E-85
Exhibit No. 4
Form 8-K
Headway Corporate Resources, Inc.
SEC File No. 0-23170
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES F CONVERTIBLE
PREFERRED STOCK OF HEADWAY CORPORATE RESOURCES, INC.
HEADWAY CORPORATE RESOURCES, INC., a corporation organized
and existing under the General Corporation Law of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY THAT:
A. Pursuant to authority conferred upon the Board of
Directors (the "Board") by the Certificate of Incorporation of
the Corporation (the "Certificate of Incorporation") and pursuant
to the provisions of 151 of the Delaware General Corporation
Law, the Board, pursuant to a unanimous written consent dated
March 19, 1998, adopted the following resolution providing for
the designations, preferences and relative, participating,
optional and other rights, and the qualifications, limitations
and restrictions of the Series F Convertible Preferred Stock.
WHEREAS, the Certificate of Incorporation provides for
two classes of shares known as common stock, $0.0001 par value
per share (the "Common Stock"), and preferred stock, $0.0001 par
value per share (the "Preferred Stock"); and
WHEREAS, the Board is authorized by the Certificate of
Incorporation to provide for the issuance of the shares of
Preferred Stock in series, and by filing a certificate pursuant
to the applicable law of the State of Delaware, to establish from
time to time the number of shares to be included in such series
and to fix the designations, preferences and rights of the shares
of each such series and the qualifications, limitations and
restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board deems it
advisable to, and hereby does, designate a Series F Convertible
Preferred Stock and fixes and determines the preferences, rights,
qualifications, limitations and restrictions relating to the
Series F Convertible Preferred Stock as follows:
1. Designation. The shares of such series of Preferred
Stock shall be designated "Series F Convertible Preferred Stock"
(referred to herein as the "Series F Stock").
2. Authorized Number. The number of shares constituting
the Series F Stock shall be 1,000.
3. Ranking. The Series F Stock shall rank, as to
dividends and upon Liquidation Payments (as defined in Section
5(a) hereof), senior and prior to the Common Stock and to all
other classes or series of stock issued by the Corporation. (All
equity securities of the Corporation to which the Series F Stock
ranks prior, whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise, including the
Common Stock are collectively referred to herein as "Junior
Securities.") The Corporation shall not have or create any class
of stock ranking on parity with, or senior to, the Series F
Stock.
4. Dividends.
(a) Dividend Accrual and Payment. From and after the
date of issuance of the Series F Stock (the "Original Issue Date"
), dividends shall accrue on a daily basis on the shares of
Series F Stock at the initial annual rate (subject to reset in
accordance with Section 4(e)) of 5.5% per share (expressed as a
percentage of the $20,000,000.00 per share liquidation preference
(the "Dividend Rate")). The holders of shares of Series F Stock
shall be entitled to receive such dividends when and as declared
by the Board, in cash, out of assets legally available for such
purpose, quarterly in arrears on the 30th day of March, June,
September and December of each year (each of such dates being a
"Dividend Payment Date"), commencing June 30, 1998. Such
dividends shall be paid to the holders of record at the close of
business on the date specified by the Board at the time such
dividend is declared, provided, however, that such date shall not
be more than 60 nor less than 10 days prior to the applicable
Dividend Payment Date. Dividends on the Series F Stock shall be
cumulative so that if, for any dividend accrual period, cash
dividends at the rate hereinabove specified are not declared and
paid or set aside for payment, the amount of accrued but unpaid
dividends shall accumulate with interest at the then applicable
Dividend Rate and shall be added to the dividends payable for
subsequent dividend accrual periods and upon any redemption or
conversion of shares of Series F Stock. If the Original Issue
Date is on a date which does not coincide with a Dividend Payment
Date, then the initial dividend accrual period applicable to such
shares shall be the period from the Original Issue Date through
whichever of March, June, September or December next occurs after
the Original Issue Date. If the date fixed for payment of a
final liquidating distribution on any shares of Series F Stock,
or the date on which any shares of Series F Stock are redeemed or
converted into Common Stock does not coincide with a Dividend
Payment Date, then subject to the provisions hereof relating to
such payment, redemption or conversion, the final dividend
accrual period applicable to such shares shall be the period from
whichever of March, June, September or December most recently
precedes the date of such payment, conversion or redemption
through the effective date of such payment, conversion or
redemption. The rate at which dividends are paid shall be
adjusted for any combinations or divisions or similar
recapitalizations affecting the shares of Series F Stock. In
addition to the dividends provided for in this Section 4(a),
holders of Series F Stock shall be entitled to participate in
extraordinary dividends in accordance with the provisions of
Section 7 hereof. So long as any shares of Series F Stock are
outstanding, (i) the amount of all dividends paid with respect to
the shares of Series F Stock pursuant to this Section 4(a) shall
be paid pro rata to the holders entitled thereto and (ii) holders
of the shares of Series F Stock shall be entitled to receive the
dividends provided for in this Section 4(a) in preference to and
in priority over any dividends upon any Junior Securities.
(b) Dividend Limitation on Junior Securities. So long
as any shares of Series F Stock are outstanding, the Corporation
shall not declare, pay or set apart for payment, any dividend on
any Junior Securities or make any payment on account of, or set
apart for payment, money for a sinking or other similar fund for,
the purchase, redemption or other retirement of, any Junior
Securities or any warrants, rights, calls or options exercisable
or exchangeable for or convertible into any Junior Securities, or
make any distribution in respect thereof, either directly or
indirectly, and whether in cash, obligations or shares of the
Corporation or other property (other than distributions or
dividends in Junior Securities to the holder of Junior
Securities), unless prior to, or concurrently with, such
declaration, payment, setting apart for payment, purchase,
redemption or distribution, as the case may be, all accrued and
unpaid dividends on the shares of Series F Stock not paid on the
dates provided for in Section 4(a) hereof shall have been paid in
full in cash.
(c) Dividends on Fractional Shares. Each fractional
share of Series F Stock outstanding shall be entitled to a
ratably proportionate amount of all dividends accruing with
respect to each outstanding share of Series F Stock pursuant to
Section 4(a) hereof, and all such dividends with respect to such
outstanding fractional shares shall be fully cumulative and shall
accrue (whether or not declared), and shall be payable in the
same manner and at such times as provided for in Section 4(a)
hereof with respect to dividends on each outstanding share of
Series F Stock.
(d) Payments on Shares of Common Stock Subject to
Restricted Transferability. If, subsequent to the conversion of
any shares of Series F Stock into Common Stock (or other
securities) pursuant to Section 6 hereof, the shares of Common
Stock (or other securities) into which such shares of Series F
Stock were converted are subject to a contractual or other
restriction, other than (x) restrictions created by the holder of
such shares of Common Stock not at the request of the
Corporation, limiting the transferability thereof, and (y)
restrictions imposed by applicable federal and state securities
laws (such shares of Common Stock (or other securities) which are
so encumbered are herein referred to as the "Subject Shares" and
the limitation on the transferability thereof is referred to as
the "Sale Limitation"), then the Corporation shall pay to the
holder of such Subject Shares an amount in (i) cash, (ii) shares
of the Series F Stock valued at the liquidation preference
thereof, or (iii) shares of the Common Stock valued at the Market
Price thereof on the date of payment, at the option of the holder
of such Series F Stock (such amount is referred to herein as the
"Restriction Fee") equal to the amount of dividends which would
have accrued on the shares of Series F Stock which were converted
into the Subject Shares from the date upon which the Subject
Shares became subject to the Sale Limitation until the date upon
which the Sale Limitation was no longer in effect with respect to
the Subject Shares. The Restriction Fee shall be paid by the
Corporation to the holders entitled thereto on the date that
dividends are payable, or would have been payable, on the shares
of Series F Stock.
(e) Dividend Rate Adjustment. If either (x) the
Conversion Price (as defined below) is not adjusted on the second
anniversary of the Original Issue Date to $6.00 or (y) a Series F
Stock Event of Default (as defined below) has occurred prior
thereto, then the Dividend Rate shall increase, as of such second
anniversary or the date of such Series F Stock Event of Default,
as the case may be, to, and shall thereafter be, 7.5% per annum.
In addition, if all of the outstanding shares of Series F Stock
are not redeemed on or prior to the eighth anniversary of the
Original Issue Date, then the Dividend Rate shall increase to 10%
per annum commencing on such eighth anniversary, and shall
further increase by an additional 2% per year on each anniversary
thereafter, but in no event will the Dividend Rate exceed 20% per
annum.
