Exhibit 3.1(m)
CERTIFICATE OF DESIGNATION
OF
SERIES C SENIOR CUMULATIVE COMPOUNDING CONVERTIBLE REDEEMABLE
PREFERRED STOCK
OF
MENTUS MEDIA CORP.
Pursuant to the Provisions of
Section 151 of the General
Corporation Law of the State of Delaware
Mentus Media Corp., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies that, pursuant to authority
contained in Article IV of its Certificate of Incorporation and in accordance
with Section 151 of the General Corporation Law of the State of Delaware, the
Board of Directors of the Corporation duly adopted the following resolution:
RESOLVED, that pursuant to authority expressly granted by Article IV
of the Certificate of Incorporation of Mentus Media Corp., a Delaware
corporation (the "Corporation"), the Board of Directors of the Corporation
hereby creates and authorizes the issuance of a series of the preferred stock,
par value $1.00 per share, of the Corporation, to consist of 90,000 shares, and
hereby fixes the designation, dividend rights, voting powers, rights on
liquidation or dissolution and other preferences and relative, participating,
optional or other rights, and the qualifications, limitations or restrictions of
the shares of such series (in addition to any thereof set forth in the
Corporation's Certificate of Incorporation that are applicable to the
Corporation's preferred stock of all series) as follows:
1. Designation; Original Issuance; Status of Reacquired or Converted
Shares.
(a) The designation of the series of the preferred stock, par value
$1.00 per share, of the Corporation authorized hereby is "Series C Senior
Cumulative Compounding Convertible Redeemable Preferred Stock" (the "Series C
Preferred Stock"). The dividend rights, voting powers, rights on liquidation or
dissolution and other preferences and relative, participating, optional or other
rights, and the qualifications, limitations or restrictions of the shares of
such series are as set forth in this resolution.
(b) Shares of the Series C Preferred Stock shall be originally
issued pursuant to the Purchase Agreements (as defined in Section 2 below) and,
thereafter, no additional shares of Series C Stock shall be issued by the
Corporation other than issuances (i) expressly provided for in Section 2.4 of
the Series C Purchase Agreement, (ii) pursuant to the Pugliese Employment
Agreement (as defined in Section 2 below), (iii) pursuant to the Co-Investment
Agreement (as defined in Section 2 below), (i) upon permitted transfers of
shares of Series C Stock or (iv) with the prior written consent of the Majority
Senior Holders.
(c) All shares of Series C Preferred Stock received by the
Corporation upon conversion or redeemed, retired, purchased or otherwise
acquired by the Corporation shall be retired and shall be restored
to the status of authorized, undesignated and unissued shares of preferred stock
of the Corporation and may be reissued as part of another series of the
preferred stock of the Corporation, but such shares shall not be reissued as
Series C Preferred Stock or Series B Preferred Stock.
2. Certain Definitions. The terms defined in this Section 2 shall have the
meanings herein specified:
"Action" has the meaning set forth in Section 3(h).
"Advisor" has the meaning set forth in Section 3(h).
"Additional Shares of Common Stock" means any shares of Common Stock
issued or deemed to be issued by the Corporation after the Closing Time other
than shares issued upon conversion of any Series C Share.
"Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly through or with one or more intermediaries,
controls, is controlled by or is under common control with, such Person. The
term "affiliated" (whether or not capitalized) shall have a correlative meaning.
For the purposes of this definition, "control", as used with respect to any
Person, means the possession, directly or indirectly through or with one or more
intermediaries, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise. The terms "controlled by" and "under common control
with" shall have correlative meanings. For purposes hereof, no holder or group
of holders (whether or not affiliated with or otherwise related to each other
and whether or not acting in concert with respect to any matter or matters) of
shares of Series B Preferred Stock or Series C Preferred Stock shall be deemed
to be an Affiliate of the Corporation or any of its Affiliates solely by reason
of the ownership of Series B Shares or Series C Shares or the possession or
exercise of any right, power or privilege of the holders of Series B Shares or
Series C Shares as such. For purposes hereof, neither the Corporation nor any
Subsidiary shall be deemed to be an Affiliate of any TFC Holder and no TFC
Holder nor any Affiliate of any TFC Holder shall be deemed to be an Affiliate of
the Corporation.
"Bankruptcy Code" means Title 11 of the United States Code.
"Beneficial Owner" means a beneficial owner within the meaning of
Rules 13d-3 and 13d-5 under the Exchange Act, as interpreted by the Commission,
including the provision of such Rules that a Person shall be deemed to have
beneficial ownership of all securities that such Person has a right to acquire
within 60 days, provided that a Person shall not be deemed a beneficial owner
of, or to own beneficially, any securities if such beneficial ownership (i)
arises solely as a result of a revocable proxy delivered in response to a proxy
or consent solicitation made pursuant to, and in accordance with, the Exchange
Act and the applicable rules and regulations thereunder and (ii) is not also
then reportable on Schedule 13D under the Exchange Act. The terms (whether or
not capitalized) "beneficially own" and "owned beneficially" shall have
correlative meanings.
"Board of Directors" means the Board of Directors of the
Corporation.
"Business Day" means any day other than a Saturday, a Sunday or a
day on which banking institutions in either New York, New York, or the city and
state in which the
principal executive offices of the Corporation within the United States are
located are authorized or obligated by law or executive order to close.
"capital stock" when used with respect to any corporation means
(unless the context otherwise indicates) any and all shares of capital stock
(however designated) of such corporation, including each class and series of
common stock and preferred stock of such corporation, any class or series, any
and all stock appreciation rights and any and all equivalents of any of the
foregoing, and including any security or interest convertible into or warrant,
option or other right (absolute or contingent) to subscribe for, purchase or
otherwise acquire any of the foregoing, in each case whether or not evidenced by
any certificate, instrument or other document and whether voting or nonvoting.
"Change in Control" means the occurrence of any of the following:
(i) any "person" (within the meaning of that term as used in
the Rules under Section 13(d) and 14(d) of the Exchange Act, as interpreted by
the Commission), other than any TFC Holder or any Affiliate of any TFC Holder or
any group or persons acting in concert which includes any TFC Holder or any
Affiliate of any TFC Holder and other than Thomas Pugliese and Gerard Joyce, who
was not, on the Closing Date, the Beneficial Owner, directly or indirectly, of
50% or more of the combined voting power represented by all then outstanding
Common Stock of the Corporation becomes (after the Closing Date) the Beneficial
Owner, directly or indirectly, of 50% or more of the combined voting power
represented by all outstanding Common Stock of the Corporation, whether as a
result of issuances, redemptions, repurchases or transfers of Common Stock or
otherwise; or
(ii) the Corporation consolidates with, or merges with or
into, another Person or any Person consolidates with, or merges with or into,
the Corporation, in any such event pursuant to a transaction in which the
outstanding Common Stock of the Corporation is converted into or exchanged for
cash, securities, equity interests or other property and immediately after such
transaction the Persons who were the Beneficial Owners of the outstanding Common
Stock of the Corporation immediately prior to such transaction are not the
beneficial owners, directly or indirectly, of more than 50% of the combined
voting power represented by all then outstanding common stock of the surviving
or transferee Person; or
(iii) the Corporation, in one or more transactions, sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person or Persons; or
(iv) for any reason (including death or disability), Gerard
Joyce and Thomas Pugliese cease to be directors of the Corporation, or Gerard
Joyce ceases function as a senior executive officer of the Corporation and
Thomas Pugliese ceases to function as a senior executive officer of the
Corporation, unless in any such case the Corporation replaces such person in
such office within 90 days and such replacement is approved by the Majority
Senior Holders, which approval shall not be unreasonably withheld; or
(v) for any reason (including death or disability), Gerard
Joyce or Thomas
Pugliese ceases to be the Beneficial Owner, directly or indirectly, of 80% or
more of the shares of Common Stock held by him on September 25, 1996 (as
appropriately adjusted for any subdivision, combination, reclassification,
recapitalization, reorganization, merger or other change of or in the
outstanding Common Stock), other than any shares thereof which were "Restricted
Shares" issued subject to forfeiture pursuant to his employment agreement with
the Corporation as amended and in effect on September 25, 1996.
For purposes of determining the percentage of the combined voting power of the
outstanding Common Stock beneficially owned by any particular Person as of any
time, any Common Stock not actually outstanding but which is deemed to be
beneficially owned by a Person through the application of the definition of
"Beneficial Owner" above in this Section 2 shall be deemed to be outstanding,
but no Common Stock not actually outstanding but which is deemed to be
beneficially owned by any other Person through the application of such
definition shall not be deemed to be outstanding. For purposes of clause (v) of
this definition, Mr. Joyce or Mr. Pugliese, as the case may be, shall be deemed
to continue to be the Beneficial Owner of shares of Common Stock transferred by
him for estate planning purposes to his spouse or minor children or to a trust
described in Section 664 of the Internal Revenue Code of 1986, as amended, of
which the income beneficiaries consist exclusively of one or more of him, his
spouse and his minor children, so long as Mr Joyce or Mr. Pugliese, as the case
may be, continues to have the power to vote and dispose or direct the voting or
disposition of such transferred shares.
"Closing Date" means the date on which the closing of the
consummation of the first issuance of Series C Shares to the Purchasers in
accordance with the Series C Purchase Agreement occurs.
"Closing Time" means 4:30 P.M., New York City time, on the Closing
Date.
"Co-Investment Agreement" means a stock purchase agreement pursuant
to which Lazard, Freres & Co., any of its Affiliates or one or more other
Persons who are designated by it and reasonably acceptable to the Corporation
acquire shares of the Series C Preferred Stock after the Closing Date and that
either is (i) substantially in the form of the Series C Purchase Agreement,
provides for the purchase of Series C Preferred Stock for a total purchase price
of not less than $1,000,000 and provides for the closing thereunder to occur not
later than 15 Business Days after the Closing Date or (ii) is in such form and
provides for the purchase and sale of such number of shares of Series C
Preferred Stock for such price, at such time and on such terms and conditions as
may be approved by a majority of the Board of Directors, which majority includes
the Series B Director, in each case as the same may be amended from time to time
in accordance with its terms and with the prior written consent of the Majority
Senior Holders.
"Commission" means the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" means the Common Stock, $.01 par value per share, of
the Corporation as constituted on the Closing Date, and any capital stock into
which such Common
Stock may thereafter be changed, and (except where the context otherwise
unambiguously indicates) shall also include (i) capital stock of the Corporation
of each and every other class or series (regardless of how denominated) which is
also not preferred as to dividends or assets on liquidation over any other class
or series of stock of the Corporation and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 9(w)) received by or distributed to the holders of Common
Stock of the Corporation in the circumstances contemplated by Section 9(w).
"Company Parties" means the Corporation and its Subsidiaries.
"Compensation Committee" has the meaning set forth in Section 7(f).
"Conversion Price" means, as of any time, the initial price of
Seventy-Seven Dollars ($77), as such initial price shall have from time to time
been cumulatively adjusted pursuant to Section 9 through such time.
"Conversion Rate" means, as of any time, the rate, determined
pursuant to the second sentence of Section 9(a), at which each share of Series C
Preferred Stock may be converted into Common Stock, as such rate shall have from
time to time been cumulatively adjusted pursuant to Section 9 through such time.
"Conversion Securities" means, with respect to any Series C Share at
any time, each class and series of Conversion Stock, each class, series and
issue of any other securities, and any Rights with respect to any of such
Conversion Stock or other securities, any shares, number or other amount of
which at such time are deliverable to a Holder upon conversion of any Series C
Share.
"Conversion Stock" means, with respect to any Series C Share at any
time, the Common Stock, each other class or series of capital stock and any
Rights with respect to any of the foregoing any shares, number or other amount
of which at such time is deliverable to a Holder upon conversion of any Series C
Share.
"Convertible Securities" means evidences of indebtedness, shares of
stock or other securities or obligations which are convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for any Common Stock, either immediately or upon the occurrence of a
specified date or a specified event or the satisfaction or happening of any
other condition or contingency.
"Current Market Price" means, in respect of any share of Common
Stock as of any time, (i) if the Common Stock shall not then be Publicly Traded,
the Fair Market Value per share of Common Stock as at such date as determined by
the Board of Directors in good faith (subject to subdivision (F) of Section
9(p), if applicable), or (ii) if the Common Stock is then Publicly Traded, the
average of the reported last sales prices for the 30 consecutive Trading Days
commencing 40 Trading Days before the date in question. The reported last sales
price for each day shall be the reported last sales price, regular way (and if
no such sales take place on any day, such day shall not be a Trading Day), as
reported on the New York Stock
Exchange Composite Tape or, if the Common Stock is not listed or admitted to
trading on the New York Stock Exchange at such time, in the principal
consolidated or composite transaction reporting system on the principal national
securities exchange on which such security is listed or admitted to trading or,
if not listed or admitted to trading on any national securities exchange, on the
Nasdaq National Market or, if such security is not quoted on the Nasdaq National
Market, the average of the closing bid and asked prices on such day in the
over-the-counter market as reported by the National Association of Securities
Dealers, Inc. or, if bid and asked prices for the security on each such day
shall not have been reported through the National Association of Securities
Dealers, Inc., the average of the bid and asked prices for such date as
furnished by any New York Stock Exchange member firm regularly making a market
in such security selected for such purpose by the Board of Directors. As used
herein, the term "Trading Day" means a day on which the New York Stock Exchange,
each national securities exchange on which the Common Stock is listed and the
Nasdaq National Market are open for business. The Common Stock shall be
considered to be "Publicly Traded" as of any date if on such date (i) the Common
Stock is registered under Section 12(b) or 12(g) of the Exchange Act and (ii)
the Common Stock is listed for trading on a national securities exchange
registered under the Exchange Act or traded in the over-the-counter market and
quoted in an automated quotation system of the National Association of
Securities Dealers, Inc.
"Dividend Date" means (i) in the case of the Series C Preferred
Stock, any Dividend Payment Date; and (ii) in the case of the Series B Preferred
Stock, any "Dividend Payment Date" as defined in the Series B Certificate of
Designation.
"Dividend Payment Date" has the meaning set forth in Section 4(a).
"Dividend Period" means each quarterly period from and including any
Dividend Payment Date (or, in the case of the first Dividend Period, from and
including the Closing Date) to but not including the next successive Dividend
Payment Date.
"Employee Option" means any option to purchase Common Stock for cash
which is granted by or with the approval of the Compensation Committee to any
director, officer, employee or consultant of the Corporation or any subsidiary
of the Corporation pursuant to either (i) the Corporation's 1993 Stock Option
Plan or the Corporation's 1994 Stock Option Plan as in effect on the Closing
Date or (ii) any other option plan adopted by the Corporation after the Closing
Date with the prior approval of the Majority Senior Holders, in each case as the
same may be amended from time to time with the prior approval of the Majority
Senior Holders.
"Entity" means any corporation, limited liability company, general
or limited partnership, joint venture, association, joint stock company, trust,
other unincorporated business or organization or other Person which is not
either a natural person or a governmental authority or agency.
An "equity interest" in or of any Entity includes any capital stock
or other equity security issued by such Entity, any partnership (general or
limited) or joint venture interest in
such Entity, any other equity, ownership, participating or beneficial interest
in such Entity, any stock appreciation or other equity appreciation right with
respect to such Entity, and any equivalent of any of the foregoing, regardless
of how denominated and whether voting or non-voting, and any security or
interest convertible into or warrant, option or other right (absolute or
contingent) to subscribe for, purchase or otherwise acquire, any of the
foregoing, in each case whether or not evidenced by any certificate, instrument
or other document and whether voting or nonvoting.
"Election Form" has the meaning set forth in Section 3(g).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Rights" means all Rights (including stock options issued
pursuant to the Corporation's 1993 Stock Option Plan and the Corporation's 1994
Stock Option Plan) and Convertible Securities, including the Series A Preferred
Stock and the Series B Preferred Stock, but not including any Series C Shares,
which were outstanding at the Closing Time.
"Fair Market Value" means, in respect of any security, asset or
other property, the price at which a willing seller would sell and a willing
buyer would buy such security, asset or other property having full knowledge of
the facts, in an arm's-length auction transaction without time constraints, and
without being under any compulsion to buy or sell. The determination of the Fair
Market Value of the Corporation, the Common Stock or any other capital stock of
the Corporation shall be determined on a going concern or liquidation basis,
whichever yields the higher result, on the basis of the assumption that the
management and other key employees of the Corporation and its subsidiaries will
continue to be employed indefinitely and without treating as liabilities the
amount, if any, (i) payable or which may become payable by the Corporation
pursuant to the indemnification provisions of the TFC Series B Purchase
Agreement, the Co-Investment Agreement or any Purchase Agreement, (ii) any
indebtedness of the Corporation to Gerard P. Joyce subject to the Agreement,
dated as of September 25, 1996, among the Corporation, Mr. Joyce and the TFC
Partnerships, as amended, or (iii) in the case of any Participation Event, any
indebtedness or liability of the Corporation or any of its subsidiaries to its
controlling Person or Persons or any of their respective Affiliates. In the case
of a determination of the Fair Market Value of a share of capital stock of the
Corporation as of any time, if such capital stock is Publicly Traded at such
time, the Fair Market Value of a share of such capital stock shall be the
Current Market Price thereof as of such time and (ii) if such capital stock is
not Publicly Traded at such time, the Fair Market Value of a share of such
capital stock shall be the price determined as of such time in accordance with
the first three sentences of this definition, without giving effect to any
discount for a minority interest, to the fact that such capital stock is not
Publicly Traded, to any lack of liquidity of such capital stock or to the fact
(if true) that the Corporation has no class of equity security registered under
the Exchange Act.
"Holder" means a Person in whose name any Series C Share is
registered on the
books of the Corporation maintained for such purpose.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Insolvency Law" means the Bankruptcy Code and any other law,
foreign, federal or state, relating to bankruptcy, receivership, reorganization,
insolvency, adjustment, compromise or extension of debt or other relief of a
debtor from creditors.
"Investor Approved Action" has the meaning set forth in Section
3(h).
"Investor Preferred Stock" means the Series B Preferred Stock or the
Series C Preferred Stock.
"Investor Preferred Share" means any Series B Share or Series C
Share.
"Issue Date" means, with respect to any Investor Preferred Share,
the date of original issuance of such Investor Preferred Share. The date of
original issuance of the Series C Shares issued pursuant to any Purchase
Agreement or the Co-Investment Agreement is or shall be deemed to be the Closing
Date. The date of original issuance of each Series B Share issued pursuant to
the TFC Series B Purchase Agreement or any of the "Other Purchase Agreements"
referred to therein is September 25, 1996.
