Exhibit 4.2
Form 10-K 2001, Amendment No. 1
Headway Corporate Resources, Inc.
File No. 1-16025
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES G 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 ss.151 of the
Delaware General Corporation Law, the Board, at a telephonic meeting held on
September 6, 2001, by vote of a majority of the Board present, duly adopted and
approved the following resolution providing for the designations, preferences
and relative, participating, optional and other rights, and the qualifications,
limitations and restrictions of the Series G 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 G Convertible Preferred Stock and fixes
and determines the preferences, rights, qualifications, limitations and
restrictions relating to the Series G Convertible Preferred Stock as
follows:
1. Designation. The shares of such series of Preferred Stock shall be
designated "Series G Convertible Preferred Stock" (referred to herein as the
"Series G Stock").
2. Authorized Number. The number of shares constituting the Series G Stock
shall be 1,000.
3. Ranking. The Series G 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 G
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 G Stock.
4. Dividends.
(a) Dividend Accrual and Payment. From and after the date of issuance
of the Series G Stock (the "Original Issue Date" ), dividends shall accrue
on a daily basis on the shares of Series G Stock at the initial annual rate
(subject to reset in accordance with Section 4(e)) of 7.5% per share
(expressed as a percentage of the $20,000.00 per share liquidation
preference (the "Dividend Rate")). The holders of shares of Series G 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"). For the purposes
of this Certificate of Designations, it shall be deemed that (x) dividends
shall have begun to accrue on the Series G Stock as of April 1, 2001 and
that (y) dividends were neither declared nor paid by the Corporation for
the quarter ended June 30, 2001. 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 G 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 G 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 G Stock, or the date on which any shares of Series G 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 G Stock. In addition to
the dividends provided for in this Section 4(a), holders of Series G 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 G
Stock are outstanding, (i) the amount of all dividends paid with respect to
the shares of Series G 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 G 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 G 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,
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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 G 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 G
Stock outstanding shall be entitled to a ratably proportionate amount of
all dividends accruing with respect to each outstanding share of Series G
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 G Stock.
(d) Payments on Shares of Common Stock Subject to Restricted
Transferability. If, subsequent to the conversion of any shares of Series G
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 G 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 G
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 G 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 G 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 G Stock.
(e) Dividend Rate Adjustment. If all of the outstanding shares of
Series G Stock are not redeemed on or prior to March 19, 2006, then the
Dividend Rate shall increase to 10% per annum commencing on such date, 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.
Notwithstanding the foregoing, (x) if all interest on the Increasing Rate
Senior Subordinated Notes Due 2006 of the Corporation and dividends on the
Series G Stock (collectively, the "Payments") accrued on and prior to
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January 2, 2002 have not been paid in full in cash by such date, then the
Dividend Rate shall increase to 9% at such time, and (y) if all Payments
accrued on and prior to April 1, 2002 have not been paid in full in cash by
such date, then the Dividend Rate shall increase to 10% at such time.
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 G Stock shall be entitled, before any
distribution or payment is made upon any Junior Securities, to be paid an
amount equal to (i) $20,000.00 per share of Series G Stock, representing
the liquidation preference per share of the Series G Stock (as adjusted for
any combinations, divisions or similar recapitalizations affecting the
shares of Series G Stock) (the "Series G Issue Price"), plus (ii) all
accrued and unpaid dividends on the Series G Stock to such date (together
with the Series G 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 G Stock shall be insufficient to permit payment in full to the
holders of Series G 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 G 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 G 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 G Stock shall be equal to a ratably
proportionate amount of the Liquidation Payments with respect to each
outstanding share of Series G Stock.
6. Conversion.
The holders of the Series G Stock shall have the following conversion
rights:
(a) Conversion. Subject to the limitations set forth below, the Series
G Stock shall be convertible at any time after 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
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shares of Series G Stock being converted (plus any accrued and unpaid
dividends on such shares) 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 G 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 G
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.
