EXHIBIT 3
Amended and Restated
Certificate of Incorporation
of
Vanguard Health Systems, Inc.
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Vanguard Health Systems, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
as follows:
1. The name of the Corporation is Vanguard Health Systems, Inc.
The original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on July 1, 1997.
2. Pursuant to Sections 103(d), 242 and 245 of the General Corporation
Law of the State of Delaware, as amended (the "DGCL"), this Amended and
Restated Certificate of Incorporation restates and further amends the
provisions of the Certificate of Incorporation of this Corporation, which
restatement and amendment shall become effective as of June 1, 1998. Pursuant
to and in accordance with the provisions of Section 228 of the DGCL, written
consent to this Amended and Restated Certificate of Incorporation has been
given in lieu of a vote of stockholders at a meeting and written notice of such
written consent has been given to all stockholders who have not consented in
writing to this Amended and Restated Certificate of Incorporation. Pursuant to
and in accordance with Section 242(c), the Board of Directors of the
Corporation may abandon this proposed restatement and amendment without further
action by the stockholders at any time prior to the effectiveness of the filing
of this restatement and amendment with the Secretary of State of the State of
Delaware.
3. The text of the original Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:
FIRST: The name of the Corporation is Vanguard Health Systems, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 9 East Loockerman Street, in the City of Dover, County of
Kent. The name of its registered agent at that address is National Registered
Agents, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the DGCL.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 450,000 shares of capital stock, classified as
(i) 100,000 shares of preferred stock, par value $.01 per share (the "Preferred
Stock"), and (ii) 350,000 shares of common stock, par value $.01 per share (the
"Common Stock"). The designations and the powers, preferences, rights,
qualifications, limitations, and restrictions of the Preferred Stock and Common
Stock are as follows:
I. Preferred Stock
Shares of the Preferred Stock of the Corporation may be issued from
time to time in one or more classes or series, each of which class or series
shall have such distinctive designation or title as shall be fixed by the Board
of Directors of the Corporation (the "Board of Directors") prior to the
issuance of any shares thereof. Each such class or series of the Preferred
Stock shall be issued for such consideration and shall have such voting powers,
full or limited, or no voting powers, and such preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolution or
resolutions providing for the issue of such class or series of the Preferred
Stock as may be adopted from time to time by the Board of Directors prior to
the issuance of any shares thereof pursuant to the authority hereby expressly
vested in it, all in accordance with the laws of the State of Delaware. All
shares of any one class or series of the Preferred Stock shall be alike in
every particular. The Board of Directors is further authorized to increase or
decrease (but not below the number of such shares of a series then outstanding)
the number of shares of any series subsequent to the issuance of shares of that
series.
II. Common Stock
1. Dividends. The Board of Directors may cause dividends to be
paid to the holders of shares of Common Stock out of funds legally available
for the payment of dividends by declaring an amount per share as a dividend.
2. Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of
shares of Common Stock shall be entitled to share in all remaining assets of
the Corporation available for distribution to its stockholders.
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3. Voting Rights. Except as otherwise required by law, each
outstanding share of Common Stock shall be entitled to vote on each matter on
which the stockholders of the Corporation shall be entitled to vote, and each
holder of Common Stock shall be entitled to one vote for each share of such
stock held by such holder.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders.
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of
Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal
the By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as from
time to time fixed by, or in the manner provided in, the
By-Laws of the Corporation. Election of directors need not be
by written ballot unless the By-Laws so provide.
(4) A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director to the fullest extent
permitted by the DGCL. Any repeal or modification of this
Subsection (4) of Article FIFTH by the stockholders of the
Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the
time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are
hereby empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the provisions of the
DGCL, this
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Amended and Restated Certificate of Incorporation, and any
By-Laws adopted by the stockholders; provided, however, that
no By-Laws hereafter adopted by the stockholders shall
invalidate any prior act of the directors which would have
been valid if such By-Laws had not been adopted.
(6) (a) Each person (and the heirs, executors or administrators
of such person) who was or is a party or is threatened to be
made a party to, or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the
fact that such person is or was a director or officer of the
Corporation or is or was serving at the request of the
Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless by the Corporation to the
fullest extent permitted by the DGCL. The right to
indemnification conferred in this ARTICLE FIFTH shall also
include the right to be paid by the Corporation the expenses
incurred in connection with any such proceeding in advance of
its final disposition to the fullest extent authorized by the
DGCL. The right to indemnification conferred in this ARTICLE
FIFTH shall be a contract right.
(b) The Corporation may, by action of its Board of Directors,
provide indemnification to such of the employees and agents
of the Corporation to such extent and to such effect as the
Board of Directors shall determine to be appropriate and
authorized by the DGCL.
SIXTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the DGCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
SEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
EIGHTH: The Corporation expressly elects not to be governed by Section
203 of the DGCL.
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This Amended and Restated Certificate of Incorporation shall become
effective upon its filing with the Secretary of State of the State of Delaware.
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IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation of Vanguard Health Systems, Inc. is signed on behalf of the
Corporation by its President and Chief Executive Officer and attested by its
Secretary as of the 21st day of May, 1998.
VANGUARD HEALTH SYSTEMS, INC.
By: /s/ Charles N. Martin, Jr.
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Name: Charles N. Martin, Jr.
Title: Chairman of the Board, President
and Chief Executive Officer
ATTEST
By: /s/ Ronald P. Soltman
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Name: Ronald P. Soltman
Title: Secretary
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CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF PAYABLE IN KIND
CUMULATIVE REDEEMABLE
CONVERTIBLE PREFERRED STOCK
of
VANGUARD HEALTH SYSTEMS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the undersigned, Joseph D. Moore, Executive Vice President, and Ronald
Soltman, Secretary, of Vanguard Health Systems, Inc., a Delaware corporation
(hereinafter called the "Corporation"), pursuant to the provisions of Sections
103 and 151 of the General Corporation Law of the State of Delaware, do hereby
make this Certificate of Designations and do hereby state and certify that
pursuant to the authority expressly vested in the Board of Directors of the
Corporation by the Certificate of Incorporation, the Board of Directors duly
adopted the following resolutions:
RESOLVED, that, pursuant to Article Fourth of the Amended and Restated
Certificate of Incorporation (which authorizes 100,000 shares of preferred
stock, $.01 par value (the "Preferred Stock")), the Board of Directors hereby
fixes the powers, designations, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations and
restrictions, of a series of Preferred Stock.
RESOLVED, that each share of such series of Preferred Stock shall rank
equally in all respects and shall be subject to the following provisions:
1. Number and Designation. 20,000 shares of the Preferred Stock of the
Corporation shall be designated as Payable In Kind Cumulative Redeemable
Convertible Preferred Stock (the "PIK Preferred Stock").
2. Rank. The PIK Preferred Stock shall, with respect to dividend rights
and rights on liquidation, dissolution and winding up, rank prior to all
classes or series of the Corporation's common stock, $.01 par value (the
"Common Stock"). All equity securities of the Corporation to which the PIK
Preferred 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 the "Junior Securities." All equity
securities of the Corporation with which the PIK Preferred Stock ranks on a
parity (whether with respect to dividends or upon liquidation, dissolution
winding up or otherwise) are collectively referred to herein as the "Parity
Securities." All shares of any series of Preferred Stock of the Corporation to
which the PIK Preferred Stock ranks junior (whether with respect to dividends
or upon liquidation, dissolution, winding up or otherwise) are collectively
referred to herein as the "Senior Securities". The respective definitions of
Junior Securities, Parity Securities and Senior Securities shall also include
any rights or options exercisable for or convertible into any of the Junior
Securities, Parity Securities and Senior Securities, as the case may be.
Subject to paragraph (b) of Section 7, the PIK Preferred Stock shall be subject
to the creation of Junior Securities and Parity Securities.
3. Dividends. (a) The holders of shares of PIK Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available for the payment of dividends, dividends at the annual
rate of $80.00 per share. Such dividends shall be payable in arrears annually
on March 31 of each year for the fiscal period February 1 through January 31
(unless March 31 in any year is not a business day, in which event on the next
succeeding business day) (each of such dates being a "Dividend Payment Date"
and each such annual period ending on January 31 in each year commencing
January 31, 2001 being a "Dividend Period"). When, as and if declared, such
dividends shall be cumulative from the date of issue, whether or not in any
Dividend Period or Periods there shall be funds of the Corporation legally
available for the payment of such dividends. Each such dividend shall be
payable to the holders of record of shares of the PIK Preferred Stock, as they
appear on the stock records of the Corporation at the close of business on such
record dates, not more than 60 days or less than 10 days preceding the payment
dates thereof, as shall be fixed by the Board of Directors. Accrued and unpaid
dividends for any past Dividend Periods may be declared and paid at any time,
without reference to any Dividend Payment Date, to holders of record on such
date, not more than 45 days preceding the payment date thereof, as may be fixed
by the Board of Directors. Any dividend payments made with respect to PIK
Preferred Stock shall be made in cash; provided that, notwithstanding anything
to the contrary set forth herein, during any Dividend Period prior to the
Dividend Period ending January 31, 2008 (the "Pay in Kind Period"), such
dividend payments may be made, in the sole discretion of the Corporation, in
lieu of the payment in whole or in part of dividends in cash, by issuing
additional fully paid, duly authorized, validly issued and nonassessable shares
of PIK Preferred Stock at the rate of 0.08 shares of PIK Preferred Stock for
each $80.00 of such dividend not paid in cash, and the issuance of such
additional shares shall constitute full payment of such dividend; provided,
further, the Pay in Kind Period shall immediately terminate upon the
Corporation's payment of a cash dividend upon any share of its capital stock.
