Exhibit 3.2
CORNERSTONE REALTY INCOME TRUST, INC.
ARTICLES OF AMENDMENT TO
THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
Designating the
SERIES A CONVERTIBLE PREFERRED SHARES
1. Name. The name of the Corporation is Cornerstone Realty Income
Trust, Inc.
2. The Amendment. The amendment, a copy of which is attached hereto,
adds Article IX to the Amended and Restated Articles of Incorporation which
creates a series of Preferred Shares (the Series A Convertible Preferred
Shares), states the designation and number of Shares in the series and fixes the
preferences, limitations and relative rights thereof.
3. Board Action. At a meeting held on the 30th day of March, 1999, the
Board of Directors of the Corporation found the amendment to the Amended and
Restated Articles of Incorporation to be in the best interests of the
Corporation. Shareholder approval is not required.
Dated: July 20, 1999
CORNERSTONE REALTY INCOME TRUST, INC.
By: /s/ Glade M. Knight
--------------------------------
Glade M. Knight, Chairman
ARTICLE IX
SERIES A CONVERTIBLE PREFERRED SHARES
9.1 Designation, Number and Rank.
Twelve Million Seven Hundred Thousand (12,700,000) authorized but
unissued Preferred Shares (no par value) are hereby designated as a series of
Preferred Shares to be called the Series A Convertible Preferred Shares (the
"Series A Preferred Shares"). The Series A Preferred Shares shall, with respect
to distribution rights and rights upon voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, rank (a) senior to all classes or
series of Common Shares and to all equity securities issued by the Corporation
the terms of which provide that such equity securities shall rank junior to such
Series A Preferred Shares; (b) on a parity with all equity securities issued by
the Corporation the terms of which provide that such equity securities shall
rank on a parity with the Series A Preferred Shares; and (c) junior to all other
equity securities issued by the Corporation. The Corporation retains the power
and authority to issue Preferred Shares which rank senior to or on a parity with
the Series A Preferred Shares as to dividends or as to rights in liquidation,
but only if, at the time of and after giving effect to the issuance of Preferred
Shares which rank senior to the Series A Preferred Shares, the sum of (i) the
aggregate liquidation preferences of all Preferred Shares which rank senior to
the Series A Preferred Shares, and (ii) the aggregate liquidation preferences of
all of the Series A Preferred Shares, does not exceed 20% of the Corporation's
Total Assets (as hereinafter defined), as disclosed on the balance sheet of the
Corporation most recently filed on a report with the United States Securities
and Exchange Commission. For the purposes of this Section 9.1, "Total Assets" as
of any date means the sum of (a) Undepreciated Real Estate Assets and (b) all
other assets of the Corporation determined in accordance with generally accepted
accounting principles (but excluding intangibles). "Undepreciated Real Estate
Assets" as of any date means the cost (original cost plus capital improvements)
of real estate assets of the Corporation on such date, before depreciation and
amortization, determined in accordance with generally accepted accounting
principles.
9.2 Dividends.
(a) The holders of the outstanding Series A Preferred Shares shall be
entitled to receive, if, when and as declared by the Board of Directors, out of
any funds legally available therefor, cash dividends at the Specified Rate (as
hereinafter defined), and no more, payable in quarterly installments on the 20th
day of January, April, July and October of each year (each, a "Dividend Payment
Date") commencing on the 20th day of October, 1999. The Specified Rate shall be
the rate per annum per Series A Preferred Share set forth in the following
table:
Dividend Rate Per Annum Period from Date of Issuance of
Per Series A Preferred Share Series A Preferred Share
$ 2.125 Year 1
$ 2.250 Year 2
$ 2.375 Year 3 and thereafter
Dividends shall be cumulative and shall accrue on the Series A
Preferred Shares from and after the date of issue thereof, whether or not such
dividends shall be declared or there shall be funds of the Corporation legally
available for the payment of such dividends for any given dividend period. If
any Dividend Payment Date occurs on a day that is not a business day, any
accrued dividends otherwise payable on such Dividend Payment Date shall be paid
on the next succeeding business day. The amount of dividends payable on Series
A Preferred Shares for each full dividend period shall be calculated by dividing
by four (4) the Specified Rate set forth in this paragraph (a). Dividends
payable in respect of the first dividend period and any subsequent period which
is less than a full dividend period in length will be calculated on the basis of
a 360-day year consisting of twelve 30-day months. Dividends shall be paid to
the holders of record of the Series A Preferred Shares as their names appear on
the stock re cords of the Corporation at the close of business on the applicable
record date (the "Dividend Record Date"), which shall be the same day as the
record date for any dividend payable on the Common Shares with respect to the
same period or, if no such Common Shares dividend is payable, then the Dividend
Record Date for such Dividend Payment Date shall be the Friday occurring between
the tenth and sixteenth days of the calendar month in which the applicable
Dividend Payment Date falls or on such date as shall be fixed by the Board of
Directors at the time of declaration of the dividend, which shall be not less
than 10 nor more than 30 days prior to the Dividend Payment Date. "Business Day"
shall mean any day, other than a Saturday or Sunday,
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that is neither a legal holiday nor a day on which banking institutions in New
York City, New York are authorized or required by law, regulation or executive
order to close.