"Junior Stock" means (i) each class or series of Common Stock, (ii)
the Series A Preferred Stock of the Corporation, (iii) any other class or series
of capital stock of the Corporation hereafter created, other than (A) the Series
B Preferred Stock, (B) any class or series of Parity Stock (except to the extent
provided under clause (iv) of this sentence) and (C) any class or series of
Senior Stock (except to the extent provided under clause (iv) of this sentence),
and (iv) any class or series of Parity Stock or Senior Stock to the extent that
it ranks junior to the Series C Preferred Stock as to dividend rights, rights of
redemption or rights on liquidation, as the case may be. For purposes of clause
(iv) above, a class or series of Parity Stock or Senior Stock shall rank junior
to the Series C Preferred Stock as to dividend rights, rights of redemption or
rights on liquidation if the holders of shares of Series C Preferred Stock shall
be entitled to dividend payments, payments on redemption or payments of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or series.
"Liquidation Price" means, as of any time:
(i) in the case of any Series C Share, the sum of (A)
Seventy-Seven Dollars ($77.00) plus (B) an amount equal to all
unpaid dividends accrued on such Series C Share since the
Issue Date thereof which, pursuant to
Section 4(b) hereof, have been added to and remain part of the
Liquidation Price as of such time of determination, whether or
not such unpaid dividends have been earned or declared or
there are any unrestricted funds of the Corporation legally
available for the payment of dividends; and
(ii) in the case of any Series B Share, the "Liquidation
Price" of such Series B Share as of such time as defined in
and determined in accordance with the Series B Certificate of
Designation.
"Majority Holders" means, as of any time, the holder or holders of
record of at least a majority of the Series C Shares then outstanding.
"Majority Senior Holders" means, as of any time, the holder or
holders of Series B Shares, Series C Shares or both having an aggregate
Liquidation Price representing more than 50% of the total Liquidation Price of
all Series B Shares and Series C Shares then outstanding.
"Outstanding Common Shares" means, as of any time, all issued and
outstanding shares of Common Stock as of such date, except shares then owned or
held by or for the account of the Corporation or any subsidiary thereof.
Outstanding Common Shares shall not include any shares issuable upon exercise,
conversion or exchange of any Series B Shares, Series C Shares or other Rights
or Convertible Securities or issuable in payment of any dividend or other
distribution which has been declared but not actually paid, nor any other shares
which have not actually been issued.
"Parity Stock" means (i) the Series B Preferred Stock, (ii) the
Series C Preferred Stock and (iii) each class or series of capital stock of the
Corporation, if any, hereafter created with the approval of the Majority Senior
Holders and ranking on a parity basis with the Series C Preferred Stock as to
any of dividends, rights of redemption or rights on liquidation. Capital stock
of any class or series shall rank on a parity as to dividends, rights of
redemption or rights on liquidation with shares of Series C Preferred Stock,
whether or not the dividend rates, dividend payment dates, redemption or
liquidation prices per share or sinking fund provisions, if any, are different
from those of the Series C Preferred Stock if the holders of such stock shall be
entitled to the receipt of dividends, amounts distributable upon dissolution,
liquidation or winding up of the Corporation or redemption payments, as the case
may be, in proportion to their respective dividend rates, liquidation prices or
redemption prices, respectively, without preference or priority, one over the
other, as between the holders of such stock and the holders of shares of the
Series C Preferred Stock. No class or series of capital stock that ranks junior
to the Series C Preferred Stock as to rights on liquidation shall rank or be
deemed to rank on a parity basis with the Series C Preferred Stock as to
dividend rights or rights of redemption, unless the instrument creating or
evidencing such class or series of capital stock otherwise expressly provides.
"Participation Amount" means, with respect to any share of Investor
Preferred Stock as of any time, the aggregate amount that would be payable to
the holder of such share pursuant subsections (a) and (b) of Section 5 hereof if
it were assumed that at such time (i) the assets of the Corporation were sold in
a tax-free transaction for cash equal to the Fair Market Value of the
Corporation determined as of such time and (ii) the Corporation was dissolved
and liquidated, and the cash proceeds of the deemed sale of the Corporation's
assets were distributed to the Corporation's stockholders, including the holders
of the Investor Preferred Stock, the Series A Preferred Stock and the Common
Stock, in accordance with their respective preferences and priorities upon
dissolution and liquidation of the Corporation. For purposes of the calculation
of the Participation Amount as of any time, it shall be assumed that (i) all
Rights and Convertible Securities, including the Series A Preferred Stock, but
excluding the Series B Preferred Stock and the Series C Preferred Stock, that
are exercisable at such time were either exercised or not exercised, whichever
would result in the greatest payment to the holders thereof in the event of the
assumed dissolution and liquidation of the Corporation at such time as provided
in the first sentence of this definition, and (ii) all shares of Series B
Preferred Stock or Series C Preferred Stock then outstanding continue to be
outstanding and are not converted into Common Stock.
"Participation Event" means (i) any Change in Control, or (ii) any
consolidation, merger, binding share exchange or reorganization to which the
Corporation is party, except a consolidation, merger, share exchange or
reorganization in which the Corporation is the continuing corporation and which
does not result in any exchange or conversion of the outstanding shares of any
class or series of capital stock of the Corporation, any distribution, issuance
of securities or payment of other consideration to the holders of the
outstanding shares of any class or series of capital stock of the Corporation,
or change in the outstanding shares of any class or series of capital stock of
the Corporation (other than an increase in the number of shares thereof issued
and outstanding) or (iii) any sale, assignment, conveyance, leasing or other
disposition, in one or more transactions, of all or substantially all of its
assets to any Person or Persons.
"Person" means any individual, corporation, limited liability
company, general or limited partnership, joint venture, association, joint stock
company, trust, unincorporated business or organization, government or agency or
political subdivision thereof, or other entity, whether acting in an individual,
fiduciary or other capacity.
"Preferred Interest" as applied to the equity interests of any
Person means equity interests of any class or classes (however designated) which
are preferred as to the payments of dividends or distributions, as to rights of
redemption or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person, over equity interests of any other
class of such Person.
"Publicly Traded" is defined under the definition of "Current Market
Price" above
in this Section 2.
"Pugliese Employment Agreement" means the Employment Agreement,
dated August 1, 1990, between the Corporation and Thomas Pugliese, as amended
pursuant to the Amendment to Employment Agreement dated September 25, 1996 and
the Second Amendment to Employment Agreement dated the Closing Date, as the same
may be amended from time to time with the approval of the Series B Director, the
Series C Director or the Majority Senior Holders.
"Purchase Agreements" means (i) the Series C Purchase Agreement; and
(ii) one or more other stock purchase agreements, dated as of the Closing Date,
among the Corporation and certain purchasers named therein of shares of Series C
Preferred Stock, as the same may be amended from time to time in accordance with
its or their respective terms and with the prior written consent of the Majority
Senior Holders.
"Purchasers" means each of the TFC Partnerships and Pulitzer
Publishing Company.
"Qualified IPO" means either (i) consummation of an initial public
offering of the Corporation's Common Stock generating proceeds of at least $20
million on a pre-money equity valuation of at least $308 per share of Common
Stock (as appropriately adjusted for stock splits, reverse splits, stock
dividends or other reclassifications, reorganizations or similar events
affecting the capital stock of the Corporation, the record date for which occurs
after the Closing Date) or (ii) any date at which all of the following
statements are true: (A) the Common Stock is registered under Section 12(b) or
Section 12(g) of the Securities Exchange Act of 1934, as amended, (B) the Common
Stock is listed for trading on a national securities exchange registered under
the Exchange Act or traded in over-the-counter market and quoted in an automated
quotation system of the National Association of Securities Dealers, Inc., (C)
the average daily trading volume of shares of the Common Stock reported by such
exchange or quotation systems for the period of 5 consecutive trading days prior
to such date of closing has exceeded 0.7% of the number of shares of Common
Stock actually issued and outstanding on such date and (D) the average closing
price for the period of 20 consecutive trading days before such date is at least
$308 per share (as appropriately adjusted for stock splits, reverse splits,
stock dividends or other reclassifications, reorganizations or similar events
affecting the capital stock of the Corporation, the record date for which occurs
after the Closing Date).
"Record Date" means, for dividends payable on any Dividend Payment
Date, the fifteenth day of the month immediately preceding such Dividend Payment
Date or if any such day is not a Business Day, then on the next preceding or the
next following Business Day, as and if designated by the Board of Directors.
"Redeemable Equity" of any Person means any equity interest of such
Person that
by its terms or otherwise, absolutely, contingently or otherwise, is required to
be redeemed or is redeemable at the option of the holder thereof at any time.
"Redemption Agent" has the meaning set forth in Section 6(f).
"Redemption Date" as to any share of Series C Preferred Stock shall
mean:
(i) in the case of a redemption pursuant to Section 6(a), the
date specified in the notice of redemption given in accordance with Section
6(e); or
(ii) in the case of a redemption pursuant to Section 6(b) on
the fifth anniversary of the Closing Date, the date of such anniversary; or
(iii) in the case of a redemption pursuant to Section 6(c),
the tenth Business Day after the Section 6(c) Election Notice is given;
provided that in none of the foregoing cases shall such date be a Redemption
Date unless (A) the applicable Redemption Price is actually indefeasibly paid in
full on such date or (B) such date is a Business Day and the consideration
sufficient for the payment thereof, and for no other purpose, has been
indefeasibly deposited in a trust fund with the Redemption Agent, with
irrevocable instructions and authority to the Redemption Agent to pay the
Redemption Price, all in accordance with Section 6(f), and if the Redemption
Price is not so indefeasibly paid in full or the consideration sufficient
therefor is not so indefeasibly deposited, then the Redemption Date will be the
date on which such Redemption Price indefeasibly and is fully paid or the first
Business Day on which the consideration sufficient for the payment thereof, and
for no other purpose, has been so indefeasibly deposited.
"Redemption Price" means:
(i) as to any share of Series C Preferred Stock that is to be
redeemed on any Redemption Date pursuant to any subsection of
Section 6, the redemption price determined pursuant to such
subsection; and
(ii) in the case of any Series B Share as of any time, the
"Redemption Price" of such Series B Share as of such time as defined in and
determined in accordance with the Series B Certificate of Designation.
"Reference Price" means, as of any time, the higher of (x) the
Conversion Price then in effect or (y) the Current Market Price per share of the
Common Stock determined as of such time.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated
September 25, 1996, among the Corporation, the TFC Partnerships and certain
other stockholders of the Corporation, as amended by the First Amendment thereto
dated as of the Closing Date and as the same may be further amended from time to
time in accordance with its terms.
A "Reorganization Event" shall be deemed to have occurred upon the
happening of any of the following:
(i) the appointment of a receiver or trustee to administer all or a
substantial portion of the Corporation or any Significant
Subsidiary's assets which shall remain in effect for 30 days;
(ii) the filing by the Corporation or any Significant Subsidiary of
a voluntary petition for relief under any Insolvency Law or of a
pleading in any court of record admitting in writing its inability
to pay its debts as they become due;
(iii) the making by the Corporation or any Significant Subsidiary of
a general assignment for the benefit of creditors;
(iv) the filing by the Corporation or any Significant Subsidiary of
an answer admitting the material allegations of, or its consenting
to or defaulting in answering, a petition for relief filed against
it in any proceeding under any Insolvency Law; or
(v) the entry of an order, judgment or decree by any court of
competent jurisdiction granting relief against the Corporation or
any Significant Subsidiary in a proceeding under any Insolvency Law.
"Rights" means any options, warrants or other rights (except
Convertible Securities and the Series C Preferred Stock), however denominated,
to subscribe for, purchase or otherwise acquire any Common Stock or Convertible
Securities, with or without payment of additional consideration in cash or
property, either immediately or upon the occurrence of a specified date or a
specified event or the satisfaction or happening of any other condition or
contingency.
"Section 6(c) Election Notice" has the meaning set forth in Section
6(c).
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder.
"Senior Stock" means each class or series of capital stock of the
Corporation, if
any, hereafter created with the approval of the Majority Senior Holders and
ranking prior to the Series C Preferred Stock as to dividends, rights of
redemption or rights on liquidation, as the case may be. Capital stock of any
class or series shall rank prior to the Series C Preferred Stock as to
dividends, upon redemption or upon liquidation if the holders of such class or
series shall be entitled to the receipt of dividends, payments on redemption or
payments of amounts distributable upon the dissolution, liquidation or winding
up of the Corporation, as the case may be, in preference or priority to the
holders of shares of Series C Preferred Stock. No class or series of capital
stock that ranks junior to or on parity with the Series C Preferred Stock as to
rights on liquidation shall rank or be deemed to rank as senior to the Series C
Preferred Stock as to dividend rights or rights of redemption, unless the
instrument creating or evidencing such class or series of capital stock
otherwise expressly provides.
"Series A Preferred Stock" means the 8.25% Convertible Preferred
Stock, par value $1.00 per share, of the Corporation.
"Series B Certificate of Designation" means the Certificate of
Designation setting forth the resolution of the Board of Directors creating and
authorizing the issuance of the Series B Preferred Stock and filed with the
Delaware Secretary of State pursuant to Section 151 of the Delaware General
Corporation Law or any successor provisions of the Corporation's Certificate of
Incorporation, as the same may have been amended prior to or concurrently with
the Closing Time and thereafter may be further amended.
"Series B Director" means any director of the Corporation elected by
the holders of the Series B Shares voting as a separate class.
"Series B Preferred Stock" means the Series B Senior Cumulative
Compounding Redeemable Convertible Preferred Stock, par value $1.00 per share,
of the Corporation.
"Series B Share" means any issued and outstanding share of Series B
Preferred Stock. In no event shall shares of Series B Preferred Stock owned or
held by or for the account of the Corporation or any subsidiary thereof be
deemed to be issued and outstanding for any purpose.
"Series C Certificate of Designation" means the Certificate of
Designation setting forth the resolution of the Board of Directors creating and
authorizing the issuance of the Series C Preferred Stock and filed with the
Delaware Secretary of State pursuant to Section 151 of the Delaware General
Corporation Law or any successor provisions of the Corporation's Certificate of
Incorporation, as the same may have been amended prior to or concurrently with
the Closing Time and thereafter may be amended.
"Series C Director" has the meaning set forth in Section 7(a).
"Series C Preferred Stock" has the meaning set forth in Section
1(a).
"Series C Purchase Agreement" means the Stock Purchase Agreement,
dated the Closing Date, among the Corporation and the Purchasers, as the same
may be amended from time to time in accordance with its terms.
"Series C Share" means any issued and outstanding share of Series C
Preferred Stock. In no event shall shares of Series C Preferred Stock owned or
held by or for the account of the Corporation or any subsidiary thereof be
deemed to be issued and outstanding for any purpose.
"Significant Subsidiary" means a subsidiary in which the
Corporation's and its other subsidiaries' (i) investments in and advances to the
subsidiary exceed 15% of the total assets of the Corporation and its
subsidiaries consolidated as of the end of the most recently completed fiscal
year, (ii) proportionate share of the total assets of the subsidiary exceeds 15%
of the total assets of the Corporation and its subsidiaries consolidated as of
the end of the most recently completed fiscal year; or (iii) equity in the
income from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principle of the subsidiary exceeds
15% of such income of the Corporation and its subsidiaries consolidated for the
most recently completed fiscal year.
"Stockholders Agreement" means the Stockholders Agreement, dated
September 25, 1996, among the Corporation, the TFC Partnerships and certain
other stockholders of the Corporation, as amended by the First Amendment
thereto, dated the Closing Date, among the original parties thereto and the
Purchasers other than the TFC Partnerships and as the same may be further
amended from time to time in accordance with its terms.
"Subsidiary" means, as of any time, each Entity as to which any of
the following statements is true as of such time:
(i) such Entity is an Affiliate of the Corporation which is
controlled by the Corporation, or
(ii) the Corporation owns or controls, directly or indirectly
through one or more intermediaries, 50% or more of the outstanding
equity interests in such Entity having ordinary voting power to
elect a majority of the members of the board of directors or joint
venture, partnership or other management committee, trustees,
managers or other Persons ordinarily having the power, authority or
responsibility for managing or directing the management of such
Entity, or
(iii) the Corporation, directly or indirectly through one or more
intermediaries, is entitled under ordinary circumstances to 50% or
more of the profits or losses of
such Entity or to receive upon dissolution and liquidation of such
Entity 50% or more of the assets available for distribution to the
holders of equity interests in such Entity, or
(iv) such Entity is a partnership (general or limited), joint
venture or other unincorporated Entity and the Corporation or
another Subsidiary is a general partner or joint venturer thereof or
has liability for the debts and obligations thereof over and above
its investment therein,
and in the case of any of clauses (i), (ii) and (iii), disregarding any voting
power, equity interests or other rights or interests which any Person other than
the Corporation or another Subsidiary Corporation would or might have upon the
happening of any contingency, the satisfaction of any condition or the
occurrence of any event which has not happened, been satisfied or occurred as of
such time.
"TFC Holder" means (i) each of the TFC Partnerships and (ii) each
other Person who (A) at any time acquires any Investor Preferred Shares directly
or indirectly from any TFC Holder in a transaction or chain of transactions not
involving a public offering within the meaning of the Securities Act and (B) was
designated, by the TFC Holder from whom such Investor Preferred Shares were
acquired, as a TFC Holder in a written notice delivered to the Corporation, in
each case for so long as any such Person continues to hold any Investor
Preferred Share.
"TFC Partnerships" means 21st Century Communications Partners, L.P.,
a Delaware limited partnership, 21st Century Communications T-E Partners, L.P.,
a Delaware limited partnership, and 21st Century Communications Foreign
Partners, L.P., a Delaware limited partnership.
"TFC Series B Purchase Agreement" means the Stock Purchase
Agreement, dated September 25, 1996, among the Corporation and the TFC
Partnerships, as the same may be amended from time to time in accordance with
its terms.
"Valuation Committee" means a committee of the Board of Directors
composed of (i) the Series B Director or, during any period that there is no
Series B Director, the Series C Director, (ii) one or more independent directors
(as defined in Section 8(f) hereof) and (iii) not more than one other director.
"Wholly Owned Subsidiary" means an Entity all of the equity
interests of which at the time are owned beneficially and of record by the
Corporation, one or more Wholly Owned Subsidiaries of the Corporation or the
Corporation and one or more Wholly Owned Subsidiaries of the Corporation.
3. Rank; Certain Restrictions; Fractional Shares; Certain Notices to be
Given; Actions to Facilitate Redemption.
(a) Rank. The Series C Preferred Stock shall, with respect to
dividend rights, rights on liquidation, winding up and dissolution and rights
upon redemption (i) rank on a parity basis with the Series B Preferred Stock and
(ii) rank prior to (A) the Common Stock, (B) the Series A Preferred Stock and
(C) any other class or series of capital stock of the Corporation, whether now
existing or hereafter created, except (in the case of this subclause (ii)(C)
only) the Series B Preferred Stock or any other class or series of Parity Stock
or Senior Stock hereafter created and issued with the prior approval of the
Majority Senior Holders, to the extent otherwise provided for by the terms of
such other class or series of Parity Stock or Senior Stock set forth in the
instrument creating and authorizing such Parity Stock or Senior Stock, provided
that such terms shall have been furnished in writing to and approved by the
Majority Senior Holders.
