CERTIFICATE OF DESIGNATION
OF 12% SERIES C-1 CONVERTIBLE
PARTICIPATING PREFERRED STOCK
OF
AMERICAN SKIING COMPANY
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
AMERICAN SKIING COMPANY, a corporation organized under the laws
of the State of Delaware (the "Corporation"), certifies that, pursuant to the
authority contained in its Certificate of Incorporation, and in accordance with
the provisions of Section 151 of the General Corporation Law of the State of
Delaware, its Board of Directors has adopted the following resolution creating a
series of Serial Preferred Stock, $.01 par value per share, designated 12%
Series C-1 Convertible Participating Preferred Stock:
RESOLVED, that the series of authorized Preferred Stock, par
value $.01 per share, designated 12% Series C-1 Convertible Participating
Preferred Stock of the Corporation be hereby created, and that the designations
and amounts thereof and the voting powers, preferences and relative, optional
and other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof, are as follows:
A. The Corporation shall have authority to issue 40,000 shares of
12% of Series C-1 Convertible Participating Preferred Stock, $.01 par value per
share (the "Series C-1 Preferred Stock"); and
B. The voting powers, preferences and relative, participating,
optional and other special rights of the shares of the Series C-1 Preferred
Stock, and the qualifications, limitations and restrictions thereof are as
follows:
Section 1. Definitions.
As used herein, the following terms have the following meanings
(with terms defined in the singular having comparable meanings when used in the
plural and vice versa), unless the context otherwise requires:
"Accretion Amounts" shall mean the sum of all amounts added to
the Liquidation Price pursuant to Section 3.
"Affiliate" has the meaning set forth in Rule 12b-2, as in effect
on the date hereof, under the Exchange Act.
"Associate" has the meaning set forth in Rule 12b-2, as in effect
on the date hereof, under the Exchange Act.
"Beneficially Own" has the meaning set forth below:
A Person shall be deemed to "Beneficially Own" any securities:
(i) of which such Person or any of such Person's Affiliates or
Associates is considered to be a "beneficial owner" under Rule 13d-3 of the
Exchange Act, as in effect on the date of this Agreement;
(ii) which are Beneficially Owned, directly or indirectly, by any
other Person (or any Affiliate or Associate of such other Person) with which
such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing), for the
purpose of acquiring, holding, voting or disposing of such securities; or
(iii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time or upon the
satisfaction of conditions) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of conversion
rights, exchange rights, rights, warrants or options, or otherwise.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Business Day" shall mean any day that is not a Saturday, Sunday
or a Legal Holiday.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Corporation and its Subsidiaries,
taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Permitted Holders, or (ii) the consummation of
any transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), other than the Permitted Holders, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of more than 50% of the voting power of the
Corporation's capital stock, unless, in the case of this clause (ii), the
Permitted Holders retain the right or ability, by voting power, contract or
otherwise, to elect or designate a majority of the Board of Directors of the
Corporation; provided, that, for so long as any Senior Subordinated Notes are
outstanding, a Change of Control shall not be deemed to occur for purposes of
this Certificate of Designation unless the same event or transaction shall also
have caused a "Change of Control" to have occurred for purposes of the Senior
Subordinated Note Indenture, and the Corporation shall be required to make a
"Change of Control Offer" as provided therein.
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"Change of Control Notice" shall have the meaning set forth in
Section 5(c).
"Change of Control Price" shall have the meaning set forth in
Section 5(c).
"Class A Common Stock" shall mean the Class A common stock, par
value $.01 per share, of the Corporation.
"Common Stock" shall mean the Company Common Stock and the Class
A Common Stock as the same exist as of the date hereof or as such stock may be
constituted from time to time.
"Company Common Stock" shall mean the common stock, par value
$.01 per share, of the Corporation.
"Conversion Date" shall have the meaning specified in Section
9(b).
"Conversion Price" shall mean the applicable price at which
Conversion Shares shall be delivered upon conversion of shares of the Series C-1
Preferred Stock as specified in Section 9(a).
"Conversion Shares" shall have the meaning specified in Section
9(a).
"Current Market Price" shall mean the Current Market Price of the
Company Common Stock calculated in accordance with Section 9(c)(iv).
"Default Voting Event" shall have the meaning specified in
Section 6(b)(ii).
"Definitive Agreements" shall mean the Purchase Agreement, the
Registration Rights Agreement, the Junior Subordinated Note Indenture and the
Junior Subordinated Notes.
"Distribution Date" shall have the meaning specified in Section
9(c)(iii).
"Dividend Rate" shall have the meaning specified in Section 3.
"Equity Equivalents" shall mean Common Stock or rights, warrants,
options or other convertible securities (including the Repriced Preferred Stock
and any other convertible debt or equity) representing the right to acquire
Common Stock, or any securities that have similar common equity features, but
excluding the exercise of options which were granted prior to the initial public
offering of the Corporation or options that were or are set at the market price
at the time such options were or are granted by the Corporation or as determined
by the Board of Directors or a duly authorized committee thereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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"Group" shall have the meaning set forth in Rule 13d-5, as in
effect on the date hereof, under the Exchange Act.
"Holders" shall mean the holders of the Series C-1 Preferred
Stock.
"Issue Date" shall mean the original date of issuance of the
Series C-1 Preferred Stock.
"Junior Preferred" shall have the meaning specified in Section 2.
"Junior Stock" shall have the meaning specified in Section 2.
"Junior Subordinated Note Indenture" means the Indenture dated as
of the Closing Date (as defined in the Purchase Agreement) relating to the
Junior Subordinated Notes, between the Corporation as issuer and Oak Hill
Capital Partners, L.P. as initial trustee.
"Junior Subordinated Notes" means the 11.3025% Junior
Subordinated Convertible Notes due issued pursuant to the Junior Subordinated
Note Indenture.
"Legal Holiday" shall mean any day on which banking institutions
are obligated or authorized to close in The City of New York.
"Liquidation Price" shall mean for each share of Series C-1
Preferred Stock, as of any date, an amount equal to $1,000 per share, plus (x)
the aggregate Accretion Amounts through such date and (y) all accrued and unpaid
dividends to such date, whether or not declared, to the extent such accrued and
unpaid dividends are not taken into account in determining the Accretion Amounts
under clause (x).
"Liquidation Right" shall mean for each share of Series C-1
Preferred Stock the greater of (i) the Liquidation Price and (ii) the amount
that would be received in liquidation following conversion of a share of Series
C-1 Preferred Stock into Common Stock.
"Majority Holders" shall mean the Holders of a majority of the
then outstanding shares of Series C-1 Preferred Stock.
"Mandatory Redemption" shall have the meaning specified in
Section 5(a).
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation System.
"Notice" shall have the meaning specified in Section 5(b).
"NYSE" shall mean the New York Stock Exchange.
"Parity Securities" shall have the meaning specified in Section
4.
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"Permitted Holders" means (a) Leslie B. Otten (or, in the event
of his incompetence or death, his estate and his estate's heirs, executor,
administrator, committee or other representative (collectively, "Heirs")), (b)
any Person in which Leslie B. Otten and his Heirs, directly or indirectly, have
an 80% controlling interest, and/or (c) Oak Hill Capital Partners, L.P. and Oak
Hill Securities Fund, L.P. and their respective Affiliates and Associates.
"Person" means any individual, firm, corporation, partnership,
limited partnership, limited liability company, association, trust,
unincorporated organization or other entity, as well as any syndicate or group
that would be deemed to be a person under Section 13(d)(3), as in effect on the
date hereof, of the Exchange Act.