(b) When dividends are not paid in full (or a sum sufficient for such
full payment is not so set apart) upon the Series A Preferred Shares and any
other Preferred Shares ranking on a parity as to dividends with the Series A
Preferred Shares, all dividends declared on the Series A Preferred Shares and
any other Preferred Shares ranking on a parity with the Series A Preferred
Shares shall be declared pro rata so that the amount of dividends declared per
share of Series A Preferred Shares and such other Preferred Shares for the same
or similar dividend period shall in all cases bear to each other the same ratio
that accrued dividends per share on the Series A Preferred Shares and such other
Preferred Shares bear to each other.
(c) Unless (i) Full Cumulative Dividends (as hereinafter defined in
Section 9.7) (to the extent that the amount thereof shall have become
determinable) on all outstanding Series A Preferred Shares and any outstanding
Preferred Shares ranking senior to or on a parity with the Series A Preferred
Shares as to dividends for all past dividend periods shall have been declared
and paid, or declared and a sum sufficient for the payment thereof set apart,
and (ii) unless all mandatory sinking fund payments required pursuant to the
terms of any outstanding Preferred Shares ranking senior to or on a parity with
the Series A Preferred Shares as to rights in liquidation shall have been paid,
then (i) no dividend (other than a dividend payable solely in shares ranking
junior to the Series A Preferred Shares) shall be declared or paid upon, or any
sum set apart for the payment of dividends upon, any shares of the Corporation
ranking junior to the Series A Preferred Shares as to dividends; (ii) no other
distribution shall be made with respect to any shares of the Corporation
ranking junior to the Series A Preferred Shares as to rights in liquidation;
(iii) no shares of the Corporation ranking junior to the Series A Preferred
Shares as to dividends or rights in liquidation shall be purchased, redeemed or
otherwise acquired for value by the Corporation or by any Subsidiary; and (iv)
no monies shall be paid into or set apart or made available for a sinking or
other like fund for the purchase, redemption or other acquisition for value of
any shares of the Corporation ranking junior to the Series A Preferred Shares as
to dividends or rights in liquidation by the Corporation or any Subsidiary.
(d) Dividends in respect of any past dividend periods that are in
arrears may be declared and paid at any time to holders of record of the Series
A Preferred Shares as of the applicable Dividend Record Date.
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(e) Any dividend payment made on the Series A Preferred Shares shall
first be credited against the earliest accrued but unpaid dividend due with
respect to such shares which remains payable.
(f) Accrued but unpaid dividends on the Series A Preferred Shares will
not bear interest. Holders of the Series A Preferred Shares will not be entitled
to dividends in excess of Full Cumulative Dividends.
(g) No dividends on the Series A Preferred Shares shall be declared by
the Board of Directors or paid or funds set apart for the payment thereof by the
Corporation at such time as the terms and provisions of any agreement of the
Corporation, including any agreement relating to its indebtedness, prohibits
such declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law. Notwithstanding the foregoing, dividends on the
Series A Preferred Shares shall accrue whether or not they are declared or paid.
9.3 Voting Rights.
(a) Except for the voting rights expressly conferred by this Section
9.3, and except to the extent provided by law, the holders of the outstanding
Series A Preferred Shares shall not be entitled (i) to vote at any meeting of
the shareholders for election of directors or for any other purpose, or (ii) to
receive notice of, or to otherwise participate in, any meeting of shareholders
of the Corporation at which they are not entitled to vote.