(b) Certain Restrictions on Payments in Respect of Capital Stock.
Except if and to the extent expressly authorized by Section 3(e) or with the
prior approval of the Majority Senior Holders so long as any Series C Preferred
Stock is outstanding, the Corporation shall not, and shall cause each of the
Subsidiaries not to:
(i) declare or pay dividends on, or declare or make any other
distribution, whether in cash, property, securities or any other form of
consideration, to the holders of or otherwise with respect to, the Common Stock,
the Series A Preferred Stock or any other class or series of capital stock of
the Corporation now existing or hereafter created other than the Series B
Preferred Stock or the Series C Preferred Stock;
(ii) redeem, purchase or otherwise acquire for cash, property,
securities or any other form of consideration any Common Stock, Series A
Preferred Stock or any other class or series of capital stock of the Corporation
now existing or hereafter created other than the Series B Preferred Stock or the
Series C Preferred Stock;
(iii) declare or pay dividends on, or make any other
distribution to the holders of or otherwise with respect to any Parity Stock,
whether in cash, property, securities or any other form of consideration, except
dividends declared and paid ratably on the Series C Preferred Stock and each
class or series of Parity Stock as to which dividends are payable or in arrears
so that the amount of dividends declared and paid per share of the Series C
Preferred Stock and per share of each class or series of such Parity Stock are
in proportion to the respective total amounts of unpaid dividends accrued with
respect to the Series C Preferred Stock and all such classes and series of
Parity Stock;
(iv) subject to Section 3(c) hereof, redeem, purchase or
otherwise acquire for cash, property, securities or any other form of
consideration any Series B Shares or Series C Shares otherwise than in
accordance with the respective terms thereof, but conversion of
any Series B Shares or Series C Shares in accordance with their respective terms
shall not be deemed to be a redemption, purchase or other acquisition subject to
this clause or Section 3(c) hereof; or
(v) set aside, pursuant to a sinking fund or otherwise, any
cash, property, securities or other form of consideration for any of the
foregoing purposes.
(c) Pro Rata Redemptions and Purchases. If any date or event shall
occur that requires the Corporation to redeem any Series B Shares or Series C
Shares and the Corporation has insufficient legally available funds to redeem
all Series B Shares and Series C Shares then required to be redeemed, then: (i)
the Corporation shall give written notice to such effect to the holders of
Investor Preferred Shares as soon as practicable (and in any event not later
than ten Business Days) prior to the applicable Redemption Date; and (ii)
subject to the third sentence of this subsection, (A) the funds legally
available for such purpose shall be applied to redeem the Series B Shares and
Series C Shares then required to be redeemed ratably in proportion to the
respective full amounts to which the holders of shares of each such series would
be entitled if the Corporation had sufficient legally available funds to redeem
all Series B Shares and Series C Shares then required to be redeemed and (B) as
and when the Corporation has additional legally available funds, it shall apply
such funds to redeem the balance of the Series B Shares and Series C Shares so
required to be redeemed proportionately as provided in subclause (ii)(A) of this
sentence. In the event of any such partial redemption, the shares of either
series to be redeemed shall be selected on a pro rata basis from among all
holders of the shares that series required to be redeemed. At any time after a
notice from the Corporation is given pursuant to the first sentence of this
subsection and before the applicable Redemption Date, either the Majority
Holders or the holders of a majority of the shares of Series B Preferred Stock
then outstanding (the "Majority Series B Holders") may notify the Corporation in
writing that such Majority Holders or Majority Series B Holders, as the case may
be, object to partial redemptions as provided in the first sentence of this
subsection. If such a written objection is given, the Corporation shall not make
any such redemption of any Series B Shares or Series C Shares unless or until it
is otherwise instructed in writing by both the Majority Holders and the Majority
Series B Holders. Unless otherwise determined by the Majority Senior Holders,
the Corporation shall not, and shall cause each of the Subsidiaries not to,
otherwise purchase or acquire for value any shares of Series B Preferred Stock
or Series C Preferred Stock unless (i) such purchase or other acquisition is
made pursuant to an offer made on the same terms to all holders of shares of
Series B Preferred Stock and all holders of Series C Preferred Stock, except for
differences in price proportionate to any differences in the respective
Liquidation Prices of the two series and (ii) there are simultaneously purchased
or otherwise acquired on such terms all shares which such holders elect to
tender for purchase or other acquisition; provided, that if the aggregate
purchase price for all shares tendered for purchase exceeds the aggregate amount
offered by the Corporation, the purchase shall be made proportionately between
the Series B Shares and the Series C Shares tendered so that the aggregate
amount received by the holders of tendered shares of either series shall be
proportionate to the ratio that the aggregate Liquidation Price of all tendered
shares of that series
bears to the aggregate Liquidation Price of all shares of both series tendered
for purchase, and the shares of either series purchased by the Corporation shall
be selected on a pro rata basis from among all holders who tendered shares of
that series. Nothing contained in this Section 3(c) is intended to eliminate,
qualify, modify or limit the rights of the holders of any Investor Preferred
Shares under any provision of this resolution, including Section 3(h), or the
Series B Certificate of Designation, including the provisions thereof
corresponding to Section 3(h) hereof, or any other rights or remedies which such
holders may have at law, in equity, by contract or otherwise in the event of the
failure of the Corporation to redeem any Investor Preferred Shares as and at the
times that would be required but for the provisions of this Section 3(c).
(d) Restriction on Dividends, Redemptions, Etc. by Subsidiaries. So
long as any shares of Series C Preferred Stock or Series C Preferred Stock shall
be outstanding, without the prior approval of the Majority Senior Holders, the
Corporation will not permit any Subsidiary that is not a Wholly Owned Subsidiary
to declare or pay any dividend on or declare or make any other distribution to
the holders of or otherwise with respect to any equity interest in such
Subsidiary (whether in cash, property, securities or any other form of
consideration) nor redeem, purchase or otherwise acquire for cash, property or
any other form of consideration any equity interest in such Subsidiary, other
than (i) distributions of available cash in excess of the amount required for
operating expenses, debt service, budgeted capital expenditures, reasonable
reserves for working capital and liabilities and other amounts reasonably
necessary for the continued efficient operation of the business of such
Subsidiary as reasonably determined by the Board of Directors or (ii)
distributions of cash to the extent necessary to permit the Corporation to pay
dividends on the Series B Preferred Stock or Series C Preferred Stock on a
current basis or to make redemption payments or payments on liquidation to the
holders of the Series B Preferred Stock or Series C Preferred Stock as and when
required, provided, in each case, that no holder (other than the Corporation or
a Wholly Owned Subsidiary) of any equity interest in any Subsidiary making any
such permitted distribution receives more than its proportionate share (based on
the percentage of outstanding equity interests in such Subsidiary held by such
holder) of any such permitted distribution. The Corporation will not, without
the prior approval of the Majority Senior Holders, permit any of the
Subsidiaries to issue any Preferred Interest other than issuances to the
Corporation or a Wholly Owned Subsidiary.
(e) Certain Exceptions. If, after the Closing Date, the Corporation,
with the prior approval of the Majority Senior Holders, creates and issues any
class or series of Parity Stock or Senior Stock, the restrictions contained in
Section 3(b) shall be subject to such exceptions, if any, expressly provided for
by the terms of such Parity Stock or Senior Stock set forth in the instrument
creating and authorizing such Parity Stock or Senior Stock, provided that such
terms shall have been furnished in writing to and approved by the Majority
Senior Holders.
(f) Fractional Shares. Fractional shares of Series C Preferred Stock
may be issued, either upon original issuance pursuant to any Purchase Agreement
or the Co-Investment Agreement or otherwise as permitted by Section 1(b) or from
time to time thereafter upon
transfers or exchanges of outstanding shares (or fractional shares) thereof or
certificates therefor. Each fractional share of Series C Preferred Stock, if
any, outstanding shall be entitled to ratably proportionate voting and approval
rights with respect to all matters submitted for the vote of or approval by
holders of the Series C Preferred Stock and a ratably proportionate amount of
all dividends accruing, declared or paid with respect to each outstanding whole
share of Series C Preferred Stock pursuant to Section 4 and of all payments due
or made with respect to each outstanding whole share of Series C Preferred Stock
pursuant to Section 5 or Section 6; all such dividends with respect to such
outstanding fractional shares shall be fully cumulative and shall accrue
(whether or not declared) and shall be payable in the same manner and at the
same time as provided for in Section 4 with respect to dividends on each
outstanding whole share of Series C Preferred Stock; and all such payments
pursuant to Section 5 or Section 6 with respect to such outstanding fractional
shares shall be payable in the same manner and at such time as provided for in
Section 5 or Section 6 (as the case may be) with respect to such payments on
each outstanding whole share of Series C Preferred Stock. The holder of each
such fractional share shall otherwise be entitled to all of the rights, powers,
preferences, and be subject to the same qualifications, limitations and
restrictions, as the holders of whole shares of the Series C Preferred Stock,
including conversion rights pursuant to Section 9.
(g) Certain Notices and Other Obligations Relating to Participation
Event or Reorganization Event. If the Corporation agrees or the Board of
Directors passes a resolution authorizing the Corporation to voluntarily
consummate or take, or assist any one or more of the holders of its Common Stock
in consummating or taking, any transaction or action which would, if
consummated, result in a Participation Event, or if the Corporation receives
formal written notice that one or more of the holders of its Common Stock have
agreed to engage in any such transaction, then it shall send to each holder of
Series C Preferred Stock and each holder of the Series B Preferred Stock, at
least 15 days prior to the scheduled or anticipated closing of such transaction
(or, in the case where the Corporation receives formal written notice of such
transaction, immediately upon receiving such formal written notice if such
notice is received less than 15 days prior to the scheduled or anticipated
closing of such transaction), a written notice which will summarize the material
terms of such transaction, and if any of such terms change in any material
respect prior to such closing, the Corporation shall promptly notify the holders
of the Series C Preferred Stock and the holders of the Series B Preferred Stock
in writing. If any Participation Event occurs, the Corporation shall give the
holders of the Series C Preferred Stock and the holders of the Series B
Preferred Stock written notice thereof promptly, and in any event not later than
the fifth Business Day after the Corporation has knowledge of such occurrence,
and such notice shall summarize the material facts relating to such
Participation Event. If the Corporation plans or the Board of Directors passes a
resolution authorizing the Corporation, or any Significant Subsidiary's Board of
Directors or other governing body plans or authorizes such Significant
Subsidiary, to take any voluntary action intended to result in any
Reorganization Event, or if the Corporation receives formal written notice that
any other Person plans to take or has taken any action intended to result in an
involuntary Reorganization Event, then it shall immediately send to each holder
of Series C Preferred Stock and each holder of the Series B
Preferred Stock (or, in the case where the Corporation receives formal written
notice of such action, immediately upon receiving such formal written notice), a
written notice to that effect stating the material relevant facts relating
thereto and shall thereafter keep each such holder apprised on a current basis
of all related material developments. If any Reorganization Event occurs, the
Corporation shall give the holders of the Series C Preferred Stock and the
holders of the Series B Preferred Stock written notice thereof promptly, and in
any event not later than the next Business Day after the Corporation has
knowledge of such occurrence, and such notice shall summarize the material facts
relating to such Reorganization Event. Each notice given by the Corporation
pursuant to the second or fourth sentence of this Section 3(g) shall be
accompanied by an appropriate form (an "Election Form") by which the holders of
the Series C Preferred Stock and the holders of the Series B Preferred Stock may
elect whether or not to require the Corporation to redeem their shares of the
Series C Preferred Stock in accordance with the terms of Section 6(c) or their
shares of the Series B Preferred Stock in accordance with the terms thereof (as
the case may be). If, at any time within a period of 15 days after Election
Forms are mailed, the Corporation shall have received completed Election Forms
from the Majority Senior Holders electing to require the Corporation to redeem
the Series B Shares, Series C Shares or both held by them, the Corporation shall
promptly thereafter redeem from all holders of Series C Preferred Stock and all
holders of Series B Preferred Stock, in accordance with Section 6(c) and the
other applicable provisions of this resolution and the applicable provisions of
the Series B Certificate of Designation, respectively, all outstanding shares of
Series C Preferred Stock and Series B Preferred Stock; provided, however, that
the Corporation shall not voluntarily consummate or take, or assist any of the
holders of its Common Stock in consummating or taking, any transaction or action
which would result in a Participation Event unless (i) prior to the date such
transaction is closed or such action is taken, the procedures specified in this
Section 3(g) shall have been followed and the period of 15 days referred to in
this sentence shall have expired; (ii) if the Corporation would be required to
redeem all shares of Series B Preferred Stock and all shares of Series C
Preferred Stock by virtue of such Participation Event, the Corporation shall
have (A) deposited with a Redemption Agent funds sufficient to redeem on the
applicable Redemption Date all Series C Shares required to be redeemed at the
applicable Redemption Price and (B) deposited with a "Redemption Agent" funds
sufficient to redeem on the applicable "Redemption Date" all Series B Shares
required to be redeemed at the applicable "Redemption Price," as such quoted
terms are defined in and determined in accordance with the Series B Certificate
of Designation; and (iii) the Corporation shall have given written notice of its
compliance with clause (ii) of this sentence to each holder of Series C
Preferred Stock or Series B Preferred Stock. The provisions of this Section 3(g)
shall apply successively to each Change of Control or Reorganization Event which
may occur.
(h) Actions to Facilitate Required Redemptions. If, at any time that
any redemption of any shares of Investor Preferred Stock is, or with the passage
of time after any notice will be, required by any provision of this resolution,
the Corporation is in material violation or breach of the terms of any material
indebtedness of the Corporation or a default or event of default with respect to
or under any material indebtedness of the Corporation exists and
has not been waived or cured, if the Corporation is insolvent under applicable
law, or if the Corporation's capital is impaired under the law of the
jurisdiction of incorporation, or if any such violation, breach, default, event
of default, insolvency or impairment of capital or any material violation of law
would result from such redemption, then the Corporation shall (i) promptly give
written notice to such effect to the holders of the Series B Preferred Stock and
the holders of the Series C Preferred Stock, (ii) subject to the applicable
provisions of the Stockholders Agreement, take, as hereafter provided in this
Section 3(h), all reasonable lawful actions to cure or avoid such violation,
breach, default or event of default, to restore or preserve its solvency or to
cure or avoid such impairment of capital, in each case as necessary to enable
the Corporation to make such redemption to the fullest extent possible,
including (A) the sale of additional equity securities, (B) any necessary action
under applicable law to reduce the Corporation's stated capital or otherwise
increase the Corporation's surplus or other funds legally available, (C)
additional borrowings by, or a refinancing of the debt of, one or more Company
Parties, (D) asset sales by one or more Company Parties and (E) sales of one or
more Company Parties to third parties and (iii) no later than thirty days after
the date of delivery of the notice referred to in clause (i) of this sentence,
engage (at the Corporation's sole expense) a nationally recognized independent
investment banking firm reasonably acceptable to the Majority Senior Holders
(such firm, the "Advisor") in order to advise and assist the Corporation in
connection with the actions to be taken by the Corporation (each such action, an
"Action"), including without limitation the actions enumerated in subclauses
(A)-(E) of clause (ii) of this sentence. The Corporation and the Advisor shall
submit to the holders of the Series C Preferred Stock and the holders of the
Series B Preferred Stock, no later than sixty days after the date of the notice
referred to in clause (i) of the immediately preceding sentence, a proposal
setting forth the Actions proposed to be taken by the Corporation. Any proposed
Action that is approved by the affirmative vote of the Majority Senior Holders
and by the Investors (as defined in the Stockholders Agreement), pursuant to the
Stockholders Agreement (if such approval is required by the terms thereof)
(each, an "Investor Approved Action") shall be pursued by the Corporation in
good faith as quickly as practicable. In the event that the Investor Approved
Actions include a sale of a Company Party or assets of a Company Party, then no
later than 120 days after such approval (one hundred fifty days if the Advisor
assisting in the sale shall advise the Corporation in writing that such
additional period is reasonably likely, in its good faith judgment, to result in
a higher price being obtained in such sale) or such later date as may be agreed
upon by the Corporation and the Majority Senior Holders, the Board of Directors
shall accept the highest bid submitted for such sale deemed by the Advisor to
represent an "adequate" price for such assets or such Company Party (the values
of such bids to be determined by the Advisor). Any holder of shares of Series C
Preferred Stock or Series B Preferred Stock and any Affiliate of any such holder
or of the Corporation shall be entitled to submit its own bid in the competitive
bidding process. In the event that the Investor Approved Actions include (i) a
sale of additional equity securities or debt securities of any Company Party or
(ii) additional borrowings by or a refinancing of the debt of any Company Party,
the Corporation will take and cause each other affected Company Party to use its
best efforts to consummate such proposed Action within 120 days after such
approval or by such later date as may be agreed upon by the Corporation and the
Majority Senior Holders. Consistent
with his or her fiduciary duties as a director of the Corporation, each director
of the Corporation (whether or not a Series C Director) shall approve the taking
by the Corporation of each Investor Approved Action and, if any approval or
other action by any of the Corporation's stockholders is required by applicable
law in order to authorize, or otherwise in connection with, the taking of such
Investor Approved Action, shall recommend that such stockholders give such
approval and take such other action, but this sentence shall not be construed as
establishing any requirement for unanimous approval by the Board of Directors in
order to authorize any Investor Approved Action or otherwise the vote required
under applicable law, this resolution or the Corporation's Certificate of
Incorporation. Nothing contained in this Section 3(h) is intended to eliminate,
qualify, modify or limit the rights of the holders of the Series C Preferred
Stock or the holders of the Series B Preferred Stock under any provision of the
Series C Certificate of Designation or the Series B Certificate of Designation,
respectively, or any other rights or remedies which such holders may have at
law, in equity or by contract in the event of the failure of the Corporation to
redeem shares of Series C Preferred Stock or Series B Preferred Stock as and
when required by the Series C Certificate of Designation or the Series B
Certificate of Designation.