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(b) The amount of dividends payable for the initial Dividend Period,
or any other period shorter or longer than a full Dividend Period, on the PIK
Preferred Stock shall be computed on the basis of twelve 30-day months and a
360-day year. Holders of shares of PIK Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or stock, in excess of
cumulative dividends, as herein provided, on the PIK Preferred Stock. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the PIK Preferred Stock that may be in
arrears.
(c) Notwithstanding anything contained herein to the contrary, no
cash dividends on shares of PIK Preferred Stock shall be declared by the Board
of Directors or paid or set apart for payment by the Corporation at such time
as the terms and provisions of any financing or working capital agreement of
the Corporation specifically prohibit such declaration, payment or setting
apart for payment or if such declaration, payment or setting apart for payment
would constitute a breach thereof or a default thereunder or if such
declaration, payment or setting apart for payment would, upon the giving of
notice or passage of time or both, constitute such a breach or default;
provided, that subject to applicable law, if any cash dividends are prohibited
in whole or in part during the Pay In Kind Period, the Corporation may, to the
extent payment in cash of such dividends is not made, pay such dividends in
shares of PIK Preferred Stock in accordance with paragraph (a) of this Section
3; and provided, further, that nothing herein contained shall in any way or
under any circumstances be construed or deemed to require the Board of
Directors to declare or the Corporation to pay or set apart for payment any
dividends on shares of the PIK Preferred Stock at any time, whether permitted
by any of such agreements or not.
(d) So long as any shares of the PIK Preferred Stock are outstanding,
no dividends, except as described in the next succeeding sentence, shall be
declared or paid or set apart for payment on Parity Securities, for any period
unless full cumulative dividends have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
such payment on the PIK Preferred Stock for all Dividend Periods terminating on
or prior to the date of payment of the dividend on such class or series of
Parity Securities. When dividends are not paid in full or a sum sufficient for
such payment is not set apart, as aforesaid, all dividends declared upon shares
of the PIK Preferred Stock and all dividends declared upon any other class or
series of stock ranking on a parity as to dividends and amounts distributable
upon liquidation, dissolution or winding up shall be declared ratably in
proportion to the respective amounts of dividends accumulated and unpaid on the
PIK Preferred Stock and accumulated and unpaid on such Parity Securities. No
interest, or sum of
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money in lieu of interest, shall be payable in respect of any dividend payment
or payments on the PIK Preferred Stock or any other Parity Securities which may
be in arrears.
(e) (i) Holders of shares of the PIK Preferred Stock shall be
entitled to receive the dividends provided for in paragraph (a) of this Section
3 in preference to and in priority over any dividends upon any of the Junior
Securities.
(ii) The Corporation shall not declare, pay or set apart for
payment any dividend on any of the Junior Securities or make any payment
on account of or set apart for payment money for a sinking or other
similar fund for the purchase, redemption or other retirement of, any of
the Junior Securities or any warrants, rights, calls or options,
exercisable for or convertible into any of the 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 holders of Junior Securities), and shall not permit any corporation or
other entity directly or indirectly controlled by the Corporation to
purchase or redeem any of the Junior Securities so long as any shares of
the PIK Preferred Stock are outstanding, 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 shares of the PIK Preferred Stock not paid on the dates
provided for in paragraph (a) of this Section 3 shall have been or be paid
or set apart for payment.
(f) Subject to the foregoing provisions of this Section 3 and
applicable law, the Board of Directors may declare and the Corporation may pay
or set apart for payment dividends on any of the Junior Securities or Parity
Securities, may make any payment on account of or set apart for payment money
for a sinking fund or other similar fund for the purchase, redemption or other
retirement of, any of the Junior Securities or Parity Securities or any
warrants, rights, calls or options, exercisable for or convertible into any of
the Junior Securities or Parity Securities, and may make any distribution in
respect thereof, either directly or indirectly, and whether in cash,
obligations or shares of the Corporation or other property, and may purchase or
otherwise redeem any of the Junior Securities or Parity Securities or any
warrants, rights or options exercisable for or convertible into any of the
Junior Securities or Parity Securities, and the holders of the shares of the
PIK Preferred Stock shall not be entitled to share therein.
4. Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
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involuntary, before any payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart for the
holders of Junior Securities, the holders of the shares of PIK Preferred Stock
shall be entitled to receive $1,000 per share of PIK Preferred Stock plus an
amount equal to all dividends (whether or not earned or declared) accrued and
unpaid thereon to the date of final distribution to such holders; but such
holders shall not be entitled to any further payment. If, upon any liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation, or
proceeds thereof, distributable among the holders of the shares of PIK
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any Parity Securities, then such assets,
or the proceeds thereof, shall be distributed among the holders of shares of
PIK Preferred Stock and any such other Parity Securities ratably in accordance
with the respective amounts that would be payable on such shares of PIK
Preferred Stock and any such other stock if all amounts payable thereon were
paid in full. Notwithstanding anything else in this Certificate of
Designations, a liquidation, dissolution or winding up, voluntary or
involuntary, of the Corporation shall not be deemed to have occurred upon (i)
the acquisition of the Corporation by another entity by means of any
transaction or series of related transactions (including, without limitation,
any reorganization, merger or consolidation, whether of the Corporation with or
into any other corporation or corporations or of any other corporation or
corporations with or into the Corporation; or (ii) a sale of all or
substantially all of the assets of the Corporation.
(b) Subject to the rights of the holders of any Parity
Securities, after payment shall have been made in full to the holders of the
PIK Preferred Stock, as provided in paragraph (a) of this Section 4, any other
series or class or classes of Junior Securities shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the PIK Preferred Stock shall not be entitled to share therein.
5. Redemption. (a) To the extent the Corporation shall have funds
legally available for such payment, the Corporation may redeem at its option
shares of PIK Preferred Stock, at any time in whole or from time to time in
part, at a redemption price of $1,000 per share, together with accrued and
unpaid dividends thereon to the date fixed for redemption, without interest.
(b) To the extent the Corporation shall have funds legally
available for payment, the Corporation shall redeem all outstanding shares of
PIK Preferred Stock upon the earliest to occur of the following dates:
(i) January 31, 2015;
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(ii) no later than 90 days after there shall have been a
Change in Control of the Corporation; and
(iii) no later than 90 days after the Corporation or its
affiliate shall have sold to a Person not its affiliate all or
substantially all of the assets of MacNeal Hospital, Berwyn,
Illinois.
Such shares shall be redeemed at a redemption price of $1,000 per share,
together with accrued and unpaid dividends thereon to the redemption date,
without interest.
(c) Shares of PIK Preferred Stock which have been issued and
reacquired in any manner, including shares purchased or redeemed, shall (upon
compliance with any applicable provisions of the laws of the State of Delaware)
have the status of authorized and unissued shares of the class of Preferred
Stock undesignated as to series and may be redesignated and reissued as part of
any series of the Preferred Stock; provided, however, that no such issued and
reacquired shares of PIK Preferred Stock shall be reissued or sold as PIK
Preferred Stock unless reissued as a stock or pay in kind dividend on shares of
PIK Preferred Stock.
(d) If the Corporation is unable or shall fail to discharge its
obligation to redeem all outstanding shares of PIK Preferred Stock pursuant to
paragraph (b) of this Section 5 (the "Mandatory Redemption Obligation"), the
Mandatory Redemption Obligation shall be discharged as soon as the Corporation
is able to discharge such Mandatory Redemption Obligation. If and so long as
any Mandatory Redemption Obligation with respect to the PIK Preferred Stock
shall not be fully discharged, the Corporation shall not (i) declare or pay any
dividends or make any distribution on or, directly or indirectly, purchase,
redeem or discharge any mandatory redemption, sinking fund or other similar
obligation in respect of any Parity Securities or any warrants, rights or
options exercisable for or convertible into any of the Parity Securities
(except in connection with a redemption, sinking fund or other similar
obligation to be satisfied pro rata with PIK Preferred Stock) or (ii) declare
or pay any dividend or make any distributions on, or, directly or indirectly,
purchase, redeem or satisfy any such mandatory redemption, sinking fund or
other similar obligation in respect of the Junior Securities or any warrants,
rights or options exercisable for or convertible into any of the Junior
Securities.