(b) Whenever distributions payable on any Series A Preferred Shares, or
on any class or series of preferred shares which ranks on a parity with the
Series A Preferred Shares as to dividends ("Parity Stock"), are in arrears for
six or more quarterly periods (whether or not consecutive), the number of
directors then constituting the Board of Directors of the Corporation will be
automatically increased by two, and the holders of the Series A Preferred
Shares, voting together as a class with the holders of shares of any other class
or series of Parity Stock entitled to such voting rights (collectively, the
"Voting Preferred Stock"), will have the right to elect at any annual meeting of
shareholders or a properly called special meeting of the holders of Voting
Preferred Stock two additional directors who are nominees of any holder of
Voting Preferred Stock to serve on the Corporation's Board of Directors until
all such accrued but unpaid dividends have been authorized and paid or declared
with a sufficient sum for payment thereof
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set aside for payment. Such right of the holders of the Voting Preferred Stock
to elect directors may be exercised until all dividends to which the holders of
Voting Preferred Stock shall have been entitled for (i) all previous dividend
periods and (ii) the current dividend period shall have been paid in full or
declared and a sum of money sufficient for payment thereof set aside for
payment, at which time the right of the holders of Voting Preferred Stock to
elect such two additional directors shall cease, the term of such directors
previously elected shall thereupon terminate, and the authorized number of
directors of the Corporation shall thereupon return to the number of authorized
directors otherwise in effect, but subject always to the same provisions for the
renewal and divestment of such special voting rights in the case of any such
future dividend arrearages in six quarterly periods.
(c) At any time when such voting power shall have vested in the holders of
the Voting Preferred Stock and prior to the termination of such voting power,
the Secretary of the Corporation may, and upon the written request of any holder
of Voting Preferred Stock (addressed to the Secretary at the principal office of
the Corporation) shall, call a special meeting of the holders of the Voting
Preferred Stock for the election of the two directors to be elected by them as
herein provided; such call to be made by notice similar to that provided in the
Bylaws of the Corporation for a special meeting of the shareholders or as
required by law. If any such special meeting required to be called as above
provided shall not be called by the Secretary within 20 days after receipt of
any such request, then any holder of Voting Preferred Stock may call such
meeting, upon the notice above provided, and for that purpose shall have access
to the stock books of the Corporation. The directors elected at any such special
meeting shall serve until the next annual meeting of the shareholders or special
meeting held in lieu thereof and until their respective successors are duly
elected and qualified, if such directorship shall not have previously terminated
as above provided. If any vacancy shall occur among the directors elected by the
holders of the Voting Preferred Stock, a successor shall be elected by the Board
of Directors upon the nomination of the then-remaining director (or, if there is
no such remaining director or successor thereto, by the holders of the Voting
Preferred Stock) to serve until the next annual meeting of the shareholders or
special meeting held in lieu thereof and until the successor is duly elected and
qualified if such directorship shall not have previously been terminated as
provided above.
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(d) The affirmative vote of the holders of a majority of the
outstanding Series A Preferred Shares, voting as a separate voting group, shall
be required for the adoption of any amendment, alteration or repeal of any
provision of these Articles of Amendment, or of any provision of the Articles of
Incorporation of the Corporation, whether by merger, consolidation or otherwise,
that adversely changes any preferences, limitations, privileges, voting power or
relative rights of the Series A Preferred Shares or the holders thereof, it
being understood that the authorization of, or the increase in the authorized
number of shares of, any class of shares ranking senior to or on a parity with
the Series A Preferred Shares as to dividends or rights in liquidation and the
designation of the preferences, limitations, privileges, voting power and
relative rights of any such class is not such an adverse change.
(e) Whenever the holders of Series A Preferred Shares or Voting
Preferred Stock, respectively, are entitled to vote as a separate voting group
on any matter pursuant to the provisions of paragraphs (b), (c) or (d) of this
Section 9.3, the vote required to approve such matter shall be the affirmative
vote of a majority of all the votes entitled to be cast by the respective voting
group, with each share having one vote.