4. Dividends.
(a) Dividend Rate; Dividend Payments Dates; Etc. The holders of the
Series C Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors, out of funds legally available therefor, cumulative
cash dividends, in preference and priority to dividends on any Junior Stock,
that shall accrue on the Liquidation Price of each share of the Series C
Preferred Stock at the rate of fourteen and eight-tenths percent (14.8%) per
annum, from and including the Issue Date of such share to and including the date
on which the Liquidation Price (plus unpaid dividends as described in Section
5(a) hereof) or Redemption Price of such share is made available pursuant to
Section 5 or Section 6, respectively, or such share is converted pursuant to
Section 9 or Section 10. Accrued dividends on the Series C Preferred Stock shall
be payable on September 1, 1997 and thereafter quarterly on each December 1,
March 1, June 1 and September 1 of each year (each a "Dividend Payment Date"),
to the holders of record of the Series C Preferred Stock as of the close of
business on the applicable Record Date. Dividends shall be fully cumulative and
shall accrue on a daily basis based on a 365- or 366-day year, as the case may
be, without regard to the occurrence of a Dividend Payment Date and whether or
not such dividends have been declared and whether or not there are any
unrestricted funds of the Corporation legally available for the payment of
dividends. Whenever the Board of Directors declares any dividend pursuant to
this Section 4(a), notice of the applicable Record Date and related Dividend
Payment Date shall be given, not more than 45 days nor less than 10 days prior
to such Record Date, to the holders of record of the Series C Preferred Stock at
their respective addresses as the same appear on the books of the Corporation or
are supplied by them in writing to the Corporation for the purpose of such
notice.
(b) Compounding of Dividends. On each Dividend Payment Date, all
dividends that have accrued on each share of Series C Preferred Stock during the
immediately
preceding Dividend Period shall, to the extent not paid on such Dividend Payment
Date for any reason (whether or not such unpaid dividends have been earned or
declared or there are any unrestricted funds of the Corporation legally
available for the payment of dividends), be added to the Liquidation Price of
such share effective as of such Dividend Payment Date and shall remain a part
thereof to and including the date on which the Liquidation Price (plus unpaid
dividends as described in Section 5(a) hereof) or Redemption Price of such share
is made available pursuant to Section 5 or Section 6, respectively. No accrued
dividends (or dividends accrued thereon) which have been added to Liquidation
Price of any Series C Share may be subsequently declared or, except in
accordance with Section 5 or Section 6, paid by the Corporation without the
consent of the Majority Senior Holders.
(c) Pro Rata Declaration and Payment of Dividends. All dividends
paid with respect to shares of the Series C Preferred Stock pursuant to this
Section 4 shall be declared and paid pro rata to all the holders of the shares
of Series C Preferred Stock outstanding as of the applicable Record Date.
5. Distributions Upon Liquidation, Dissolution or Winding Up.
(a) Payment of Liquidation Price. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of shares of the Investor Preferred Stock shall be entitled to
receive from the assets of the Corporation available for distribution to
stockholders, before any payment or distribution to the holders of any Junior
Stock (in their capacities as holders of such Junior Stock) shall be declared,
made or provided for or any cash, property or other consideration shall be set
aside for such purpose, an amount in cash or property at its Fair Market Value,
as reasonably determined by the Board of Directors in good faith, or a
combination thereof, for each share of Investor Preferred Stock, equal to the
sum of the Liquidation Price of such share of Investor Preferred Stock as of the
date of the payment or distribution thereof to the holders of the Investor
Preferred Stock plus all unpaid dividends accrued on such share during the
period from and including the applicable Dividend Date immediately preceding
such date (or the Issue Date for such share if there was no prior Dividend Date)
through and including such date of payment or distribution (whether or not such
unpaid dividends have been earned or declared).
(b) Participating Distributions. Subject to Section 5(c), if, in
connection with any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, after payment in full to the holders of the
Series C Preferred Stock, the Series B Preferred Stock and the holders of all
other classes or series of Parity Stock, if any, which rank on a parity basis
with the Investor Preferred Stock with respect to distributions upon such
liquidation, dissolution or winding up of the respective preferential amounts to
which they are entitled, the Corporation shall at any time distribute to the
holders of its shares of Common Stock or any other class or series of Junior
Stock any cash, property or other consideration, the holders of the Investor
Preferred Stock shall be entitled to receive, for each share of Investor
Preferred
Stock held, an amount per share of the Investor Preferred Stock equal to the
amount that a holder of one share of the Investor Preferred Stock would have
been entitled to receive as a record holder of the number of shares of Common
Stock or such class or series of other Junior Stock (as the case may be) had
such share of Investor Preferred Stock been converted in accordance with Section
9 hereof, in the case of the Series C Preferred Stock, or in accordance with the
Series B Certificate of Designation, in the case of the Series B Preferred
Stock, immediately prior to the record date for such distribution (or, if no
such record date is fixed, immediately prior to any other time as of which the
holders of Common Stock or other Junior Stock entitled to participate in such
distribution was determined). The holders of the Investor Preferred Stock shall
be entitled to a distribution of fractional shares or interests in any
securities or other property distributed as contemplated by this subsection to
the extent that holders of Common Stock or such other Junior Stock are entitled
to receive the same. The holders of shares of the Investor Preferred Stock on
the applicable record date (or other effective time) shall be entitled to
receive in lieu of such fractional shares or interests the same consideration as
is payable to holders of the Common Stock or other Junior Stock in respect of
which such distribution is made. If there are no fractional shares or interests
payable to holders of the Common Stock or such other Junior Stock, the holders
of shares of the Investor Preferred Stock on the applicable record date (or
other effective time) shall receive in lieu of such fractional shares or
interests the Fair Market Value thereof as determined by the Board of Directors
in good faith. If the holders of Common Stock or such other Junior Stock are
entitled to make any election with respect to the kind or amount of securities
or other property receivable by them in any distribution that is subject to this
subsection, the kind and amount of securities or other property that shall be
distributable to each holder of shares of Investor Preferred Stock shall be
based on (i) the election, if any, made by such holder of Investor Preferred
Stock in writing to the Corporation on or prior to the last date on which a
holder of Common Stock or such other Junior Stock may make such an election or
(ii) if no such election is timely made, an assumption that such holder failed
to exercise any such rights (provided that if the kind or amount of securities
or other property is not the same for each nonelecting holder, then the kind and
amount of securities or other property receivable by holders of shares of
Investor Preferred Stock who do not make such election on a timely basis shall
be based on the kind or amount of securities or other property receivable by a
plurality of the shares held by the nonelecting holders of Common Stock or such
other Junior Stock). Concurrently with the delivery to holders of Common Stock
or such other Junior Stock of any document pursuant to which such holders may
make an election of the type referred to in this subsection, the Corporation
shall deliver a copy thereof to the holders of record of shares of the Investor
Preferred Stock as of the date used for determining the holders of record of
Common Stock or such other Junior Stock entitled to such delivery, which
document shall be used by the holders of record of shares of the Investor
Preferred Stock to make such an election. Distributions to which holders of
Investor Preferred Stock are entitled to receive pursuant to this Section 5(b)
are in addition to those distributions to which they are entitled pursuant to
Section 5(a).
(c) Limit on Participating Payments. The right of the holders of
Investor
Preferred Stock to participate in distributions to holders of the Common Stock
or any other class or series of Junior Stock pursuant to Section 5(b) shall
terminate at such time as the total amount distributed to the holders of the
Investor Preferred Stock pursuant to Section 5(a) and Section 5(b) equal, for
each share of Investor Preferred Stock held, Three Hundred and Eight Dollars
($308) per share.
(d) Pro Rata Distributions to Senior Holders. If, upon distribution
of the Corporation's assets in liquidation, dissolution or winding up, the
assets of the Corporation available for distribution to its stockholders shall
be insufficient to permit payment in full to the holders of the Investor
Preferred Stock and the holders of all other classes or series of Parity Stock,
if any, which rank on a parity basis with the Investor Preferred Stock with
respect to distributions upon such liquidation, dissolution or winding up of the
respective preferential amounts to which they are entitled, then the entire
assets of the Corporation available for distribution to stockholders shall be
distributed ratably to such holders in proportion to the respective full
preferential amounts to which the shares of Investor Preferred Stock and all
such other classes and series of Parity Stock would otherwise be entitled. For
purposes of this subsection (d), the "preferential amounts" to which the holders
of the Series C Preferred Stock or the Series B Preferred Stock are entitled
shall be the amounts determined pursuant to Section 5(a) and shall not include
any amounts to which they are or may become entitled pursuant to Section 5(b).
(e) Merger, Sale of Assets, Etc. For purposes of this Section 5, no
Participation Event shall in and of itself be considered to be a liquidation or
winding up of the Corporation; provided, however, that if the Corporation shall
fail to redeem, as and when required by Section 6 hereof and the corresponding
provisions of the Series B Certificate of Designation, all shares of Investor
Preferred Stock required to be redeemed as a result of such Participation Event,
then the Majority Senior Holders may elect, by written notice to the Corporation
at any time (either before, after or during any proceedings initiated under
Section 3(h) hereof or the corresponding provisions of the Series B Certificate
of Designation), to require that such Participation Event be treated as a
liquidation, dissolution or winding up of the Corporation entitling the holders
of the Series B Preferred Stock and the Series C Preferred Stock and the holders
of the Common Stock and other Junior Stock, if any, to receive, at the closing,
the respective amounts specified above in this Section 5. Nothing contained in
this Section 5(e) is intended to eliminate, qualify, modify or limit the rights
of the holders of the Series C Preferred Stock or the holders of the Series B
Preferred Stock under any provision of the Series C Certificate of Designation
or the Series B Certificate of Designation, respectively, or any other rights or
remedies which such holders may have at law, in equity or by contract in the
event of the failure of the Corporation to redeem shares of Series C Preferred
Stock or Series B Preferred Stock as and when required by the Series C
Certificate of Designation or the Series B Certificate of Designation.
(f) Record Date and Notice. Unless the Majority Senior Holders
otherwise
agree in writing, in the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary:
(i) Any distribution to the holders of capital stock of the
Corporation of any class or series of assets of the Corporation
available for distribution to its stockholders will be made to the
holders of record of such class or series on a record date that is
not less than 10 days nor more than 30 days prior to the date such
distribution is proposed to be made (each, a "Distribution Date").
(ii) The Corporation shall give to each holder of Investor Preferred
Stock at least 20 days' prior written notice of the record date to be fixed for
any payment or distribution to any of the holders of any capital stock of the
Corporation of any class or series. In addition to any other information
required by this resolution, the Series B Certificate of Designation, any
contract or applicable law, such notice shall describe in reasonable detail each
payment or distribution proposed to be made, identify all classes and series of
capital stock that will participate in such payment or distribution and the
relative participations of the holders of each such class or series and state
the record date and Distribution Date for such payment or distribution. Such
notice shall be accompanied by a statement, in reasonable detail, showing the
amount, kind and value of all assets of the Corporation available for payment or
distribution to its stockholders. After any such notice is given, the
Corporation shall promptly furnish to each holder of Investor Preferred Stock
any information that such holder may reasonably request relating to the
liquidation, dissolution or winding up of the Corporation and its assets and
liabilities, including any information reasonably requested and in the
possession of the Corporation in order to assist such holder in determining
whether to exercise any right to convert any or all of such holder's shares of
Investor Preferred Stock into Common Stock or other Junior Stock.
(iii) The Investor Preferred Shares shall continue to be convertible
into Common Stock in accordance with the respective terms thereof unless and
until such holders have received indefeasible payment of the full preferential
amounts to which they are entitled pursuant to Section 5(a). Once such payment
in full has been indefeasibly made, the Investor Preferred Shares no longer
shall be convertible, but the holders thereof shall continue to be entitled to
participating distributions pursuant to Section 5(b).
6. Redemption.
(a) At Corporation's Option. At any time after the Closing Date and
prior to the fifth anniversary of the Closing Date, all but not less than all of
the Series B Shares and the Series C Shares may be redeemed at the option of the
Corporation at the Redemption Price equal to Three Hundred and Eight Dollars
($308.00) per share. Unless otherwise approved by the Majority Senior Holders,
the Corporation shall not exercise its right of redemption pursuant to
this Section 6(a) unless such redemption does not and shall not result in
impairment of the Corporation's capital, otherwise result in a violation of
applicable law or result in a material breach, violation, default or event of
default under any agreement or instrument to which the Corporation is a party or
by or to which it or its assets are bound or subject and unless the Corporation
is not then insolvent and would not be rendered insolvent as a result of such
redemption.
(b) Mandatory Redemption. The Corporation shall redeem, on the fifth
anniversary of the Closing Date, all shares of Series C Preferred Stock then
outstanding at a Redemption Price per share equal to the sum of the Liquidation
Price of such share determined as of the applicable Redemption Date plus all
unpaid dividends (whether or not earned or declared) accrued on such share
during the period from and including the Dividend Payment Date immediately
preceding such Redemption Date through and including such Redemption Date.
(c) Redemption at Option of Holders Upon Participation Event or
Reorganization Event. In the event of the occurrence of a Participation Event or
any Reorganization Event, the Majority Senior Holders shall have the right to
require the Corporation to redeem, on the applicable Redemption Date, all of the
outstanding shares of the Investor Preferred Stock. Such right may be exercised
by one or more Election Forms or any other written notices (collectively, a
"Section 6(c) Election Notice") to such effect which, collectively, have been
signed by the Majority Senior Holders and given to the Corporation at any time
after the date of occurrence of such Participation Event or Reorganization Event
(as the case may be) and prior to the expiration of the period of 15 days after
written notice of such occurrence is given to the holders of the Investor
Preferred Stock pursuant to Section 3(g) or, if the penultimate sentence of
Section 3(g) is applicable, at any time within the period of 15 consecutive days
after the written notice referred to in clause (iii) of such sentence is given;
provided, however, that in the case of any Reorganization Event, such 15-day
period shall be extended by a number of days equal to the number of days, if
any, during which either the exercise of such right or the redemption by the
Corporation of the Investor Preferred Stock shall be enjoined, stayed or
otherwise prevented or delayed by order or decree of any court or tribunal. In
the case of a redemption of the Investor Preferred Stock pursuant to this
Section 6(c) in connection with a Reorganization Event or in connection with a
Participation Event under clause (v) of the definition of "Change in Control" in
Section 2 resulting solely from the death of Gerard Joyce or Thomas Pugliese,
the Redemption Price per share of the Series C Preferred Stock shall be equal to
the sum of the Liquidation Price of such share determined as of the applicable
Redemption Date plus all unpaid dividends (whether or not earned or declared)
accrued on such share during the period from and including the Dividend Payment
Date immediately preceding the applicable Redemption Date (or the Issue Date of
such share, if the first Dividend Payment Date for such share has not yet
occurred) through and including such Redemption Date. In the case of a
redemption of the Investor Preferred Stock pursuant to this Section 6(c) in
connection with a Participation Event other than any under clause (v) of the
definition of "Change in Control" in Section 2 resulting solely from the death
of Gerard Joyce or Thomas Pugliese, the Redemption
Price per share of the Series C Preferred Stock shall be equal to the lesser of
(i) Three Hundred and Eight Dollars ($308) or (ii) the sum of (x) the
Liquidation Price of such share determined as of the applicable Redemption Date,
plus (y) all unpaid dividends (whether or not earned or declared) accrued on
such share during the period from and including the Dividend Payment Date
immediately preceding the applicable Redemption Date (or the Issue Date of such
share, if the first Dividend Payment Date for such share has not yet occurred)
through and including such Redemption Date plus (z) the Participation Amount
calculated as of the Redemption Date.
(d) Form and Source of Redemption Payments. The Redemption Price for
all shares redeemed pursuant to Section 6(a), Section 6(b) or Section 6(c) shall
be paid in cash from unrestricted funds legally available for such purpose.
(e) Notice of Redemption. Notice of any redemption by the
Corporation pursuant to Section 6(a), Section 6(b) or Section 6(c) shall be
given to the holders of record of the shares of Investor Preferred Stock to be
redeemed, at their respective addresses as the same appear upon the books of the
Corporation or are supplied by them in writing to the Corporation for the
purpose of such notice. In the case of a redemption pursuant to Section 6(a) or
Section 6(b), such notice shall be given not more than 45 days nor less than 10
days prior to the applicable Redemption Date; and in the case of a redemption
pursuant to Section 6(c), such notice shall be given not earlier than the date
the related Section 6(c) Election Notice is given nor later than the tenth
Business Day prior to the applicable Redemption Date. In addition to any
information required by law or by the applicable rules of any national stock
exchange or national interdealer quotation system, such notice shall set forth
the Redemption Price, the Redemption Date, the number of shares to be redeemed
and the place at which the shares called for redemption will, upon presentation
and surrender of the stock certificates evidencing such shares, be redeemed, and
shall state the name and address of the Redemption Agent appointed in accordance
with Section 6(f).
(f) Deposit of Redemption Price. If any shares of Investor Preferred
Stock are to be redeemed pursuant to Section 6(a), Section 6(b) or Section 6(c),
then on or before the applicable Redemption Date the Corporation shall deposit,
in an irrevocable trust fund for the sole purpose of redeeming the shares of
Investor Preferred Stock to be redeemed on such Redemption Date, with any bank
or trust company organized under the laws of the United States of America or any
state thereof having capital, undivided profits and surplus aggregating at least
$250,000,000 or having capital, undivided profits and surplus aggregating at
least $250,000,000 on a consolidated basis with such bank's or trust company's
parent, provided, however, that, in such case, such parent has guaranteed all of
the existing and future obligations of such bank or trust company (a "Redemption
Agent"), immediately available unrestricted funds legally available for such
purpose sufficient to redeem for the applicable Redemption Price on such
Redemption Date the shares of Investor Preferred Stock called for redemption or
otherwise required to be redeemed in accordance with Section 6(a), Section 6(b)
or Section 6(c) with irrevocable instructions and authority to the Redemption
Agent, on behalf and at the expense of
the Corporation, to pay, commencing on such Redemption Date or prior thereto,
the Redemption Price of the shares of Investor Preferred Stock to be redeemed to
their respective holders upon the surrender of their share certificates and,
from and after the later of the date of such deposit and such Redemption Date,
such shares shall be deemed to be no longer outstanding and the holders thereof
shall cease to be stockholders with respect to such shares and shall have no
rights with respect thereto, except the right to receive payment, as provided in
this resolution, of the Redemption Price of such shares, calculated through such
Redemption Date, upon surrender of the certificates therefor. Any funds so
deposited with the Redemption Agent by the Corporation and unclaimed for six
months from the Redemption Date shall (unless an applicable escheat or abandoned
property law designates another Person) be paid to the Corporation, after which
repayment the holders of such shares of Investor Preferred Stock shall look to
the Corporation for the payment of the Redemption Price therefor, without
interest.
7. Board Representation.
(a) Right to Elect Director. The holders of the Series C Preferred
Stock shall be entitled to vote as a separate class for the election of one
director of the Corporation. The director whom, at any time and from time to
time, the holders of the Series C Preferred Stock elect or are entitled to elect
voting as a separate class is sometimes herein referred to as the "Series C
Director". Subject to earlier death, resignation or removal pursuant to Section
7(c), each Series C Director elected or appointed at any time as provided herein
shall serve until the next annual meeting of the Corporation's stockholders and
his or her successor shall have been elected as provided herein. At their option
and in their sole discretion and for any one or more periods of any length of
time, the Majority Holders at any time and from time to time may choose not to
exercise their right to elect a Series C Director or to fill any vacancy
existing in the office of the Series C Director, without prejudice to any
subsequent exercise of such right. In such event, the Majority Holders may (in
their sole discretion) choose to have a representative appointed by them attend
any one or more meetings of the Board of Directors as an observer, and such
representative shall be entitled to receive the same notices of meetings of and
proposed actions by the Board of Directors as directors generally.