"Preferred Stock" shall mean the Serial Preferred Stock, par
value $.01 per share, of the Corporation.
"Purchase Agreement" shall mean the Securities Purchase
Agreement, dated as of July 15, 2001, between the Corporation and the
Stockholders.
"Redemption Price" shall have the meaning specified in Section
5(b).
"Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated as of the Closing Date (as defined in the Purchase
Agreement), between the Corporation and the Stockholders.
"Repriced Preferred Stock" shall mean the 10.5% Repriced
Convertible Exchangeable Preferred Stock, $.01 par value per share, of the
Corporation.
"Rights" shall have the meaning specified in Section 9(c)(iii).
"Senior Liquidation Stock" shall have the meaning specified in
Section 4.
"Senior Subordinated Note Indenture" means the Indenture dated as
of June 28, 1996, as amended and supplemented by the Supplemental Indenture
dated as of September 4, 1998, the Second Supplemental Indenture dated as of
September 4, 1998, the Third Supplemental Indenture dated as of August 6, 1999,
and the Fourth Supplemental Indenture dated as of October 6, 1999, and as it may
be further amended from time to time, relating to the Senior Subordinated Notes,
among the Corporation, as issuers, several of the Corporation's subsidiaries, as
guarantors, and The United States Trust Company of New York, as trustee.
"Senior Subordinated Notes" means the Corporation's Series A and
Series B Senior Subordinated Notes due 2006 issued pursuant to the Senior
Subordinated Note Indenture.
"Series B Preferred Stock" shall mean the 8.5% Series B
Convertible Participating Preferred Stock, par value $.01 per share, of the
Corporation.
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"Series C-1 Default Preferred Directors" shall have the meaning
specified in Section 6(b)(ii).
"Series C-1 Preferred Directors" shall have the meaning specified
in Section 6(b)(i).
"Series C-2 Preferred Stock" shall mean the 15% Series C-2
Preferred Stock, par value $0.01 per share, of the Corporation.
"Series D Preferred Stock" shall mean the Series D Participating
Preferred Stock, par value $.01 per share, of the Corporation.
"Stockholder Director" means a director of the Corporation
designated by the Stockholders and elected pursuant to the Stockholders'
Agreement, or a director elected by the holders of the Series B Preferred Stock
pursuant to the terms thereof.
"Stockholders" shall mean Oak Hill Capital Partners, L.P., Oak
Hill Securities Fund, L.P. and their respective Affiliates and Associates who
may now or hereafter own Equity Equivalents.
"Stockholders' Agreement" means the Stockholders' Agreement dated
as of August 6, 1999, as amended by Amendment No. 1 thereto dated July 31, 2000,
and as it may be further amended from time to time, among the Corporation,
Leslie B. Otten, Oak Hill Capital Partners, L.P. and the other parties
identified therein.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of capital stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of such Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner of
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such person or of one or
more Subsidiaries of such Person (or any combination thereof).
Section 2. Rank.
All shares of Series C-1 Preferred Stock, both as to payment of
dividends and to distribution of assets upon liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, shall rank (i) senior
to all of the Corporation's now or hereafter issued preferred stock including,
without limitation, the Series D Preferred Stock (the "Junior Preferred") except
for (A) the Repriced Preferred Stock, as to which it shall rank junior, and (B)
the Series B Preferred Stock and the Series C-2 Preferred Stock, as to which it
shall rank pari passu, and (ii) senior to all of the Corporation's now or
hereafter issued Common Stock or any other common stock of any class of the
Corporation (collectively with the Junior Preferred, the "Junior Stock").
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Section 3. Dividends and Certain Restrictions.
The Holders shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds of the Corporation legally
available therefor, dividends at a rate per share of 12% per annum (as may be
adjusted from time to time as provided in this Section 3) of the Liquidation
Price (the "Dividend Rate"), which shall be fully cumulative, shall accrue and
be compounded quarterly on October 31, January 31, April 30 and July 31 of each
year, commencing on October 31, 2001 (except that if such date is a Saturday,
Sunday or Legal Holiday, then dividends to be paid in cash will be payable on
the next Business Day) to Holders of record as they appear on the stock transfer
books of the Corporation on the record date for the payment of such dividend,
which shall be not more than 60 nor less than 30 days preceding the payment date
for such dividend, as is fixed by the Board of Directors. Dividends may, at the
option of the Corporation, be paid (i) in cash at the Dividend Rate or (ii) by
way of an increase in the Liquidation Price in effect as of the relevant
quarterly dividend payment date in an amount calculated based on the Dividend
Rate. Notwithstanding the foregoing, dividends shall be payable solely in
accordance with clause (ii) if cash dividends have not been paid on the Repriced
Preferred Stock on the immediately preceding dividend payment date with respect
to such Repriced Preferred Stock. The Dividend Rate on the Series C-1 Preferred
Stock shall be increased by 2% per annum upon a declaration of Default Voting
Event as set forth in Section 6(b)(ii) for so long as such Default Voting Event
remains uncured.
In addition to the dividends described in the preceding
paragraph, if the Corporation declares and pays any dividend or makes a
distribution on the Company Common Stock, the Holders shall be entitled to an
amount in cash, securities or other property receivable by the holders of
Company Common Stock equal to the amount that the Holders would be entitled to
receive if the Series C-1 Preferred Stock were fully converted into Company
Common Stock on the record date for the payment of any such dividends or
distribution. No dividends may be paid (or declared and set aside for payment)
on the Common Stock and no other distributions may be made in respect of the
Common Stock, and no Common Stock (or any rights, options or warrants to
purchase Common Stock) may be redeemed, purchased or otherwise acquired for any
consideration by the Corporation, unless the Corporation shall simultaneously
declare and pay a dividend or make a distribution to the holders of the Series
C-1 Preferred stock as provided in this paragraph, or unless, in the case of a
redemption, purchase or acquisition of Common Stock, the Corporation is
simultaneously redeeming, purchasing or acquiring all of the Series C-1
Preferred Stock and Series C-2 Preferred Stock. The record date for the payment
of any dividend or distribution under this Section 3 shall be not more than 60
nor less than 30 days preceding the date of payment thereof.
On any quarterly dividend payment date, if all dividends that
have accrued on the Series C-1 Preferred Stock are not paid, then such dividends
shall accumulate and be added to the Liquidation Price of the Series C-1
Preferred Stock effective as of such dividend payment date and shall thereafter
accrue additional dividends in respect thereof until such unpaid dividends have
been paid in full. Dividends paid on shares of Series C-1 Preferred Stock in an
amount less than the total amount of such dividends at the time accumulated and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
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Any reference to "dividend" or "distribution" contained in this
Section 3 shall not be deemed to include any dividend or distribution made in
connection with any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, that is effected in accordance with the
preferences and priorities set forth in the Corporation's certificate of
incorporation and all certificates of designation setting forth the rights of
the holders of the Corporation's Preferred Stock.
Section 4. Liquidation Right.