9.4 Redemption.
(a) The Series A Preferred Shares shall not be redeemable by the
Corporation for five years after the first issuance of the Series A Preferred
Shares. At any time and from time to time following the fifth anniversary of the
first issuance of the Series A Preferred Shares, the Corporation may, at its
option, redeem all or any portion of the outstanding Series A Preferred Shares
for the Redemption Consideration (as hereinafter defined). The Redemption
Consideration shall be either, or any combination of, the following amounts, as
selected by the Corporation: (i) cash in the amount of the Liquidation Payment
(as hereinafter defined) for the Series A Preferred Shares to be redeemed
together with an amount equal to all unpaid Dividends
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Accrued (as hereinafter defined) thereon to the date fixed for redemption (the
"Redemption Date"), or (ii) such number of Common Shares of the Corporation
(rounded to the nearest one one-thousandth (1/1000) of a Common Share) as is
equal to (A) the Liquidation Payment for the Series A Preferred Shares to be
redeemed together with an amount equal to all unpaid Dividends Accrued thereon
to the Redemption Date, divided by (B) the Conversion Price (as defined in
Section 9.6); provided, that the Corporation may exercise this option to deliver
Common Shares upon redemption only if for 20 trading days within the 30
consecutive trading days immediately preceding the Redemption Notice Date (as
defined in paragraph (b) of this Section 9.3) the average closing price of the
Common Shares on the New York Stock Exchange equals or exceeds the Conversion
Price (as defined in Section 9.6).
(b) Notice of any redemption shall be given by the Corporation, by
first class mail, postage prepaid, not less than 30 nor more than 60 days prior
to the Redemption Date to each holder of record of Series A Preferred Shares to
be redeemed, notifying such holder of the Corporation's election to redeem such
shares. Such notice shall be mailed to such holder's address as the same appears
on the Corporation's stock records. The date such notice is mailed shall be the
"Redemption Notice Date." No failure to give such notice or any defect therein
or in the mailing thereof shall affect the validity of the proceedings for the
redemption of any Series A Preferred Shares except as to the holder to whom
notice was defective or not given. In addition to any information required by
law, such notice shall state: (i) the Redemption Date; (ii) the Conversion Price
and Redemption Consideration per redeemed share; (iii) the total number of
Series A Preferred Shares to be redeemed; (iv) the place or places where
certificates for such shares, if any, are to be surrendered for payment of the
Redemption Consideration; (v) the amount per Series A Preferred Share of unpaid
Dividends Accrued to the Redemption Date; (vi) that dividends on the shares to
be redeemed will cease to accumulate on such Redemption Date; and (vii) that
each holder of Series A Preferred Shares may exercise the conversion rights
described in Section 9.6 for any such shares at any time prior to the close of
business on the last full business day preceding the Redemption Date.
(c) If fewer than all of the outstanding Series A Preferred Shares are
to be redeemed, the Corporation shall prorate the total number of shares to be
so redeemed among the holders thereof in proportion, as nearly as may be, to the
number of shares registered in their respective names. In any such proration the
Corporation may make such adjustments, reallocations and eliminations as it
shall deem proper by increasing, decreasing or eliminating the number of shares
to be redeemed otherwise all ocable to any one holder on the basis of exact
proration by not more than ten shares, to the end that the numbers of shares so
prorated shall be integral multiples of ten shares. If less than all of the
Series A Preferred Shares held by any
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holder are to be redeemed, the notice mailed to such holder (pursuant to
paragraph (b) above) shall also specify the number of Series A Preferred Shares
held by such holder to be redeemed. The Corporation may not redeem less than all
of the outstanding Series A Preferred Shares unless Full Cumulative Dividends on
all outstanding Series A Preferred Shares for all dividend periods (whether full
or partial) up to and including the Redemption Date shall have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart.
(d) If notice of redemption of any outstanding Series A Preferred
Shares shall have been duly given as herein provided, then on or before the
Redemption Date the Corporation shall, as applicable, (i) cause to be issued in
the name of the record holder of Series A Preferred Shares being redeemed Common
Shares of the Corporation equal to the Redemption Consideration due for such
Series A Preferred Shares, or (ii) cause to be paid to the record holder of
Series A Preferred Shares being redeemed cash equal to the Redemption
Consideration due for such Series A Preferred Shares or (iii) cause to be issued
and paid some combination of (i) and (ii) equal in the aggregate to the
Redemption Consideration. From and after the Redemption Date, such redeemed
Series A Preferred Shares shall no longer be deemed to be outstanding for any
purpose, and all rights with respect to such shares shall thereupon cease and
terminate.
(e) The Corporation shall also have the right to acquire outstanding
Series A Preferred Shares, otherwise than by redemption (as provided in this
Section 9.4) from time to time for such consideration as may be acceptable to
the holders thereof; provided, however, that if Full Cumulative Dividends on all
outstanding Series A Preferred Shares for all past dividend periods shall not
have been declared and paid or declared and a sum sufficient for the payment
thereof set apart, and the dividend payable thereon for the next following
dividend period shall not have been declared and a sum sufficient for the
payment thereof set apart, neither the Corporation nor any Subsidiary shall so
acquire any Series A Preferred Shares except in accordance with a purchase or
exchange offer made on the same terms to all the holders of the outstanding
Series A Preferred Shares.