(b) Manner of Election. Subject to the last sentence of this Section
7(b), Series C Directors shall be elected (and if such directors previously have
been elected and any vacancy shall exist, such vacancy shall be filled) either
(i) by written consent of the Majority Holders given in accordance with Section
8(a); or (ii) by the vote of the Majority Holders voting as a separate class and
in accordance with Section 8(b), at (A) annual meetings of the shareholders of
this Corporation, or (B) a special meeting of the holders of Series C Preferred
Stock for the purpose of electing such directors (or filling any such vacancy),
to be called by the Secretary of this Corporation upon the written request of
the holders of record of 5% or more of the number of shares of Series C
Preferred Stock then outstanding; provided, however, that if the Secretary of
this Corporation shall fail to call any such special meeting within 10 days
after any such request, such meeting may be called by any holder or holders of
5% or more of the number
of shares of Series C Preferred Stock then outstanding. Notwithstanding the
foregoing, the Secretary shall not be entitled to call any such special meeting
in the case of any such request received by this Corporation less than 45 days
before the date fixed for any annual meeting of shareholders, and if in such
case such special meeting is not called, the holders of Series C Preferred Stock
shall be entitled to vote (as a class) at such annual meeting to elect the
Series C Director (or to fill any such vacancy).
(c) Removal. Any Series C Director may at any time and from time to
time be removed, with or without cause, by and only by the Majority Holders. Any
vacancy in the office of Series C Director resulting from death, resignation or
removal or existing for any other reason whatsoever may be filled only by the
Majority Holders. Any director elected to fill a vacancy shall serve the same
remaining term as that of his or her predecessor and until his or her successor
has been chosen and has qualified.
(d) Certain Procedural Matters. So long as the holders of the Series
C Preferred Stock shall have the right to elect a Series C Director: any one or
more members of the Board of Directors or any committee thereof may participate
in meetings of the Board of Directors by conference telephone; each member of
the Board of Directors or any committee thereof shall be given not less than
three days' prior written notice of each meeting of the Board of Directors or
such committee (or two days' prior written notice in case of meetings to
consider emergency matters), specifying the time and place of such meeting and
the matters to be discussed thereat, unless such member signs (either before or
after such meeting) a written waiver of his right to be given such notice, or
attends such meeting without protesting (prior thereto or at the commencement
thereof) the failure to be given such notice; each member of the Board of
Directors or any committee thereof shall be given not less than three days'
prior written notice of any action proposed to be taken by the Board of
Directors or such committee without a meeting (or two days' prior written notice
in case of proposed actions involving emergency matters), unless such member
signs (either before or after such action is taken) a written waiver of his
right to be given such notice, or gives his written consent to such action
without protesting the failure to be given such notice; no executive committee
of the Board of Directors, and no other committee of the Board of Directors
which is authorized to exercise any powers of the Board of Directors, shall be
created except (i) for the Valuation Committee, (i) as provided in Section 7(f)
or (i) otherwise with the concurrence of the Series B Director or, if there is
no Series B Director, by the Series C Director or, if there is no Series C
Director, by the Majority Senior Holders; and at any meeting of the Board of
Directors or any committee thereof, a quorum for the purpose of taking any
action shall require the presence in person or participation by conference
telephone or similar communications equipment of a number of directors equal to
at least a majority of the entire Board of Directors or the entire committee.
(e) Indemnification. The Corporation shall (i) to the fullest extent
permitted by applicable law, indemnify each director and former Series C
Director who is made a party or threatened to be made a party to 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 of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such Person in connection
with such action, suit or proceeding and (ii) pay in advance, or advance to each
such director and former director for payment of, expenses incurred in defending
any such action, suit or proceeding to the maximum extent permitted by Section
145(e) of the General Corporation Law of the State of Delaware (or any successor
statutory provision). The rights conferred on any Person by this Section 7(e)
shall not be exclusive of any other rights which such Person may have or acquire
under any statute, under the Corporation's Certificate of Incorporation, under
the Corporation's By-laws, under any agreement, vote of stockholders or
disinterested directors or otherwise.
(f) Audit and Compensation Committees. Unless the Majority Senior
Holders otherwise agree, so long as the holders of the Series C Preferred Stock
shall have the right to elect a Series C Director, the Board of Directors shall
have an audit committee and a compensation committee (the "Compensation
Committee"), each of which shall have three members one of whom shall be the
Series B Director or, during any period when there is no Series B Director, the
Series C Director, and at least one other of whom shall be an independent
director (as defined below in this Section). The audit committee will have the
authority and responsibility for the selection, engagement or discharge of
independent auditors, reviewing with the independent auditors the plan and
results of the auditing engagement, reviewing the Corporation's system of
internal accounting controls, directing investigations in matters within the
scope of its functions and performing any and all other such functions
customarily performed by audit committees of public companies. The Compensation
Committee will have the authority and responsibility for establishing and
administering the stock, incentive and other employee benefit plans of the
Corporation, establishing and changing the compensation of executive officers,
approving or amending existing and proposed employment agreements between the
Corporation and its executive officers and performing any and all other such
functions customarily performed by compensation committees of public companies.
Without limiting the generality of the foregoing, the Compensation Committee
will have the authority and responsibility, in administering any stock,
incentive or other employee benefit plans, including any such plans in effect on
the Closing Date, to determine the persons to whom awards or benefits may be
made, to determine the terms and conditions (which need not be identical) of
each award made or benefit conferred (including the timing and type of award or
benefit, the exercise or purchase price for any award of stock or stock options,
and terms related to vesting, exercisability, forfeiture and termination), and
to interpret the provisions of each such plan. For purposes hereof, an
"independent director" is an individual who (unless otherwise approved by the
Series B Director or, if there is no Series B Director, by the Series C Director
or, if there is no Series C Director, by the Majority Senior Holders) (i) has
either a significant financial investment in the Corporation or a significant
strategic position or expertise relative to the business of the Corporation and
(ii) is not (A) an officer or employee of the Corporation or any
of its Subsidiaries, (B) a director, employee, partner, manager or other member
of management of any of Affiliate of the Corporation (except a director of a
Subsidiary of the Corporation), (C) a relative of any Person described in
subclause (ii)(A) or (ii)(B) or (D) a trustee of any trust or estate in which
any Person described in subclause (ii)(A), (ii)(B) or (ii)(C) is a beneficiary
has a substantial beneficial interest.
8. Actions by Holders Generally; Consistent Charter and By-law Provisions.
(a) Actions by Written Consent or at Meetings.
(i) With respect to action by the holders of the Series C Preferred
Stock upon any matter on which such holders are entitled to vote as a separate
series or class, such action may be taken either at a meeting of such holders or
without a stockholder meeting by the written consent of holders of shares of
Series C Preferred Stock having voting power to cast not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares of Series C Preferred Stock entitled to vote were
present and voted. Notice shall be given in accordance with the applicable
provisions of the Delaware General Corporation Law of the taking of corporate
action without a meeting by less than unanimous written consent to those holders
of Series C Preferred Stock whose shares were not represented on the written
consent.
(ii) With respect to actions by the holders of the Series B
Preferred Stock and the Series C Preferred Stock upon those matters on which
such holders are entitled to vote as a single series or class (including any
action which this resolution states is within the authority or discretion of the
Majority Senior Holders), such actions may be taken either at a meeting of such
holders or without a stockholder meeting by the written consent of holders of
shares of Investor Preferred Stock having an aggregate Liquidation Price
representing more than 50% of the total Liquidation Price of all Series B Shares
and Series C Shares then outstanding. Notice shall be given in accordance with
the applicable provisions of the Delaware General Corporation Law of the taking
of corporate action without a meeting by less than unanimous written consent to
those holders of Investor Preferred Stock whose shares were not represented on
the written consent.
(b) Meetings.
(i) At any meeting having as a purpose either the election of
a Series C Director or any action upon any other matter on which the holders of
the Series C Preferred Stock are entitled to vote as a separate series or class,
the presence, in person or by proxy, of the holders of record of at least a
majority of the Series C Shares then outstanding shall be required and be
sufficient to constitute a quorum of such series or class for any such purpose,
and the affirmative vote of the holders of a majority of the shares of Series C
Preferred Stock then outstanding and entitled to vote at such meeting shall be
the act of the Series C Preferred Stock. At any such meeting or adjournment
thereof, (A) the absence of a quorum of such holders of
Series C Preferred Stock shall not prevent the election of the directors to be
elected by the holders of shares other than the Series C Preferred Stock or the
taking of any other action which they are entitled to take, and the absence of a
quorum of holders of shares other than the Series C Preferred Stock shall not
prevent the election of any director to be elected by the holders of the Series
C Preferred Stock or the taking of any other action which they are entitled to
take and (A) in the absence of such quorum, either of holders of the Series C
Preferred Stock or of shares other than the Series C Preferred Stock (or both),
a majority of the holders, present in person or by proxy, of the series, class
or classes of stock which lack a quorum shall have power to adjourn the meeting
for the election of directors which they are entitled to elect or the taking of
any other action which they are entitled to take, from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
(ii) At any meeting having as a purpose any vote or action by
holders of the Series B Preferred Stock and the Series C Preferred Stock as a
single series or class (including any action which this resolution states is
within the authority or discretion of the Majority Senior Holders), the
presence, in person or by proxy, of the holders of record of shares of Investor
Preferred Stock having an aggregate Liquidation Price representing more than 50%
of the total Liquidation Price of all Series B Shares and Series C Shares then
outstanding shall be required and be sufficient to constitute a quorum of such
class for any such purpose, and the affirmative vote of the shares of Investor
Preferred Stock having an aggregate Liquidation Price representing more than 50%
of the total Liquidation Price of all Series B Shares and Series C Shares then
outstanding and entitled to vote at such meeting shall be the act of the
Investor Preferred Stock. At any such meeting or adjournment thereof, (A) the
absence of a quorum of such holders of Investor Preferred Stock shall not
prevent the taking of any action by the holders of shares other than the
Investor Preferred Stock which they are entitled to take, and the absence of a
quorum of holders of shares other than the Investor Preferred Stock shall not
prevent the holders of the Investor Preferred Stock from taking of any action
which they are entitled to take and (B) in the absence of such quorum, either of
holders of the Investor Preferred Stock or of shares other than the Investor
Preferred Stock (or both), a majority of the holders, present in person or by
proxy, of the class or classes of stock which lack a quorum shall have power to
adjourn the meeting for the election of directors which they are entitled to
elect or the taking of any other action which they are entitled to take, from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
(c) Consistent By-laws and Charter. The Certificate of Incorporation
and the By-laws of the Corporation shall at all times contain provisions
consistent with the provisions, purposes and intent of Section 7, Section 8, and
Section 9 and the other provisions of this resolution.
9. Conversion.
(a) Conversion Right Generally. Unless previously redeemed in
accordance
with Section 6, each share of Series C Preferred Stock may be converted at the
option of the holder thereof, in whole or in part, at any time and from time to
time on and after the Closing Date, into fully paid and nonassessable shares of
Common Stock at the Conversion Rate in effect at the time of conversion and in
the manner and on the terms and conditions hereinafter provided in this Section
9. The number of whole or fractional shares of Common Stock into which each
share of Series C Preferred Stock shall be convertible as of any time shall be
equal to the quotient determined by dividing (i) the sum of (A) the Liquidation
Price of such share plus (B) an amount equal to all unpaid dividends accrued on
such share of Series C Preferred Stock from and including the Dividend Payment
Date immediately preceding such date (or the Issue Date if there was no prior
Dividend Payment Date) through and including such time, whether or not such
unpaid dividends have been earned or declared or there are any unrestricted
funds of the Corporation legally available for the payment of dividends; by (ii)
the Conversion Price determined as of such time. Each of the initial Liquidation
Price and Conversion Price is $77 and so the initial Conversion Rate is one
share of Common Stock for each Series C Share converted. The Conversion Rate,
the Conversion Price and the kind, number and amount of securities and other
property deliverable upon conversion of any Series C Share shall be subject to
adjustment from time to time as set forth in this Section 9. The conversion
right provided by this Section 9 with respect to any Series C Share redeemed in
accordance with Section 6 shall terminate as of, and may be exercised at any
time prior to, the close of business on the applicable Redemption Date. In case
cash, property or securities other than Common Stock shall be payable,
deliverable or issuable upon conversion, then all references to Common Stock in
this Section 9 or, if applicable, Section 10 shall be deemed to apply, so for as
appropriate and as nearly as may be, to such cash, property or other securities.
(b) Mechanics of Conversion. In order to convert any Series C Share,
the Holder thereof shall deliver to the Corporation at its principal executive
offices within the United States or at another office or agency designated by
the Corporation pursuant to Section 9(x), of the certificate(s) evidencing the
Series C Share(s) to be converted, which certificate(s), if the Corporation
shall so request, shall be duly endorsed to the Corporation or in blank or
accompanied by proper instruments of transfer to the Corporation or in blank
(such endorsements or instruments of transfer to be in form reasonably
satisfactory to the Corporation), and shall give written notice to the
Corporation at said office that such holder elects to convert all or a part of
the Series C Share(s) represented by said certificate(s) in accordance with the
terms of this Section 9, and shall state in writing therein the name or names
and denomination or denominations in which such Holder wishes certificate(s) for
Common Stock to be issued. Every such notice of election to convert shall
constitute a contract between the holder of such Series C Share(s) and the
Corporation, whereby the holder of such Series C Share(s) shall be deemed to
subscribe for the amount of Common Stock which such holder shall be entitled to
receive upon conversion of the number of shares of Series C Preferred Stock to
be converted, and, in satisfaction of such subscription, to deposit the shares
of Series C Preferred Stock to be converted, and whereby the Corporation shall
be deemed to agree that the surrender of the shares of Series C Preferred Stock
to be converted shall constitute full payment of such subscription for
such Common Stock to be issued upon such conversion. The Corporation will as
soon as practicable after such deposit of a certificate or certificates for
Series C Preferred Stock, accompanied by the written notice above prescribed,
issue and deliver at such offices of the Corporation or at such other office or
agency to the Person for whose account such Series C Preferred Stock was so
surrendered, or to his nominee(s) or, subject to compliance with applicable law,
transferee(s), a certificate or certificates for the number of whole shares of
Common Stock to which such holder shall be entitled. Such conversion shall be
deemed to have been made as of the date of such surrender of the Series C
Preferred Stock to be converted, and the Person or Persons entitled to receive
the Common Stock issuable upon conversion of such Series C Preferred Stock shall
be treated for all purposes as the record holder or holders of such Common Stock
on such date and the holder of the share or shares of Series C Preferred Stock
so converted shall no longer have any rights or obligations pursuant to the
Series C Certificate of Designation (except the right of such holder to receive,
and the obligation of the Corporation to issue and deliver, such shares of
Common Stock and all other securities, cash or other property, if any, issuable
upon such conversion). Notwithstanding the foregoing, if any notice of
conversion given by any Holder states that such conversion is in connection with
an offering of securities registered or to be registered pursuant to the
Securities Act, then such conversion may, at the option of such Holder, be
conditioned upon and deferred until the closing of the sale of such securities
pursuant to such offering, in which event the Series C Share(s) covered by such
notice shall not be deemed to have been converted until immediately prior to the
closing of such sale and the Corporation shall, unless otherwise instructed by
such Holder, deliver the stock certificate(s) and any cash, securities or other
property to which such Holder shall be entitled at such time or times as such
Holder shall reasonably request.
(c) Expenses and Taxes. The Corporation shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery of the shares of Common Stock and
cash, property or other securities which any Holder is entitled to receive upon
conversion of any Series C Share(s). The Corporation shall not be required,
however, to pay any stamp, stock transfer or other similar tax or other
governmental charge required to be paid solely by virtue of any transfer
involved in the issue of shares of Common Stock in any name other than that of
the Holder of the Series C Share(s) converted at the order of such Holder, and
if any such transfer is involved, the Corporation shall not be required to issue
or deliver the shares of Common Stock as to which such tax or charge is
applicable until such tax or other charge shall have been paid or it has been
established to the Corporation's reasonable satisfaction that no such tax or
other charge is due.
(d) Fractional Shares of Common Stock. If the number of shares of
Common Stock purchasable on the conversion of Series C Share(s) is not a whole
number, the Corporation shall not be required to issue any fraction of a share
of Common Stock and such number of shares issuable shall be rounded up to the
nearest whole number. If a certificate or certificates evidencing more than one
Series C Share shall be surrendered for conversion at one time by the same
Holder, the number of full shares which shall be issuable upon conversion
thereof shall be
computed on the basis of the aggregate number of Series C Shares so surrendered
for conversion. Notwithstanding the provisions of this Section 9(d), in
computing adjustments to the Conversion Rate pursuant to Section 9, fractional
shares of Common Stock shall be taken into account as provided in Section
9(p)(C) and any outstanding Series C Share may at any time represent the right
to receive upon conversion less than one share of Common Stock or some other
number of shares of Common Stock which is not a whole number.
(e) Covenant to Reserve Shares for Issuance on Conversion. The
Corporation shall at all times reserve and keep available out of the authorized
but unissued shares of Common Stock, solely for the purpose of issue upon
conversion of Series C Shares, the full number of shares of Common Stock
issuable if all outstanding Series C Shares were to be converted in full. All
shares of Common Stock which shall be issuable upon conversion of any Series C
Share shall be newly issued, duly authorized, validly issued, fully paid and
nonassessable and without any personal liability attaching to the ownership
thereof, and the issuance thereof shall not give rise or otherwise be subject to
preemptive or similar purchase rights on the part of any Person or Persons, and
the Corporation shall take any corporate and other actions that may, in the
opinion of its counsel, be necessary in order that the Corporation may validly
and legally issue fully paid and nonassessable all shares of Common Stock and
all shares of the Corporation's capital stock of any other class or series
issuable upon conversion of the Series C Preferred Stock. The Corporation hereby
authorizes and directs its current and future transfer agents, if any, for the
Common Stock and for any shares of the Corporation's capital stock of any other
class or series issuable upon the conversion of the Series C Preferred Stock at
all times to reserve such number of authorized shares as shall be requisite for
such purpose. The Corporation shall supply such transfer agents with duly
executed stock certificates for such purposes.
(f) Compliance with Governmental Requirements; Listing of Shares;
Hart-Scott-Rodino Act.