In the event of a liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, for each share of Series C-1
Preferred Stock the Holders shall be entitled to receive out of the assets of
the Corporation, whether such assets are stated capital or surplus of any
nature, the Liquidation Right, before any payment shall be made or any assets
distributed to the holders of Common Stock or any other class or series of the
Corporation's capital stock ranking junior as to liquidation rights to the
Series C-1 Preferred Stock; provided, however, that such rights shall accrue to
the Holders only in the event that the Corporation's payments with respect to
the liquidation preferences of the holders of capital stock of the Corporation
ranking senior as to liquidation rights to the Series C-1 Preferred Stock (the
"Senior Liquidation Stock") are fully met. If the assets of the Corporation
available for distribution after the payment of the liquidation preferences of
the holders of all Senior Liquidation Stock are not sufficient to pay an amount
equal to the Liquidation Right to the holders of outstanding shares of Series
C-1 Preferred Stock and the liquidation preferences payable to the holders of
shares of capital stock of the Corporation ranking (based on relative
liquidation preference) pari passu with the Series C-1 Preferred Stock,
including, without limitation, the Series C-2 Preferred Stock ("Parity
Securities"), then the assets of the Corporation shall be distributed ratably
among the Holders and the holders of Parity Securities. Neither a consolidation,
merger or other business combination of the Corporation with or into another
corporation or other entity nor a sale or offer of all or part of the
Corporation's assets for cash, securities or other property shall be considered
a liquidation, dissolution or winding up of the Corporation for purposes of this
Section 4 (unless in connection therewith the liquidation of the Corporation is
specifically approved).
Section 5. Redemption.
(a) Mandatory Redemption. The Corporation shall mandatorily
redeem all of the outstanding shares of Series C-1 Preferred Stock for cash on
July 31, 2007 (the "Mandatory Redemption"), at a redemption price equal to the
Liquidation Price per share.
No Mandatory Redemption pursuant to this Section 5(a) shall be
made unless and until all outstanding Repriced Preferred Stock has been
converted, repurchased, redeemed or otherwise retired, or the holders of the
Repriced Preferred Stock have consented thereto in accordance with the
requirements of the Corporation's certificate of incorporation. If a Mandatory
Redemption cannot occur by reason of this paragraph, the Corporation shall
redeem all of the outstanding shares of Series C-1 Preferred Stock as provided
herein on the first Business Day after all outstanding Repriced Preferred Stock
has been so converted, repurchased, redeemed or otherwise retired or after the
holders of the Repriced Preferred Stock shall have consented to such redemption.
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If, upon any Mandatory Redemption, funds are not legally
available to the Corporation for redemption of all the shares of Series C-1
Preferred Stock, the Corporation shall redeem on such date, at the applicable
redemption price, pro rata among the Holders based on the Liquidation Price of
their shares, that number of shares of Series C-1 Preferred Stock which it can
lawfully redeem, and from time to time thereafter, as soon as funds are legally
available, the Corporation shall redeem at the applicable redemption price
shares of Series C-1 Preferred Stock pro rata among the Holders until the
Corporation has redeemed the shares of Series C-1 Preferred Stock in full.
In the event that the Corporation is in arrears in the redemption
of its Series C-1 Preferred Stock pursuant to a Mandatory Redemption (including,
without limitation, by reason of the fact that sufficient funds are not legally
available to pay the redemption price), or a mandatory redemption cannot occur
by reason of the fact that the Repriced Preferred Stock remains outstanding, the
Corporation may not (i) purchase, redeem or pay dividends on any Junior Stock or
(ii) make any mandatory purchase or redemption of any Series C-1 Preferred Stock
or Parity Securities except pro rata according to all such obligations then due
or in arrears.
Any shares of Series C-1 Preferred Stock that are not redeemed on
the scheduled redemption date shall continue to be outstanding and shall accrue
dividends until redeemed.
(b) Optional Redemption. From and after the Issue Date, the
Corporation shall have the right, at its option, at any time and from time to
time, upon not less than 60 days' prior written notice ("Notice"), but subject
to the right of the Holders to convert their shares of Series C-1 Preferred
Stock into shares of Common Stock pursuant to Section 9, to redeem, out of funds
legally available therefor, all or a portion of the shares of Series C-1
Preferred Stock during the 12-month period beginning on July 31 of the years
indicated below (other than 2001, which shall be the period commencing on the
Issue Date and ending on July 30, 2002) at the redemption prices in cash
(expressed as a percentage of the Liquidation Price) set forth below (the
"Redemption Price"):
Year Redemption Price
2001 112%
2002 109.6%
2003 107.2%
2004 104.8%
2005 102.4%
2006 and thereafter 100%
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Any redemption made pursuant to this Section 5(b) shall be
initiated only upon (i) the approval of a majority of the Board of Directors,
provided that such approval includes the approval of a majority of the directors
of the Corporation who are not designated or appointed by the Purchasers (as
defined in the Purchase Agreement) or their Affiliates (so long as the
Purchasers or their Affiliates are Holders) or by any other Person which is a
Holder and has the ability to designate or appoint a majority of the Board of
Directors or (ii) the approval of a special committee of the Independent
Directors (as such term is defined in the Stockholders' Agreement).
No Notice shall be given, and no redemption shall be made,
pursuant to this Section 5(b) unless the Corporation shall, on the date fixed
for redemption, simultaneously redeem a pro rata portion (based on the aggregate
liquidation preference of Series C-1 Preferred Stock and Series C-2 Preferred
Stock then outstanding) of the Series C-2 Preferred Stock.
In case of the redemption of less than all of the then
outstanding Series C-1 Preferred Stock and Series C-2 Preferred Stock, the
Corporation shall (subject the preceding paragraph) select the shares of Series
C-1 Preferred Stock to be redeemed in accordance with any method permitted by
the national securities exchange on which the shares to be redeemed are then
listed, or if not so listed, the Corporation shall designate by lot, or in such
other manner as the Board of Directors may determine, the shares to be redeemed,
or shall effect such redemption pro rata among the Holders and the holders of
shares of the Series C-2 Preferred Stock.
The Notice shall be given by first class mail, postage prepaid,
to each holder of record of the Series C-1 Preferred Stock to be redeemed, at
such holder's address as it shall appear upon the stock transfer books of the
Corporation. Each such notice of redemption shall specify the date fixed for
redemption, the Redemption Price, the then current Conversion Price, the place
or places of payment and conversion and that payment or conversion will be made
upon presentation of and surrender of the certificates evidencing the shares of
Series C-1 Preferred Stock to be redeemed or converted, and that the Series C-1
Preferred Stock may be converted at any time before the close of business on
such date fixed for redemption.
Any Notice that is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of the
Series C-1 Preferred Stock receives such Notice; and failure to give such Notice
by mail, or any defect in such notice, to a Holder of any shares designated for
redemption shall not affect the validity of the proceedings for the redemption
of any shares of Series C-1 Preferred Stock owned by other Holders to whom such
Notice was duly given. On or after the date fixed for redemption as stated in
such Notice, each Holder of the shares called for redemption shall surrender the
certificate evidencing such shares to the Corporation at the place designated in
such Notice and shall thereupon be entitled to receive payment of the Redemption
Price. If less than all the shares represented by any such surrendered
certificate are redeemed, a new certificate shall be issued without cost to the
Holder thereof representing the unredeemed shares. If such Notice shall have
been so mailed and if, on or prior to the redemption date specified in such
Notice, all funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds, in trust for the account
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of the Holders of the shares so to be redeemed (as to be and continue to be
available therefor), then on and after the redemption date, notwithstanding that
any certificate for shares of the Series C-1 Preferred Stock so called for
redemption shall not have been surrendered for cancellation, all shares of the
Series C-1 Preferred Stock with respect to which such Notice shall have been
mailed and such funds shall have been set aside shall be deemed to be no longer
outstanding and all rights with respect to such shares of the Series C-1
Preferred Stock so called for redemption shall forthwith cease and terminate,
except the right of the Holders to receive out of the funds so set aside in
trust the amount payable on the redemption thereof (including an amount equal to
accrued and unpaid dividends to the date of redemption) without interest
thereon.