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(b) Conversion Price; Converted Shares. The initial conversion price
of the Series G Stock shall be $5.58 per share (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, shall be referred to as the
"Conversion Price"); provided, however, that (i) if all Payments accrued on
and prior to January 2, 2002 have not been paid in full in cash by such
date, then the Conversion Price shall be reduced to $2.75 per share at such
time, and (ii) if all Payments accrued on and prior to April 1, 2002 have
not been paid in full in cash by such date, then the Conversion Price shall
be further reduced to $1.00 per share at such time; provided, that the
reductions in the Conversion Price set forth in clauses (i) and (ii) above
shall be subject, to the extent legally required, to the approval of the
holders of the Common Stock of such reductions, along with an increase in
the number of shares of Common Stock authorized for issuance to an amount
agreed to by the Corporation and the holders of the Series G Stock as
sufficient to permit the conversion of the Series G Stock following such
reduction. 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 G 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 G 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 G Stock so
converted shall represent the right to receive (i) such number of shares of
Common Stock into which such shares of Series G 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 G Stock as provided in this Section 6, the Corporation
shall promptly pay all then accrued but unpaid dividends to the holder of
the Series G Stock being converted. The Board shall at all times, so long
as any shares of Series G 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
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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 G 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 G 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 or 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 G 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 G Stock in any case in which fewer than all of the shares of Series
G 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 G 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 G 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 G Stock now or
hereafter issued by the Corporation; and
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(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 March 19, 1998 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 Corporation's 1998
fiscal year; 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 G
Stock and the warrants issued pursuant to Section 3(a)(vi) of the
Limited Waiver and Amendment dated as of August 24, 2001 by and among
the Corporation, the holders of the Series F Convertible Preferred
Stock of the Corporation and State Street Bank and Trust Company,
N.A., as trustee under the Note Indenture (the "Limited Waiver")
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
G 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 G Stock would have been
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entitled to receive if the holder had held the Common Stock issuable upon
conversion of such share of Series G 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 G 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 G Stock would have
been entitled to receive if the holder had held the Common Stock issuable
upon conversion of such share of Series G 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
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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 lower 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
10
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 G 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
11
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.
12
(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 G 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 were
(x) outstanding as of March 19, 1998 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 G Stock.
8. Redemption.
(a) Redemption by the Corporation. The Corporation shall have the
right to redeem the Series G Stock or to cause the sale by the holders of
such Series G Stock if (x) after the Original Issue Date and prior to March
19, 2003, the average of the Market Prices for the Common Stock for 20
consecutive trading days (the first day of which was after the Original
Issue Date) is at least $10.00, or (y) after March 19, 2003, the average of
the Market Prices for the Common Stock for 20 consecutive trading days (the
first day of which was after March 19, 2003) is at least $10.9375, the
Series G Stock may be redeemed in whole, but not in part, at a price per
share equal to 100% of the Series G 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 G Stock pursuant to this Section
8 if at, and immediately subsequent to, the Redemption Date, the Common
13
Stock into which the Series G 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 G 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 March 19, 2006, the
Corporation may redeem the Series G Stock in whole, but not in part, at a
price per share equal to 100% of the Series G 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 G 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 G 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 G 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 G 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 G Stock owned by such holder or holders at a price per share
equal to 102% of the Series G Stock Issue Price, plus all accrued and
unpaid dividends on the shares of Series G Stock to be so redeemed to the
Redemption Date. The Corporation will give written notice of such election
to the other holders of Series G 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 G Stock may demand redemption of all or any portion of such holder's
Series G Stock by mailing written notice thereof to the Corporation prior
to the Redemption Date. The Corporation will redeem all shares of Series G
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 G 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 G 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 G Stock owned
by such holder at a price per share equal to 102% of the Series G Stock
Issue Price plus an amount equal to all accrued and unpaid dividends on the
shares of Series G Stock to be so redeemed to the Redemption Date. The
14
Corporation will redeem all shares of Series G 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 G 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, cease to occupy such
positions within a period of 365 consecutive days.