5. Liquidation.
(a) Liquidation Procedure. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary
or involuntary, the holders of the shares of Series F Stock shall
be entitled, before any distribution or payment is made upon any
Junior Securities, to be paid an amount equal to (i) $20,000,000
per share of Series F Stock, representing the liquidation
preference per share of the Series F Stock (as adjusted for any
combinations, divisions or similar recapitalizations affecting
the shares of Series F Stock) (the "Series F Issue Price"), plus
(ii) all accrued and unpaid dividends on the Series F Stock to
such date (together with the Series F Issue Price, the
"Liquidation Payments"). If upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of Series F Stock
shall be insufficient to permit payment in full to the holders of
Series F Stock of the Liquidation Payments, then the entire
assets of the Corporation shall be distributed ratably among such
holders in proportion to the full respective distributive amounts
to which they are entitled.
(b) Remaining Assets. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary
or involuntary, after the holders of Series F Stock shall have
been paid in full the Liquidation Payments, the remaining assets
of the Corporation may be distributed ratably per share in order
of preference to the holders of Junior Securities in accordance
with their terms.
(c) Notice of Liquidation. Written notice of a
liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, stating a payment date, the
amount of the Liquidation Payments and the place where said
Liquidation Payments shall be payable, shall be given by mail,
postage prepaid, not less than 30 days prior to the payment date
stated therein, to each holder of record of Series F Stock at his
post office addresses as shown by the records of the Corporation.
(d) Fractional Shares. The Liquidation Payments with
respect to each outstanding fractional share of Series F Stock
shall be equal to a ratably proportionate amount of the
Liquidation Payments with respect to each outstanding share of
Series F Stock.
6. Conversion.
The holders of the Series F Stock shall have the
following conversion rights:
(a) Conversion. Subject to the limitations set forth
below, the Series F Stock shall be convertible at any time after
the third month subsequent to the Original Issue Date, unless
previously redeemed, at the option of the holder of record
thereof, into the number of fully paid and nonassessable shares
of Common Stock equal to the quotient of (x) the aggregate
liquidation preference of the shares of Series F Stock being
converted divided by (y) the Conversion Price (as defined below)
then in effect upon surrender to the Corporation or its transfer
agent of the certificate or certificates representing the Series
F Stock to be converted, as provided below, or if the holder
notifies the Corporation or its transfer agent that such
certificate or certificates have been lost, stolen or destroyed,
upon the execution and delivery of an agreement satisfactory to
the Corporation to indemnify the Corporation from any losses
incurred by it in connection therewith; provided, however, that,
except to the extent provided by Regulation Y, or any successor
regulation ("Regulation Y"), promulgated under the Bank Holding
Company Act of 1956, as amended, by the Board of Governors of the
Federal Reserve System or any successor thereto (the "Federal
Reserve Board"), no shares of Series F Stock originally issued by
the Corporation to a Person subject to the provision of
Regulation Y shall be convertible by the original holder thereof
or any direct or indirect transferee thereof into shares of
Common Stock, if, after giving effect to such conversion, such
Person, its Bank Holding Company Affiliates (as hereinafter
defined) and any direct or indirect transferee thereof would
beneficially own more than 4.9% of the total issued and
outstanding shares, interests, participations or other
equivalents (however designated) of voting capital stock of the
Corporation, unless such shares of Common Stock are being
distributed, disposed of or sold in any one of the following
transactions:
(1) such shares of Common Stock are being sold in
a public offering registered under the Securities Act
of 1933, as amended, (or any successor provision
thereto) (the "Securities Act") or a public sale
pursuant to Rule 144 and 144A promulgated thereunder or
any successor rule then in effect;
(2) such shares of Common Stock are being sold
(including by virtue of a merger, consolidation or
similar transaction involving the Corporation) to any
Person or group of related persons for purposes of
Section 13(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), if, after such sale,
such Person or group of Persons in the aggregate would
own or control securities of the Corporation which
possess in the aggregate the ordinary voting power to
elect a majority of the members of the corporation's
Board of Directors;
(3) such shares of Common Stock are being sold to
a person or group of related persons for purposes of
Section 13(d) of the Exchange Act, if, after such sale,
such Person or group of Persons in the aggregate would
own, control or have the right to acquire more than two
percent (2%) of the outstanding securities of any class
of voting securities of the Corporation; or
(4) such shares of Common Stock are being sold in
any other manner permitted by the Federal Reserve
Board.
As used herein, "Bank Holding Company Affiliates" means, with
respect to a Person subject to the provisions of Regulation Y,
(i) if such Person is a bank holding company, any company
directly or indirectly controlled by such bank holding company,
and (ii) otherwise, the bank holding company that controls such
Person and any company (other than such Person) directly or
indirectly controlled by such bank holding company.
(b) Conversion Price; Converted Shares. The initial
conversion price of the Series F Stock shall be $5.58 per share
(the "Initial Conversion Price"); provided, however, that if the
average of the Market Prices (as defined below) for the Common
Stock for the 20 consecutive trading days immediately preceding
the second anniversary of the Original Issue Date (the "Second
Anniversary Price") is greater than $8.50, then the conversion
price shall thereafter be $6.00; provided further, however, that
if the Second Anniversary Price is equal to or less than $8.50,
then the conversion price shall be adjusted as of the second
anniversary of the Original Issue Date to be equal to $6.00 (the
"Maximum Conversion Price") minus the product of (i) 0.75 and
(ii) the difference between $8.50 and the Second Anniversary
Price, but in no event shall the adjusted conversion price be
lower than the Initial Conversion Price (the Initial Conversion
Price, as it may be adjusted pursuant to the terms of this
Section 6(b) and Section 7, is referred to as the "Conversion
Price"); provided, further, however, that if shares of Series F
Stock are converted prior to the earlier to occur of (x) the
second anniversary of the Original Issue Date and (y) the
occurrence of a Series F Stock Event of Default, then the
Conversion Price applicable to the shares of Series F Stock so
converted shall be $6.00 per share. Notwithstanding anything to
the contrary contained in the preceding sentence with respect to
the Conversion Price, if, at any time prior to the second
anniversary of the Original Issue Date, there is a Series F Stock
Event of Default, then the Initial Conversion Price shall not be
adjusted pursuant to such sentence. The Conversion Price also
shall be subject to adjustment as provided in Section 7 below.
If any fractional interest in a share of Common Stock would be
deliverable upon conversion of Series F Stock, the Corporation
shall pay in lieu of such fractional share an amount in cash
equal to the Conversion Price of such fractional share (computed
to the nearest one hundredth of a share) in effect at the close
of business on the date of conversion. Any shares of Series F
Stock which have been converted shall be cancelled and all
dividends on converted shares shall cease to accrue and the
certificates representing shares of Series F Stock so converted
shall represent the right to receive (i) such number of shares of
Common Stock into which such shares of Series F Stock are
convertible, plus (ii) cash payable for any fractional share,
plus (iii) all accrued but unpaid dividends relating to such
shares, together with interest thereon, through the date of
conversion, plus, if applicable (iv) the Restriction Fee.
Amounts payable with respect to the foregoing clause (iii) shall
be paid, at the option of each holder, in cash or additional
shares of Common Stock valued at the Market Price thereof on the
date of such payment. Amounts payable with respect to the
foregoing clause (iv) shall be paid in accordance with the
provisions of Section 4(d) hereof. Upon the conversion of shares
of Series F Stock as provided in this Section 6, the Corporation
shall promptly pay all then accrued but unpaid dividends to the
holder of the Series F Stock being converted. The Board shall at
all times, so long as any shares of Series F Stock remain
outstanding, reserve a sufficient number of authorized but
unissued shares of Common Stock to be issued in satisfaction of
the conversion rights and privileges aforesaid.
As used herein, "Market Price" means, with respect to
the shares of Common Stock, (a) if the shares are listed or
admitted for trading on any national securities exchange or
included in The Nasdaq National Market or Nasdaq SmallCap
Market, the last reported sales price as reported on such
exchange or Market; (b) if the shares are not listed or
admitted for trading on any national securities exchange or
included in The Nasdaq National Market or Nasdaq SmallCap
Market, the average of the last reported closing bid and
asked quotation for the shares as reported on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") or a similar service if NASDAQ is not reporting
such information; (c) if the shares are not listed or
admitted for trading on any national securities exchange or
included in The Nasdaq National Market or Nasdaq SmallCap
Market or quoted by NASDAQ or a similar service, the average
of the last reported bid and asked quotation for the shares
as quoted by a market maker in the shares (or if there is
more than one market maker, the bid and asked quotation
shall be obtained from two market makers and the average of
the lowest bid and highest asked quotation). In the absence
of any available public quotations for the Common Stock, the
Board shall determine in good faith the fair value of the
Common Stock, which determination shall be set forth in a
certificate by the Secretary of the Corporation.