The Holder of any shares of Series C-1 Preferred Stock redeemed
upon any exercise of the Corporation's redemption right under this Section 5(b)
shall not be entitled to receive payment of the Redemption Price for such shares
until such Holder shall cause to be delivered to the place specified in the
Notice (i) the certificate(s) representing such shares of Series C-1 Preferred
Stock redeemed and (ii) transfer instrument(s) satisfactory to the Corporation
and sufficient to transfer such shares of Series C-1 Preferred Stock to the
Corporation free of any adverse interests; provided, that the foregoing is
subject to the other provisions of the Corporation's certificate of
incorporation or the Corporation's bylaws governing lost certificates generally.
(c) Change Of Control. Upon the occurrence of a Change of
Control, each Holder may require the Corporation to purchase such requesting
Holder's Series C-1 Preferred Stock at a purchase price in cash (expressed as a
percentage of the Liquidation Price) set forth below (such prices to be
applicable in respect of a purchase relating to a Change of Control occurring
during the 12-month period beginning on July 31 of the years indicated below,
other than 2001, which shall be the period commencing on the Issue Date and
ending on July 30, 2002) (the "Change of Control Price"):
Change of
Year Control Price
---- -------------
2001 112.0%
2002 108.9%
2003 105.7%
2004 102.6%
2005 101.3%
2006 and thereafter 100.0%
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Notwithstanding the foregoing, the Change of Control Price shall
not exceed 100% of the Liquidation Price unless (i) a majority of the Board of
Directors, provided that such majority includes a majority of the directors of
the Corporation who are not designated or appointed by the Purchasers (as
defined in the Purchase Agreement) or their Affiliates or by any other Person
which has the ability to designate or appoint a majority of the Board of
Directors, or (ii) a majority of a special committee of the Independent
Directors (as such term is defined in the Stockholders' Agreement) shall have
approved the transaction(s) constituting the Change of Control; provided, that
if such approval has been withheld solely or primarily to reduce the Change of
Control Price, the Holders shall be entitled to receive the applicable Change of
Control Price set forth in the table in the preceding paragraph.
Within 45 days following any Change of Control, the Corporation
shall give to each Holder a written notice (a "Change of Control Notice")
stating:
(i) that a Change of Control has occurred and that such
Holder has the right to require the Corporation to purchase such Holder's Series
C-1 Preferred Stock at the Change of Control Price as set forth above;
(ii) the circumstances and relevant facts regarding such
Change of Control;
(iii) the purchase date, which date shall be no earlier
than 45 days nor later than 60 days from the date such notice is mailed; and
(iv) the instructions a Holder must follow in order to
have its Series C-1 Preferred Stock purchased pursuant to this Section 5(c).
Change of Control Notices shall otherwise be governed by the
provisions set forth above in paragraph (b) relating to Notices.
Holders electing to have Series C-1 Preferred Stock purchased
under this Section 5(c) will be required to surrender such Series C-1 Preferred
Stock to the Corporation at the address specified in the Change of Control
Notice at least five Business Days prior to the specified purchase date. Any
Holder will be entitled to withdraw its election if the Corporation receives,
not later than three Business Days prior to the purchase date, a telegram,
telex, facsimile transmission or letter setting forth the name of such Holder,
the amount of the Series C-1 Preferred Stock delivered for purchase by such
Holder as to which its election is to be withdrawn and a statement that such
Holder is withdrawing its election to have such Series C-1 Preferred Stock
purchased.
On the purchase date specified in the Change of Control Notice,
the Corporation shall purchase all the electing Holders' Series C-1 Preferred
Stock at the Change of Control Price and otherwise on the terms and subject to
the conditions set forth herein.
No Change of Control Notice shall be issued pursuant to this
Section 5(c) unless and until all outstanding Repriced Preferred Stock has been,
or shall have been as part of the Change of Control, converted, repurchased,
redeemed or otherwise retired or the holders of the Repriced Preferred Stock
have consented thereto in accordance with the requirements of the Corporation's
certificate of incorporation. If a Change of Control Notice cannot be issued by
reason of this paragraph, the Corporation shall deliver the Change of Control
Notice on the first Business Day after all outstanding Repriced Preferred Stock
has been so converted, repurchased, redeemed or otherwise retired or such
consent shall have been granted.
12
If any Senior Subordinated Notes are outstanding or were
outstanding within 91 days prior to the scheduled date of purchase under this
Section 5(c), (i) notwithstanding any other provision of this Section 5(c), the
purchase date of any Series C-1 Preferred Stock shall not occur prior to the
purchase date for the Senior Subordinated Notes, and (ii) no purchase or
payments shall be made under this Section 5(c) so long as such payments are
prohibited by the terms of the Senior Subordinated Note Indenture. Any purchase
or payment not made by reason of this paragraph shall be deferred until the
first date on which such purchase or payment shall be permitted to be made under
the terms of the Senior Subordinated Note Indenture. If the Corporation is only
permitted to purchase a portion of the Series C-1 Preferred Stock or to pay part
of the Change of Control Price (including, without limitation, paying only the
Liquidation Price and a portion of the premium), it shall immediately pay such
portion to the Holders pro rata in accordance with the Liquidation Price of
their shares.
If, upon any Change of Control, funds are not legally available
to the Corporation for purchase of the shares of Series C-1 Preferred Stock that
the Holders have requested to be purchased, the Corporation shall purchase on
the scheduled purchase date, at the Change of Control Price, pro rata among the
Holders based on the Liquidation Price of their shares, that number of shares of
Series C-1 Preferred Stock which it can lawfully purchase, and from time to time
thereafter, as soon as funds are legally available, the Corporation shall
purchase at the Change of Control Price shares of Series C-1 Preferred Stock pro
rata among the electing Holders until the Corporation has purchased all the
shares of Series C-1 Preferred Stock that the Holders have requested be
purchased.
If the Corporation defaults or is in arrears in its obligations
under this Section 5(c), (including, without limitation, by reason of the fact
that sufficient funds are not legally available to pay the Change of Control
Price), or if the Corporation does not deliver a Change of Control Notice by
reason of the fact that the Repriced Preferred Stock remains outstanding, or if
the Corporation is not permitted to purchase all of the Series C-1 Preferred
Stock or to pay all or any portion of the Change of Control Price for any
reason, the Corporation may not (i) purchase, acquire, redeem or pay dividends
on any Junior Stock or (ii) purchase, redeem or otherwise acquire any Series C-1
Preferred Stock or Parity Securities except pro rata according to all such
obligations then due or in arrears (including the pro rata purchase of any
Series C-2 Preferred Stock required in connection with a Change of Control).
13
Notwithstanding anything in this Section 5(c) to the contrary,
the Corporation will not be required to pay the Change of Control Price upon a
Change of Control if a third party pays the Change of Control Price in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 5(c) applicable to a Change of Control Price paid by the
Corporation.
Any shares of Series C-1 Preferred Stock that are not purchased
on the scheduled purchase date shall continue to be outstanding and shall accrue
dividends at the Dividend Rate, compounding quarterly as provided in Section 3,
until purchased. If any shares of Series C-1 Preferred Stock are purchased on
the scheduled purchase date but the Change of Control Price is not paid in full,
then the unpaid portion of the Change of Control Price shall accrue dividends at
the Dividend Rate (calculated as if the affected shares of series C-1 Preferred
Stock were still outstanding), compounding quarterly as provided in Section 3,
until paid in full.
(d) Conflict. If there is any conflict between the provisions of
this Section 5 and any applicable federal securities laws or regulations, the
provisions of such federal securities laws and regulations shall apply.