(f) At the close of business on the Redemption Date, each holder of
Series A Preferred Shares to be redeemed (unless the Corporation defaults in the
payment of the Common Shares portion of the Redemption Consideration) shall be
deemed to be the record holder of the number of Common Shares into which such
Series A Preferred Shares are to be so redeemed.
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(g) Series A Preferred Shares purchased, redeemed or otherwise acquired
by the Corporation shall not thereafter be disposed of as Series A Preferred
Shares but shall become authorized and unissued Preferred Shares undesignated as
to series. No additional Preferred Shares may be classified as Series A
Preferred Shares.
9.5 Liquidation.
In the event of the voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, the holders of the outstanding
Series A Preferred Shares shall be entitled to be paid in cash out of the assets
of the Corporation a liquidation payment of $25 per share (the "Liquidation
Payment") plus an amount equal to all unpaid Dividends Accrued thereon to the
date of payment, without interest, before any distribution or payment shall be
made to the holders of Common Shares or any other shares of the Corporation
ranking junior to the Series A Preferred Shares as to rights in liquidation.
After payment to the holders of the outstanding Series A Preferred Shares of the
full liquidation payment provided for in the preceding sentence, the holders of
the Series A Preferred Shares as such shall have no right or claim to any of the
remaining assets of the Corporation. For the purposes of the preceding two
sentences, neither the consolidation of the Corporation with nor the merger of
the Corporation into any other corporation, partnership, limited liability
company, trust or other entity, nor the sale, lease or other disposition of all
or substantially all of the Corporation's properties and assets shall, without
further corporate action, be deemed a liquidation, dissolution or winding up of
the affairs of the Corporation. If the assets of the Corporation legally
available for distribution to its shareholders are insufficient to pay to the
holders of the Series A Preferred Shares the full amounts to which they are
respectively entitled, such assets of the Corporation shall be distributed
ratably to the holders of the Series A Preferred Shares and the holders of other
Preferred Shares, if any, ranking on a parity with the Series A Preferred Shares
as to rights in liquidation in proportion to the full amounts to which they are
respectively entitled. Written notice of such liquidation, dissolution or
winding up of the Corporation, stating the payment date or dates when, and the
place or places where, the amount distributable in such circumstances shall be
payable, shall be given by the Corporation by press release or announcement in a
newspaper or periodical with national distribution (such as the Wall Street
Journal) not less than 30 days nor more than 60 days before the payment date
stated therein.
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9.6 Conversion.
(a) Each holder of outstanding Series A Preferred Shares shall have the
right, at any time, to convert any of such shares into Common Shares of the
Corporation. The number of Common Shares into which each Series A Preferred
Share shall be convertible shall be equal to the number (rounded to the nearest
one one-thousandth (1/1000) of a Common Share) arrived at by dividing $25.00 by
the conversion price per Common Share fixed or determined as hereinafter
provided. The conversion price shall initially be Fifteen Dollars and Eighty
Cents ($15.80) per Common Share, subject to the adjustments hereinafter provided
(such price, as adjusted at any time, being hereinafter called the "Conversion
Price"). As to Series A Preferred Shares called for redemption, each such holder
shall have the right at any time prior to the close of business on the last full
business day preceding the Redemption Date (unless default shall be made by the
Corporation in the payment of the Redemption Consideration, in which case such
right of conversion shall continue uninterrupted) to convert any of such Series
A Preferred Shares into Common Shares.
(b) Each holder of outstanding Series A Preferred Shares may exercise
the conversion right provided in paragraph (a) above as to all or any portion of
the shares he holds by delivering to the Corporation during regular business
hours, at the principal office of the Corporation or at such other place as may
be designated in writing by the Corporation, a written notice stating that the
holder elects to convert such shares and stating the name or names (with address
and applicable social security or other tax identification number) in which the
certificate or certificates for Common Shares are to be issued. Conversion shall
be deemed to have been effected on the date (the "Conversion Date") when such
delivery is made if the notice is in the form required by the Corporation. As
promptly as practicable thereafter the Corporation shall issue and deliver to
such holder the number of Common Shares to which he is entitled. The person in
whose name the Common Shares are to be issued shall be deemed to have become a
shareholder of record on the Conversion Date, unless the transfer books of the
Corporation are closed on that date, in which event he shall be deemed to have
become a shareholder of record on the next succeeding date on which the transfer
books are open; but the Conversion Price shall be that in effect on the
Conversion Date.