(c) Mechanics of Conversion. In the case of a
conversion, before any holder of Series F Stock shall be entitled
to convert the same into shares of Common Stock, it shall
surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or its transfer agent
for the Series F Stock, and shall give written notice to the
Corporation of the election to convert the same and shall state
therein the name or names in which the certificate of
certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter and in any
case within two (2) business days of the Corporation's receipt of
the notice of conversion, issue and deliver at such office to
such holder of Series F Stock, or to the nominee or nominees of
such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled as
aforesaid. A certificate or certificates will be issued for the
remaining shares of Series F Stock in any case in which fewer
than all of the shares of Series F Stock represented by a
certificate are converted.
(d) Issue Taxes. The Corporation shall pay all issue
taxes, if any, incurred in respect of the issue of shares of
Common Stock on conversion. If a holder of shares surrendered
for conversion specifies that the shares of Common Stock to be
issued on conversion are to be issued in a name or names other
than the name or names in which such surrendered shares stand,
then the Corporation shall not be required to pay any transfer or
other taxes incurred by reason of the issuance of such shares of
Common Stock to the name of another, and if the appropriate
transfer taxes shall not have been paid to the Corporation or the
transfer agent for the Series F Stock at the time of surrender of
the shares involved, the shares of Common Stock issued upon
conversion thereof may be registered in the name or names in
which the surrendered shares were registered, despite the
instructions to the contrary.
(e) Valid Issuance. All shares of Common Stock which
may be issued in connection with the conversion provisions set
forth herein will, upon issuance by the Corporation, be validly
issued, fully paid and nonassessable, free from preemptive rights
and free from all taxes, liens or charges with respect thereto
created or imposed by the Corporation.
7. Adjustment of Conversion Price. The number and kind of
securities issuable upon the conversion of the Series F Stock and
the Conversion Price shall be subject to adjustment from time to
time in accordance with the following provisions:
(a) Certain Definitions. For purposes of this
Certificate:
(i) The term "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued, or deemed
to be issued by the Corporation pursuant to paragraph
(h) of this Section 7, after the Original Issue Date
except:
(A) shares of Common Stock issuable upon
conversion of, or distributions with respect to,
the Series F Stock now or hereafter issued by the
Corporation; and
(B) up to 1,000,000 shares of Common Stock
(the "Maximum Amount") issuable upon the exercise
of stock options or other awards made or
denominated in shares of Common Stock granted
after the Original Issue Date under the
Corporation's 1993 Stock Incentive Plan, or any
successor plan, which stock options or other
awards will be issuable in aggregate amounts not
to exceed one third of the Maximum Amount (the
"Maximum Annual Amount") in any of the three (3)
fiscal years commencing with the Company's 1998
fiscal year (provided that with respect to the
1998 fiscal year, any options or awards granted
before the Initial Issue Date that are disclosed
in the Securities Purchase Agreement will not be
included for the purpose of the limitations set
forth herein); provided that (x) no more than (i)
50% of the Maximum Annual Amount may be granted to
directors, officers, employees or consultants of
the Corporation who are, at the time of such
grant, and were for a period of ninety (90) days
prior thereto, employed or otherwise engaged or
retained by the Corporation or any of its
Subsidiaries (collectively, "Eligible Personnel"),
(ii) no stock option grants or other awards shall
be made in any fiscal year to any Eligible
Personnel unless the Corporation's Stock Incentive
Plan Committee (or any successor thereto) approved
each grant and award, based upon such criteria as
such Committee determines to be appropriate, which
criteria shall include the achievement by the
Corporation, with respect to the four (4) fiscal
quarters preceding the fiscal quarter in which
such grant or award is made, of performance goals
adopted by the foregoing Committee (or the Board
of Directors, as applicable), and (iii) 50% of the
Maximum Annual Amount may be granted to
prospective officers and employees of the
Corporation or its Subsidiaries in connection with
Permitted Acquisitions; and (y) the exercise price
of each such stock option and the exercise price
for each other award made or denominated in shares
of Common Stock is no less than the Market Value
of the Common Stock on the date of the grant of
such stock option (the foregoing permitted options
or other awards are referred to herein as the
"Management Options").
(ii) The term "Common Stock" shall mean (A) the
Common Stock and (B) the stock of the Corporation of
any class, or series within a class, whether now or
hereafter authorized, which has the right to
participate in the distribution of either earnings or
assets of the Corporation without limit as to the
amount or percentage.
(iii) The term "Convertible Securities" shall
mean any evidence of indebtedness, shares or other
securities (other than the Series F Stock) convertible
into or exercisable or exchangeable for Common Stock.
(iv) The term "Options" shall mean any and all
rights, options or warrants (other than the Management
Options) to subscribe for, purchase or otherwise in any
manner acquire Common Stock or Convertible Securities.
(b) Reorganization, Reclassification. Subject to the
provisions of Sections 8(b) and 8(c) hereof, in the event of a
reorganization, share exchange, or reclassification, other than a
change in par value, or from par value to no par value, or from
no par value to par value or a transaction described in
subsection (c) or (d) below, each share of Series F Stock shall,
after such reorganization, share exchange or reclassification, be
convertible at the option of the holder into the kind and number
of shares of stock and/or other securities, cash or other
property which the holder of such share of Series F Stock would
have been entitled to receive if the holder had held the Common
Stock issuable upon conversion of such share of Series F Stock
immediately prior to such reorganization, share exchange or
reclassification.
(c) Consolidation, Merger. Subject to the provisions
of Sections 8(b) and (c) hereof, in the event of a merger or
consolidation to which the Corporation is a party, each share of
Series F Stock shall, after such merger or consolidation, be
convertible at the option of the holder into the kind and number
of shares of stock and/or other securities, cash or other
property which the holder of such share of Series F Stock would
have been entitled to receive if the holder had held the Common
Stock issuable upon conversion of such share of Series F Stock
immediately prior to such consolidation or merger.
(d) Subdivision or Combination of Shares. In case
outstanding shares of Common Stock shall be subdivided, the
Conversion Price shall be proportionately reduced as of the
effective date of such subdivision, or as of the date a record is
taken of the holders of Common Stock for the purpose of so
subdividing, whichever is earlier. In case outstanding shares of
Common Stock shall be combined, the Conversion Price shall be
proportionately increased as of the effective date of such
combination, or as of the date a record is taken of the holders
of Common Stock for the purpose of so combining, whichever is
earlier.
(e) Stock Dividends. In case shares of Common Stock
are issued as a dividend or other distribution on the Common
Stock (or such dividend is declared), the Conversion Price shall
be adjusted, as of the date a record is taken of the holders of
Common Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the earliest
of the date of such declaration, payment or other distribution),
to that price determined by multiplying the Conversion Price in
effect immediately prior to such declaration, payment or other
distribution by a fraction (i) the numerator of which shall be
the number of shares of Common Stock outstanding immediately
prior to the declaration or payment of such dividend or other
distribution, and (ii) the denominator of which shall be the
total number of shares of Common Stock outstanding immediately
after the declaration or payment of such dividend or other
distribution. In the event that the Corporation shall declare or
pay any dividend on the Common Stock payable in any right to
acquire Common Stock for no consideration, then the Corporation
shall be deemed to have made a dividend payable in Common Stock
in an amount of shares equal to the maximum number of shares
issuable upon exercise of such rights to acquire Common Stock.
(f) Extraordinary Dividends. In case the Corporation
shall fix a record date for the making of a dividend or
distribution to all holders of its Common Stock of capital stock
(other than Common Stock), evidence of indebtedness, assets or
cash, or rights, options or warrants to subscribe for or other
securities convertible into or exercisable or exchangeable for
capital stock (excluding those referred to in Section 7(h) and
any cash dividends, during any period of 365 consecutive days,
not exceeding, in the aggregate, the lesser of (i) five percent
(5%) of the Corporation's aggregate Consolidated Net Income (as
defined in the Indenture under which the Corporation issued its
Increasing Rate Senior Subordinated Notes due 2006 (the "Note
Indenture")) per share of Common Stock, calculated on a fully
diluted basis, for the four (4) consecutive fiscal quarters most
recently preceding the declaration of the dividend or
distribution and (ii) two percent (2%) of the Market Price of the
Common Stock as of the date of the declaration of the dividend),
then in each such case the Conversion Price shall be adjusted so
that after such record date, the Conversion Price shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on such record date by
a fraction of which the numerator shall be the Market Price per
share of Common Stock on such record date less the fair market
value (as determined in good faith by the Board) of the portion
of the capital stock, rights, options, warrants, evidences of
indebtedness, assets or cash so distributed with respect to each
share of Common Stock and the denominator of which shall be the
Market Price per share of Common Stock on such record date. Such
adjustment shall be made whenever any Extraordinary Dividend is
made, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive
such Extraordinary Dividend.