Section 6. Voting Rights.
(a) General.
In addition to the voting rights required under or granted by
Delaware law and as otherwise provided in Section 6(b), the Holders shall vote,
in person or by proxy, as a single class with the holders of the Common Stock
(and any other class of equity securities which may similarly vote with the
holders of the Common Stock as a single class with respect to any matter) on all
matters upon which stockholders are entitled to vote, except for the election of
directors (on which the Holders shall be entitled to vote as a separate class
pursuant to paragraph (b) below), and shall be entitled to a number of votes per
share of Series C-1 Preferred Stock equal to the number of shares of Common
Stock into which the shares of the Series C-1 Preferred Stock are convertible on
the record date of the determination of stockholders entitled to notice of and
to vote on such matter. Any shares of Series C-1 Preferred Stock held by the
Corporation or any entity controlled by the Corporation shall not have voting
rights under this paragraph (a) or under paragraph (b) and shall not be counted
in determining the presence of a quorum.
(b) Class Voting Rights.
(i) Right To Elect Directors. The Holders shall be
entitled from time to time to vote together as a class to elect the number of
directors of the Corporation ("Series C-1 Preferred Directors") provided in
subparagraphs (A), (B) and (C) of this Section (6)(b)(i).
(A) If for any reason the Stockholder Directors do not
constitute a majority of the members of the Board of Directors at any time for
so long as the Stockholders Beneficially Own at least 80% of both the number of
shares of Series C-1 Preferred Stock and the number of shares of Series C-2
Preferred Stock that they own on the Issue Date (as these numbers may be
adjusted for stock splits, stock dividends or similar transactions), the Holders
14
shall be entitled to elect the smallest number of Series C-1 Preferred Directors
necessary so that the Stockholder Directors and Series C-1 Preferred Directors
together constitute a majority of the members of the Board of Directors.
(B) In the event that the Stockholders Beneficially
Own less than 80% but at least 25% of both the number of shares of Series C-1
Preferred Stock and the number of shares of Series C-2 Preferred Stock that they
own on the Issue Date (as these numbers may be adjusted for stock splits, stock
dividends or similar transactions), then the Holders shall be entitled to elect
the number of Series C-1 Preferred Directors necessary so that the Stockholder
Directors and Series C-1 Preferred Directors together constitute at least the
following percentage of the members of the Board of Directors:
(1) For so long as the Stockholders Beneficially
Own at least 70% of both the number of shares of Series C-1 Preferred Stock and
the number of shares of Series C-2 Preferred Stock that they own on the Issue
Date (as these numbers may be adjusted for stock splits, stock dividends or
similar transactions), 40%;
(2) For so long as the Stockholders Beneficially
Own at least 60% of both the number of shares of Series C-1 Preferred Stock and
the number of shares of Series C-2 Preferred Stock that they own on the Issue
Date (as these numbers may be adjusted for stock splits, stock dividends or
similar transactions), 331/3%;
(3) For so long as the Stockholders Beneficially
Own at least 40% of both the number of shares of Series C-1 Preferred Stock and
the number of shares of Series C-2 Preferred Stock that they own on the Issue
Date (as these numbers may be adjusted for stock splits, stock dividends or
similar transactions), 25%; and
(4) For so long as the Stockholders Beneficially
Own at least 25% of both the number of shares of Series C-1 Preferred Stock and
the number of shares of Series C-2 Preferred Stock that they own on the Issue
Date (as these numbers may be adjusted for stock splits, stock dividends or
similar transactions), 10%.
(C) If the Stockholders Beneficially Own less than 25%
of both the number of shares of Series C-1 Preferred Stock and the number of
shares of Series C-2 Preferred Stock that they own on the Issue Date, then the
Holders shall not be entitled to elect any Series C-1 Preferred Directors unless
the Stockholders Beneficially Own at least 10% of both the number of shares of
Series C-1 Preferred Stock and the number of shares of Series C-2 Preferred
Stock that they own on the Issue Date (as these numbers may be adjusted for
stock splits, stock dividends or similar transactions) and there are no
Stockholder Directors, in which case the Holders shall be entitled to elect one
(1) Series C-1 Preferred Director.
15
(ii) Default Voting Rights. If, without either the consent
of Majority Holders or the consent of at least one Series C-1 Preferred Director
or Stockholder Director, the Corporation breaches a material covenant contained
in the Definitive Agreements or the provisions of Section 6(b)(iii) hereof (each
such event being a "Default Voting Event"), the Holders, following a declaration
of default by the Majority Holders, will have the right to elect two Series C-1
Preferred Directors ("Series C-1 Default Preferred Directors"). In addition, the
Accretion Rate on the Series C-1 Preferred Stock shall be increased by 2% per
annum for so long as any Default Voting Event remains uncured by the
Corporation. At such time as a Default Voting Event no longer exists, any Series
C-1 Default Preferred Directors elected pursuant to this Section 6(b)(ii) shall
be deemed to have automatically resigned from the Board of Directors and they
shall cease to be directors of the Corporation. The Holders (voting separately
as a class) will have the exclusive right to vote for and elect such Series C-1
Default Preferred Directors pursuant to a written consent or at a meeting of
stockholders without any further action on the part of the Corporation or the
Holders as provided below.
(iii) Actions Requiring Affirmative Vote. So long as
shares of Series C-1 Preferred Stock are outstanding, the Corporation shall not,
directly or indirectly, or through merger or consolidation with any other
person, without the affirmative vote or consent of the Majority Holders, with
the Holders voting separately as a class, (a) amend, alter or repeal (by merger,
consolidation or otherwise) any provision of the Corporation's certificate of
incorporation or the Corporation's by-laws, as amended, so as to affect
adversely the relative rights, preferences, powers (including, without
limitation, voting powers) and privileges of the Series C-1 Preferred Stock, (b)
except for the Series C-2 Preferred Stock, authorize or issue any new class of
shares or Equity Equivalents having a preference with respect to dividends,
redemption and/or liquidation over, or on parity with, the Series C-1 Preferred
Stock, (c) reclassify any of its capital stock into shares having a preference
with respect to dividends, redemption and/or liquidation over, or on parity
with, the Series C-1 Preferred Stock or (d) issue any additional shares of
Series C-1 Preferred Stock.
(iv) Special Meeting. Whenever the rights of the Holders
to vote as a class on any matter shall vest pursuant to this Section 6(b) or
Delaware law, such rights may be exercised by the vote of the Majority Holders
present and voting, in person or by proxy, at a special meeting of Holders or at
the next annual meeting of stockholders, or by written consent of the Majority
Holders without a meeting. Unless such action shall have been taken by written
consent as aforesaid, a special meeting of the Holders for the exercise of any
such right shall be called by the Secretary of the Corporation as promptly as
possible in compliance with applicable law and regulations, and in any event
within 10 days after receipt of a written request signed by the Holders of
record of at least 25% of the then outstanding shares of the Series C-1
Preferred Stock, subject to any applicable notice requirements imposed by law or
by any national securities exchange on which any Series C-1 Preferred Stock is
listed. Such meeting shall be held at the earliest practicable date thereafter.
In connection with any right to vote pursuant to this Section 6(b), each Holder
will have one vote for each share of Series C-1 Preferred Stock held.