(A) If issuance of any Conversion Securities issuable upon conversion of
any Series C Share(s) require, under any applicable federal, state, local or
foreign law, rule or regulation or any applicable requirement of any national
securities exchange or inter-dealer quotation system, any registration,
qualification, listing or approval before such shares may be issued upon
conversion, the Corporation shall in good faith, as promptly as practicable and
at its expense, diligently endeavor to cause such shares to be duly registered,
qualified, approved or listed, as the case may be, and the conversion of such
Series C Share(s) shall be suspended for the period during which such
registration, qualification, approval or listing is being diligently pursued or
sought by the Corporation. Without limiting the generality of the foregoing, if
any shares of Common Stock or other capital stock or securities required to be
reserved for issuance upon conversion of Series C Shares require registration or
qualification with any governmental authority under any federal or state law
before such shares may be so issued, the Corporation will in good faith and as
expeditiously as possible and at its expense endeavor to cause such shares to be
duly registered. During all periods during which shares of Common Stock or any
other
capital stock or securities of the same class, series or issue as are issuable
upon conversion of any Series C Share are listed, qualified or otherwise
eligible for trading or quotation on any national securities exchange or the
Nasdaq National Market, the National Association of Securities Dealers, Inc.
Automated Quotation System or any similar quotation system, the Corporation
shall cause all shares of Common Stock, and all such other capital stock and
securities, issuable upon conversion of such Series C Share to be listed,
qualified or eligible for trading or quotation thereon upon issuance thereof.
(B) If any Holder is advised by its own legal counsel that its intended
conversion of any Series C Shares would or might be subject to the HSR Act, the
Corporation shall promptly comply with any applicable requirements under the HSR
Act relating to filing and furnishing of information (the "HSR Report") to the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice, such actions to include, without limitation, (i) filing
the HSR Report and taking all other action required by the HSR Act, (ii)
coordinating with respect to the filing of the HSR Reports of such Holder and
the Corporation (and exchanging drafts thereof), so as to present all required
HSR Reports to the FTC and the Department of Justice at the time selected by
such Holder, and to avoid substantial errors or inconsistencies among such HSR
Reports in the description of the transaction, (iii) complying with any
additional request for documents or information made by the FTC or the
Department of Justice or by a court and assisting the other parties to so comply
and (iv) causing all Persons which are part of the same "person" (as defined for
purposes of the HSR Act) as the Corporation to cooperate and assist in such
filing and compliance. If any Holder is advised by its own legal counsel that
its intended conversion of any Series C Share(s) would or might be subject to
any other law, rule or regulation which requires any filing with or review or
approval by any governmental authority or agency, the Corporation shall promptly
comply with any requirements of such law, rule or regulation applicable to it
and shall cooperate with such Holder in such Holder's efforts to comply with the
requirements of such law, rule or regulation applicable to it on a timely basis.
Each of the Corporation and such Holder shall bear and pay any costs or expenses
that it incurs in complying with this Section 9(f)(B), except that each shall
pay one half of any fee payable to the FTC or the Department of Justice in
connection with the filing of an HSR Report pursuant to this Section 9(f)(B) and
the HSR Act.
(g) Intentionally omitted.
(h) Adjustment Generally. The Conversion Price and the Conversion
Rate and the kind, number and amount of securities and other property issuable
upon conversion of any Series C Share shall be subject to adjustment from time
to time as hereinafter set forth. Upon any issuance or deemed issuance of Common
Stock or other event that results in an adjustment to the Conversion Rate, the
Conversion Price shall also be adjusted by multiplying the Conversion Price in
effect immediately prior to the effective time of such adjustment in the
Conversion Rate by a fraction the numerator of which is the number of shares of
Common Stock issuable upon conversion of one share of Series C Preferred Stock
immediately prior to such
adjustment, and the denominator of which is the number of shares of Common Stock
issuable upon conversion of one share of Series C Preferred Stock immediately
following such adjustment to the Conversion Rate. Such adjustments of the
Conversion Rate and the Conversion Price shall be cumulative and shall be made
successively on each and every occasion that any event requiring any such
adjustment shall occur. The form of the stock certificate(s) evidencing the
Series C Shares need not be changed because of any adjustment made pursuant
hereto.
(i) Stock Dividends, Subdivisions, Combinations and
Recapitalizations. If the Corporation shall at any time (i) declare or pay a
dividend or declare, pay or make any other distribution on the Common Stock in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock
into a greater number of shares, (iii) combine the outstanding shares of Common
Stock into a smaller number of shares, or (iv) issue any shares of capital stock
of the Corporation by way of reclassification of the Common Stock, then in each
and every such event the Conversion Rate and the Conversion Price determined as
of immediately prior to the applicable time referred to in subclause (x) or (y)
of this sentence shall be adjusted so that the Holder of any Series C Share
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock (or other capital stock of the Corporation) which such
Holder would have owned and would have been entitled to receive by virtue of the
happening of any of the events described above had such Series C Share been
converted (x) in the case of a dividend or distribution, immediately prior to
the record date for the determination of the stockholders entitled to receive
such dividend or distribution (or, if no such record date is fixed, as of any
other time as of which the holders of Common Stock entitled to participate in
such distribution was determined) or (y) in the case of a subdivision,
combination or reclassification, on the effective date thereof. An adjustment
made pursuant to this Section 9(i) shall become effective immediately after such
record date (or other applicable date referred to in clause (x) of the
immediately preceding sentence) in the case of a dividend or distribution,
subject to Section 9(p)(D) and Section 9(p)(E), and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.
(j) Certain Other Distributions. Subject to the second and third
sentences of this Section 9(j), if the Corporation shall at any time declare or
make any distribution, by dividend or otherwise, to all holders of outstanding
shares of Common Stock of any cash (subject to the last sentence of this
subsection) or other assets or property of any nature whatsoever, any debt
securities or other evidences of its indebtedness, any capital stock, any other
securities of any nature whatsoever or any warrants, options or other Rights to
subscribe for, purchase or otherwise acquire any assets, property, capital
stock, debt or other securities or evidences of indebtedness (excluding
dividends, distributions or issuances referred to in Section 9(i), Rights
referred to in Section 9(l) and Convertible Securities referred to in Section
9(m)), or shall take a record of such holders for the purpose of entitling them
to receive such a distribution, then the Conversion Rate shall be adjusted to
equal the product of the Conversion Rate determined as of immediately prior to
such adjustment multiplied a fraction the numerator of which shall be the
Current Market Price per share of the Outstanding Common Shares at the date of
taking such record or, if no record is taken, at the date as of which the
holders of Common Stock entitled to participate in such distribution were
determined or if no such determination is made, on the date of such
distribution, and the denominator of which shall be the excess of (x) such
Current Market Price per share of the Outstanding Common Shares at such date
over (y) the amount allocable to one share of the Outstanding Common Shares at
such date of any such cash so distributable and of the Fair Market Value (as
determined as of such date in good faith by the Board of Directors) of any and
all such evidences of indebtedness, shares of capital stock, debt securities,
other securities, property, assets or Rights so distributable. No adjustment
pursuant to the foregoing provisions of this Section 9(j) shall be made if such
adjustment would result in a Conversion Rate that is lower than the Conversion
Rate in effect prior to such adjustment or in a Conversion Price higher than
that in effect prior to such adjustment. In the event that, with respect to any
such distribution, the result of subtracting the amount referred to in clause
(y) of the first sentence of this Section from the Current Market Price referred
to in clause (x) of such sentence is less than one-half of such Current Market
Price or such amount referred to in such clause (y) is greater than the amount
of such Current Market Price referred to in such clause (x), then the adjustment
provided for above in this Section shall not be made and in lieu thereof the
Conversion Rate and the Conversion Price determined as of immediately prior to
the applicable time referred to in clause (i) or (ii) of this sentence shall be
adjusted so that the Holder of any Series C Share thereafter surrendered for
conversion shall be entitled to receive the kind and number or amount of shares
of Common Stock (or other capital stock of the Corporation), other Conversion
Securities and other property or assets which such Holder would have received
had such Series C Share been converted prior to the record date for the
determination of the stockholders entitled to receive such distribution or, if
no such record date is fixed, as of any other time as of which the holders of
Common Stock entitled to participate in such distribution was determined, plus
the kind and amount of cash, other assets or property, debt securities, other
evidences of indebtedness, other securities or Rights which such Holder would
have been entitled to receive by virtue of being the record holder, as of such
record date or other time, of such kind and number or amount of shares of Common
Stock or other Conversion Securities (assuming that such holder of Common Stock
or other Conversion Securities failed to exercise rights of election, if any, as
to the kind or amount of shares or stock, other securities or property
receivable in such distribution, provided that if the kind or amount of shares
of stock, other securities or property receivable in such distribution is not
the same for each non-electing share, then the kind and amount of shares of
stock, other securities or property receivable upon consummation of such
transaction for each non-electing share shall be deemed to be the kind and
amount so receivable per share by a plurality of the non-electing shares). An
adjustment made pursuant to this Section 9(j) shall become effective, subject to
Section 9(p)(D) and Section 9(p)(E), immediately after such record date or, if
no such record date is fixed, immediately after the time as of which holders of
Common Stock entitled to participate in such distribution were determined or, if
no such time is fixed, as of the date of such distribution. No adjustment
pursuant to this subsection (j) shall be required for any cash dividend paid out
of current or retained earnings to the extent the sum of the cash dividends
payable after the Issue Date does
not exceed the aggregate net income (determined in accordance with generally
accepted accounting principles consistently applied) of the Corporation since
the Issue Date.
(k) Issuance of Additional Shares of Common Stock.
(A) Subject to subdivision (B) of this Section 9(k), if at any time
the Corporation shall issue, or pursuant to Section 9(l), Section 9(m), Section
9(n) or Section 9(o) be deemed to issue, any Additional Shares of Common Stock
in exchange for consideration in an amount (determined in accordance with
subdivisions (A) and (F) of Section 9(p)) per Additional Share of Common Stock
less than the Reference Price determined as of the time such Additional Shares
of Common Stock are issued or deemed to be issued, then the Conversion Rate
shall be adjusted to equal the product obtained by multiplying the Conversion
Rate in effect immediately prior to such issuance or deemed issuance by a
fraction (i) the numerator of which shall be the number of Outstanding Common
Shares immediately after such issuance or deemed issuance, and (ii) the
denominator of which shall be the number of Outstanding Common Shares
immediately prior to such issuance or deemed issuance plus the number of shares
which the aggregate amount of consideration, if any, received by the Corporation
upon such issuance or deemed issuance of all such Additional Shares of Common
Stock would purchase at the Reference Price determined as of such time.
(B) The provisions of subdivision (A) of this Section 9(k) shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is made under Section 9(i) or Section 9(j) or to the issuance of
Additional Shares of Common Stock pursuant to the exercise of any Existing Right
in accordance with the terms thereof in effect of the Closing Date. No
adjustment of the Conversion Rate shall be made under this Section 9(k) upon the
issuance of any Additional Shares of Common Stock which are or are deemed to be
issued pursuant to (i) subject to Section 9(o), the exercise of any Existing
Rights or (ii) subject to Section 9(n), the exercise of any other Rights or the
exercise of any conversion or exchange rights in any other Convertible
Securities if, in the case of any such Rights or Convertible Securities referred
to in this clause (ii) any such adjustment shall previously have been made, or
no such adjustment shall have been required to be made, upon the issuance of
such Rights or upon the issuance of such Convertible Securities (or upon the
issuance of any Rights therefor) pursuant to Section 9(l) or Section 9(m).
(C) Each adjustment pursuant to this Section 9(k) by reason of any
issuance or sale of any Additional Shares of Common Stock shall be effective as
of the date of such issuance or sale.
(l) Issuance of Rights. Subject to the last sentence of this Section
9(l), if at any time the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution of, or shall in any manner (whether directly or indirectly by
assumption in a consolidation or in a merger in which the Corporation is
the surviving corporation or otherwise) grant, issue or sell to any Person or
Persons, any Rights to subscribe for, purchase or otherwise acquire any
Additional Shares of Common Stock or any Convertible Securities, in any case
whether or not such Rights or the right to exchange or convert such Convertible
Securities are immediately exercisable, and the consideration per share for
which Common Stock is issuable upon the exercise of such Rights or upon
conversion or exchange of such Convertible Securities (determined pursuant to
subdivisions (A) and (F) of Section 9(p)) shall be less than the Reference Price
determined (x) in the case of such dividend or distribution, as of the close of
business on such record date or (y) in the case of such grant, issuance or sale,
immediately prior to the time of such issue or sale, then the maximum number of
shares of Common Stock issuable upon the exercise of such Rights or, in the case
of Rights for Convertible Securities, upon the conversion or exchange of such
Convertible Securities determined as of such applicable time shall be deemed to
be Additional Shares of Common Stock issued as of such applicable time for such
consideration per share and the Conversion Rate shall be adjusted as provided in
Section 9(k). Subject to Section 9(n), no further adjustments of the Conversion
Rate shall be made upon the actual issuance of such Common Stock or of such
Convertible Securities upon exercise of such Rights or upon the actual issuance
of such Common Stock upon such conversion or exchange of such Convertible
Securities for which an adjustment pursuant to this Section 9(l) previously had
been made or was not required to be made. No adjustment under this Section 9(l)
shall be required by reason of the grant of Employee Options.
(m) Issuance of Convertible Securities. Subject to the last sentence
of this Section 9(m), if at any time the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution of, or shall in any manner (whether directly or
indirectly by assumption in a consolidation or in a merger in which the
Corporation is the surviving corporation or otherwise) grant, issue or sell to
any Person or Persons, any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the
consideration per share for which Common Stock is issuable upon such conversion
or exchange (determined pursuant to subdivisions (A) and (F) of Section 9(p))
shall be less than the Reference Price determined (x) in the case of such
dividend or distribution, as of the close of business on such record date or (y)
in the case of such issuance or sale, immediately prior to the time of such
grant, issuance or sale, then the maximum number of shares of Common Stock
issuable upon the conversion or exchange of such Convertible Securities
determined as of such applicable time shall be deemed to be Additional Shares of
Common Stock issued as of such applicable time for such consideration per share
and the Conversion Rate shall be adjusted as provided in Section 9(k). No
further adjustment of the Conversion Rate shall be made under this Section 9(m)
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any Rights therefor if any such adjustment shall previously have
been made upon the issuance of such Rights pursuant to Section 9(l). Subject to
Section 9(n), no further adjustments of the Conversion Rate shall be made upon
the actual issuance of such Common Stock upon conversion or exchange of
Convertible Securities for which an adjustment pursuant to this Section 9(m)
previously had been made or was not required. If the terms of any Convertible
Securities provide for any issuance of additional
Convertible Securities (whether in payment of dividends or interest or
otherwise), then each occasion on which any such additional Convertible
Securities are issued shall be deemed a new issuance of Convertible Securities
for which an adjustment pursuant to this Section 9(m) shall be made. No
adjustment under this Section 9(m) shall be required by reason of the issuance
of any shares of the Series C Preferred Stock (i) pursuant to the Series C
Purchase Agreement or the Co-Investment Agreement, (ii) that is expressly
provided for in either (A) Section 2.4 of the Series C Purchase Agreement or (B)
the Pugliese Employment Agreement, or (iii) with the prior consent of the
Majority Senior Holders given in a written instrument that expressly states that
no such adjustment shall be required.
(n) Superseding Adjustment.
(A) If, at any time after any adjustment of the Conversion Rate
shall have been made pursuant to Section 9(l) or Section 9(m) in respect of any
Rights or any Convertible Securities other than Shares of the Series C Preferred
Stock referred to in the last sentence of Section 9(m):
(i) the consideration paid or payable to the Corporation, or the
number of shares of Common Stock issued or issuable, upon the exercise,
conversion or exchange of the Rights or Convertible Securities in respect of
which such adjustment was made is increased or decreased by virtue of provisions
contained therein for an automatic increase or decrease (as the case may be)
upon the occurrence of a specified date or event, any amendment or modification
of or departure from the terms thereof previously in effect or otherwise, the
adjustments to the Conversion Rate computed upon the original grant, issuance or
sale thereof or upon the taking of a record date with respect thereto (as the
case may be), and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be readjusted to the Conversion Rate
which would then be in effect had such adjustment originally been made on the
basis that such increased or decreased consideration paid or payable or such
increased or decreased number of shares of Common Stock issued or issuable was
the consideration paid or payable or the number of shares issued or issuable in
respect of such Rights or Convertible Securities which are actually outstanding
immediately prior to the effective time of such increase or decrease (but no
such readjustment shall be made with respect to any Rights or Convertible
Securities which for any reason no longer are outstanding as of such time); or
(ii) any Rights or any rights of conversion or exchange under
Convertible Securities in respect of which such adjustment was made shall expire
without having been fully exercised, the adjustments to the Conversion Rate
computed upon the original grant, issuance or sale thereof or upon the taking of
a record date with respect thereto (as the case may be), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
(1) in the case of such Rights or Convertible Securities, the
only Additional Shares of Common Stock issued were the shares of Common Stock,
if any, actually
issued upon the exercise of such Rights or the conversion or exchange of such
Convertible Securities and the consideration received for such Additional Shares
of Common Stock was, in the case of Rights, the consideration actually received
by the Corporation for the grant, issuance or sale of all such Rights, whether
or not exercised, plus the consideration actually received by the Corporation
upon such exercise, or, in the case of Convertible Securities, the consideration
actually received by the Corporation for the issuance or sale of all such
Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Corporation upon such
conversion or exchange; and
(2) in the case of any such Rights for Convertible Securities,
only the Convertible Securities, if any, actually issued or sold upon the
exercise thereof were issued at the time of grant, issuance or sale of such
Rights, and the consideration received by the Corporation for the Additional
Shares of Common Stock deemed to have been then issued was the consideration
actually received by the Corporation for the grant, issuance or sale of all such
Rights, whether or not exercised, plus the additional consideration, if any,
actually received by the Corporation upon the issuance or sale of the
Convertible Securities with respect to which such Rights were actually
exercised.
(B) No readjustment pursuant to this Section 9(n) shall have the
effect of (1) decreasing the number of shares of Common Stock or the amounts of
other Conversion Securities, cash or other property into which any Series C
Share is convertible below the greater of the number of such shares and the
amounts of such other Conversion Securities, cash and property as would have
resulted from any adjustment to such number of such shares and such amounts of
such other Conversion Securities, cash and other property between the original
adjustment date (before giving effect to the original adjustment) and the time
such readjustment is made or (2) requiring any surrender, return or redelivery
of any shares of Common Stock, other Conversion Securities, cash or other
property delivered upon any conversion of any Series C Share prior to the time
such readjustment is made, requiring that the converting Holder or any
subsequent holder of any such shares of Common Stock, Conversion Securities or
other property make any payment to the Corporation or otherwise affecting such
shares of Common Stock, other Conversion Securities or other property or the
rights or obligations of the converting Holder or any such subsequent holder
with respect thereto. From and after any adjustment or adjustments provided for
in this Section 9(n), the Conversion Rate shall continue to be subject to
further adjustment as provided in this Section 9.