(g) Issuance of Additional Shares of Common Stock. If
the Corporation shall issue any Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued
pursuant to paragraph (h) below) after the Original Issue Date
(other than as provided in the foregoing subsections (b) through
(f)), for no consideration or for a consideration per share less
than the greater of (x) the Conversion Price in effect on the
date of and immediately prior to such issue, and (y) the Market
Price in effect on the date of and immediately prior to such
issue, then in such event, the Conversion Price shall be reduced,
concurrently with such issue, to a price equal to the quotient
obtained by dividing:
(A) an amount equal to (x) the total number of
shares of Common Stock outstanding immediately prior to
such issuance or sale multiplied by the greater of (i)
the Conversion Price, and (ii) the Market Price, in
each case in effect immediately prior to such issuance
or sale, plus (y) the aggregate consideration received
or deemed to be received by the Corporation upon such
issuance or sale, by
(B) the total number of shares of Common Stock
outstanding immediately after such issuance or sale.
(h) Deemed Issue of Additional Shares of Common Stock.
If the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of
holders of any class of securities then entitled to receive any
such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein designed to
protect against dilution) of Common Stock issuable upon the
exercise of such Options, or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of
such Convertible Securities, shall be deemed to be Additional
Shares of Common Stock issued as of the time of such issue of
Options or Convertible Securities or, in case such a record date
shall have been fixed, as of the close of business on such record
date, provided that in any such case in which Additional Shares
of Common Stock are deemed to be issued:
(i) no further adjustments in the Conversion
Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon
the exercise of such Options or the issue of Common
Stock upon the conversion or exchange of such
Convertible Securities;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or
otherwise, for any increase or decrease in the
consideration payable to the Corporation, or increase
or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the
original issuance of such Options or Convertible
Securities (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments
based thereon, upon any such increase or decrease
becoming effective, shall be recomputed to reflect such
increase or decrease insofar as it affects such Options
or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such
adjustment of the Conversion Price shall affect Common
Stock previously issued upon conversion of the Series F
Stock);
(iii) upon the expiration of any such Options
or any rights of conversion or exchange under such
Convertible Securities which shall not have been
exercised, the Conversion Price computed upon the
original issue of such Options or Convertible
Securities (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration, be
recomputed as if:
(A) in the case of Options or Convertible
Securities, the only Additional Shares of Common
Stock issued were the shares of Common Stock, if
any, actually issued upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities and the consideration
received therefor was the consideration actually
received by the Corporation (x) for the issue of
all such Options, whether or not exercised, plus
the consideration actually received by the
Corporation upon exercise of the Options or (y)
for the issue of all such Convertible Securities
which were actually converted or exchanged plus
the additional consideration, if any, actually
received by the Corporation upon the conversion or
exchange of the Convertible Securities; and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if
any, actually issued upon the exercise thereof
were issued at the time of issue of such Options,
and the consideration received by the Corporation
for the Additional Shares of Common Stock deemed
to have been then issued was the consideration
actually received by the Corporation for the issue
of all such Options, whether or not exercised,
plus the consideration deemed to have been
received by the Corporation upon the issue of the
Convertible Securities with respect to which such
Options were actually exercised.
(iv) No readjustment pursuant to clause (ii) or
(iii) above shall have the effect of increasing the
Conversion Price to an amount which exceeds the lower
of (x) the Conversion Price on the original adjustment
date or (y) the Conversion Price that would have
resulted from any issuance of Additional Shares of
Common Stock between the original adjustment date and
such readjustment date.
(v) In the case of any Options which expire by
their terms not more than 30 days after the date of
issue thereof, no adjustment of the Conversion Price
shall be made until the expiration or exercise of all
such Options, whereupon such adjustment shall be made
in the same manner provided in clause (iii) above.
(i) Determination of Consideration. For purposes of
this Section 7, the consideration received by the Corporation for
the issue of any Additional Shares of Common Stock shall be
computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the
aggregate amount of cash received by the
Corporation; and
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof
at the time of the issue, as determined in good
faith by the vote of a majority of the Board or if
the Board cannot reach such agreement, by a
qualified independent public accounting firm,
other than the accounting firm then engaged as the
Corporation's independent auditors.
(ii) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been
issued pursuant to paragraph (h) above, relating to
Options and Convertible Securities shall be determined
by dividing:
(A) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the
instruments relating thereto, without regard to
any provision contained therein designed to
protect against dilution) payable to the
Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities, or in the case of Options for
Convertible Securities, the exercise of such
Options for Convertible Securities and the
conversion or exchange of such Convertible
Securities, by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein designed to protect against dilution)
issuable upon the exercise of such Options or
conversion or exchange of such Convertible
Securities.
(j) Other Provisions Applicable to Adjustment Under
this Section. The following provisions will be applicable to the
adjustments in Conversion Price as provided in this Section 7:
(i) Treasury Shares. The number of shares of
Common Stock at any time outstanding shall not include
any shares thereof then directly or indirectly owned or
held by or for the account of the Corporation.
(ii) Other Action Affecting Common Stock. If
the Corporation shall take any action affecting the
outstanding number of shares of Common Stock other than
an action described in any of the foregoing subsections
7(b) to 7(h) hereof, inclusive, which would have an
inequitable effect on the holders of Series F Stock,
then the Conversion Price shall be adjusted in such
manner and at such time as the Board on the advice of
the Corporation's independent public accountants may in
good faith determine to be equitable in the
circumstances.
(iii) Minimum Adjustment. No adjustment of
the Conversion Price shall be made if the amount of any
such adjustment would be an amount less than one
percent (1%) of the Conversion Price then in effect,
but any such amount shall be carried forward and an
adjustment in respect thereof shall be made at the time
of and together with any subsequent adjustment which,
together with such amount and any other amount or
amounts so carried forward, shall aggregate an increase
or decrease of one percent (1%) or more.
(iv) Certain Adjustments. The Conversion Price
shall not be adjusted upward except in the event of a
combination of the outstanding shares of Common Stock
into a smaller number of shares of Common Stock or in
the event of a readjustment of the Conversion Price
pursuant to Section 7(h)(ii) or (iii).
(k) Dilution Event. Each of Section 7(b), (c), (d),
(e), (f) and (g) are herein referred to as a "Dilution Event."
Notwithstanding the foregoing sentence, any exercise of any
Options or Convertible Securities that are (x) outstanding as of
the Original Issue Date and (y) disclosed in Schedule 5.6 to the
Securities Purchase Agreement (as defined in the Note Indenture)
shall not be deemed a Dilution Event.
(l) Notices of Adjustments. Whenever the Conversion
Price is adjusted as herein provided, an officer of the
Corporation shall compute the adjusted Conversion Price in
accordance with the foregoing provisions and shall prepare a
written certificate setting forth such adjusted Conversion Price
and showing in detail the facts upon which such adjustment is
based, and such written instrument shall promptly be delivered to
the recordholders of the Series F Stock.