16
(v) Term of Office of Directors. Any Series C-1 Preferred
Director or Series C-1 Default Preferred Director shall hold office for a term
expiring at the next annual meeting of stockholders and during such term may be
removed at any time, either for or without cause, by and only by, the
affirmative vote of the Majority Holders of record, with the Series C-1
Preferred Stock voting as a single class, present and voting, in person or by
proxy, at a special meeting of such stockholders called for such purpose, or by
written consent without a meeting of the Majority Holders of record, with the
Series C-1 Preferred Stock voting as a single class. A special meeting of the
Holders for the removal of a director elected by the Holders in accordance with
this paragraph (b) and the filling of the vacancy created thereby shall be
called by the Secretary of the Corporation as promptly as possible and in any
event within 10 days after receipt of request therefor signed by the holders of
not less than 25% of the outstanding shares of the Series C-1 Preferred Stock
taken as a single class, subject to any applicable notice requirements imposed
by law or any national securities exchange on which any Series C-1 Preferred
Stock is listed. Such meeting shall be held at the earliest practicable date
thereafter.
(vi) Vacancies. Any vacancy caused by the death,
resignation or removal of any Series C-1 Preferred Director or Series C-1
Default Preferred Director may be filled by the remaining Series C-1 Preferred
Directors and Series C-1 Default Preferred Directors or, if not so filled, or if
there are no Series C-1 Preferred Directors or Series C-1 Default Preferred
Directors on the Board of Directors, by and only by a vote of the Majority
Holders present and voting as a single class, in person or by proxy, at a
meeting of such Holders called for such purpose, or by written consent without a
meeting of the Majority Holders. Unless such vacancy shall have been filled by
the remaining Series C-1 Preferred Directors and Series C-1 Default Preferred
Directors or by written consent as aforesaid, such meeting shall be called by
the Secretary of the Corporation at the earliest practicable date after such
death, resignation or removal, and in any event within 10 days after the receipt
of a written request signed by the Holders of record of at least 25% of the
outstanding shares of the Series C-1 Preferred Stock taken as a single class.
(vii) Stockholders' Right To Call Meeting. If any meeting
of the Holders required by this paragraph (b) to be called shall not have been
called within 10 days after personal service of a written request therefor upon
the Secretary of the Corporation or within 15 days after mailing the same within
the United States of America by registered mail addressed to the Secretary of
the Corporation at its principal office, subject to any applicable notice
requirements imposed by law or any national securities exchange on which any
Series C-1 Preferred Stock is then listed, then the Holders of record of at
least 25% of the then outstanding shares of the Series C-1 Preferred Stock may
designate in writing a Holder of the Series C-1 Preferred Stock to call such
meeting at the reasonable expense of the Corporation, and such meeting may be
called by such Person so designated upon the notice required for annual meetings
of stockholders or such shorter notice (but in no event shorter than permitted
by law or any national securities exchange on which the Series C-1 Preferred
Stock is then listed) as may be acceptable to the Majority Holders. Any Holder
of Series C-1 Preferred Stock so designated shall have reasonable access to the
stock books of the Corporation relating solely to the Series C-1 Preferred Stock
for the purpose of causing such meeting to be called pursuant to these
provisions.
17
(viii) Quorum. At any meeting of the Holders called in
accordance with the provisions of this paragraph (b) for the election or removal
of directors, the presence in person or by proxy of the Majority Holders with
the Holders of Series C-1 Preferred Stock voting as a single class shall be
required to constitute a quorum; in the absence of a quorum, a majority of the
Holders present in person or by proxy shall have power to adjourn the meeting
from time to time without notice, other than announcement at the meeting, until
a quorum shall be present.
Section 7. Outstanding Shares.
For purposes of this Certificate of Designation, all shares of
Series C-1 Preferred Stock shall be deemed outstanding except (i) from the date
fixed for redemption pursuant to Section 5(b), all shares of Series C-1
Preferred Stock that have been so called for redemption under Section 5(b) if
funds necessary for payment of the Redemption Price have been irrevocably
deposited in trust, for the account of the Holders of the shares so to be
redeemed (so as to be and continue to be available therefor), with a corporation
organized and doing business under the laws of the United States or any State or
territory thereof or of the District of Columbia (or a corporation or other
person permitted to act as a trustee by the Securities and Exchange Commission),
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $100,000,000 and subject to supervision or
examination by Federal, State or District of Columbia or territorial authority;
and (ii) from the date of registration of transfer, all shares of Series C-1
Preferred Stock held of record by the Corporation or any subsidiary of the
Corporation.
Section 8. Status of Acquired Shares.
The Corporation shall take all such actions as are necessary to
cause any shares of Series C-1 Preferred Stock redeemed by the Corporation,
received upon conversion pursuant to Section 9, or otherwise acquired by the
Corporation, to be restored to the status of authorized and unissued shares of
Preferred Stock, without designation as to series, and such shares may
thereafter be issued, but not as shares of Series C-1 Preferred Stock unless the
other provisions of this Certificate of Designation have been complied with.
Section 9. Conversion.
(a) Except as provided in the next succeeding sentence, each
share of the Series C-1 Preferred Stock shall be convertible, at any time, at
the option of the Holder thereof, into validly issued, fully paid and
non-assessable shares of the Company Common Stock and, to the extent set forth
in Section 9(c), shares of Series D Preferred Stock (collectively, "Conversion
Shares") at the Conversion Price, determined as hereinafter provided, in effect
at the time of conversion. Unless default be made in the payment of any amount
due on redemption or repurchase of shares of Series C-1 Preferred Stock as
provided in this Certificate of Designation, shares of Series C-1 Preferred
Stock called for redemption or otherwise redeemed or purchased by the
Corporation in accordance with the terms herein shall cease to be convertible
into Conversion Shares at the close of business on the redemption date or date
of purchase. The Conversion Price shall be initially $1.25 per share. The number
18
of Conversion Shares issuable upon conversion of a share of Series C-1 Preferred
Stock is determined by dividing the Liquidation Price (inclusive of any accrued
and unpaid dividends to the conversion date) of a share of Series C-1 Preferred
Stock by the Conversion Price in effect on the Conversion Date (as hereinafter
defined) and rounding the result to the nearest 1/100th of a share. The
Conversion Price shall be subject to adjustment as provided below. If a holder
converts more than one share at the same time, the number of full shares
issuable upon the conversion shall be based upon the total number of shares
converted.
(b) In order to convert shares of the Series C-1 Preferred Stock
into Conversion Shares, the Holder thereof shall surrender at the office of any
transfer agent for the Series C-1 Preferred Stock (or in the absence of any
transfer agent, the Corporation) the certificate or certificates therefor, duly
endorsed to the Corporation or in blank, and give written notice to the
Corporation at said office that he or she elects to convert such shares. Shares
of the Series C-1 Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the date of surrender of such
shares for conversion in accordance with the foregoing provisions (hereinafter
the "Conversion Date"), and the person or persons entitled to receive Conversion
Shares issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such Conversion Shares at such time. As promptly as
practicable after the Conversion Date, the Corporation shall issue and deliver
at said office the certificate or certificates for the number of full Conversion
Shares issuable upon such conversion, together with a cash payment in lieu of
any fraction of a Conversion Share, as hereinafter provided, to the person or
persons entitled to receive the same or to the nominee or nominees of such
person or persons.
(c) The Conversion Price shall be subject to adjustment as
follows:
(i) In case the Corporation shall (i) pay a dividend in
shares of any class of its Common Stock to all holders of such class, (ii) make
a distribution in shares of any class of its Common Stock to all holders of such
class, (iii) subdivide any of its outstanding Common Stock into a greater number
of shares, or (iv) combine any of its outstanding Common Stock into a smaller
number of shares, the Conversion Price in effect immediately prior thereto shall
be adjusted so that the holder of any shares of Series C-1 Preferred Stock
thereafter surrendered for conversion shall be entitled to receive that number
of Conversion Shares representing the percentage of all outstanding shares of
Common Stock which the Holder would have owned had such Series C-1 Preferred
Stock been converted immediately prior to the happening of such event and the
Conversion Price shall be adjusted accordingly. An adjustment made pursuant to
this subsection (i) shall become effective immediately after the record date in
the case of a dividend in shares or distribution and shall become effective
immediately after the effective date in the case of subdivision or combination.