(C) If, at any time after any grant, sale or other issuance of any
Rights or Convertible Securities for which an adjustment of the Conversion Rate
shall not have been required to be made pursuant to the provisions of Section
9(l) or Section 9(m) (as the case may be), the consideration paid or payable to
the Corporation upon the exercise of such Rights or Convertible Securities is
decreased, or the number of shares of Common Stock issued or issuable upon the
exercise of such Rights or Convertible Securities is increased, in either case
by virtue of provisions contained therein for an automatic decrease or increase
(as the case may be) upon the
occurrence of a specified date or event, any amendment or modification of or
departure from the terms thereof previously in effect or otherwise, then such
event shall, for purposes of Section 9(l) (in the case of such Rights) or
Section 9(m) (in the case of such Convertible Securities) be deemed to be a new
issuance, as of the date of the effectiveness of such decrease or increase (as
the case may be) of Rights or Convertible Securities having terms reflecting
such changes.
(o) Adjustment for Events Affecting Existing Rights. If the number
of shares of Common Stock issued or issuable upon exercise of any Existing Right
is increased as a direct or indirect result of any amendment or modification of
or departure from the terms thereof previously in effect, then such increased
number of shares of Common Stock issued or issuable upon exercise thereof shall
be deemed to be Additional Shares of Common Stock issued as of the effective
date of such increase for the additional consideration, if any, payable to
acquire such increased number of shares upon exercise of such Existing Right,
and the Conversion Rate shall be adjusted as provided in Section 9(k). If the
consideration payable for shares of Common Stock issued or issuable upon
exercise of any Existing Right is decreased as a direct or indirect result of
any amendment or modification of or departure from the terms thereof previously
in effect, then such event shall be deemed to be the issuance, as of the
effective date of such decrease, of a number of Additional Shares of Common
Stock equal to the excess of (1) the maximum number of shares of Common Stock
issuable upon exercise of such Existing Right over (2) the number of shares of
Common Stock determined by dividing the total consideration, if any, that would
be payable to the Corporation upon the exercise in full of such Existing Right
after giving effect to such decrease by the amount of consideration per share of
Common Stock issuable upon exercise of such Existing Right that would have been
payable to the Corporation absent such decrease. The provisions of this Section
9 are in addition to (and not exclusive of) any other rights or remedies of such
holders in the event that any such amendment, modification or departure occurs
without any required approval of the holders of Series C Shares.
(p) Other Provisions Applicable to Adjustments. The following
provisions shall be applicable to the making of adjustments provided for in this
Section 9:
(A) Computation of Consideration. Subject to the last sentence of
this Section 9(p)(A), to the extent that any Additional Shares of Common Stock,
any Convertible Securities or any Rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities shall be issued
or deemed to be issued for cash consideration, the consideration received or
deemed to be received by the Corporation therefor shall be the net amount of the
cash received or deemed to be received by the Corporation therefor (in any such
case subtracting any amounts received in respect of accrued interest, accrued
dividends or other similar amounts which the Corporation may be obligated to pay
to the holders thereof in the future and any compensation, discounts or expenses
paid or incurred by the Corporation in connection with the issuance thereof).
Subject to the last sentence of this Section 9(p)(A), to the extent that such
issuance or deemed issuance shall be for a consideration other than cash, then,
except as herein otherwise expressly provided, the amount of such consideration
shall be deemed
to be the Fair Market Value of such consideration at the time of such issuance
or deemed issuance as determined in good faith by the Board of Directors.
Subject to the last sentence of this Section 9(p)(A), in case any Additional
Shares of Common Stock, any Convertible Securities or any Rights to subscribe
for, purchase or otherwise acquire Additional Shares of Common Stock or
Convertible Securities shall be issued or deemed to be issued in connection with
any merger, consolidation, share exchange or similar transaction, the amount of
consideration therefor shall be deemed to be the Fair Market Value, as
determined in good faith by the Board of Directors, of such portion of the
assets and business of the nonsurviving corporation as the Board of Directors in
good faith shall determine to be attributable to such Additional Shares of
Common Stock, Convertible Securities, or Rights, as the case may be. Subject to
the last sentence of this Section 9(p)(A), in case any Additional Shares of
Common Stock, any Convertible Securities or any Rights to subscribe for,
purchase or otherwise acquire Additional Shares of Common Stock or Convertible
Securities are issued or deemed to be issued in combination with each other or
with any other securities or property in connection with any transaction in
which the Corporation receives cash, securities, property or other
consideration, or any combination of the foregoing, then the amount of
consideration therefor shall be deemed to be such portion of the cash,
securities, property and other consideration received by the Corporation as the
Board of Directors in good faith shall determine to be attributable to such
Additional Shares of Common Stock, Convertible Securities or Rights, as the case
may be, with any noncash consideration being valued at its Fair Market Value as
determined by the Board of Directors in good faith. Subject to the last sentence
of this Section 9(p)(A), the consideration for any Additional Shares of Common
Stock issuable or deemed to be issuable pursuant to any Rights to subscribe for,
purchase or otherwise acquire the same shall be the consideration received or
deemed to be received by the Corporation for issuing such Rights plus the
minimum additional consideration, if any, paid or payable to the Corporation
upon the exercise or deemed exercise of such Rights. Subject to the last
sentence of this Section 9(p)(A), the consideration for any Additional Shares of
Common Stock issued or issuable pursuant to the terms of any Convertible
Securities covered by any Rights to subscribe for, purchase or otherwise acquire
such Convertible Securities shall be the consideration received or deemed to be
received by the Corporation for issuing such Rights, plus the minimum additional
consideration, if any, paid or payable to the Corporation in respect of the
subscription for, purchase or other acquisition of such Convertible Securities,
plus the minimum additional consideration, if any, paid or payable to the
Corporation upon the exercise or deemed exercise of the right of conversion or
exchange in such Convertible Securities. Subject to the last sentence of this
Section 9(p)(A), the consideration for any Additional Shares of Common Stock
issuable or deemed to be issuable pursuant to the terms of any Convertible
Securities, other than any covered by any Rights to subscribe for, purchase or
acquire the same, shall be the consideration received or deemed to be received
by the Corporation for issuing such Convertible Securities plus the minimum
additional consideration, if any, paid or payable to the Corporation upon the
exercise of the right of conversion or exchange in such Convertible Securities.
For all purposes of this Section 9, all Rights or Convertible Securities issued
or deemed to be issued to directors, officers, employees or consultants of the
Corporation or any Subsidiary, except Shares of Series C Preferred Stock
issued to Thomas Pugliese pursuant to the Pugliese Employment Agreement, shall
be deemed to be issued for no consideration except to the extent the Corporation
receives in exchange for the issuance thereof consideration other than services
rendered or to be rendered.
(B) When Adjustments to Be Made. The adjustments required by this
Section 9 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock into which a Series C Share is convertible that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock) up to, but not beyond the date of conversion if such
adjustment either by itself or with other adjustments not previously made adds
or subtracts less than 1% of the shares of Common Stock into which a Series C
Share is convertible immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section 9 and not
previously made by virtue of this Section 9(p)(B), would result in a minimum
adjustment or on the date of conversion. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(C) Fractional Interests. In computing adjustments under this
Section 9, fractional interests in Common Stock shall be taken into account to
the nearest 1/100th of a share.
(D) When Adjustment Not Required. If the Corporation shall take a
record of the holders of any class or series of its capital stock for the
purpose of entitling them to receive a dividend or distribution for which an
adjustment pursuant to this Section 9 is required and shall, thereafter and
before the declaration, payment or delivery of such dividend or distribution to
stockholders otherwise entitled thereto, abandon its plan to pay or deliver such
dividend or distribution (so that such stockholders are legally bound by such
abandonment and have no right, remedy or recourse by reason of such taking of a
record or such abandonment), then thereafter no adjustment shall be required by
reason of the taking of such record and any such adjustment previously made in
respect thereof shall be rescinded and annulled.
(E) Delivery of Due Bills. If, after the taking of any record of the
holders of any class or series of capital stock of the Corporation for the
purpose of entitling them to receive a dividend or distribution for which an
adjustment pursuant to this Section 9 is required, but prior to the occurrence
of the event for which such record is taken, any Series C Share is converted,
the Corporation shall deliver to the converting Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive the additional
shares of Common Stock, other securities, cash and other property receivable
upon conversion by reason of an adjustment pursuant to this Section 9 upon such
taking of a record upon the occurrence of the event requiring such adjustment.
(F) Certain Determinations. During each and every period that the
Board of Directors includes at least one sitting member who is a Series B
Director or, during any period that no shares of Series B Preferred Stock shall
be outstanding, the Series C Director, each determination of the Current Market
Price of any share of Common Stock or the Fair Market Value of any other
security, asset, property or consideration which may be required to be made by
the Board of Directors pursuant to or in connection with the application of any
provision of this resolution and each determination which may be required by
Section 9(r)(B) or Section 9(w) to be made by the Board of Directors, shall be
made in good faith by the Valuation Committee. Any such determination of Fair
Market Value by the Valuation Committee or the Board of Directors may be
disputed in good faith by the Majority Senior Holders and any such dispute shall
be resolved by an independent investment banking firm of recognized national
standing selected by the Majority Senior Holders and reasonably acceptable to
the Corporation (and whose fees and expenses shall be paid by the Corporation),
whose decision with respect to such dispute shall be final and conclusive and
binding on the Corporation and all Holders; provided, however, that the Majority
Senior Holders shall not have the right to dispute under this Section 9(p)(F)
any such determination that shall be made during any period referred to in the
first sentence of this Section 9(p)(F) by the Valuation Committee by the
affirmative vote or written consent of a majority of its members, which majority
includes the Series B Director, or during any period that no shares of Series B
Preferred Stock shall be outstanding, the Series C Director. Any determination
by the Valuation Committee or the Board of Directors pursuant to Section 9(r)(B)
or Section 9(w) may be disputed in good faith by the Majority Senior Holders,
and any such dispute shall be resolved in accordance with Section 9(y);
provided, however, that the Majority Senior Holders shall not have the right to
dispute under this Section 9(p)(F) any such determination that shall be made
during any period referred to in the first sentence of this Section 9(p)(F) by
the Valuation Committee by the affirmative vote or written consent of a majority
of its members, which majority includes at least one Series B Director or,
during any period that no shares of Series B Preferred Stock shall be
outstanding, the Series C Director.
(q) Other Action Affecting Common Stock. In case at any time or from
time to time the Corporation shall take any action in respect of its Common
Stock which is not one described in any other provision of this Section 9 as
requiring an adjustment, then, unless such action will not have an adverse
effect upon the rights and intended benefits of the Holders of Series C Shares,
the number of shares of Common Stock and the kind and amount of other securities
and property into which each Series C Share is convertible shall be increased in
such manner as may be equitable in the circumstances.
(r) Multiple Classes of Common Stock.
(A) If, at any time while any Series C Shares are outstanding, the
Corporation's authorized capital stock shall include two or more classes or
series of Common Stock, then each Holder shall have the right, upon each
conversion of any of his Series C
Share(s), to elect to receive such number of shares of each such class or series
as such Holder desires, provided that the total number of shares of all classes
and series selected by such Holder shall not exceed the aggregate number of
shares of Common Stock issuable upon conversion of such Series C Share(s).
(B) If, as a result of any adjustment made pursuant to Section 9, by
virtue of the existence of Section 9(r)(A), as a result of any action by the
Corporation referred to in Section 9(w), or otherwise, the Holder of a Series C
Share would, upon conversion thereof, become the holder of more than one class
or series of capital stock of the Corporation, then the Conversion Rate and the
Conversion Price shall be subject to adjustment in respect of each such class
and series of capital stock in a manner and on terms as nearly as equivalent as
practicable to the provisions set forth in this Section 9, which manner and
terms shall be determined by the Board of Directors promptly after each such
adjustment, each such action by the Corporation and each other event which has
or might have such result. Promptly after the Board of Directors makes any such
determination, the Corporation shall deliver to each Holder a written notice
which shall describe in reasonable detail the manner and terms so determined.
(s) Notices to Holders.
(A) Notice of Adjustments. Whenever the Conversion Rate shall be
adjusted pursuant to Section 9, the Corporation at its expense shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Corporation setting forth, in reasonable detail, the event requiring the
adjustment, the nature and amount of such adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board of Directors made any determination required by any provision of Section
9), the date as of which such adjustment was or will be effective as provided
herein, the Conversion Rate and the Conversion Price immediately prior to such
event and for and the Conversion Rate and the Conversion Price immediately after
such adjustment and all other relevant information. The Corporation shall
promptly cause to be delivered to each Holder a signed copy of such certificate.
The Corporation shall, upon the written request at any time of any Holder,
furnish or cause to be furnished to such Holder a like certificate setting forth
(i) the Conversion Rate and the Conversion Price at the time in effect and
showing how such Conversion Rate and Conversion Price was calculated, and (ii)
the number of shares of each class or series of Conversion Stock and the kind
and amount, if any, of other Conversion Securities, cash and other property
which at the time would be received upon the conversion of a Series C Share at
the time and showing how the same were calculated.
(B) Notice of Corporate Action. If at any time
(i) the Corporation shall take a record of the holders of any
class, series or issue of its capital stock or other securities for the purpose
of entitling them to receive a dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any
evidences of its indebtedness, any shares of capital stock of any class or
series, any cash or any other securities or property, or to receive any other
right, interest or benefit, or
(ii) there shall be any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation or any consolidation or merger or binding share exchange of the
Corporation with, or any sale, transfer or other disposition of all or
substantially all the property, assets or business of the Corporation to,
another Person, or
(iii) there shall be any tender offer or exchange offer for
Conversion Securities of any class, series or issue, or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation,
then the Corporation shall (i) give to each Holder at least 20 days' prior
written notice of the date on which a record date shall be fixed for such
dividend, distribution or right or for determining rights to vote in respect of
any such reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up, (ii) promptly
after learning of any such tender or exchange offer, deliver to the each Holder
notice thereof, a copy of all written offering material which the Corporation
possesses or reasonably can obtain or if no such materials exist or are
possessed or can reasonably be obtained by the Corporation, a written summary of
all material terms and conditions of and other material facts relating thereto
known to the Corporation and (iii) give each Holder at least 20 days' prior
written notice of the scheduled, planned or anticipated date when any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up shall take place. Such
notice in accordance with clause (i) of the immediately preceding sentence also
shall specify (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, the date on which the holders
of Common Stock shall be entitled to any such dividend, distribution or right,
and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of Common Stock
shall be entitled to exchange their shares of Common Stock for securities, cash
or other property deliverable upon such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution, liquidation or
winding up.
(C) Notices To Stockholders. In addition to the foregoing, each
Holder shall be given the same notices of corporate action or proposed corporate
action as any holder of Common Stock.
(t) No Impairment. The Corporation shall not by or through amending
its
certificate of incorporation, any reorganization, transfer of assets,
consolidation, merger, share exchange, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this resolution, but will at all times in
good faith carry out and assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights and intended benefits of the Holders against impairment. Without limiting
the generality of the foregoing, the Corporation (i) will not directly or
indirectly increase the par value of any shares of Common Stock or other capital
stock receivable upon the conversion of any Series C Share above the Conversion
Price immediately prior to such increase in par value, (ii) will not take any
action that results in any adjustment to the Conversion Rate pursuant to Section
9 if after such adjustment the total number of shares of Common Stock or shares
of any other class or series of Conversion Stock issuable upon the conversion of
all of the outstanding Series C Shares would exceed the total number of shares
of Common Stock or such other Conversion Stock, respectively, then authorized by
the Corporation's Certificate of Incorporation and available and reserved for
the purpose of issuance upon such conversion, (iii) will not enter into any
transaction or take any action which, by reason of any resulting adjustment
hereunder, would cause the Conversion Price to be less than the par value per
share of Common Stock and (iv) will take all such action as may be necessary or
appropriate in order that the Corporation may validly and legally issue shares
of each class and series of Conversion Stock and other Conversion Securities
upon the conversion of any Series C Share which in each case are fully paid,
non-assessable and without personal liability attaching to the ownership thereof
and not subject to preemptive and similar purchase rights. Upon the request of
any Holder, at any time, the Corporation will acknowledge in writing, in form
satisfactory to such Holder, the continuing validity of each certificate for any
Series C Share(s) then held by such Holder and the obligations of the
Corporation with respect thereto and thereunder.
(u) Taking of Record; Stock Transfer Books. In the case of all
dividends or other distributions by the Corporation to the holders of its Common
Stock with respect to which any provision of Section 9 refers to the taking of a
record of such holders, in each such case the Corporation will not declare, pay
or make any such dividend or distribution unless it shall take such a record and
the Corporation shall take each such record as of the close of business on a
Business Day. The Corporation shall not be required to convert any shares of
Series C Preferred Stock, and no surrender of Series C Preferred Stock shall be
effective for that purpose, while the stock transfer books of the Corporation
are closed for any proper purpose; but the surrender of Series C Preferred Stock
for conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books, as if the
conversion had been made on the date such Series C Preferred Stock was
surrendered for conversion. The Corporation will not at any time voluntarily
close its stock transfer books so as to result in preventing or delaying the
conversion or transfer of any Series C Share.
(v) Each Holder May Enforce Rights. Notwithstanding any of the
provisions hereof, any Holder, without the consent of any other Holder, or any
holder of any Conversion
Securities may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Corporation
suitable to enforce, or otherwise in respect of, his rights with respect to his
Series C Shares or Conversion Securities.