8. Redemption.
(a) Redemption by the Corporation. The Corporation
shall have no rights to redeem the Series F Stock or to cause the
sale by the holders of such Series F Stock prior to the third
anniversary of the Original Issue Date and other than as
specifically provided herein. If (x) after the third and prior
to the fifth anniversary of the Original Issue Date, the average
of the Market Prices for the Common Stock for 20 consecutive
trading days (the first day of which was after the third
anniversary of the Original Issue Date) is at least $10.00, or
(y) after the fifth anniversary of the Original Issue Date, the
average of the Market Prices for the Common Stock for 20
consecutive trading days (the first day of which was after the
fifth anniversary of the Original Issue Date) is at least
$10.9375, the Series F Stock may be redeemed in whole, but not in
part, at a price per share equal to 100% of the Series F Stock
Issue Price plus all accrued and unpaid dividends to the date of
redemption (such date being referred to herein as the "Redemption
Date"); provided, however, that the Corporation may only effect a
redemption of the Series F Stock pursuant to this Section 8 if
at, and immediately subsequent to, the Redemption Date, the
Common Stock into which the Series F Stock is convertible could
be offered and sold by the holders thereof without compliance
with the registration requirements of Section 5 of the Securities
Act or if the offer and sale of the Common Stock into which the
Series F Stock is convertible is covered by a registration
statement which has been filed with and declared effective by the
Securities and Exchange Commission, and which remains effective
through the Redemption Date, and in each case without being
subject to any other legal or contractual restriction on
transferability, including without limitation, limitations under
paragraph (e)(i) of Rule 144 promulgated under the Securities
Act. At any time after the eighth anniversary of the Original
Issue Date, the Corporation may redeem the Series F Stock in
whole, but not in part, at a price per share equal to 100% of the
Series F Stock Issue Price, plus all accrued and unpaid dividends
to the Redemption Date, provided that the conditions set forth in
the proviso to the previous sentence are satisfied.
(b) Redemption Upon the Occurrence of an Event of
Default. Upon the occurrence of any Series F Stock Event of
Default, other than a Bankruptcy Event of Default (as defined
below), (x) the Initial Purchaser or Initial Purchasers (as
defined in the Securities Purchase Agreement) holding at least
30% of the outstanding shares of Series F Stock, or (y) in the
event that each of the Initial Purchasers, other than GarMark
Partners, L.P. (collectively "GarMark"), shall own less than 100%
of the Series F Stock owned by such Initial Purchaser on the
Original Issue Date, then the holder or holders of at least 35%
of the outstanding shares of Series F Stock, shall have the right
to require (by written notice delivered to the Corporation (the
"Holders' Redemption Demand") within 60 days after such holder or
holders' receipt of the Event of Default Notice (as defined
below)) the Corporation to redeem no later than 30 days after the
Corporation's receipt of the Holders' Redemption Demand all or
any portion of the Series F Stock owned by such holder or holders
at a price per share equal to 102% of the Series F Stock Issue
Price, plus all accrued and unpaid dividends on the shares of
Series F Stock to be so redeemed to the Redemption Date. The
Corporation will give written notice of such election to the
other holders of Series F Stock, which notice shall (i) state the
Redemption Date, which date should be not later than 30 days
after the date of the Holders' Redemption Demand, and (ii) be
given at least 10 days prior to such Redemption Date. Upon the
giving of such notice, each holder of the Series F Stock may
demand redemption of all or any portion of such holder's Series F
Stock by mailing written notice thereof to the Corporation prior
to the Redemption Date. The Corporation will redeem all shares
of Series F Stock as to which rights under this paragraph have
been exercised within 30 days after the date of the Holders'
Redemption Demand. Each holder of Series F Stock shall also have
any other rights that such holder may have been afforded under
any contract or agreement at any time and any other rights that
such holder may have under any law.
(c) Redemption on Bankruptcy Event of Default or
Change in Control. Upon the occurrence of any Bankruptcy Event
of Default or in the event of a Change of Control (as defined
below), any holder of Series F Stock shall have the right to
require (by delivery of a Holders' Redemption Demand) the
Corporation to redeem within 60 days after such holder or
holders' receipt of the Event of Default Notice or Change of
Control Notice (as defined below), as the case may be, all or any
portion of the Series F Stock owned by such holder at a price per
share equal to 102% of the Series F Stock Issue Price plus an
amount equal to all accrued and unpaid dividends on the shares of
Series F Stock to be so redeemed to the Redemption Date. The
Corporation will redeem all shares of Series F Stock as to which
rights under this paragraph have been exercised within 30 days
after the date of the Holders' Redemption Demand. Each holder of
Series F Stock shall also have any other rights that such holder
may have been afforded under any contract or agreement at any
time and any other rights that such holder may have under any
law.
As used herein, a "Change of Control" means a change of
control of the Corporation of a nature that would be
required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Exchange Act,
whether or not the Corporation is then subject to such
reporting requirement; provided, that, without limitation,
such a Change of Control shall be deemed to have occurred
if:
(i) any "person" (as defined in Sections 13(d)
and 14(d) of the Exchange Act) or "group" (as defined
in Section 13(d) of the Exchange Act) other than
Permitted Holders (as defined in the Note Indenture) is
or becomes the "beneficial owner" (as defined in Rule
13(d)(3) of the Exchange Act), directly or indirectly,
of securities of the Corporation representing thirty
percent (30%) or more of the combined voting power of
the Corporation's then outstanding securities;
provided, however, that no Change of Control shall be
deemed to have occurred if prior to the acquisition of
such thirty percent (30%) of the combined voting power
of the Corporation's then outstanding securities, a
majority of the Continuing Directors (as defined below)
approves such acquisition; or
(ii) if there shall cease to be a majority of the
Board comprised of Continuing Directors; or
(iii) the stockholders of the Corporation
approve a merger or consolidation of the Corporation
with any other corporation, other than a merger or
consolidation which would result in the voting
securities of the Corporation outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty
percent (80%) of the combined voting power of the
voting securities of the Corporation or such surviving
entity outstanding immediately after such merger or
consolidation; or
(iv) if any recapitalization event occurs as a
result of which the holders of voting securities of the
Corporation outstanding immediately prior thereto do
not continue to hold at least eighty percent (80%) of
the combined voting power of the voting securities of
the Corporation immediately after such recapitalization
event; or
(v) the stockholders of the Corporation approve a
plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the
Corporation of all or substantially all of the
Corporation's assets; or
(vi) a majority of the "named executive officers"
set forth in the Corporation's most recent Proxy
Statement or Annual Report on Form 10-K or Form 10-KSB,
as the case may be (excluding Edward E. Furash), cease
to occupy such positions within a period of 365
consecutive days.
As used herein, "Continuing Directors" means
individuals who constitute the Board as of the Original
Issue Date and any new director(s) whose election by
the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of
the period or whose election or nomination for election
was previously so approved.
(d) Option to Convert in Lieu of Redemption.
Notwithstanding anything to the contrary contained herein, any
holder of shares of Series F Stock that does not want the
Corporation to redeem the shares of Series F Stock called by the
Corporation for redemption shall have the prior right to convert
all or any portion of its shares of Series F Stock into Common
Stock at the then-applicable Conversion Price.
(e) Redemption Procedure. On or prior to the
Redemption Date, the Corporation shall deposit the Series F Stock
Issue Price plus an amount equal to all accrued and unpaid
dividends on all outstanding shares of Series F Stock to be so
redeemed to the Redemption Date (the "Redemption Price") with a
bank or trust corporation having aggregate capital and surplus in
excess of $500,000,000 as a trust fund for the benefit of the
holders of the shares of Series F Stock, with irrevocable
instructions and authority to the bank or trust corporation to
pay the Redemption Price for such shares to their respective
holders on or after the Redemption Date upon receipt of the
certificate or certificates of the shares of Series F Stock to be
redeemed. From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all
rights of the holders of shares of Series F Stock as holders of
Series F Stock (except the right to receive the Redemption Price
upon surrender of their certificate or certificates) shall cease
as to those shares of Series F Stock redeemed, and such shares
shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose
whatsoever. If on the Redemption Date the funds of the
Corporation legally available for redemption of shares of Series
F Stock are insufficient to redeem the total number of shares of
Series F Stock to be redeemed on such date, then the Corporation
will use those funds which are legally available therefor to
redeem the maximum possible number of shares of Series F Stock
ratably among the holders of such shares to be redeemed based
upon their holdings of Series F Stock. Payments shall first be
applied against accrued and unpaid dividends and thereafter
against the remainder of the Redemption Price. The shares of
Series F Stock not redeemed shall remain outstanding and entitled
to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally
available for the redemption of shares of Series F Stock such
funds will immediately be used to redeem the balance of the
shares of Series F Stock to be redeemed. No dividends or other
distributions shall be declared or paid on, nor shall the
Corporation redeem, purchase or acquire any shares of, the Common
Stock or any other class or series of stock of the Corporation
unless the Redemption Price of all shares elected to be redeemed
shall have been paid in full. Until the Redemption Price for a
share of Series F Stock elected to be redeemed shall have been
paid in full, such share of Series F Stock shall remain
outstanding for all purposes and entitle the holder thereof to
all the rights and privileges provided herein, including, without
limitation, that dividends and interest thereon shall continue to
accrue and, if unpaid prior to the date such shares are redeemed,
shall be included as part of the Redemption Price as provided in
this Section 8(e).