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(c) The Corporation shall issue fractional Common Shares, rounded to
the nearest one one-thousandth (1/1000) of a Common Share, upon conversion of
Series A Preferred Shares and will not pay cash with respect to any fractional
shares.
(d) The issuance of Common Shares on conversion of outstanding Series A
Preferred Shares shall be made by the Corporation without charge for expenses or
for any tax in respect of the issuance of such Common Shares, but the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of Common Shares in any
name other than that of the holder of record on the books of the Corporation of
the outstanding Series A Preferred Shares converted, and the Corporation shall
not be required to issue any Common Shares unless and until the person
requesting the issuance thereof shall have paid to the Corporation the amount of
such tax or shall have established to the satisfaction of the Corporation that
such tax has been paid.
(e) Holders of Series A Preferred Shares at the close of business on a
Dividend Record Date shall be entitled to receive the dividend payable on such
shares on the corresponding Dividend Payment Date notwithstanding the conversion
of such shares following such Dividend Record Date and prior to such Dividend
Payment Date. Except as provided in the preceding sentence, the Corporation
shall make no payment or allowance for unpaid dividends, whether or not in
arrears, on converted shares or for dividends on the Common Shares issued upon
such conversion.
(f) The Conversion Price shall be subject to the following adjustments:
(i) If the Corporation shall (A) pay a dividend on its outstanding Common Shares
in Common Shares or subdivide or otherwise split its outstanding Common Shares
into a larger number of shares, (B) combine its outstanding Common Shares into a
smaller number of shares, or (C) reclassify its Common Shares, the Conversion
Price in effect at the time of the record date for the happening of such event
shall be adjusted so that the holder of any Series A Preferred Shares
surrendered for conversion after such record date shall be entitled to receive
the same aggregate number of Common Shares that such holder would have owned or
have been entitled to receive after the happening of such event had such Series
A Preferred Shares been converted immediately prior to such record date. An
adjustment made pursuant to this subparagraph (i) shall become effective
immediately upon the opening of business on the
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day next following the record date in the case of a dividend (except as provided
in paragraph (h) of this Section 9.6 below) and shall become effective
immediately upon the opening of business on the day next following the effective
date in the case of a subdivision, combination or reclassification.
(ii) If the Corporation shall issue rights, warrants or options to all
holders of its Common Shares entitling them (for a period expiring within 90
days after the record date mentioned below) to subscribe for or purchase Common
Shares at a price per share which is less than the Current Market Value per
share (as hereinafter defined) on the record date mentioned below, the
Conversion Price shall be adjusted to a price determined by multiplying (A) the
Conversion Price in effect immediately prior to the issuance of such rights,
warrants or options by (B) a fraction, the numerator of which shall be the sum
of (i) the number of Common Shares outstanding at the close of business on the
record date fixed for the determination of shareholders entitled to receive such
rights, warrants or options and (ii) the number of Common Shares which the
aggregate exercise price of all such rights, warrants or options would purchase
at such Current Market Value, and the denominator of which shall be the sum of
(i) the number of Common Shares outstanding at the close of business on the
record date fixed for the determination of shareholders entitled to receive such
rights, warrants or options and (ii) the number of additional Common Shares
offered for subscription pursuant to such rights, warrants or options. Such
adjustment shall be effective immediately upon the opening of business on the
day next following the record date for the determination of the shareholders
entitled to receive such rights, warrants or options (except as provided in
paragraph (h) of this Section 9.6 below). For the purposes of this Section
9.6(f), the "Fair Market Value" of one Common Share shall, if the Common Shares
are traded in the over-the-counter market, be deemed to be the mean between the
bid and asked prices on the date the value is required to be determined, as
reported by NASDAQ or any similar service, and if the Common Shares are listed
and traded on a national stock exchange, be deemed to be the closing price of
the Common Shares for such day derived from the New York Stock Exchange
Composite Tape or any similar service; provided, however, that if the Common
Shares are not traded on that date, then the Fair Market Value shall be
determined, in the manner as just set forth, on the most recent preceding
Business Day on
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which the Common Shares were traded; provided further, however, that if the Fair
Market Value of the Common Shares cannot be determined in accordance with the
foregoing provisions (for example, if the Common Shares are not traded), the
Fair Market Value of the Common Shares shall be determined in good faith by the
Corporation's Board of Directors. "Current Market Value" per Common Share on any
date shall be deemed to be the average of the Fair Market Value of one Common
Share on each of the 20 consecutive trading days commencing 40 trading days
before such date (a trading day being a day on which securities are traded in
the over-the-counter market or, if the Common Shares are then listed on any
national stock exchange, on such exchange) and if the Common Shares are not then
traded, the Fair Market Value of one Common Share (as determined under this
Section 9.6(f)) as of the date in question.