19
(ii) In case the Corporation shall issue Equity Equivalents
to all or substantially all holders of any class of its Common Stock or to any
other person (other than the Holders) entitling such person or persons to
subscribe for, purchase or otherwise acquire shares of Common Stock (or
securities in any manner representing the right to acquire Common Stock or other
Equity Equivalent) at a price per share (or conversion price or other equivalent
price per share) that is less than the then Current Market Price per share of
Common Stock (as determined in accordance with subsection (iv) below) at the
record date for the determination of shareholders entitled to receive such
Equity Equivalents on the date of issuance thereof or, with respect to issuances
to persons other than Holders, on the issue date, as applicable, the Conversion
Price in effect immediately prior thereto shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to such record date or issue date, as applicable, by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding on such record date or issue date, as applicable, plus the number of
shares which the aggregate offering price of the total number of shares of
Common Stock or other Equity Equivalent so offered, (or the aggregate conversion
price or other equivalent price of the securities so offered) would purchase at
such Current Market Price (as defined in subsection (iv) below), and of which
the denominator shall be the number of shares of Common Stock outstanding on
such record date or issue date, as applicable, plus the number of additional
shares of Common Stock offered (or into which the convertible securities so
offered are convertible or, in the case of other Equity Equivalents, the number
of shares of Common Stock represented by such Equity Equivalents). Such
adjustment shall be made successively whenever any Equity Equivalents are
issued, and shall become effective immediately after such record date or such
sale date, as applicable. If at the end of the period during which such Equity
Equivalents are exercisable not all such Equity Equivalents shall have been
exercised, the adjusted Conversion Price shall be readjusted to what it would
have been based upon the number of additional shares of Common Stock actually
issued (or the number of shares of Common Stock issuable upon conversion of
convertible securities actually issued).
(iii) In case the Corporation shall distribute to all or
substantially all holders of any class of Common Stock any shares of capital
stock of the Corporation (other than Common Stock), evidences of indebtedness or
other non-cash assets (including securities of any company other than the
Corporation), or shall distribute to all or substantially all holders of any
class of Common Stock rights or warrants to subscribe for or purchase any of its
securities (excluding those referred to in subsection (ii) above), then in each
such case the Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying the Conversion Price in effect immediately
prior to the date of such distribution by a fraction of which the numerator
shall be the Current Market Price per share (as defined in subsection (iv)
below) of the Conversion Shares on the record date mentioned below less the fair
market value on such record date (as agreed to by the Corporation and the
Majority Holders or, if not so agreed, as determined in a manner similar to the
definition of Current Market Price described in the second to the last sentence
of subsection (iv) below) of the portion of the capital stock or assets or
evidences of indebtedness so distributed or of such rights or warrants
applicable to one share of Common Stock (determined on the basis of the number
20
of shares of Common Stock outstanding on the record date), and of which the
denominator shall be the Current Market Price per share (as defined in
subsection (iv) below) of the Conversion Shares on such record date. Such
adjustment shall become effective immediately after the record date for the
determination of shareholders entitled to receive such distribution.
Notwithstanding the foregoing, in the event that the Corporation
shall distribute rights or warrants (other than those referred to in subsection
(ii) above) ("Rights") pro rata to holders of any class of Common Stock, the
Corporation may, at its option, in lieu of making any adjustment pursuant to
this Section 9, make proper provision so that each holder of Series C-1
Preferred Stock who converts such stock (or any portion thereof) after the
record date for such distribution and prior to the expiration or redemption of
the Rights shall be entitled to receive upon such conversion, in addition to the
Conversion Shares issuable upon such conversion, a number of Rights to be
determined as follows: (i) if such conversion occurs on or prior to the date for
the distribution to the holders of Rights of separate certificates evidencing
such Rights (the "Distribution Date"), the same number of Rights to which a
holder of a number of shares of Common Stock equal to the number of Conversion
Shares is entitled at the time of such conversion in accordance with the terms
and provisions of and applicable to the Rights and (ii) if such conversion
occurs after the Distribution Date, the same number of Rights to which a holder
of the number of shares of Common Stock into which the shares of Series C-1
Preferred Stock so converted were convertible immediately prior to the
Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
(iv) For the purpose of any computation under subsections
(ii) and (iii) of this Section 9(c), the current market price (the "Current
Market Price") per Conversion Share on any date shall be deemed to be equal to
the average of the daily closing prices of the Common Stock on the NYSE or, if
not then listed or traded on the NYSE, such national securities exchange or the
NASDAQ National Market if the Common Stock is then listed or traded thereon on
for the 10 trading days immediately prior to the record date or date of issuance
with respect to distributions, issuances or other events requiring such
computation under subsection (ii) or (iii) above; provided, that in the case of
an underwritten public offering of Equity Equivalents which are currently
traded, the Current Market Price shall be the closing price of the Common Stock
on the issuance date, less an allowance for a customary discount to the current
market trading price which is reasonably required to effect such offering. The
closing price for each day shall be the closing price on the NYSE or the last
reported sales price or, if the Conversion Shares are not listed or admitted to
trading on the NYSE, on the principal national securities exchange on which the
Conversion Shares are listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, the closing sales price
of the Conversion Shares as quoted on the NASDAQ National Market or, in case no
reported sale takes place, the average of the closing bid and asked prices as
quoted on the NASDAQ National Market. Notwithstanding the provisions of this
subsection (iv), if (A) the Common Stock is listed or traded on the NYSE or
other national securities exchange or quoted on the NASDAQ National Market but
either (1) the prices described in this Section 9(c)(iv) are not available or
(2) the Majority Holders determine that such prices do not adequately reflect
the fair value of a Conversion Share due to limited float or trading volume, or
21
(B) the Common Stock is not listed on the NYSE or other national securities
market or quoted on the NASDAQ National Market, the Current Market Price shall
be the fair value of a Conversion Share as agreed by the Corporation and the
Majority Holders or if the Corporation and the Majority Holders are unable to
agree, the fair value of a Conversion Share as determined by a nationally
recognized investment bank selected jointly by the Corporation and the Majority
Holders (or if they are unable to agree on such an investment bank, as
determined by a nationally recognized investment bank selected by lot by the
Board of Directors from a total of four such investment banks (two of which
shall be selected by the Corporation, and two of which shall be selected by the
Majority Holders)). The fees and expenses of such investment bank shall be paid
by the Corporation.
(v) In any case in which this Section 9 shall require that
an adjustment be made following a record date the Corporation may elect to defer
(but only until five Business Days following the mailing by the Corporation to
the holders of the notice of adjustment described in subsection (viii) below)
issuing to the Holder of any Series C-1 Preferred Stock converted after such
record date the Conversion Shares and other capital stock of the Corporation
issuable upon such conversion over and above the Conversion Shares and other
capital stock of the Corporation issuable upon such conversion only on the basis
of the Conversion Price prior to adjustment; and, in lieu of the shares the
issuance of which is so deferred, the Corporation shall issue or cause its
transfer agents to issue due bills or other appropriate evidence prepared by the
Corporation of the right to receive such shares. If any distribution in respect
of which an adjustment to the Conversion Price is required to be made as of the
record date therefor is not thereafter made or paid by the Corporation for any
reason, the Conversion Price shall be readjusted to the Conversion Price which
would then be in effect if such record date had not been fixed or such effective
date had not occurred.