(e) Notwithstanding the foregoing provisions of this Section 5,
unless the full cumulative dividends on all outstanding shares of PIK Preferred
Stock shall have been paid or contemporaneously are declared and payable for
all past and current dividend periods, none of the shares of
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PIK Preferred Stock shall be redeemed, and no sum shall be set aside for such
redemption, unless shares of PIK Preferred Stock are redeemed pro rata.
(f) Change in Control. For purposes of this Certificate of
Designations, a Change in Control of the Corporation shall have occurred if:
(i) any Person (other than (1) the Corporation, any
of its subsidiaries or any of its stockholders on February 1,
2000 (or any affiliate of any such stockholder)), (2) any
trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or any of its
subsidiaries, (3) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (4)
any corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same
proportions as their ownership of the Corporation's common
stock)), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934 (the
"Exchange Act")), directly or indirectly, of securities of
the Corporation representing more than 50% of the combined
voting power of the Corporation's then outstanding voting
securities;
(ii) the stockholders of the Corporation approve a merger
or consolidation of the Corporation with any other
corporation, other than both (A)(1) 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
or parent entity) 50% or more of the combined voting power
of the voting securities of the Corporation or such
surviving or parent entity outstanding immediately after
such merger or consolidation or (2) a merger or
consolidation in which no Person acquires 50% or more of
the combined voting power of the Corporation's then
outstanding securities; and (B) immediately after the
consummation of such merger or consolidation described in
clause (A)(1) or (A)(2) above (and for at least 180 days
thereafter) neither the Corporation's Chief Executive
Officer nor its Chief Financial Officer change from the
people occupying such positions immediately prior to such
merger or consolidation except as a result of their death
or disability and neither of such officers shall have
changed prior to such merger or consolidation at the
direction of a Person who has entered into an agreement
with the Corporation the
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consummation of which will constitute a Change in Control of the
Corporation; or
(iii) 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 any
transaction having a similar effect).
6. Procedure for Redemption. (a) In the event the Corporation shall
redeem shares of PIK Preferred Stock, notice of such redemption shall be given
by first class mail, postage prepaid, mailed not less than 30 days nor more
than 60 days prior to the redemption date, to each holder of record of the
shares to be redeemed at such holder's address as the same appears on the stock
register of the Corporation; provided that neither the failure to give such
notice nor any defect therein shall affect the validity of the giving of notice
for the redemption of any share of PIK Preferred Stock to be redeemed except as
to the holder to whom the Corporation has failed to give said notice or except
as to the holder whose notice was defective. Each such notice shall state: (i)
the redemption date; (ii) the amount of shares of PIK Preferred Stock that are
being redeemed and, if less than all the shares held by such holder are to be
redeemed from such holder, the number of shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price; and
(v) that dividends on the shares to be redeemed will cease to accrue on such
redemption date. In the event that fewer than all the outstanding shares of PIK
Preferred Stock are to be redeemed, the number of shares to be redeemed shall
be determined by the Board of Directors and the shares to be redeemed shall be
selected by lot or pro rata as may be determined by the Board of Directors,
except that in, any redemption of fewer than all the outstanding shares of PIK
Preferred Stock, the Corporation may redeem all shares held by any holders of a
number of shares not to exceed 100 as may be specified by the Corporation.
(b) Notice having been mailed as aforesaid, from and after the
redemption date (provided that on or prior to the redemption date the
Corporation shall have irrevocably deposited funds for such redemption in trust
for the holders of PIK Preferred Stock), dividends on the shares of PIK
Preferred Stock so called for redemption shall cease to accrue, and such shares
shall no longer be deemed to be outstanding and shall have the status of
authorized but unissued shares of Preferred Stock, unclassified as to series,
and shall not be reissued as shares of PIK Preferred Stock unless reissued as a
stock dividend on shares of PIK Preferred Stock, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from
the Corporation the redemption price) shall cease. Upon surrender in
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accordance with said notice of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), such share shall
be redeemed by the Corporation at the redemption price. In case fewer than all
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the holder
thereof.
7. Voting Rights. (a) The holders of record of shares of PIK Preferred
Stock shall not be entitled to any voting rights except as hereinafter provided
in this paragraph 7 or as otherwise provided by law.
(b) (i) If at any time or times dividends payable (whether in
cash or shares of PIK Preferred Stock) on PIK Preferred Stock shall be
in arrears and unpaid on an amount equal to two full annual dividends
(whether or not consecutive) or if the Corporation shall have failed
to discharge its Mandatory Redemption Obligation, then the number of
directors constituting the Board of Directors, without further action,
shall be increased by two and the holders of PIK Preferred Stock shall
have the exclusive right, voting separately as a class, to elect the
directors of the Corporation to fill such newly created directorships,
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 initially either at a special meeting of
the holders of PIK Preferred Stock, called as hereinafter
provided, or at any annual meeting of stockholders held for the
purpose of electing directors, and thereafter at such annual
meetings or by the written consent of the holders of PIK
Preferred Stock. Such voting right shall continue until such
time as all accrued dividends accumulated on the PIK Preferred
Stock shall have been paid in full, or the Corporation has
fulfilled its Mandatory Redemption Obligation, as the case may
be, at which time such voting right of the holders of PIK
Preferred Stock shall terminate, subject to revesting in the
event of each and every subsequent failure of the Corporation of
the character described above.
(iii) At any time when such voting right shall have vested
in the holders of PIK Preferred 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 PIK Preferred Stock then outstanding, addressed to the
Secretary of the Corporation, call a special meeting of holders
of PIK Preferred
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Stock. Such meeting shall be held at the earliest practicable date
upon the notice required for annual meetings of stockholders at the
place for holding annual meetings of stockholders of the Corporation
or, if none, at a place designated by the Secretary of the
Corporation. If such meeting shall not be called by the proper
officer of the Corporation within 30 days after the personal service
of such written request upon the Secretary of the Corporation, or
within 30 days after mailing the same within the United States, by
registered mail, addressed to the Secretary of the Corporation at its
principal office (such mailing to be evidenced by the registry
receipt issued by the postal authorities), then the holders of record
of 10% of the shares of PIK Preferred Stock then outstanding may
designate in writing a holder of PIK Preferred Stock to call such
meeting at the expense of the Corporation, and such meeting may be
called by such person so designated upon the notice required for
annual meetings of stockholders and shall be held at the same place
as is elsewhere provided in this paragraph (b)(iii) of this Section
7. Any holder of PIK Preferred 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 holders of PIK
Preferred Stock 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 held for the purpose of electing
directors at which the holders of PIK Preferred Stock shall have
the right to elect 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 PIK Preferred Stock shall be required
and be sufficient to constitute a quorum of such class for the
election of directors by such class. At any such meeting or
adjournment thereof (A) the absence of a quorum of the holders
of PIK Preferred Stock shall not prevent the election of
directors other than those to be elected by the holders of stock
of such class 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 directors to be elected by the
holders of PIK Preferred Stock and (B) in the absence of a
quorum of the holders of any class of stock entitled to vote for
the election of directors, a majority of the holders present in
person or by proxy of such class shall have the power to adjourn
the meeting for the elections of directors which the holders of
such class are entitled to elect, from time to time, without
notice (except as required by law) other than announcement at
the meeting, until a quorum shall be present.
-10-
(v) The term of office of all directors elected by the holders
of PIK Preferred Stock pursuant to paragraph (b)(i) of this Section 7
in office at any time when the aforesaid voting rights are vested in
the holders of PIK Preferred Stock shall terminate upon the election
of their successors at any meeting of holders of PIK Preferred Stock
for the purpose of electing directors. Upon any termination of the
aforesaid voting rights in accordance with paragraph (b)(ii) of this
Section 7, the term of office of all directors elected by the holders
of PIK Preferred Stock pursuant to paragraph (b)(i) of this Section 7
then in office shall thereupon terminate and upon such termination
the number of directors constituting the Board of Directors, shall,
without further action, be reduced by two, subject always to the
increase of the number of directors pursuant to paragraph (b)(i) of
this Section 7 in case of the future right of holders of PIK
Preferred Stock to elect directors as provided herein.
(vi) In case of any vacancy occurring among the directors so
elected, the remaining director who shall have been so elected may
appoint a successor to hold office for the unexpired term of the
director whose place shall be vacant. If both directors so elected by
the holders of PIK Preferred Stock shall cease to serve as directors
before their terms shall expire, the holders of PIK Preferred Stock
then outstanding may, at a special meeting of the holders called as
provided above, elect successors to hold office for the unexpired
terms of such directors whose places shall be vacant.