(f) Events of Default. A "Series F Stock Event of
Default" occurs if:
(i) the Corporation has breached any material
covenant, obligation or agreement set forth in this
Certificate, the Securities Purchase Agreement (as
defined in the Note Indenture), the Registration Rights
Agreement (as defined in the Note Indenture) or any
other agreement executed in connection with the
Financing (as defined in the Note Indenture) and such
breach continues for a period of thirty (30) days; or
(ii) the Corporation defaults in the payment of
any dividend on the Series F Stock as and when due and
payable, and such default continues for a period of
fifteen (15) days; or
(iii) the Corporation defaults in making any
redemption payment that it is obligated to make
hereunder; whether or not such payment is legally
permissible or conflicts with any other agreement to
which the Corporation or any of its Subsidiaries (as
defined in the Note Indenture) is a party or by which
any of its or their respective assets are bound; or
(iv) any representation or warranty contained in
the Securities Purchase Agreement, the Registration
Rights Agreement or any other agreement executed in
connection with the Financing, or any writing furnished
by the Corporation or any of its Subsidiaries to any
holder of the Series F Stock, contains any untrue
statement of a material fact or omits to state a
material fact necessary in order to make the statements
made, in the light of the circumstances under which
they were made, not misleading; or
(v) an Event of Default (as defined in the Credit
Agreement) under the Credit Agreement (as defined in
the Note Indenture) has occurred and is continuing; or
(vi) an Event of Default (as defined in the Note
Indenture) under the Note Indenture has occurred and is
continuing; or
(vii) the Corporation or any of its
Subsidiaries has breached any material contract to
which it or any of its Subsidiaries is a party, or by
which any of its or their respective assets are bound,
except a breach that would not have a material adverse
effect on the business, operations, prospects, assets
or condition (financial or otherwise) on the
Corporation or any of its Material Subsidiaries (as
defined below); or
(viii) any judgments, orders or decrees for the
payment of money in excess of $2,500,000, either
individually or in an aggregate amount, shall be
entered against the Corporation or any of its
Subsidiaries or any of their respective properties and
shall not be discharged and there shall have been a
period of thirty (30) days during which a stay of
enforcement of such judgment or order, by reason of
pending appeal or otherwise, shall not be in effect; or
(ix) the Corporation or any of its Subsidiaries
which would be a "significant subsidiary" pursuant to
Article 1-02 of Regulation S-X ("Material Subsidiary")
pursuant to or within the meaning of any law under
Title 11 of the U.S. Code or any similar Federal, state
or foreign law for the relief of debtors ("Bankruptcy
Law"):
(A) commences a voluntary case or proceeding
with respect to itself,
(B) consents to the entry of an order for
relief against it in an involuntary case or
proceeding,
(C) consents to the appointment of a
receiver, trustee, assignee, liquidator,
sequestrator or similar official under any
Bankruptcy Law ("Custodian") of it or for all or
any material part of its property,
(D) makes a general assignment for the
benefit of its creditors,
(E) consents to or acquiesces in the
institution of bankruptcy or insolvency
proceedings against it,
(F) shall generally not pay its debts when
such debts become due or shall admit in writing
its inability to pay its debts generally, or
(G) takes any corporate action in
furtherance of or to facilitate, conditionally or
otherwise, any of the foregoing; or
(x) a court of competent jurisdiction enters a
decree, judgment or order under any Bankruptcy Law
that:
(A) is for relief against the Corporation or
any Material Subsidiary of the Corporation in an
involuntary case or proceeding,
(B) appoints a Custodian of the Corporation
or any Material Subsidiary of the Corporation for
all or substantially all of its properties, or
(C) orders the winding-up or liquidation of
the Corporation or any Material Subsidiary of the
Corporation, and in each case the order or decree
remains unstayed and in effect for sixty (60)
days.
Each of the foregoing events in clause (ix) and (x) are
referred to herein as a "Bankruptcy Event of Default."
If an Event of Default occurs and is continuing, in
addition to any other notices required pursuant to this
Certificate or the Financing Documents (as defined in the
Note Indenture), the Corporation must, within ten (10) days
after the occurrence of such Event of Default, give to the
holders of the Series F Stock notice of such Event of
Default, including a reasonably detailed description of the
events causing such Event of Default, and the actions
proposed to be taken by the Corporation in response thereto
(an "Event of Default Notice").
9. Notices of Record Dates and Effective Dates. In case:
(a) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock payable otherwise than in
shares of Common Stock; or (b) the Corporation shall authorize
the granting to the holders of Common Stock of rights to
subscribe for or purchase any shares of capital stock of any
class or any other rights; or (c) of any reorganization, share
exchange or reclassification of the capital stock of the
Corporation (other than a subdivision or combination of
outstanding shares of Common Stock), or of any consolidation or
merger to which the Corporation is party or of the sale, lease or
exchange of all or substantially all of the property of the
Corporation; or (d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation; then the
Corporation shall cause to be mailed to the recordholders of the
Series F Stock at least 20 days prior to the applicable record
date or effective date hereinafter specified, a notice stating
(i) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights, or, if a record is not to
be taken, the date as of which the holders of record of Common
Stock to be entitled to such dividend, distribution or rights are
to be determined or (ii) the date on which such reclassification,
reorganization, share exchange, consolidation, merger, sale,
lease, exchange, dissolution, liquidation or winding up is
expected to become effective or be consummated, and the date as
of which it is expected that holders of record of Common Stock
shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such
reclassification, reorganization share exchange, consolidation,
liquidation, merger, sale, lease, exchange, dissolution,
liquidation or winding up.
10. Preemptive Rights.
(a) For so long as any shares of Series F Stock are
outstanding, prior to seeking financing in one or a series of
related transactions that would aggregate more than $1,000,000 in
any consecutive twelve month period from any Person (as defined
below) consisting of any issuance by the Corporation or any
Affiliate (as defined below) thereof of any shares of Common
Stock or Preferred Stock, including securities convertible into,
or exercisable or exchangeable for, any shares of Common Stock or
Preferred Stock (other than (i) to fund the lesser of $2,000,000
or 20% of the consideration payable in connection with a
Permitted Acquisition (as defined in the Note Indenture)
provided, however, that the per share price paid in connection
with such Permitted Acquisition is at least equal to the greater
of (x) the Market Price of the Common Stock on the Business Day
immediately preceding the day on which the Permitted Acquisition
is consummated, and (y) the Maximum Conversion Price (a
"Permitted Acquisition Equity Financing"), (ii) which is made
pursuant to an underwritten public offering pursuant to a
registration statement declared effective by the Securities and
Exchange Commission, (iii) upon the exercise of the Management
Options or (iv) upon the exercise, in accordance with the
currently existing terms thereof, of the Corporation's Options as
set forth on Schedule 5.6 to the Securities Purchase Agreement)
(the "Equity Financing," and the securities to be issued in
connection therewith, the "Equity Securities"), the Corporation
shall first give to each holder of Series F Stock the opportunity
(such opportunity being herein referred to as the "Preemptive
Right") to purchase (on the same terms as such Equity Securities
are proposed to be sold) the same proportion of such Equity
Securities proposed to be sold by the Corporation as equals such
holder's percentage of the outstanding Series F Stock held by
such holder on the day preceding the date of the Preemptive
Notice (as defined herein). Notwithstanding any provision
hereof, on the date, if any, that the Initial Purchasers
beneficially own, in the aggregate, less than 30% of the Series
F Stock, the Corporation's obligations set forth in this Section
10 shall cease and be of no further effect.
(b) At least thirty (30) days prior to the issuance by
the Corporation of any Equity Securities, the Corporation shall
give written notice thereof (the "Preemptive Notice") to each
holder of Series F Stock. The Preemptive Notice shall specify
(i) the name and address of the bona fide investor to whom the
Corporation proposes to issue or sell Equity Securities, (ii) the
total amount of capital to be raised by the Corporation pursuant
to the issuance or sale of Equity Securities, (iii) the number of
such Equity Securities proposed to be issued or sold, (iv) the
price and other terms of their proposed issuance or sale, (v) the
number of such Equity Securities which such holder is entitled to
purchase (determined as provided in subsection (a) above), and
(vi) the period during which such holder may elect to purchase
such Equity Securities, which period shall extend for at least
thirty (30) days following the receipt by such holder of the
Preemptive Notice (the "Preemptive Acceptance Period"). Each
holder of Series F Stock who desires to purchase Equity
Securities shall notify the Corporation within the Preemptive
Acceptance Period of the number of Equity Securities he wishes to
purchase, as well as the number, if any, of additional Equity
Securities he would be willing to purchase in the event that all
of the Equity Securities subject to the Preemptive Right are not
subscribed for by the other holders of Series F Stock.
