock acquired by the Corporation by
reason of redemption, purchase, conversion, exchange or otherwise shall be
reissued, and all such shares shall be canceled, retired and eliminated from the
shares which the Corporation shall be authorized to issue.
8. COVENANTS. So long as any shares of Series A Redeemable Preferred
Stock shall be outstanding the provisions of Section C.8 shall apply to all
shares of Series A Redeemable Preferred Stock as if such shares were shares of
Convertible Preferred Stock.
E. Common Stock.
-------------
Subject to any Preferred Stock Designation, the holders of shares of
Common Stock shall be entitled to one vote on each matter submitted to a vote at
a meeting of shareholders for each share of Common Stock held of record by such
holder as of the record date for such meeting. Each share of Common Stock will
be equal to every other share of Common Stock.
ARTICLE V
---------
The Board of Directors shall be authorized hereby to exercise all
powers now or hereafter permitted by law providing rights to the Board of
Directors to adopt amendments to these Second Amended and Restated Articles of
Incorporation (i) to fix or change the express terms of any unissued or treasury
shares of any class, including, without limiting the generality of the
foregoing: division of such shares into series and the designation and
authorized number of shares of each series; voting rights of such shares (to the
extent now or hereafter permitted by law); dividend or distribution rate; dates
of payment of dividends or distributions and the dates
- 22 -
23
from which they are cumulative; liquidation price; redemption rights and price;
sinking fund requirements; conversion rights; and restrictions on the issuance
of shares of the same series or any other class or series; all as may be
established by resolution of the Board of Directors from time to time
(collectively with the terms of the Preferred Stock, a "Preferred Stock
Designation"), and (ii) to include within these Second Amended and Restated
Articles of Incorporation such additional provisions, or amendments to any
existing provisions, as may hereafter be authorized by law.
ARTICLE VI
A. Except as set forth in Section C of this Article VI, the affirmative
vote of the holders of at least 70% of the voting power of the Corporation,
voting together as a single class, is required:
1. to adopt an agreement for the merger or consolidation
of the Corporation with or into any other entity; or
2. to authorize the sale, lease, exchange, transfer or
other disposition of all or substantially all of the
assets of the Corporation, to another person,
corporation or other entity; or
3. to authorize any sale, transfer or other disposition
by the Corporation of any of its shares in a
transaction in which shareholder approval is
otherwise required by applicable Ohio law; or
4. to authorize any amendment of these Second Amended
and Restated Articles of Incorporation so as to
change issued or unissued shares of any class,
whether with or without par value, into the same or a
different number of shares of any class with or
without par value, theretofore or then authorized; or
5. to authorize any amendment of these Second Amended
and Restated Articles of Incorporation so as to
change any of the express terms of issued or unissued
shares of any class; or
6. to authorize any control share acquisition for which
shareholder approval is required pursuant to Ohio
Revised Code Section 1701.831 (or any successor
section thereto) as such provision is amended from
time to time;
provided, however, that this Article VI will not alter the voting entitlement of
shares that, by virtue of any Preferred Stock Designation, are expressly
entitled to vote on any amendment to these Second Amended and Restated Articles
of Incorporation.
B. For purposes of these Second Amended and Restated Articles of
Incorporation, (1) "voting power of the Corporation" means the aggregate voting
power of (a) all the outstanding Common Stock of the Corporation and (b) all the
outstanding shares of any class or series of shares of the Corporation that has
(i) rights to distributions senior to those of the Common Stock including,
without limitation, any relative, participating, optional, or other
- 23 -
24
special rights and privileges of, and any qualifications, limitations or
restrictions on, such shares and (ii) voting rights entitling such shares to
vote generally in the election of directors; and (2) "control share acquisition"
has the meaning for such term in Ohio Revised Code Section 1701.01(Z)(1) (or any
successor section thereto) as such provision is amended from time to time.
C. The provisions of Section A of this Article VI will not apply to any
vote of the shareholders made with respect to any of the matters enumerated in
Section 1 of this Article VI if, prior to such vote, all of the directors of the
Corporation then in office have, by a resolution adopted at a duly convened
meeting or by unanimous written action in lieu of a meeting, approved such
matter and recommended the approval of such matter to the shareholders.
D. The vote required under Section A.6 of this Article VI is in
addition to the requirements of Section 1701.831 of the Ohio Revised Code.
ARTICLE VII
-----------
Except as may be provided in any Preferred Stock Designation, holders
of shares of capital stock of the Corporation shall not be entitled to
cumulative voting rights in the election of directors.
ARTICLE VIII
------------
Except as may be provided in any Preferred Stock Designation, no holder
of any shares of capital stock of the Corporation shall have any preemptive
right to acquire any shares of unissued capital stock of any class or series,
now or hereafter authorized, or any treasury shares or securities convertible
into such shares or carrying a right to subscribe to or acquire such shares of
capital stock.