(c) Without the written consent of a majority of the outstanding
shares of PIK Preferred Stock or the vote of holders of a majority of the
outstanding shares of PIK Preferred Stock at a meeting of the holders of PIK
Preferred Stock called for such purpose, the Corporation will not authorize the
issuance of any Senior Securities or any securities exchangeable or convertible
into any Senior Securities or amend, alter or repeal any provision of this
Certificate of Designations (by merger or otherwise) so as to materially and
adversely affect the preferences, rights or powers of the PIK Preferred Stock.
No other series of the Corporation's preferred stock shall have the right to
vote with the PIK Preferred Stock as a single class on any matter.
(d) (i) The creation, authorization or issuance of any shares of any
Junior Securities or Parity Securities, or the creation, authorization or
issuance of any obligation or security convertible into or evidencing the right
to purchase any Junior Securities or Parity Securities, (ii) the creation of
any indebtedness of any kind of the Corporation, or (iii) the increase or
decrease in the amount of authorized capital stock of any class (including the
Preferred Stock, but excluding the PIK Preferred Stock) or any increase,
decrease or
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change in the par value of any such class other than the Preferred Stock, shall
not require the consent of the holders of PIK Preferred Stock and shall not be
deemed to affect adversely the rights, preferences, privileges and voting
rights of shares of PIK Preferred Stock.
(e) In exercising the voting rights set forth in this Section 7,
each share of PIK Preferred Stock shall have one vote per share. Except as
otherwise required by applicable law or as set forth herein, the shares of PIK
Preferred Stock shall not have any relative, participating, optional or other
special voting rights and powers and the consent of the holders thereof shall
not be required for the taking of any corporate action.
8. Reports. So long as any of the PIK Preferred Stock is outstanding, the
Corporation will furnish the holders thereof with the quarterly and annual
financial reports that the Corporation is required to file with the Securities
and Exchange Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934.
9. Conversion Rights. The holders of the PIK Preferred Stock shall be
subject to the following with respect to the conversion of the PIK Preferred
Stock into shares of Common Stock (the "Conversion Rights"):
(a) Automatic Conversion
(i) Each outstanding share of PIK Preferred Stock shall
automatically be converted into shares of Common Stock, at the PIK
Conversion Price (as defined in paragraph (b) below), immediately on
the same date that the closing occurs in respect of a firmly
underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the
offer and sale of shares of Common Stock for the account of the
Corporation in which the gross cash proceeds to the Corporation
(before underwriting discounts, commissions and fees) are not less
than $50,000,000 (a "Qualifying IPO").
(ii) Upon the occurrence of a Qualifying IPO, each of the
outstanding shares of PIK Preferred Stock shall be converted
automatically into shares of Common Stock without any further action
by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or its
transfer agent; provided that the Corporation shall not be obligated
to issue certificates evidencing the shares of Common Stock issuable
upon such conversion unless the certificates evidencing such shares
of
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PIK Preferred Stock are either delivered to the Corporation or its
transfer agent as provided below, or the holder notifies the
Corporation or its transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred
by it in connection with such certificates. Upon the occurrence of
such automatic conversion of the PIK Preferred Stock, the holders of
PIK Preferred Stock shall surrender the certificates representing
such shares at the office of the Corporation or any transfer agent
for the PIK Preferred Stock. Thereupon, there shall be issued and
delivered to such holder promptly at such office and in its name as
shown on such surrendered certificate or certificates, a certificate
or certificates for the number of shares of Common Stock into which
the shares of PIK Preferred Stock surrendered were convertible on the
date on which such automatic conversion occurred.
(iii) Notwithstanding anything to the contrary set forth herein,
as a condition to the Corporation's obligation to issue to each
holder of PIK Preferred a certificate or certificates for the number
of shares of Common Stock to which such holder is entitled, each such
holder (by acceptance of any certificate for shares of PIK Preferred
Stock) agrees to enter into a written agreement not to effect any
public sale or distribution of any shares of Common Stock issuable to
such holder, if and to the extent requested by the managing
underwriter for the Qualifying IPO during the 14 days prior to, and
during an up to 180-day period beginning on, the effective date of
the registration statement relating to the Qualifying IPO without the
written consent of such managing underwriter; provided that each such
holder has received written notice of such registration at least 5
business days prior to the anticipated beginning of the 14-day period
referred to above.
(b) PIK Conversion Price. The PIK Conversion Price shall be the
initial public offering price for each share of Common Stock in the Qualifying
IPO on the date on which the Corporation's registration statement relating
thereto first becomes effective.
(c) Mechanics of Conversion. Each holder of PIK Preferred Stock which
has been automatically converted into shares of Common Stock pursuant to this
Section 9 shall surrender the certificate or
-13-
certificates therefor, duly endorsed, at the office of the Corporation or any
transfer agent for the PIK Preferred Stock. Thereupon, the Company shall
promptly issue and deliver at such office to such holder a certificate or
certificates for the number of shares of Common Stock to which such holder is
entitled and shall promptly pay in cash or in additional shares of Common
Stock, any declared and unpaid dividends on the shares of PIK Preferred Stock
being converted. Such conversion shall be deemed to have been made at the close
of business on the date of the closing of the Qualifying IPO, and the Person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date.
(d) Fractional Shares. At the option of the Corporation, no
fractional shares of Common Stock shall be issued upon conversion of PIK
Preferred Stock and all shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of PIK Preferred Stock by a
holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of any
fractional share, the Corporation may at its option, in lieu of issuing any
fractional share, pay cash equal to the product of such fraction multiplied by
the initial public offering of the Common Stock.
(e) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the PIK Preferred Stock, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the PIK Preferred Stock. If at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the PIK
Preferred Stock, the Corporation with take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(f) Notices. Any notice to a holder of shares of PIK Preferred Stock
pursuant to the provisions of this Section 9 shall be in writing and shall be
deemed effectively given: (i) upon personal delivery to the party to be
notified, (ii) when sent by confirmed facsimile if sent during normal business
hours of the recipient; if not, then on the next business day, (iii) five (5)
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
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verification of receipt. All notices shall be addressed to each holder of
record at the address of such holder appearing on the books of the Corporation.
10. General Provisions. (a) The term "Person" as used herein means any
corporation, limited liability company, partnership, trust, organization,
association, other entity or individual provided notwithstanding the foregoing,
for the purposes only of the provisions of paragraph (f) of Section 5 above,
the term "Person" as used in such paragraph means the definition of the term
"Person" found in Section 3(a)(9) of the Exchange Act.
(b) The term "outstanding", when used with reference to shares of
stock, shall mean issued shares, excluding shares held by the Corporation or a
subsidiary.
(c) The headings of the paragraphs, subparagraphs, clauses
and subclauses of this Certificate of Designations are for convenience of
reference only and shall not define, limit or affect any of the provisions
hereof.
IN WITNESS WHEREOF, Vanguard Health Systems, Inc. has caused this
Certificate of Designations to be signed and attested by the undersigned this
31st day of January, 2000.
VANGUARD HEALTH SYSTEMS, INC.
By: /s/ Joseph D. Moore
---------------------------------------
Name: Joseph D. Moore
Title: Executive Vice President
ATTEST:
/s/ Ronald P. Soltman
- ------------------------
Name: Ronald P. Soltman
Secretary
-15-
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VANGUARD HEALTH SYSTEMS, INC.
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
Vanguard Health Systems, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware, does hereby certify:
FIRST: The first paragraph of the subsection of Section 3 of the
Amended and Restated Certificate of Incorporation of the Corporation which is
entitled "FOURTH" (that is, the first seven lines of text in said subsection
"FOURTH") is hereby amended to read in total as set forth below:
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 750,000 shares
of capital stock, classified as (i) 150,000 shares of
preferred stock, par value $.01 per share (the "Preferred
Stock"), and (ii) 600,000 shares of common stock, par value
$.01 per share (the "Common Stock"). The designations and the
powers, preferences, rights, qualifications, limitations, and
restrictions of the Preferred Stock and Common Stock are as
follows:
SECOND: This Amendment to the Amended and Restated Certificate of
Incorporation has been duly adopted by the Corporation's Board of Directors and
stockholders in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware, such adoption by the stockholders
being given by written consent in accordance with the provisions of Section 228
of the General Corporation Law of the State of Delaware.
-1-
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed in its corporate name this 20th day of June, 2000.
VANGUARD HEALTH SYSTEMS, INC.