(c) During the Preemptive Acceptance Period, except as
required by law, the Corporation and each holder of Series F
Stock shall not discuss the proposed Equity Financing with any
other person, other than officers, directors and employees of the
Corporation.
(d) In the event a holder of Series F Stock declines
to subscribe for all or any part of its pro rata portion of any
Equity Securities which are subject to the Preemptive Right (the
"Declining Preemptive Purchaser") during the Preemptive
Acceptance Period, then the other holders of Series F Stock shall
have the right to subscribe for all (or any declined part) of the
Declining Preemptive Purchaser's pro rata portion of such Equity
Securities (to be divided among the other holders of Series F
Stock desiring to exercise such right on a ratable basis).
(e) After the conclusion of the Preemptive Acceptance
Period, any Equity Securities which none of the holders elect to
purchase in accordance with the provisions of this Section 10,
may be sold by the Corporation, within a period of four (4)
months after the expiration of the Preemptive Acceptance Period,
to any other person or persons at not less than the price and
upon other terms and conditions not less favorable to the
Corporation than those set forth in the Preemptive Notice.
"Affiliate" means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or any other entity or
organization including a government or political subdivision or
any agency or instrumentality thereof ("Person") (i) which
directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control, with
such Person; or (ii) which beneficially owns or holds ten percent
(10%) or more of the voting power (or in the case of a Person
which is not a corporation, 10% or more of the equity or other
ownership interest) of such Person; or (iii) ten percent (10%) or
more of the voting power (or in the case of a Person which is not
a corporation, ten percent (10%) or more of the equity or other
ownership interest) of which is beneficially owned or held by
such Person. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through
ownership of voting power by contract or otherwise.
11. Voting Rights.
(a) General. Except as otherwise expressly provided
herein or as provided by any applicable law, the Series F Stock
shall be non-voting. In addition to the rights otherwise
provided for herein or by law, so long as any shares of Series F
Stock are outstanding, the Corporation will not, and it will
cause its Subsidiaries not to, without the affirmative vote, or
the written consent pursuant to Section 228 of the Delaware
General Corporation Law, of (x) (1) the Initial Purchasers
holding at least (A) 70% of the outstanding Series F Stock (or
such greater number as may be required by law) or (B) two thirds
of the outstanding Series F Stock (or such greater number as may
be required by law) on and after the date upon which Moore Global
Investments, Ltd. and Remington Investment Strategies, L.P. and
any of their Affiliates (collectively "Moore"), own less than
100% of the shares of Series F Stock acquired by them on the
Original Issue Date, or (2) in the event that each of the Initial
Purchasers, other than GarMark, shall own less than 50% of the
Series F Stock owned by such Initial Purchaser on the Original
Issue Date, then the holders of at least a majority (or such
greater number as may be required by law) of the Series F Stock,
voting separately as a class; and (y) so long as Moore, shall own
100% of the shares of Series F Stock acquired by them on the
Original Issue Date, the approval of Moore with respect to the
items enumerated in clauses (i), (iv), (v), (vi), (viii), (ix),
(x), (xiv), (xv), (xvi) and (xviii) below, such approval not to
be unreasonably withheld:
(i) grant or issue any Options, other than the
Management Options or Convertible Securities, to any
officers, directors, employees or consultants of the
Corporation or any of its Affiliates;
(ii) incur Indebtedness (as defined in the Note
Indenture) in excess of the amounts permitted to be
incurred pursuant to the Note Indenture;
(iii) retire, redeem, purchase or acquire any
Junior Securities or any interest therein;
(iv) effect or permit to occur any Change of
Control enumerated in clauses (i), (iii), (iv), (v) or
(vi), or facilitate any Change of Control enumerated in
clause (ii), of the definition of Change of Control
contained herein;
(v) effect any material change in the nature of
the business conducted as of the Original Issue Date by
the Corporation or any of its Subsidiaries;
(vi) enter into any Affiliate Transaction (as
defined in the Note Indenture);
(vii) effect, or agree to effect, any
acquisitions the purchase price for which (or any
portion thereof) consists of equity securities of the
Corporation or Convertible Securities in an amount in
excess of the amount of Permitted Acquisition Equity
Financing;
(viii) amend, waive or repeal any provisions
of, or add any provision to, (x) this Certificate or
(y) any provision of the Corporation's Certificate of
Incorporation or any other certificate of designation
filed with the Secretary of State of Delaware by the
Corporation with respect to its preferred stock;
(ix) increase the authorized number of shares of
Series F Stock or reclassify the shares of Series F
Stock;
(x) amend, waive or repeal any provisions of, or
add any provision to, the Corporation's By-laws (the
"By-laws") in any manner that would have an adverse
effect on the holders of the Series F Stock,
notwithstanding, without limitation, the provisions of
Article IV, Section 3 of the By-Laws as such provision
pertains to Moore;
(xi) sell, convey, transfer, assign or otherwise
dispose of any Subsidiary of the Corporation or any
division, operating unit or other business unit that,
on a pro forma basis, constitutes more than 20% of the
pro forma Consolidated EBITDA (as defined in the Note
Indenture) of the Corporation;
(xii) sell any Common Stock (other than as
permitted pursuant to the terms of Section 10(a)) at a
cash purchase price below the greater of (x) $8.50, and
(y) the Market Price on the date of such sale;
(xiii) enter, or permit any of its Subsidiaries
to enter, into any agreement, contract, binding
commitment or other arrangement providing for any
Permitted Acquisition in which the aggregate
consideration, including the estimated amounts, as
determined in good faith by the Board of Directors of
the Company, of any contingent consideration payable by
the Company in connection with such Permitted
Acquisition is, or may be, greater than $7,500,000;
(xiv) sell any Common Stock or other
Convertible Securities in connection with a Permitted
Acquisition in an amount in excess of, or on terms
other than, a Permitted Acquisition Equity Financing;
(xv) enter into any agreement, indenture or other
instrument which contains any provisions restricting
the Corporation's obligation to pay dividends on, make
liquidation payments in respect of, or make redemptions
of the Series F Stock in accordance herewith;
(xvi) dissolve the Corporation;
(xvii) terminate or change the Corporation's
independent auditors;
(xviii) (x) commence any material action, suit
or proceeding, or (y) settle, compromise or waive any
material right with respect to or release any part of,
any material action, suit, proceeding, investigation or
claim;
(xix) replace, renew, refinance, extend,
prepay, redeem, defease or otherwise retire any
material Indebtedness (as defined in the Note
Indenture) other than as permitted pursuant to the Note
Indenture;
(xx) incur, or suffer to exist, any Lien, other
than Permitted Liens (as defined in the Note
Indenture), with respect to any material Property (as
defined in the Note Indenture); or
(xxi) increase, decrease or otherwise amend
the size, or requirements for election or appointment
to or service on, the Board of Directors (other than as
provided herein).
(b) Appointment of Board of Director Observers. On
the Original Issue Date, (i) GarMark shall have the right to
designate one (1) voting Board member, and each of GarMark and
Moore shall have the right to designate one (1) non-voting Board
observer, each of whom will be given notice of, and permitted to
attend, all meetings of the Board, and (ii) GarMark shall have
the right to designate one (1) voting committee member, and each
of GarMark and Moore shall have the right to designate one (1)
non-voting committee observer, to each of the Corporation's
Compensation Committee, Stock Incentive Plan Committee, Finance
Committee, Audit Committee, and any other committee that is
created or established after the date hereof, each of whom will
be given notice of, and permitted to attend, all meetings of each
such committee. On the Original Issue Date, the Corporation
acting through its Board and in accordance with its Charter
Documents (as defined in the Securities Purchase Agreement) and
applicable Law (as defined in the Securities Purchase Agreement),
shall (i) (A) increase the size of its Board by one (1), (B)
elect the person referred to hereinabove (or such other person as
may be selected by GarMark) to the newly created directorship to
hold office until his successor is elected at a special or annual
meeting of the stockholders, and (C) in connection with any such
subsequent election of directors, nominate, recommend and do all
other acts and things to cause (including, without limitation,
voting all shares for which the Corporation's management or Board
holds proxies (including undesignated proxies) unless otherwise
provided by the stockholders submitting such proxies) the person
referenced in the preceding clause (B) to be elected to the
Board, and (ii) increase the size of each of the Compensation
Committee, Stock Incentive Plan Committee, Finance Committee,
Audit Committee, and if any other committee is created or
established after the date hereof, of such committee, by one (1),
and cause the person referred to hereinabove (or such other
person as may be selected by GarMark) to become a member thereof.