(vi) No Adjustment. No adjustment in the Conversion Price
shall be required unless the adjustment would require an increase or decrease of
at least 1% in the Conversion Price as last adjusted; provided, however, that
any adjustments which by reason of this subsection (vi) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 9 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
No adjustment need be made for a transaction referred to in
paragraph (c)(i), (ii) or (iii) above if all Holders of Series C-1 Preferred
Stock are entitled to participate in the transaction on a basis and with notice
that the Board of Directors determines to be fair and appropriate in light of
the basis and notice on which holders of Common Stock participate in the
transaction. The Corporation shall give 30 days prior notice to any transfer
agent and to the Holders of the Series C-1 Preferred Stock of any such
determination.
No adjustment need be made for (a) issuances of Common Stock
pursuant to a Corporation plan for reinvestment of dividends or interest, (b) a
change in the par value or a change to no par value of the Common Stock and (c)
the issuance of Common Stock to directors, officers and employees of the
Corporation and its subsidiaries pursuant to any stock-based incentive plan duly
approved by the Board of Directors or any duly authorized committee or delegee
thereof.
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To the extent that the Series C-1 Preferred Stock becomes
convertible into the right to receive cash, no adjustment need be made
thereafter as to the cash. Interest will not accrue on the cash.
(vii) Adjustment for Tax Purposes. The Corporation shall be
entitled to make such reductions in the Conversion Price, in addition to those
required by other provisions of this Section 9, as it in its discretion shall
determine to be advisable in order that any stock dividends, subdivisions of
shares, distributions of rights to purchase stock or securities or distributions
of securities convertible into or exchangeable for stock hereafter made by the
Corporation to its shareholders shall not be taxable.
(viii) Notice of Adjustment. Whenever the Conversion Price
is adjusted, the Corporation shall promptly mail to holders of the Series C-1
Preferred Stock and to the transfer agent a notice of the adjustment briefly
stating the facts requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence of the correctness of such adjustment.
(ix) Notice of Certain Transactions. In the event that:
(A) the Corporation takes any action which would
require an adjustment in the Conversion Price;
(B) the Corporation consolidates or merges with,
or transfers all or substantially all of its assets to, another corporation and
shareholders of the Corporation must approve the transaction; or
(C) there is a dissolution or liquidation of the
Corporation, the Corporation shall mail to holders of the Series C-1 Preferred
Stock and to any transfer agent a notice stating the proposed record or
effective date, as the case may be. The Corporation shall mail the notice at
least 10 days before such date. Failure to mail such notice or any defect
therein shall not affect the validity of any transaction referred to in clause
(A), (B) or (C) of this Section 9(c)(ix).
(x) Effect of Reclassification, Consolidation, Merger or
Sale on Conversion Privilege. If any of the following shall occur, namely: (a)
any reclassification or change of Conversion Shares issuable upon conversion of
the Series C-1 Preferred Stock (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination, or any other change for which an adjustment is
provided in (c)(i), (ii) or (iii) above); (b) any consolidation or merger to
which the Corporation is a party other than a merger in which the Corporation is
the continuing corporation and which does not result in any reclassification of,
or change (other than a change in name, or in par value, or from par value to no
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par value, or from no par value to par value, or as a result of a subdivision or
combination) in, outstanding shares of Common Stock; or (c) any sale or
conveyance of all or substantially all of the assets of the Corporation as an
entirety, then the Corporation, or such successor or purchasing corporation, as
the case may be, shall, as a condition precedent to such reclassification,
change, consolidation, merger, sale or conveyance, ensure that effective
provision be made in the certificate of incorporation of the resulting or
surviving corporation or otherwise that each holder of Series C-1 Preferred
Stock then outstanding shall have the right to convert such Series C-1 Preferred
Stock into the kind and amount of shares of stock and other securities and
property (including cash) receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Conversion Stock deliverable upon conversion of such Series C-1 Preferred Stock
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance, and that the Conversion Price shall continue to be subject to
adjustment which shall be as nearly equivalent as may be practicable to the
adjustments of the Conversion Price provided for in this Section 9. If in the
case of any such consolidation, merger, sale or conveyance, the stock or other
securities and property (including cash) receivable thereupon by a holder of
Conversion Stock include shares of stock or other securities and property of a
corporation other than the successor or purchasing corporation, as the case may
be, in such consolidation, merger, sale or conveyance, then effective provision
shall also be made in the certificate of incorporation of such other corporation
or otherwise of such additional antidilution provisions as are necessary to
protect the interests of the holders of the Series C-1 Preferred Stock by reason
of the foregoing. The provisions of this Section 9(c)(x) shall similarly apply
to successive consolidations, mergers, sales or conveyances.
(c) Notwithstanding the foregoing provisions of this Section 9,
if at any time the Corporation does not have a sufficient number of authorized
shares of Common Stock to permit the conversion of Series C-1 Preferred Stock
into shares of Common Stock, then to the extent of the deficiency, the
Corporation may satisfy its obligation to deliver Conversion Shares upon
conversion of Series C-1 Preferred Stock by delivering shares of Series D
Preferred Stock in lieu of Conversion Shares. In any such case, the number of
Shares of Series D Preferred Stock to be delivered shall be determined by
dividing the number of Conversion Shares the Corporation would otherwise be
obligated to deliver by the Common Share Equivalent Number (as defined in the
certificate of designation for the Series D Preferred Stock) then in effect. The
Corporation shall use all commercially reasonable efforts to ensure that the
number of authorized shares of Common Stock is at all times sufficient to enable
the full conversion of Series C-1 Preferred Stock into Conversion Shares.
Section 10. Reports.
So long as the Series C-1 Preferred Stock remains outstanding,
the Corporation shall cause its annual reports to stockholders and any quarterly
or other financial reports and information furnished by it to stockholders
pursuant to the requirements of the Exchange Act, to be mailed to the holders of
the Series C-1 Preferred Stock (contemporaneously with the mailing of such
materials to the Corporation's stockholders) at their addresses appearing on the
books of the Corporation. If the Corporation is not required to furnish annual
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or quarterly reports to its stockholders pursuant to the Exchange Act, it shall
cause its financial statements, including any notes thereto (and with respect to
annual reports, an auditors' report by a nationally recognized firm of
independent certified public accounts), a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and such other information
which the Corporation would otherwise by required to include in annual and
quarterly reports filed under the Exchange Act, to be mailed to the holders of
the Series C-1 Preferred Stock, within 120 days after the end of each of the
Corporation's fiscal years and within 60 days after the end of each of its first
three fiscal quarters.
Section 11. Severability of Provisions.
Whenever possible, each provision hereof shall be interpreted in
a manner as to be effective and valid under applicable law, but if any provision
hereof is held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or otherwise adversely affecting the remaining
provisions hereof. If a court of competent jurisdiction should determine that a
provision hereof would be valid or enforceable if a period of time were extended
or shortened or a particular percentage were increased or decreased, then such
court may make such change as shall be necessary to render the provision in
question effective and valid under applicable law.
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IN WITNESS WHEREOF, American Skiing Company has caused this Certificate
to be signed by William J. Fair, its President and Chief Executive Officer, this
____ day of July, 2001.
AMERICAN SKIING COMPANY
By: ______________________________
Name: William J. Fair
Title: President and Chief
Executive Officer
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