By: /s/ Joseph D. Moore
--------------------------
Joseph D. Moore
Executive Vice President
ATTEST:
By: /s/ Ronald P. Soltman
----------------------
Ronald P. Soltman
Secretary
-2-
Certificate of Designations, Preferences
and Rights of Payable in Kind
Cumulative Redeemable
Convertible Preferred Stock, Series B
OF
Vanguard Health Systems, Inc.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the undersigned, Joseph D. Moore, Executive Vice
President, and Ronald P. Soltman, Secretary, of Vanguard Health
Systems, Inc., a Delaware corporation (hereinafter called the
"Corporation"), pursuant to the provisions of Sections 103 and
151 of the General Corporation Law of the State of Delaware, do
hereby make this Certificate of Designations and do hereby state
and certify that pursuant to the authority expressly vested in
the Board of Directors of the Corporation by the Certificate of
Incorporation, the Board of Directors duly adopted the following
resolutions:
RESOLVED, that, pursuant to Article Fourth of the Amended
and Restated Certificate of Incorporation, as amended (which
authorizes 150,000 shares of preferred stock, $.01 par value (the
"Preferred Stock")), the Board of Directors hereby fixes the
powers, designations, preferences and relative, participating,
optional and other special rights, and the qualifications,
limitations and restrictions, of a series of Preferred Stock.
RESOLVED, that each share of such series of Preferred Stock
shall rank equally in all respects and shall be subject to the
following provisions:
1. Number and Designation. 30,000 shares of the Preferred
Stock of the Corporation shall be designated as Payable In Kind
Cumulative Redeemable Convertible Preferred Stock, Series B (the
"PIK Preferred Stock").
2. Rank. (a) The PIK Preferred Stock shall, with respect
to dividend rights and rights on liquidation, dissolution and
winding up, rank prior to all classes or series of the
Corporation's common stock, $.01 par value (the "Common Stock").
All equity securities of the Corporation to which the PIK
Preferred 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 the "Junior Securities." All equity securities of the
Corporation with which the PIK Preferred Stock ranks on a parity
(whether with respect to dividends or upon liquidation,
dissolution winding up or otherwise) are collectively referred to
herein as the "Parity Securities." All shares of any series of
Preferred Stock of the Corporation to which the PIK Preferred
Stock ranks junior (whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise) are
collectively referred to herein as the "Senior Securities." The
respective definitions of Junior Securities, Parity Securities
and Senior
Securities shall also include any rights or options
exercisable for or convertible into any of the Junior Securities,
Parity Securities and Senior Securities, as the case may be.
Subject to paragraph (b) of Section 7, the PIK Preferred Stock
shall be subject to the creation of Junior Securities and Parity
Securities.
(b) The PIK Preferred Stock shall be Parity Securities
(with respect to dividends and upon liquidation, dissolution or
winding up of the Corporation) in respect of the Corporation's
20,000 shares of Payable In Kind Cumulative Redeemable
Convertible Preferred Stock (plus additional preferred shares
issued in kind as dividends thereon) created by the Corporation's
Certificate of Designations, Preferences and Rights of Payable In
Kind Cumulative Redeemable Convertible Preferred Stock filed with
the Secretary of State of the State of Delaware on January 31,
2001 (the "Series A PIK Preferred Stock").
3. Dividends. (a) The holders of shares of PIK Preferred
Stock shall be entitled to receive, when, as and if declared by
the Board of Directors, out of funds legally available for the
payment of dividends, dividends at the annual rate of $62.50 per
share. Such dividends shall be payable in arrears annually on
January 1 of each year for the fiscal period January 1 through
December 31 of the previous calendar year (unless January 1 in
any year is not a business day, in which event on the next
succeeding business day) (each of such dates being a "Dividend
Payment Date" and each such annual period ending on December 31
in each year commencing December 31, 2003 being a "Dividend
Period"). Such dividends shall be cumulative from the date of
issue, whether or not in any Dividend Period or Periods there
shall be funds of the Corporation legally available for the
payment of such dividends. Each such dividend shall be payable to
the holders of record of shares of the PIK Preferred Stock, as
they appear on the stock records of the Corporation at the close
of business on December 15 in each such year. Accrued and unpaid
dividends for any past Dividend Periods may be declared and paid
at any time, without reference to any Dividend Payment Date, to
holders of record on such date, not more than 45 days preceding
the payment date thereof, as may be fixed by the Board of
Directors. Any dividend payments made with respect to PIK
Preferred Stock shall be made in cash; provided that,
notwithstanding anything to the contrary set forth herein, during
any Dividend Period prior to the Dividend Period ending December
31, 2011 (the "Pay in Kind Period"), such dividend payments may
be made, in the sole discretion of the Corporation, in lieu of
the payment in whole or in part of dividends in cash, by issuing
additional fully paid, duly authorized, validly issued and
nonassessable shares of PIK Preferred Stock at the rate of 0.0625
shares of PIK Preferred Stock for each $62.50 of such dividend
not paid in cash, and the issuance of such additional shares
shall constitute full payment of such dividend; provided further
that the Pay in Kind Period shall immediately terminate upon the
Corporation's payment of a cash dividend upon any share of its
capital stock other than cash dividends paid upon shares of
Series A PIK Preferred Stock for dividend periods ending on and
after January 31, 2008.
(b) The amount of dividends payable for the initial
Dividend Period, or any other period shorter or longer than a
full Dividend Period, on the PIK Preferred Stock shall be
computed on the basis of twelve 30-day months and a 360-day year.
Holders of shares of PIK Preferred Stock shall not be entitled to
any dividends, whether payable in cash, property or stock, in
excess of cumulative dividends, as herein provided, on the PIK
Preferred Stock. No interest,
2
or sum of money in lieu of interest, shall be payable in respect
of any dividend payment or payments on the PIK Preferred Stock that
may be in arrears.
(c) Notwithstanding anything contained herein to the
contrary, no cash dividends on shares of PIK Preferred Stock
shall be declared by the Board of Directors or paid or set apart
for payment by the Corporation at such time as the terms and
provisions of any financing or working capital agreement of the
Corporation specifically prohibit such declaration, payment or
setting apart for payment or if such declaration, payment or
setting apart for payment would constitute a breach thereof or a
default thereunder or if such declaration, payment or setting
apart for payment would, upon the giving of notice or passage of
time or both, constitute such a breach or default; provided that
subject to applicable law, if any cash dividends are prohibited
in whole or in part during the Pay In Kind Period, the
Corporation may, to the extent payment in cash of such dividends
is not made, pay such dividends in shares of PIK Preferred Stock
in accordance with paragraph (a) of this Section 3; and provided
further that nothing herein contained shall in any way or under
any circumstances be construed or deemed to require the Board of
Directors to declare or the Corporation to pay or set apart for
payment any dividends on shares of the PIK Preferred Stock at any
time, whether permitted by any of such agreements or not.
(d) So long as any shares of the PIK Preferred Stock
are outstanding, no dividends, except as described in the next
succeeding sentence, shall be declared or paid or set apart for
payment on Parity Securities, for any period unless full
cumulative dividends have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof
set apart for such payment on the PIK Preferred Stock for all
Dividend Periods terminating on or prior to the date of payment
of the dividend on such class or series of Parity Securities.
When dividends are not paid in full or a sum sufficient for such
payment is not set apart, as aforesaid, all dividends declared
upon shares of the PIK Preferred Stock and all dividends declared
upon any other class or series of stock ranking on a parity as to
dividends and amounts distributable upon liquidation, dissolution
or winding up shall be declared ratably in proportion to the
respective amounts of dividends accumulated and unpaid on the PIK
Preferred Stock and accumulated and unpaid on such Parity
Securities. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments
on the PIK Preferred Stock or any other Parity Securities which
may be in arrears.
(e) (i) Holders of shares of the PIK Preferred Stock
shall be entitled to receive the dividends provided for in
paragraph (a) of this Section 3 in preference to and in priority
over any dividends upon any of the Junior Securities.
(ii) The Corporation shall not declare, pay or set
apart for payment any dividend on any of the Junior
Securities or make any payment on account of or set apart
for payment money for a sinking or other similar fund for
the purchase, redemption or other retirement of, any of the
Junior Securities or any warrants, rights, calls or options,
exercisable for or convertible into any of the 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 holders of Junior Securities), and shall not permit
any corporation or
3
other entity directly or indirectly controlled by the Corporation
to purchase or redeem any of the Junior Securities so long as
any shares of the PIK Preferred Stock are outstanding, 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 shares of
the PIK Preferred Stock not paid on the dates provided for
in paragraph (a) of this Section 3 shall have been or be
paid or set apart for payment.
(f) Subject to the foregoing provisions of this
Section 3 and applicable law, the Board of Directors may declare
and the Corporation may pay or set apart for payment dividends on
any of the Junior Securities or Parity Securities, may make any
payment on account of or set apart for payment money for a
sinking fund or other similar fund for the purchase, redemption
or other retirement of, any of the Junior Securities or Parity
Securities or any warrants, rights, calls or options, exercisable
for or convertible into any of the Junior Securities or Parity
Securities, and may make any distribution in respect thereof,
either directly or indirectly, and whether in cash, obligations
or shares of the Corporation or other property, and may purchase
or otherwise redeem any of the Junior Securities or Parity
Securities or any warrants, rights or options exercisable for or
convertible into any of the Junior Securities or Parity
Securities, and the holders of the shares of the PIK Preferred
Stock shall not be entitled to share therein; provided, however,
the holders of the PIK Preferred Stock shall receive written
notice at least 20 business days in advance of any record date to
be set with respect to any such dividend or other distribution on
Junior Securities.