In the event any director, or member of a committee, elected
pursuant to this Section 11(b) shall cease to serve as a director
or member, as applicable, for any reason, the Corporation shall
cause (subject to the provisions of its Charter Documents and
applicable Law) the vacancy resulting thereby to be filled as
promptly as practicable by a person selected by GarMark.
Notwithstanding any provision hereof, on the date, if any, that
any Initial Purchaser entitled to exercise the rights provided in
this Section 11(b) beneficially owns less than 25% of the Common
Stock that would be issuable to such Initial Purchaser upon its
conversion of the Series F Stock acquired on the Original Issue
Date (assuming that the shares of Series F Stock would be
converted at a conversion price of $6.00 per share, subject to
the adjustments provided herein with respect to conversion price
and the number of shares issuable upon conversion), the
Corporation's obligations set forth in this Section 11(b) with
respect to such Initial Purchaser shall cease and be of no
further effect.
(c) Election of Board of Directors.
(i) If at any time or times any dividend payable
on the Series F Stock shall be in arrears and unpaid
for four (4) consecutive quarterly periods (each a
"Dividend Payment Default") or if the Corporation shall
have failed to discharge any obligation pursuant to a
request for redemption pursuant to Section 8(b) (the
"Redemption Obligation") (each of the foregoing a
"Triggering Event"), then the number of directors
constituting the Board, without further action, shall
be increased by such number (rounded up to the nearest
whole number) as is necessary such that subsequent to
such occurrence the number of directors nominated and
elected by the holders of the Series F Stock, as set
forth herein, is at least one third of the entire Board
and the holders of the Series F Stock shall have the
exclusive right, voting separately as a class, to
nominate and elect the directors (the "New Directors")
of the Corporation to fill such newly created
directorships (which New Directors shall be apportioned
among Class 1, Class 2 and Class 3 in accordance with
Article V of the Certificate of Incorporation and
Section 3 of the By-laws and in a manner that provides
the New Directors with the longest tenure of the
Board), the remaining directors to be elected by the
other class or classes of stock entitled to vote
therefor, at each meeting of stockholders held for the
purpose of electing directors;
(ii) Whenever such voting right shall have vested,
such right may be exercised at a special meeting of the
holders of the Series F Stock called as hereinafter
provided, at any annual meeting of stockholders held
for the purpose of electing directors or by the written
consent of the holders of Series F Stock pursuant to
Section 228 of the Delaware General Corporation Law.
Such voting right shall continue until such time as all
cumulative dividends accumulated on the Series F Stock
shall have been paid in full or the Corporation shall
have fulfilled its Redemption Obligation, as the case
may be, at which time such voting right of the holders
of Series F Stock shall terminate, but such voting
right shall again vest in the event of each and every
subsequent failure of the Corporation to pay dividends
for the requisite number of periods or to discharge any
Redemption Obligation as described above.
(iii) At any time when such voting right shall
have vested in the holders of Series F Stock and if
such right shall not already have been initially
exercised, a proper officer of the Corporation shall,
upon the written request of any holder of record of
Series F Stock then outstanding, call a special meeting
of holders of Series F Stock. Such meeting shall be
held at the earliest practicable date upon the notice
required for annual meetings of stockholders. If such
meeting shall not be called within 30 days after such
written request, then the holders of record of 10% of
the shares of Series F Stock then outstanding may
designate in writing a holder of Series F Stock to call
such meeting at the expense of the Corporation, and
such meeting may be called by such person so designated
upon the notice required for annual meetings of
stockholders. Any holder of Series F Stock which would
be entitled to vote at such meeting shall have access
to the stock books of the Corporation for the purpose
of causing a meeting of stockholders to be called
pursuant to the provisions of this paragraph.
Notwithstanding the provisions of this paragraph,
however, no such special meeting shall be called during
a period within 90 days immediately preceding the date
fixed for the next annual meeting of stockholders.
(iv) At any meeting at which the holders of Series
F Stock shall have the right to elect New Directors as
provided herein, the presence in person or by proxy of
the holders of at least a majority of the then
outstanding shares of Series F Stock shall be required
and be sufficient to constitute a quorum. At any such
meeting or adjournment thereof, the absence of a quorum
of the holders of Series F Stock shall not prevent the
election of directors other than the New Directors and
the absence of a quorum or quorums of the holders of
capital stock entitled to elect such other directors
shall not prevent the election of any New Directors.
(v) For so long as the aforesaid voting rights
are vested in the holders of Series F Stock, the term
of office of the New Directors shall terminate upon the
election of their successors by the holders of Series F
Stock. Upon any termination of the aforesaid voting
rights in accordance with Section 11(c)(ii), the term
of office of all New Directors shall thereupon
terminate and upon such termination the number of
directors constituting the Board shall, without further
action, be reduced by the number of such New Directors.
(vi) In the case of any vacancy occurring among
the New Directors, the New Directors who shall have
been so elected (even if there is a sole remaining New
Director) may appoint a successor to hold office until
his successor is elected at an annual or a special
meeting of the stockholders. If all New Directors
shall cease to serve as directors before their terms
shall expire, the holders of Series F Stock then
outstanding may elect successors to hold office until
each of their successors are elected at an annual or a
special meeting of the stockholders.
(vii) For the duration of any Triggering
Event, (x) Moore or any of its Affiliates, shall have
the right to designate one (1) Series F Nominee (as
defined below) and (y) GarMark shall have the right to
designate the remaining Series F Nominee(s) to be
elected by the holders of the Series F Stock; provided
that in the event that Moore shall own less than 100%
of the Series F Stock owned by it on the Original Issue
Date, then the holders of at least a majority of the
Series F Stock shall have the right to designate all of
the Corporation's New Director nominees for election to
the Board. The nominees so designated are herein
referred to as the "Series F Nominees." In furtherance
of the foregoing, the Corporation, acting through its
Board and in accordance with its Certificate of
Incorporation, By-laws and applicable law, shall
recommend in the proxy statement for each annual or
special meeting of stockholders at which any New
Director shall be elected, and shall recommend at each
such stockholders' meeting, as part of the management
or Board slate for election to the Board, the Series F
Nominees.
(viii) So long as any shares of Series F Stock
are outstanding, the Corporation shall take such action
as may be necessary so that its By-laws shall contain
provisions ensuring that the number of directors of the
Corporation shall at all times be such that the
exercise, by the holders of the Series F Stock, of the
right to elect any New Directors will not contravene
any provisions of the Certificate of Incorporation or
By-laws.
(d) Provisions with respect to Regulation Y.
Notwithstanding any other provisions to the contrary set forth in
this Section 11, no Person subject to the provisions of
Regulation Y promulgated under the Bank Holding Company Act of
1956, as amended, by the Federal Reserve Board, holding shares of
Series F Preferred Stock shall be entitled to exercise any of the
rights granted to the Series F Stock pursuant to this Section 11
if the exercise of such right(s) would cause such Person not to
be in compliance with Regulation Y.
12. Shares to be Retired. All shares of the Series F Stock
redeemed, converted, exchanged or purchased by the Corporation
shall be retired and canceled and shall not be restored to the
status of authorized but unissued shares of Preferred Stock and
may not thereafter be reissued.
13. Public Documents. For so long as the Corporation has
any securities registered under the Exchange Act, upon the filing
with the Securities and Exchange Commission of any financial
statements, proxy or information statements, notices, reports or
registration statements (other than any registration statements
relating to employee benefit or dividend reinvestment plans), or
the issuance of any press release or other public announcement
(each a "Public Document"), the Corporation shall, within five
(5) business days, provide to each holder of Series F Stock a
copy of such Public Document.
14. Notice Regarding Certain Corporate Actions. If, at any
time, the Corporation decides to take certain corporate action,
including, but not limited to, any Dilution Event or Change of
Control (a "Change of Control Notice"), then the Corporation
shall provide each holder of Series F Stock with written notice
of such action at least 20 days prior to the record date for such
action, and if there is no record date for such action, then such
written notice shall be provided at least 20 days prior to the
effective date of such action; provided that any holder of Series
F Stock may elect not to receive any such notices by providing
the Corporation with written notice of such election.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this 19th day of March, 1998.
HEADWAY CORPORATE RESOURCES, INC.
By: /s/