(iii) If the Corporation shall distribute to all holders of its Common
Shares any equity securities of the Corporation (other than Common Shares) or
evidences of its indebtedness or assets (excluding dividends paid in cash out of
funds available for dividends in accordance with applicable law), or rights,
warrants or options to subscribe for or purchase securities of the Corporation
(other than those referred to in subparagraph (ii) of this Section 9.6(f)), then
in each case the Conversion Price shall be adjusted so that it shall equal the
price determined by multiplying (A) the Conversion Price in effect immediately
prior to the close of business on the record date fixed for the determination of
shareholders entitled to receive such distribution by (B) a fraction, the
numerator of which shall be the Current Market Value of one Common Share (as
defined in subparagraph (ii) of this Section 9.6(f)) on the record date fixed
for the determination of the shareholders entitled to receive such distribution
less the fair value (as conclusively determined in good faith by the Board of
Directors of the Corporation) at the time of such distribution of that portion
of the shares or evidences of indebtedness or assets so distributed, or of such
rights, warrants or options applicable to one Common Share, and the denominator
of which shall be the Current Market Value of one Common Share on the record
date fixed for the determination of shareholders entitled to receive such
distribution. Such adjustment shall become effective immediately upon the
opening of business on the day next following such record date (except as
provided in paragraph (h) of this Section 9.6 below).
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(g) Notwithstanding any of the foregoing provisions of this Section
9.6, no adjustment of the Conversion Price shall be made (i) if the Corporation
shall issue Common Shares or rights, warrants or options to purchase Common
Shares pursuant to one or more stock purchase plans, stock option plans, stock
purchase contracts, incentive compensation plans, or other remuneration plans
for employees (including officers) or directors of the Corporation or its
Subsidiaries adopted or approved as required by law before or after the
approval of these Articles of Amendment, (ii) in respect of any right granted by
the Corporation to all holders of its Common Shares to purchase Common Shares at
a discount from their Current Market Value by the reinvestment of dividends paid
on its Common Shares, or (iii) if the Corporation shall issue rights, warrants
or options to purchase Common Shares or other shares convertible into Common
Shares pursuant to one or more plans ("Shareholder Rights Plans") which, in
connection with certain acquisitions of an equity interest in the Corporation,
may permit the holders of such rights, warrants or options to subscribe for or
to purchase Common Shares or such other shares at a price per share which is
less than the then Current Market Value thereof. However, the Corporation shall
not adopt any Shareholder Rights Plans unless, in connection therewith, the
Corporation provides that the holders of Series A Preferred Shares will be
entitled to receive substantially similar rights, warrants or options upon
conversion of their Series A Preferred Shares.
(h) If any Series A Preferred Shares are converted into Common Shares
after the record date for the happening of any of the events described in
subparagraphs (i), (ii) or (iii) of Section 9.6(f) but before the happening of
such event, the Corporation may defer, until the happening of such event,
issuing to the holder of Series A Preferred Shares so converted the additional
Common Shares to which he is entitled by reason of the adjustment required
pursuant to any such subparagraph.
(i) Anything in this Section 9.6 to the contrary notwithstanding, no
adjustment in the Conversion Price shall be required unless such adjustment
would require an increase or decrease of at least $0.10 in such price; provided,
however, that any adjustments which by reason of this Section 9.6 are not
required to be made shall be carried forward and taken into account in making
subsequent adjustments. All calculations under this Section 9.6 shall be made to
the nearest cent.