4. Liquidation Preference. (a) In the event of any
liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or
surplus) shall be made to or set apart for the holders of Junior
Securities, the holders of the shares of PIK Preferred Stock
shall be entitled to receive $1,000 per share of PIK Preferred
Stock plus an amount equal to all dividends (whether or not
earned or declared) accrued and unpaid thereon to the date of
final distribution to such holders; but such holders shall not be
entitled to any further payment; provided, however, the holders
of the PIK Preferred Stock shall receive written notice at least
20 business days in advance of any record date to be set with
respect to any such dividend or other distribution on Junior
Securities. If, upon any liquidation, dissolution or winding up
of the Corporation, the assets of the Corporation, or proceeds
thereof, distributable among the holders of the shares of PIK
Preferred Stock shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any
Parity Securities, then such assets, or the proceeds thereof,
shall be distributed among the holders of shares of PIK Preferred
Stock and any such other Parity Securities ratably in accordance
with the respective amounts that would be payable on such shares
of PIK Preferred Stock and any such other stock if all amounts
payable thereon were paid in full. Notwithstanding anything else
in this Certificate of Designations, a liquidation, dissolution
or winding up, voluntary or involuntary, of the Corporation shall
not be deemed to have occurred upon (i) the acquisition of the
Corporation by another entity by means of any transaction or
series of related transactions (including, without limitation,
any reorganization, merger or consolidation, whether of the
Corporation with or into any other corporation or corporations or
of any other corporation or corporations with or into the
Corporation; or (ii) a sale of all or substantially all of the
assets of the Corporation.
4
(b) Subject to the rights of the holders of any Parity
Securities, after payment shall have been made in full to the
holders of the PIK Preferred Stock, as provided in paragraph (a)
of this Section 4, any other series or class or classes of Junior
Securities shall, subject to the respective terms and provisions
(if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the holders of
the PIK Preferred Stock shall not be entitled to share therein.
5. Redemption. (a) The Corporation shall not have the
option to redeem any shares of PIK Preferred Stock prior to
January 1, 2008. On and after January 1, 2008, to the extent the
Corporation shall have funds legally available for such payment,
the Corporation may redeem at its option shares of PIK Preferred
Stock, at any time in whole or from time to time in part, at the
following redemption prices per share, together with accrued and
unpaid dividends thereon to the date fixed for redemption,
without interest, if redeemed during the twelve-month period
beginning on January 1 of the years indicated below:
If Redeemed During the
12-Month Period Commencing Redemption Price Per Share
---------------------------- --------------------------
January 1, 2008 $1,030
January 1, 2009 $1,020
January 1, 2010 $1,010
January 1, 2011 and thereafter $1,000
(b) To the extent the Corporation shall have funds legally
available for payment, the Corporation shall redeem all
outstanding shares of PIK Preferred Stock upon the earliest to
occur of the following dates:
(i) January 31, 2015; and
(ii) no later than 90 days after there shall have been
a Change in Control of the Corporation, subject to the prior
payment of Vanguard's 9.75% Senior Subordinated Notes due 2011
(the "Public Notes") and all other applicable Senior Indebtedness
(as such term is defined in the indenture relating to the Public
Notes).
Such shares shall be redeemed at a redemption price of $1,000 per
share, together with accrued and unpaid dividends thereon to the
redemption date, without interest.
(c) Shares of PIK Preferred Stock which have been issued and
reacquired in any manner, including shares purchased or redeemed,
shall (upon compliance with any applicable provisions of the laws
of the State of Delaware) have the status of authorized and
unissued shares of the class of Preferred Stock undesignated as
to series and may be redesignated and reissued as part of any
series of the Preferred Stock; provided that no such issued and
5
reacquired shares of PIK Preferred Stock shall be reissued or
sold as PIK Preferred Stock unless reissued as a stock or pay in
kind dividend on shares of PIK Preferred Stock.
(d) If the Corporation is unable or shall fail to discharge
its obligation to redeem all outstanding shares of PIK Preferred
Stock pursuant to paragraph (b) of this Section 5 (the "Mandatory
Redemption Obligation"), the Mandatory Redemption Obligation
shall be discharged as soon as the Corporation is able to
discharge such Mandatory Redemption Obligation. If and so long
as any Mandatory Redemption Obligation with respect to the PIK
Preferred Stock shall not be fully discharged, the Corporation
shall not (i) declare or pay any dividends or make any
distribution on or, directly or indirectly, purchase, redeem or
discharge any mandatory redemption, sinking fund or other similar
obligation in respect of any Parity Securities or any warrants,
rights or options exercisable for or convertible into any of the
Parity Securities (except in connection with a redemption,
sinking fund or other similar obligation to be satisfied pro rata
with PIK Preferred Stock) or (ii) declare or pay any dividend or
make any distributions on, or, directly or indirectly, purchase,
redeem or satisfy any such mandatory redemption, sinking fund or
other similar obligation in respect of the Junior Securities or
any warrants, rights or options exercisable for or convertible
into any of the Junior Securities.
(e) Notwithstanding the foregoing provisions of this Section 5,
unless the full cumulative dividends on all outstanding shares of
PIK Preferred Stock shall have been paid or contemporaneously are
declared and payable for all past and current dividend periods,
none of the shares of PIK Preferred Stock shall be redeemed, and
no sum shall be set aside for such redemption, unless shares of
PIK Preferred Stock are redeemed pro rata.
(f) For purposes of this Certificate of Designations, a Change
in Control of the Corporation shall have occurred if:
(i) the consummation of any transaction,
including, without limitation, any merger or
consolidation, the result of which is that any "person"
or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934), other
than (A) any of the officers of the Corporation on
December 31, 2002 holding the office of Executive Vice
President or a higher office or (B) Morgan Stanley
Capital Partners III, L.P., MSCP III 892 Investors,
L.P., Morgan Stanley Capital Investors, L.P., Morgan
Stanley Dean Witter Capital Partners IV, L.P., MSDW IV
892 Investors, L.P. and Morgan Stanley Dean Witter
Capital Investors IV, L.P., or any other merchant
banking or similar fund under common control with any
of the aforementioned entities (such Persons defined in
the foregoing clauses (A) and (B) being referred to
hereinafter as "Existing Shareholders"), becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) of shares of
capital stock of any class or kind ordinarily having
the power to vote for the election of directors of the
Corporation representing more than 50% of the total
voting power of all such shares of capital stock on a
fully diluted basis;
6
(ii) the direct or indirect sale, transfer,
conveyance or other disposition, not including a merger
or consolidation, in one or a series of related
transactions, of all or substantially all of the
properties or assets of the Corporation and its
subsidiaries taken as a whole to any "person" or
"group" (as those terms are defined in clause (i)
above), other than to the Existing Stockholders;
(iii) the adoption of a plan relating to the
liquidation or dissolution of the Corporation; or
(iv) during any consecutive two year period,
individuals who at the beginning of such period
constituted the Board of Directors (together with any
new directors (a) appointed or nominated by one or more
Existing Stockholders or (b) whose election by the
Board of Directors or whose nomination by the Board of
Directors for election by the Corporation's
stockholders was approved by a vote of at least a
majority of the members of the Board of Directors then
in office who either were members of the Board of
Directors on December 31, 2002 or whose election or
nomination for election was previously so approved)
cease for any reason during such period to constitute a
majority of the members of the Board of Directors then
in office.
6. Procedure for Redemption. (a) In the event the
Corporation shall redeem shares of PIK Preferred Stock, notice of
such redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 days nor more than 60 days prior
to the redemption date, to each holder of record of the shares to
be redeemed at such holder's address as the same appears on the
stock register of the Corporation; provided that neither the
failure to give such notice nor any defect therein shall affect
the validity of the giving of notice for the redemption of any
share of PIK Preferred Stock to be redeemed except as to the
holder to whom the Corporation has failed to give said notice or
except as to the holder whose notice was defective. Each such
notice shall state: (i) the redemption date; (ii) the amount of
shares of PIK Preferred Stock that are being redeemed and, if
less than all the shares held by such holder are to be redeemed
from such holder, the number of shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places
where certificates for such shares are to be surrendered for
payment of the redemption price; and (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption
date. In the event that fewer than all the outstanding shares of
PIK Preferred Stock are to be redeemed, the number of shares to
be redeemed shall be determined by the Board of Directors and the
shares to be redeemed shall be selected pro rata, except that in
any redemption of fewer than all the outstanding shares of PIK
Preferred Stock, the Corporation may redeem all shares held by
any holders of a number of shares not to exceed 100 as may be
specified by the Corporation.