15
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 G Stock
that does not want the Corporation to redeem the shares of Series G Stock
called by the Corporation for redemption shall have the prior right to
convert all or any portion of its shares of Series G 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 G Stock Issue Price plus an amount
equal to all accrued and unpaid dividends on all outstanding shares of
Series G 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 G 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 G
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 G Stock as holders of Series G Stock
(except the right to receive the Redemption Price upon surrender of their
certificate or certificates) shall cease as to those shares of Series G
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 G Stock are insufficient to
redeem the total number of shares of Series G 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 G Stock
ratably among the holders of such shares to be redeemed based upon their
holdings of Series G Stock. Payments shall first be applied against accrued
and unpaid dividends and thereafter against the remainder of the Redemption
Price. The shares of Series G 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 G Stock such funds will immediately
be used to redeem the balance of the shares of Series G 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 G Stock
elected to be redeemed shall have been paid in full, such share of Series G
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 G Stock Event of Default" occurs if:
16
(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 G 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 G 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"):
17
(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."
Any Series F Stock Event of Default (as such term is defined in the
Certificate of Designations, Preferences and Rights of Series F Convertible
Stock of the Corporation), other than a Series F Stock Event of Default
waived pursuant to the Limited Waiver, that occurred prior to the Original
Issue Date shall be considered a Series G Stock Event of Default.
If a Series G Stock 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 Series G Stock
18
Event of Default, give to the holders of the Series G Stock notice of such
Series G Stock Event of Default, including a reasonably detailed
description of the events causing such Series G Stock 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 G 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 G 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
19
issued in connection therewith, the "Equity Securities"), the Corporation
shall first give to each holder of Series G 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 G
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 G 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 G 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 G 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 G Stock.
(c) During the Preemptive Acceptance Period, except as required by
law, the Corporation and each holder of Series G 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 G 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 G
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 G 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")
20
(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 G Stock shall be non-voting. In
addition to the rights otherwise provided for herein or by law, so long as
any shares of Series G 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 G Stock (or such greater number as may be required by
law) or (B) two thirds of the outstanding Series G 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 G 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 G 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 G
Stock, voting separately as a class; and (y) so long as Moore, shall own
100% of the shares of Series G 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;
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(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 G Stock
or reclassify the shares of Series G 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 G
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 Corporation, of any contingent
consideration payable by the Corporation 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 G Stock in accordance herewith (other than
the Limited Waiver and the Seventh Amendment and Limited Waiver to
Credit Agreement, dated as of August 24, 2001 by and among the
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Corporation, the Credit Parties (as such term is defined therein), the
Lenders (as such term is defined therein) and Bank of America, N.A. as
agent);
(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. 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 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. 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, in connection
with any 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 above to be
elected to the Board and shall cause such member to be a member 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. 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
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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 G Stock acquired on the Original Issue Date
(assuming that the shares of Series G Stock would be converted at a
conversion price of $5.58 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 G
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
G Stock, as set forth herein, is at least one third of the entire
Board and the holders of the Series G 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 G 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 G 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
G 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 G 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 G 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 G Stock
then outstanding, call a special meeting of holders of Series G 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 G Stock then
outstanding may designate in writing a holder of Series G 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
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for annual meetings of stockholders. Any holder of Series G 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 G 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 G 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 G 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 G Stock, the term of office of the New Directors
shall terminate upon the election of their successors by the holders
of Series G 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 G
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 G
Nominee (as defined below) and (y) GarMark shall have the right to
designate the remaining Series G Nominee(s) to be elected by the
holders of the Series G Stock; provided that in the event that Moore
shall own less than 100% of the Series G Stock owned by it on the
Original Issue Date, then the holders of at least a majority of the
Series G 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 G
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 G Nominees.
(viii) So long as any shares of Series G 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
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the holders of the Series G 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 G Preferred Stock shall be entitled to exercise any of the
rights granted to the Series G 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 G 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 G 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 G 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 G 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 7th
day of September, 2001.
HEADWAY CORPORATE RESOURCES, INC.
By: /s/
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