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(j) Whenever the Conversion Price is adjusted pursuant to this Section
9.6, the Corporation shall (i) promptly place on file at its principal office
and at the office of each transfer agent for the Series A Preferred Shares, if
any, a statement, signed by the Chairman or President of the Corporation and by
its Treasurer, setting forth the Conversion Price after such adjustment and
setting forth in detail the facts requiring such adjustment, and shall make such
statement available for inspection by shareholders of the Corporation, and (ii)
as soon as practicable cause a notice to be mailed first class mail , postage
prepaid to each holder of record of outstanding Series A Preferred Shares
stating that such adjustment has been made and setting forth the adjusted
Conversion Price and the date on which such adjustment becomes effective. Such
notice shall be mailed to such holder's address as the same appears on the
Corporation's stock records.
(k) In the event of any reclassification or recapitalization of the
outstanding Common Shares (except a change in par value or from no par value to
par value or from par value to no par value, or subdivision or other split or
combination of shares), or in case of any consolidation or merger to which the
Corporation is a party, except a merger in which the Corporation is the
surviving corporation and which does not result in any such reclassification or
recapitalization, or in case of any sale or conveyance to a person or another
business entity of all or substantially all of the property of the Corporation,
in each case as a result of which Common Shares generally shall be converted
into the right to receive stock, securities or other property (including cash or
any combination thereof), effective provision shall be made by the Corporation
or by the successor or purchasing business entity (i) that the holder of each
Series A Preferred Share then outstanding shall thereafter have the right to
convert such share into the kind and amount of stock and other securities and
property receivable, upon such reclassification, recapitalization,
consolidation, merger, sale or conveyance, by a holder of the number of Common
Shares of the Corporation into which such Series A Preferred Shares might have
been converted immediately prior thereto, and (ii) that there shall be
subsequent adjustments of the Conversion Price which shall be equivalent, as
nearly as practicable, to the adjustments provided for in this Section 9.5. The
provisions of this paragraph (k) of this Section 9.6 shall similarly apply to
successive reclassifications, recapitalizations, consolidations, mergers, sales
or conveyances.
(l) Common Shares issued on conversion of Series A Preferred Shares
shall be issued as fully paid shares and shall be nonassessable by the
Corporation. The Corporation
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shall, at all times, reserve and keep available for the purpose of effecting the
conversion of the outstanding Series A Preferred Shares such number of its duly
authorized but unissued Common Shares as shall be sufficient to effect the
conversion of all of the outstanding Series A Preferred Shares.
(m) Series A Preferred Shares converted as provided herein shall become
authorized and unissued Preferred Shares which may be designated as shares of
any other series. No additional Preferred Shares, however, may be classified as
Series A Preferred Shares.
9.7 Definitions.
As used in these Articles of Amendment, unless the context otherwise
requires, the following terms shall have the following meanings:
"Dividends Accrued" means Full Cumulative Dividends to the date as of
which Dividends Accrued are to be computed, less the amount of all dividends
paid with respect to the relevant shares.
"Full Cumulative Dividends" with respect to any outstanding shares of
the Corporation which carry cumulative dividends (including, without limitation,
the Series A Preferred Shares) means an amount equal to the dividends accrued at
the full rate fixed for such shares from the date of issue to the date to which
reference is made, whether such amounts or any part thereof have been declared
and whether there shall be or have been any funds out of which such amount might
legally be paid.
"Subsidiary" means any corporation a majority of the outstanding voting
shares of which is owned, directly or indirectly, by the Corporation, by one or
more Subsidiaries of the Corporation or by the Corporation and one or more
Subsidiaries of the Corporation.
For the purpose of these Articles of Amendment the shares of any class
of the Corporation of any class or series shall be deemed to rank as follows:
(a) senior to the Series A Preferred Shares, either as to dividends or
as to rights in liquidation, if the holders of such shares shall be entitled to
the receipt of dividends or of amounts distributable upon the voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, as the case may be, in preference or priority to the holders of
Series A Preferred Shares;
(b) on a parity with the Series A Preferred Shares, either as to
dividends or as to rights in liquidation, whether or not the dividend rates,
dividend payment dates, or redemption
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or liquidation prices per share thereof be different from those of the Series A
Preferred Shares, if the holders of Series A Preferred Shares shall be entitled
to the receipt of dividends or of amounts distributable upon the voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, as the case may be, in proportion to their respective dividend
rates or liquidation prices, without preference or priority of one over the
other as between the holders of such shares; and
(c) junior to the Series A Preferred Shares, either as to dividends or
as to rights in liquidation, if such shares shall be Common Shares or if the
holders of the Series A Preferred Shares shall be entitled to the receipt of
dividends or of amounts distributable upon the voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, as the
case may be, in preference or priority to the holders of such shares.
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