(b) Notice having been mailed as aforesaid, from and
after the redemption date (provided that on or prior to the
redemption date the Corporation shall have irrevocably deposited
funds for such redemption in trust for the holders of PIK
Preferred Stock), dividends on the shares of PIK Preferred Stock
so called for redemption shall cease to accrue, and such shares
shall no longer be deemed to be outstanding and shall have the
status of authorized but unissued shares of Preferred Stock,
unclassified as to series, and shall not be reissued as shares of
7
PIK Preferred Stock unless reissued as a stock dividend on shares
of PIK Preferred Stock, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from
the Corporation the redemption price) shall cease. Upon
surrender in accordance with said notice of the certificates for
any shares so redeemed (properly endorsed or assigned for transfer,
if the Board of Directors of the Corporation shall so require and
the notice shall so state), such share shall be redeemed by the
Corporation at the redemption price. In case fewer than all the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares
without cost to the holder thereof.
7. Voting Rights. (a) The holders of record of shares of
PIK Preferred Stock shall not be entitled to any voting rights
except as hereinafter provided in this paragraph 7 or as
otherwise provided by law.
(b) (i) If at any time or times dividends payable
(whether in cash or shares of PIK Preferred Stock) on PIK
Preferred Stock shall be in arrears and unpaid in an amount equal
to two full annual dividends (whether or not consecutive) or if
the Corporation shall have failed to discharge its Mandatory
Redemption Obligation, then the number of directors constituting
the Board of Directors, without further action, shall be
increased by two and the holders of PIK Preferred Stock shall
have the exclusive right, voting separately as a class, to elect
the directors of the Corporation to fill such newly created
directorships, 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 initially either at a special meeting of the holders of PIK
Preferred Stock, called as hereinafter provided, or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at
such annual meetings or by the written consent of the holders of PIK
Preferred Stock. Such voting right shall continue until such time as
all accrued dividends accumulated on the PIK Preferred
Stock shall have been paid in full, or the Corporation has fulfilled
its Mandatory Redemption Obligation, as the case may be, at which time
such voting right of the holders of PIK Preferred Stock
shall terminate, subject to revesting in the event of each and every
subsequent failure of the Corporation of the character described above.
(iii) At any time when such voting right shall have
vested in the holders of PIK Preferred 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 PIK Preferred
Stock then outstanding, addressed to the Secretary of the Corporation,
call a special meeting of holders of PIK Preferred Stock. Such meeting
shall be held at the earliest practicable date upon the notice required
for annual meetings of stockholders at the place for holding annual meetings
of stockholders of the Corporation or, if none, at a place designated by the
Secretary of the Corporation or if the request is delivered by the holder
of more than a majority of the outstanding PIK Preferred Stock, then
at the location within the U.S. reasonably designated by the requesting
holder. If such meeting
8
shall not be called by the proper officer of the Corporation within 30
days after the personal service of such written request upon the Secretary
of the Corporation, or within 30 days after mailing the same within the
United States, by registered mail, addressed to the Secretary of the
Corporation at its principal office (such mailing to be evidenced by the
registry receipt issued by the postal authorities), then the holders of
record of 10% of the shares of PIK Preferred Stock then outstanding may
designate in writing a holder of PIK Preferred Stock to call such meeting
at the expense of the Corporation, and such meeting may be called by such
Person so designated upon the notice required for annual meetings of
stockholders and shall be held at the same place as is elsewhere provided
in this paragraph (b)(iii) of this Section 7. Any holder of PIK Preferred
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
holders of PIK Preferred Stock 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 held for the purpose of electing
directors at which the holders of PIK Preferred Stock shall have the
right to elect 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 PIK Preferred Stock shall be required and be sufficient to
constitute a quorum of such class for the election of directors by such
class. At any such meeting or adjournment thereof (A) the absence of a
quorum of the holders of PIK Preferred Stock shall not prevent the election
of directors other than those to be elected by the holders of stock of
such class 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 directors to be elected by the holders of PIK Preferred Stock and (B)
in the absence of a quorum of the holders of any class of
stock entitled to vote for the election of directors, a majority of the
holders present in person or by proxy of such class shall
have the power to adjourn the meeting for the elections of directors which
the holders of such class are entitled to
elect, from time to time, without notice (except as required by law) other
than announcement at the meeting, until a quorum shall be present.
(v) The term of office of all directors elected by the
holders of PIK Preferred Stock pursuant to paragraph (b)(i) of this Section
7 in office at any time when the aforesaid voting rights are vested in the
holders of PIK Preferred Stock shall terminate upon the election of
their successors at any meeting of holders of PIK Preferred Stock for the
purpose of electing directors. Upon any termination of the aforesaid voting
rights in accordance with paragraph (b)(ii) of this Section 7, the term of
office of all directors elected by the holders of PIK Preferred Stock
pursuant to paragraph (b)(i) of this Section 7 then in
office shall thereupon terminate and upon such termination the number
of directors constituting the Board of Directors, shall, without further
action, be reduced by two, subject
9
always to the increase of the number of directors pursuant to paragraph
(b)(i) of this Section 7 in case of the future right of holders of PIK
Preferred Stock to elect directors as provided herein.
(vi) In case of any vacancy occurring among the directors
so elected, the remaining director who shall have been so elected may
appoint a successor to hold office for the unexpired term of the director
whose place shall be vacant. If both directors so elected by the holders
of PIK Preferred Stock shall cease to serve as directors before their terms
shall expire, the holders of PIK Preferred Stock then outstanding may, at a
special meeting of the holders called as provided above, elect successors
to hold office for the unexpired terms of such directors whose places shall
be vacant.
(c) Without the written consent of a majority of the
outstanding shares of PIK Preferred Stock or the vote of holders
of a majority of the outstanding shares of PIK Preferred Stock at
a meeting of the holders of PIK Preferred Stock called for such
purpose, the Corporation will not authorize the issuance of any
Senior Securities or any securities exchangeable or convertible
into any Senior Securities or amend, alter or repeal any
provision of this Certificate of Designations (by merger or
otherwise) so as to materially and adversely affect the
preferences, rights or powers of the PIK Preferred Stock. No
other series of the Corporation's preferred stock shall have the
right to vote with the PIK Preferred Stock as a single class on
any matter.
(d) (i) The creation, authorization or issuance of any
shares of any Junior Securities or Parity Securities, or the
creation, authorization or issuance of any obligation or security
convertible into or evidencing the right to purchase any Junior
Securities or Parity Securities, (ii) the creation of any
indebtedness of any kind of the Corporation, or (iii) the
increase or decrease in the amount of authorized capital stock of
any class (including the Preferred Stock, but excluding the PIK
Preferred Stock) or any increase, decrease or change in the par
value of any such class other than the Preferred Stock, shall not
require the consent of the holders of PIK Preferred Stock and
shall not be deemed to affect adversely the rights, preferences,
privileges and voting rights of shares of PIK Preferred Stock.
(e) In exercising the voting rights set forth in this
Section 7, each share of PIK Preferred Stock shall have one vote
per share. Except as otherwise required by applicable law or as
set forth herein, the shares of PIK Preferred Stock shall not
have any relative, participating, optional or other special
voting rights and powers and the consent of the holders thereof
shall not be required for the taking of any corporate action.
8. Reports. So long as any of the PIK Preferred Stock is
outstanding, the Corporation will furnish the holders thereof
with the quarterly and annual financial reports that the
Corporation is required to file with the Securities and Exchange
Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934.
10
9. Conversion Rights. The holders of the PIK Preferred Stock
shall be subject to the following with respect to the conversion
of the PIK Preferred Stock into shares of Common Stock (the
"Conversion Rights"):
(a) Conversion.
(i) Each holder of PIK Preferred Stock is entitled, at such
holder's option, at any time on or before the close of business on the
business prior to January 31, 2015, or in case the PIK Preferred Stock
or a portion is called for redemption or the holder thereof has
exercised the holder's right to require the Corporation to repurchase
his shares of PIK Preferred Stock or such portion thereof, then in respect
of such shares until and including, but (unless the Corporation defaults
in making the payment due upon redemption or repurchase, as the case may
be) not after, the close of business on the business day prior to the
redemption date or such repurchase date, as the case may be, to convert
such holder's shares of PIK Preferred Stock into fully paid and
nonassessable shares of Common Stock of the Corporation at the
Conversion Rate of shares of Common Stock of the Corporation which is
set forth in Section 11(b) below, by surrender of his shares of PIK
Preferred Stock, duly endorsed or assigned to the Corporation
or in blank, to the Corporation or any transfer agent for the PIK
Preferred Stock.