ARTICLE IX
----------
The Corporation may from time to time, pursuant to authorization by the
Board of Directors and without action by the shareholders, purchase or otherwise
acquire capital stock of the Corporation of any class or classes in such manner,
upon such terms and in such amounts as the Board of Directors shall determine;
subject, however, to such limitation or restriction, if any, as is contained in
any Preferred Stock Designation at the time of such purchase or acquisition.
ARTICLE X
---------
Subject to Article VI and Article XI of these Second Amended and
Restated Articles of Incorporation and any Preferred Stock Designation, and
notwithstanding any provision of the Ohio Revised Code now or hereafter in force
requiring for any purpose the vote, consent, waiver or release of the holders of
shares entitling them to exercise two-thirds, or any other proportion, of the
voting power of the Corporation or of any class or classes of shares thereof,
such action, unless otherwise expressly required by statute or by these Second
Amended and Restated Articles of Incorporation, may be taken by the vote,
consent, waiver or release of the holders of
- 24 -
25
shares entitling them to exercise a majority of the voting power of the
Corporation or of such classes.
ARTICLE XI
----------
Notwithstanding anything to the contrary contained in these Second
Amended and Restated Articles of Incorporation, the affirmative vote of the
holders of at least 70% of the voting power of the Corporation, voting together
as a single class, shall be required to amend or repeal, or adopt any provision
inconsistent with, Article V, Article VI, Article VIII, Article IX, Article X or
this Article XI; provided, however, (a) that this Article XI shall not alter the
voting entitlement of shares that, by virtue of any Preferred Stock Designation,
are expressly entitled to vote on any amendment to these Second Amended and
Restated Articles of Incorporation, and (b) that this Article XI will not apply
to any amendment, repeal or adoption of any provision if, prior to such vote,
all of the directors of the Corporation then in office have, by a resolution
adopted at a duly convened meeting or by unanimous written action in lieu of a
meeting, approved such matter and recommended the approval of such matter to the
shareholders.
ARTICLE XII
-----------
Any and every statute of the State of Ohio hereafter enacted, (i)
whereby the rights, powers or privileges of corporations or of the shareholders
of corporations organized under the laws of the State of Ohio are increased or
diminished or in any way affected, or (ii) whereby effect is given to the action
taken by any number, less than all, of the shareholders of any such corporation,
or (iii) whereby the authority of the directors to adopt amendments to the
articles of incorporation without shareholder approval shall be expanded, will
apply to the Corporation and will be binding not only upon the Corporation but
upon every shareholder of the Corporation to the same extent as if such statute
had been in force at the date of filing these Second Amended and Restated
Articles of Incorporation in the office of the Secretary of State of Ohio.
ARTICLE XIII
------------
Except as may be otherwise provided in any Preferred Stock
Designation, the number of the directors of the Corporation will not be less
than six nor more than 16 as may be determined from time to time only (i) by a
vote of a majority of the total number of directors that the Corporation would
have if there were no vacancies on the Board, or (ii) by the affirmative vote of
the holders of at least 80% of the voting power of the Corporation, voting
together as a single class. The directors, other than those who may be expressly
elected by virtue of the terms of any Preferred Stock Designation, will be
classified with respect to the time for which they severally hold office into
two classes, as nearly equal in size as possible and consisting of not less than
three directors in each class, designated Class I and Class II. The directors
first appointed to Class I will hold office for a term expiring at the annual
meeting of shareholders to be held in 1999 and the directors first appointed to
Class II will hold office for a term expiring at the annual meeting of
shareholders to be held in 2000. The members of each class will hold office
until their successors are elected. Except as may be otherwise provided in any
Preferred Stock Designation, at each annual meeting of the shareholders of the
Corporation, the successors of the class of directors whose terms expire at that
meeting shall be elected by plurality vote of all votes cast at such meeting to
hold office for a term expiring at the annual meeting of
- 25 -
26
shareholders held in the third year following the year of their election. Except
as may be otherwise provided in any Preferred Stock Designation, directors may
be elected by the shareholders only at an annual meeting of shareholders. No
decrease in the number of directors constituting the Board of Directors may
shorten the term of any incumbent director. Election of directors of the
Corporation need not be by written ballot unless requested by the presiding
officer or by the holders of a majority of the voting power of the Corporation
present in person or represented by proxy at a meeting of the shareholders at
which directors are to be elected.
ARTICLE XIV
-----------
These Second Amended and Restated Articles of Incorporation supersede
the existing Amended and Restated Articles of Incorporation of the Corporation,
as amended.
- 26 -