(ii) The Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such
conversion unless the certificates evidencing such shares of PIK
Preferred Stock are either delivered to the Corporation or its transfer
agent as provided below, or the holder notifies the Corporation or
its transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any
loss incurred by it in connection with such certificates. Upon the
conversion of the PIK Preferred Stock, the holders of PIK Preferred
Stock shall surrender the certificates representing such shares at
the office of the Corporation or any transfer agent for the PIK
Preferred Stock. Thereupon, there shall be issued and delivered to
such holder promptly at such office and in its name as shown on such
surrendered certificate or certificates, a certificate or certificates
for the number of shares of Common Stock into which the shares of
PIK Preferred Stock surrendered were convertible on the date on which
such conversion occurred.
(iii) Notwithstanding anything to the contrary set forth
herein, as a condition to the Corporation's obligation to issue to
each holder of PIK Preferred a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled,
each such holder (by acceptance of any certificate for shares of PIK
Preferred Stock) agrees, in connection with the Corporation's Qualifying
IPO (as defined in this clause (iii) below), to enter into a written
agreement not to effect any public sale or distribution of any shares
of Common Stock issuable to such holder, if and to the extent requested
by the managing underwriter for the Qualifying IPO as to the PIK
Preferred Stock and substantially
11
all Parity Securities and Junior Securities during the 14 days prior
to, and during an up to 180-day period beginning on, the effective date
of the registration statement relating to the Qualifying IPO without
the written consent of such managing underwriter; provided that each
such holder has received written notice of such registration at least
5 business days prior to the anticipated beginning of the 14-day period
referred to above. The term "Qualifying IPO" means a firmly
underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933 covering the
offer and sales of shares of Common Stock for the account of the
Corporation in which the gross cash proceeds to the Corporation
(before underwriting discounts, commissions and fees) are not less
than $50,000,000.
(b) Conversion Rate. The Conversion Rate shall be 0.2857142
shares of Common Stock for each share of PIK Preferred Stock. In
case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock (including where such
result is accomplished by the payment of a stock dividend upon
the Common Stock), the Conversion Rate in effect at the opening
of business on the day following the day upon which such
subdivision becomes effective shall be proportionately increased,
and, conversely, in case outstanding shares of Common Stock shall
be combined into a smaller number of shares of Common Stock, the
Conversion Rate in effect at the opening of business on the day
following the day upon which such subdivision or combination
becomes effective shall be proportionately reduced, such increase
or reduction, as the case may be, to become effective immediately
after the opening of business on the day following the day upon
which such subdivision or combination becomes effective.
(c) Mechanics of Conversion. Each holder of PIK Preferred
Stock who wishes to convert his shares of PIK Preferred Stock into
shares of Common Stock pursuant to this Section 9 shall surrender
the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or any transfer agent for the PIK
Preferred Stock. Thereupon, the Corporation shall promptly issue
and deliver at such office to such holder a certificate or
certificates for the number of shares of Common Stock to which
such holder is entitled and shall promptly pay in cash or in
additional shares of Common Stock, any declared and unpaid
dividends on the shares of PIK Preferred Stock being converted.
(d) Fractional Shares. At the option of the Corporation, no
fractional shares of Common Stock shall be issued upon conversion
of PIK Preferred Stock and all shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one
share of PIK Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion
would result in the issuance of any fractional share. If, after
the aforementioned aggregation, the conversion would result in
the issuance of any fractional share, the Corporation may at its
option, in lieu of issuing any fractional share, pay cash equal
to the product of such fraction multiplied by the Current Market
Price (as defined below) of the Common Stock. "Current Market
Price" means, in the event the Common Stock is publicly traded,
the average of the daily closing prices per share of Common Stock
for 30 consecutive trading days ending no more than 15 business
days before the conversion date (as adjusted for any stock
dividend, split, combination or reclassification that took effect
during such period). The closing price for each
12
day shall be the last reported sale price regular way or, in case
no such reported sale takes place on such day, the average of the
last closing bid and asked prices regular way, in either case on
the principal national securities exchange on which the Common Stock
is listed or admitted to trading, or if not listed or admitted to
trading on any national securities exchange, the closing sale price
for such day reported by NASDAQ, if the Common Stock is traded over-
the-counter and quoted in the National Market System, or if the
Common Stock is so traded, but not so quoted, the average of the
closing bid and asked prices of the Common Stock as reported by
NASDAQ or any comparable system or, if the Common Stock is not
listed on NASDAQ or any comparable system, the average of the
closing bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. selected from
time to time by the Corporation for that purpose. If the Common
Stock is not traded in such manner that the quotations referred
to above are available for the period required hereunder, Current
Market Price per share of Common Stock shall be deemed to be the
fair value as determined by the Board of Directors, irrespective
of any accounting treatment.
(e) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the shares of the PIK
Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of
all outstanding shares of the PIK Preferred Stock. If at any
time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then
outstanding shares of the PIK Preferred Stock, the Corporation
with take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
(f) Notices. Any notice to a holder of shares of PIK
Preferred Stock pursuant to the provisions of this Section 9 shall
be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by
confirmed facsimile if sent during normal business hours of the recipient;
if not, then on the next business day, (iii) five (5) days after
having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of
such holder appearing on the books of the Corporation.
10. Offer to Purchase in Connection with Asset Sales. (a) If,
as of the last day of any calendar month, the Corporation has
Excess Proceeds (as defined below) not theretofore subject to an
Offer to Purchase pursuant to this Section 10 totaling at least
$10 million, the Corporation must commence, not later than 30
days after such date, and consummate an Offer to Purchase from
the holder of the PIK Preferred Stock (and if required by the
terms of Parity Securities from the holders thereof), on a pro
rata basis, such amount of shares of PIK Preferred Stock (and
Parity Securities) which is equal to the Excess Proceeds on such
date, at a purchase price per share equal to $1,000, plus accrued
and unpaid dividends to the payment date.
13
(b) The following terms shall have the following meanings:
(i) The term "Excess Proceeds" means the Corporation
has Net Cash Proceeds (as defined in the Indenture referred to in
clause (ii) below) from its Asset Sales (as defined in the Indenture)
after complying with (A) the provisions of Section 4.10 of the
Indenture which require the Company to utilize such proceeds (1) to
permanently repay its Senior Indebtedness (as defined in the Indenture)
within 12 months of the receipt of such Net Cash Proceeds, (2) to
invest such Net Cash Proceeds within such 12 months in Replacement
Assets (as defined in the Indenture) or (3) to fund an offer to purchase
the Public Notes (as defined in clause (iii) below) (and, if required
by the terms of any Indebtedness (as defined in the Indenture) that is
pari passu with the Public Notes, from the holders of such pari passu
Indebtedness) pursuant to Section 4.10 of the Indenture and (B)
the provisions of Section 5 of the 8.18% Convertible Subordinated Notes
due 2013, originally issued on January 1, 2003, in $17,641,800 aggregate
principal amount, to fund an offer to purchase such Notes pursuant to
such Section 5.
(ii) The term "Indenture" means the Indenture dated as of
July 30, 2001, in respect of the Public Notes.
(iii) The term "Public Notes" means the Corporation's 9 3/4%
Senior Subordinated Notes due 2011, originally issued in $300
million aggregate principal amount.
11. Sale or Assignment of Shares of PIK Preferred Stock. A
holder of shares of PIK Preferred Stock may not sell or assign
any shares of PIK Preferred Stock except in a transaction which
is entitled to an exception from, or is not subject to the
registration requirements of, the Securities Act of 1933 and,
before making a sale or assignment of such shares, the holder
agrees, by its acceptance hereof, to provide the Corporation with
an opinion of counsel satisfactory to the Corporation that such
registration is not required.
12. General Provisions. (a) The term "Person" as used
herein means any corporation, limited liability company,
partnership, trust, organization, association, other entity or
individual provided that notwithstanding the foregoing, for the
purposes only of the provisions of paragraph (f) of Section 5
above, the term "Person" as used in such paragraph means the
definition of the term "Person" found in Section 3(a)(9) of the
Securities Exchange Act of 1934.
(b) The term "outstanding", when used with reference
to shares of stock, shall mean issued shares, excluding shares
held by the Corporation or a subsidiary.
(c) The headings of the paragraphs, subparagraphs,
clauses and subclauses of this Certificate of Designations are
for convenience of reference only and shall not define, limit or
affect any of the provisions hereof.
14
IN WITNESS WHEREOF, Vanguard Health Systems, Inc. has caused
this Certificate of Designations to be signed and attested by the
undersigned this 17th day of December, 2002.
VANGUARD HEALTH SYSTEMS, INC.
By:/s/ Joseph D. Moore
---------------------------------------
Name: Joseph D. Moore
Title: Executive Vice President
ATTEST:
/s/ Ronald P. Soltman
- ---------------------------------------
Name: Ronald P. Soltman
Secretary
15