(w) Reclassification, Consolidation, Merger, Sale, Conveyance or
Lease. If any of the following shall occur while any Series C Shares are
outstanding: (i) any consolidation, merger, binding share exchange or
reorganization to which the Corporation is party (other than a consolidation,
merger, share exchange or reorganization in which the Corporation is the
continuing corporation and which does not result in any reclassification of or
change in the outstanding shares of Conversion Securities issuable upon
conversion of the Series C Preferred Stock); or (ii) any sale, conveyance,
transfer or lease to another corporation of the properties and assets of the
Corporation as an entirety or substantially as an entirety, then the Corporation
or such successor or acquiring corporation, as the case may be, shall thereupon
make appropriate provision, reasonably satisfactory to the Majority Holders, so
that the Holders of the Series C Shares then outstanding shall have the right at
any time thereafter, upon conversion of the Series C Shares, to receive or
purchase (as the case may be) the kind and amount of shares of common stock of
such successor or acquiring corporation, other capital stock, other securities
and property receivable or purchasable (as the case may be) upon such
reclassification, change, consolidation, merger, sale, conveyance, transfer or
lease as would be received by a holder of the number of shares of Common Stock,
the number of shares of each other class or series of Conversion Stock and the
kind and amount of all other Conversion Securities issuable upon conversion of
such Series C Shares immediately prior to such consolidation, merger, sale,
conveyance, transfer or lease (assuming that such holder of Conversion
Securities failed to exercise rights of election, if any, as to the kind or
amount of shares or stock, other securities or property receivable or
purchasable, as the case may be, upon consummation of any such transaction,
provided that if the kind or amount of shares of stock, other securities or
property receivable or purchasable, as the case may be, upon consummation of
such transaction is not the same for each non-electing share, then the kind and
amount of shares of stock, other securities or property receivable upon
consummation of such transaction for each non-electing share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
non-electing shares). In case of any such merger, consolidation, share exchange,
reorganization, or disposition of assets, the successor or acquiring corporation
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this resolution to be performed and observed
by the Corporation and all the obligations and liabilities thereunder or
otherwise with respect thereto, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board of Directors) in order to
provide for adjustments of shares of the Common Stock into which Series C Shares
are convertible which shall be as nearly equivalent as practicable to the
adjustments provided for in Section 9. Promptly after the Board of Directors
makes any such determination, the Corporation shall deliver to each Holder a
written notice which shall describe in reasonable detail the manner and terms so
determined. For purposes of this Section 9(w) "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any class
which is not preferred
as to dividends or assets on liquidation over any other class of stock of such
corporation and which is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities which are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 9(w) shall similarly apply to successive
reorganizations, mergers, consolidations or disposition of assets. The
provisions of this Section 9(w) are supplemental to, and are not intended to
eliminate, qualify, modify or limit the rights of the holders of any Investor
Preferred Shares under any other provision of this resolution, including
Sections 3(h), 6(c) and 5(e), or the Series B Certificate of Designation,
including the provisions thereof corresponding to Sections 3(h), 6(c) and 5(e)
hereof, or any other rights or remedies which such holders may have at law, in
equity, by contract or otherwise in the event of any transaction referred to in
this Section 9(w).
(x) Office of the Corporation. As long as any of the Series C Shares
are outstanding, the Corporation shall maintain one or more offices or agencies
where the Series C Shares may be presented for conversion and Series C Shares
and Conversion Securities may be presented for registration of transfer,
division or combination. Series C Shares and Conversion Securities may, in any
event, be presented for such purposes at the principal executive offices of the
Corporation in the United States.
(y) Resolution of Certain Disputes.
(A) If there shall arise any dispute between the Corporation and the
Majority Holders concerning the calculation of the Redemption Price in the case
of a redemption pursuant to Section 6(c), the interpretation, application or
operation of the adjustment provisions of Section 9 (other than any such dispute
referred to in the second sentence of Section 9(p)(F), which shall be resolved
as stated therein) or the interpretation, application or operation of the
provisions of Section 10, the Corporation and the Majority Holders will promptly
attempt to settle such dispute through consultation and negotiation in good
faith and in a spirit of mutual cooperation. If agreement is reached concerning
the resolution of such dispute, then such agreement shall be final, conclusive
and binding on the Corporation and all Holders. If, on or before the thirtieth
day after written notice of such dispute is given by the Corporation to the
Majority Holders or by the Majority Holders to the Corporation, such dispute has
not been resolved by the agreement of the Corporation and the Majority Holders,
such dispute shall be settled by an expedited arbitration proceeding conducted
in accordance with the then current Commercial Arbitration rules of the American
Arbitration Society in New York, New York by a single arbitrator who satisfies
the requirements of Section 9(y)(B) and who is mutually acceptable to the
Corporation and the Majority Holders or, in the event such Persons fail to agree
upon such arbitrator within ten Business Days after such written notice of
dispute is given, an arbitrator who satisfies such requirements appointed by the
American Arbitration Association upon application of either the Corporation or
the Majority Holders. Neither the Corporation nor the Majority Holders shall
unreasonably withhold its approval of the selection of an arbitrator
satisfying the requirements of Section 9(y)(B). The Corporation and the Majority
Holders shall provide such arbitrator with such information as may be reasonably
requested in connection with the arbitration of such dispute and shall otherwise
cooperate with each other and such arbitrator in good faith and with the goal of
resolving such dispute as promptly as reasonably practicable. The arbitrator
shall not have authority to award punitive or other non-compensatory damages.
Subject to the immediately preceding sentence and to subdivision (C) of this
Section 9(y), the arbitrator's decision and award with respect to the dispute
referred to such arbitration shall be final and binding and may be entered in
any court with jurisdiction, and the Corporation and the Holders shall abide by
such decision and award. Each party shall bear its own costs and expenses,
including attorney's fees, incurred in connection with any arbitration
proceeding, except that the Corporation and the Holders (as a group) each shall
pay one-half of all fees, costs and disbursements of the arbitrator and of or
charged by the American Arbitration Society. The provisions of this Section 9(y)
shall not in any way limit or otherwise affect (i) the right of any Holder to
seek, with regard to the matter in dispute, specific performance or other
injunctive relief in any court of competent jurisdiction or (ii) the rights or
remedies of any Holder with respect to any claim, controversy or dispute not
submitted to and decided by an arbitrator pursuant to this Section 9(y).
(B) Each arbitrator appointed pursuant to Section 9(y)(A) shall be
an attorney who practices law in New York City, who has substantial experience
in sophisticated corporate and securities transactions generally and in
negotiating and drafting "antidilution" provisions of warrants and convertible
securities in particular and who has not, and who is not a member or employee of
any firm which has, rendered legal services to any of the parties to the dispute
or any of their respective Affiliates within the preceding two years and who has
no interest (other than the receipt of customary fees for his services as an
arbitrator) in the matter in dispute.
(C) Nothing contained in this Section 9(y) or any other provision
hereof is intended to or shall preclude any holder of any Series C Share or
Conversion Securities from exercising or pursuing or otherwise limiting or
affecting the rights or remedies which such holder may have pursuant to any
Purchase Agreement or the Co-Investment Agreement, at law, in equity or
otherwise by reason of any matter which is the subject of or basis for any
dispute referred to in Section 9(y)(A) (or any other matter), and the dispute
resolution mechanisms provided for in Section 9(y)(A) are intended solely as a
means of resolving bona fide disputes concerning the interpretation, application
or operation of the adjustment provisions of Section 9 (other than any such
dispute referred to in the second sentence of Section 9(p)(F), which shall be
resolved as stated therein) or bona fide disputes which the last sentence of
Section 9(p)(F) provides will be resolved pursuant to this Section 9(y), and not
for the purpose of determining the rights of holders of Series C Shares or
Conversion Securities or the liabilities or obligations of the Corporation, for
the purpose of resolving or settling any claim by any such holder of any breach
or inaccuracy of any representation or warranty of, or any breach or failure to
perform any covenant, agreement or obligation, of the Corporation contained
herein or in any Purchase Agreement, any Co-Investment Agreement or any other
Transaction Document (as defined in the
Series C Purchase Agreement) or any other purpose. Without limiting the
generality of the immediately preceding sentence, no decision of any arbitrator
appointed pursuant to this Section 9(y) shall have or be given any res judicata
or similar effect in any action, suit or proceeding in which any claim by any
holder of any Series C Share or Conversion Securities or any holder of Series B
Shares or of any securities into which any Series B Share is converted of any
breach or inaccuracy of any representation or warranty of, or any breach or
failure to perform any covenant, agreement or obligation, of the Corporation
contained herein or in the Series B Certificate of Designation, any Purchase
Agreement, the TFC Series B Purchase Agreement, any Co-Investment Agreement or
any other agreement or instrument is to be adjudicated.
10. Initial Public Offering.
(a) Qualified IPO. Subject to Section 10(e), upon the
occurrence of a Qualified IPO or on such date or dates as of which holders of
more than 75% of the total number of shares of Series C Preferred Stock issued
pursuant to the Purchase Agreements and the Co-Investment Agreement have
converted their shares of Series C Preferred Stock into Common Stock in
accordance with the provisions of Section 9, the Corporation may elect, by
written notice to that effect given to each holder of Series C Preferred Stock
within 10 Business Days after the date of such closing, to require that all, but
not less than all, outstanding shares of Series C Preferred Stock be converted,
effective as of such tenth Business Days, into duly authorized, validly issued,
fully paid and non-assessable shares of Common Stock at the Conversion Rate
determined as of such tenth Business Day and otherwise in accordance with
Section 9 and the applicable provisions of this Section 10 (after giving effect
or pro forma effect to all adjustments, if any, to the Conversion Rate and the
Conversion Price required by the provisions of Section 9 as a result of any
issuances or deemed issuances of shares of Common Stock in or in connection with
the Qualified IPO, including all issuances or sales of shares of Common Stock,
Rights or Convertible Securities to the public, to any underwriter as
compensation or otherwise for such underwriter's own account and not for resale
to the public, and all "over-allotment options" and similar rights granted to
any underwriter).
(b) Other IPO. Subject to Section 10(e), if the Corporation,
with the prior consent of the Majority Senior Holders, consummates an initial
public offering of the Corporation's Common Stock at a price to the public
reflecting a pre-money common equity valuation of less than $231 per share of
Common Stock on a fully diluted basis (as such price per share shall be
appropriately adjusted for stock splits, reverse splits, stock dividends or
other reclassifications, reorganizations or similar events affecting the capital
stock of the Corporation, the record date for which occurs after the Closing
Date), other than an initial public offering that is initiated by a demand for
registration made in accordance with the provisions of Article II of the
Registration Rights Agreement by the Investors (as defined therein), then unless
the Majority Senior Holders and the Corporation otherwise agree in writing,
effective as of the date of the closing of the consummation of such initial
public offering, all Series C Shares (other than any Series C Shares as to which
a notice of conversion has been given prior to such date and not
revoked by the holders thereof) shall be converted into duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock in accordance with
Section 9 hereof and the applicable provisions of this Section 10. The number of
shares into which each outstanding Series C Share shall be converted shall be
the greater of (i) the Conversion Rate determined as of the date of the closing
of the consummation of such public offering (after giving effect or pro forma
effect to all adjustments, if any, to the Conversion Rate and the Conversion
Price required by the provisions of Section 9 as a result of any issuances or
deemed issuances of shares of Common Stock in or in connection with such initial
public offering, including all issuances or sales of shares of Common Stock,
Rights or Convertible Securities to the public, to any underwriter as
compensation or otherwise for such underwriter's own account and not for resale
to the public, and all "over-allotment options" and similar rights granted to
any underwriter); or (ii) the quotient obtained by dividing the lesser of "A" or
"B" by "C" where
A = Two Hundred and Thirty-One Dollars ($231),
B = the sum of (x) the Liquidation Price of such share of Series C
Preferred Stock as of the date of the closing of the consummation of
such public offering, plus (y) all unpaid dividends accrued on such
share during the period from and including the applicable Dividend
Payment Date immediately preceding such date (or the Issue Date for
such share if there was no prior Dividend Date) through and
including such date of payment or distribution (whether or not such
unpaid dividends have been earned or declared), plus (z) the
Participation Amount of such share of Series C Preferred Stock as of
the date of the closing of the consummation of such public offering,
and
C = the pre-money value per share of the Common Stock on a fully
diluted basis implied by such initial public offering.
(c) Effect of Closing of IPO. Except as otherwise expressly provided
in this Section 10, the conversion of the Series C Shares into Common Stock
pursuant to subsection (a) or (b) of this Section 10 shall, for purposes of
Section 9 hereof, have the same effect as if each holder of Series C Shares gave
a notice of conversion pursuant to Section 9(b). Upon the effective date for
such conversion determined in accordance with this Section 10, each share of
Series C Preferred Stock will be deemed to be converted into the number of
shares of Common Stock of the Corporation determined as set forth in this
Section 10 and the holder of such share of Series C Preferred Stock shall no
longer have any rights or obligations pursuant to the Series C Certificate of
Designation (except the right of such holder to receive, and the obligation of
the Corporation to issue and deliver, such shares of Common Stock and all other
securities, cash or other property, if any, issuable upon such conversion), but
shall instead have all the rights and obligations of holders of the
Corporation's Common Stock.
(d) Notices; Continued Convertibility; Effective Date of Conversion.
In the case
of any initial public offering of the Common Stock (or any Rights or Convertible
Securities), the Corporation shall, promptly after the price to the public is
determined, the Corporation shall give written notice to each holder of any
Investor Preferred Shares of such price to the public and shall also give each
such holder at least three Business Days advance notice of the date of the
closing of the consummation of such public offering. The calculations required
by Section 10(a) or Section 10(b) (whichever is applicable) shall be made
promptly after the exercise, expiration or termination of any "over-allotment
option" granted to the underwriters, and the Corporation shall promptly provide
each holder of Investor Preferred Shares with a written statement of the number
of shares of Common Stock into which each Series B Share and each Series C Share
is convertible in sufficient detail to permit such holder to confirm the
Corporation's calculations. Each Series C Share shall continue to be
convertible, at the election of the holder thereof, into Common Stock in
accordance with Section 9 through and including the eighth Business Day after
such holder receives the written statement of the Corporation's calculations
referred to in the immediately preceding sentence. If such holder does not elect
to so convert any Series C Share, such share shall be converted into shares of
Common Stock pursuant to Section 10(a) or Section 10(b) (whichever is
applicable) and such conversion shall be effective as of the date of the closing
of the consummation of the initial public offering.
(e) Simultaneous Conversion of Series B Shares. Unless the Majority
Senior Holders otherwise agree in writing, the Corporation may not require the
conversion of the Series B Preferred Stock pursuant to Section 10(a) by reason
of the occurrence of a Qualified IPO or pursuant to Section 10(b) unless all
shares of the Series C Preferred Stock are simultaneously required to be
converted in accordance with the corresponding provisions of the Series B
Certificate of Designation.
11. Headings. The headings of the various sections and subsections hereof
are for convenience of reference only and shall not affect the interpretation of
any of the provisions hereof.
12. Terms Generally. The definitions of terms contained herein shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The words "herein",
"hereof" and "hereunder" and words of similar import refer to this resolution in
its entirety and not to any part hereof, unless the context shall otherwise
require. All references herein to Sections shall be deemed references to
Sections of this resolution, unless the context shall otherwise require. Unless
the context shall otherwise require, any references to any agreement or other
instrument or to any statute or regulation or any specific section or other
provision thereof are to it as amended and supplemented from time to time (and,
in the case of a statute or regulation or specific section or other provision
thereof, to any successor to such statute, regulation, section or other
provision). Unless otherwise expressly provided herein or unless the context
shall otherwise require, any provision of this Agreement
using a defined term (such as "Subsidiary" or "Wholly Owned Subsidiary") which
is based on a specified relationship between one Person and one or more other
Persons shall, as of any time, refer to such Persons who have the specified
relationship as of that particular time. Any reference in this Agreement to a
"day" or number of "days" (without the explicit qualification of "Business")
shall be interpreted as a reference to a calendar day or number of calendar
days. Unless the context clearly indicates otherwise, "or" shall not be
exclusive and means "and/or." When used with reference to any Right or
Convertible Security, the term "exercise" means to exercise the right to
subscribe for, purchase or otherwise acquire shares of Common Stock represented
by such Right or the right to exchange or convert such Convertible Security for
or into shares of Common Stock represented by such Convertible Security, and
variants of such word (including "exercised" and "exercisable") shall have
correlative meanings. Whenever used with respect to any Additional Share of
Common Stock or any other share of Common Stock, the word "issue" includes any
issuance, sale or other method of transfer or delivery of such share, whether
such share is newly issued or is a treasury share and variants of such word
(including "issued", "issuance" or "issuable") used with respect to any
Additional Share of Common Stock or any other share of Common Stock shall have
correlative meanings; therefore, any provision of this resolution which is
stated to be applicable if the Corporation issues or shall issue any share is
applicable both to a newly issued share and to a treasury share sold or
otherwise transferred or delivered. The word "property" and the word "assets"
shall each include assets or property of any kind, whether real, personal,
tangible or intangible.
13. Actions on Non-Business Days. If any action or notice is to be taken
or given on or by a particular calendar day, and such calendar day is not a
Business Day, then such action or notice shall be deferred until, and may be
taken or given on, the next Business Day.
14. Severability. If any provision of this resolution shall be illegal,
invalid or unenforceable by reason of any rule of law or public policy, that
provision will be enforced to the maximum extent permissible so as to effect the
intent thereof and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. In any such
case, if requested by the Majority Holders, the Corporation will negotiate in
good faith to amend this resolution to replace the illegal, invalid or
unenforceable language with legal, valid and enforceable language which as
closely as possible reflects such intent.
15. Waivers.
(a) Any provision of this resolution which, for the benefit of the
holders of Series C Preferred Stock, prohibits, limits or restricts actions by
the Corporation, or imposes obligations on the Corporation, may be waived in
whole or in part, or the application of all or any part of such provision in any
particular circumstance or generally may be waived, in each case with the
consent of the Majority Holders, either in writing or by vote at a meeting
called for such purpose at which the holders of Series C Preferred Stock shall
vote as a separate class, unless such waiver, by its terms, has an adverse
effect upon the shares of Series C Preferred Stock of any
holder that does not affect all shares of Series C Preferred Stock on an equal
per share basis, in which case such waiver shall require the prior approval of
such holder.
(b) Any provision of this resolution which, for the benefit of the
holders of Investor Preferred Stock without distinction as to series or class,
prohibits, limits or restricts actions by the Corporation, or imposes
obligations on the Corporation, may be waived in whole or in part, or the
application of all or any part of such provision in any particular circumstance
or generally may be waived, in each case with the consent of the Majority Senior
Holders, either in writing or by vote at a meeting called for such purpose at
which the holders of the Investor Preferred Stock shall vote as a separate,
single class, unless such waiver, by its terms, has an adverse effect upon the
shares of the Series B Preferred Stock or the Series C Preferred Stock of any
holder that does not affect all shares of the other series on an equal per share
basis, in which case such waiver shall require the prior approval of the holders
of a majority of the shares of the affected series.
(c) Any waiver given as provided in subsection (a) of this Section
shall be binding on all holders of the Series C Preferred Stock. Any waiver
given as provided in subsection (b) of this Section shall be binding on all
holders of the Investor Preferred Stock.
16. Method Of Giving Notices; Defects in Notices. All notices, requests,
consents, demands, elections and other communications required or permitted
hereunder shall be in writing and shall be given or delivered to the intended
recipient at: (i) in the case of any holder of shares of Investor Preferred
Stock, to such holder at his address appearing on the books of the Corporation
or supplied by him in writing to the Corporation for the purpose of such notice;
and (ii) in the case of the Corporation, to the Corporation at its principal
office at 9531 West 78th Street, Minneapolis, Minnesota, or at such changed
address as the Corporation may from time to time specify in writing to each
holder of shares of Investor Preferred Stock. Any such notice, request, consent,
demand, election or other communication shall be deemed to have been duly given
or delivered if personally delivered or sent by registered or certified mail,
return receipt requested, Express Mail, Federal Express or similar overnight
delivery service for next Business Day delivery or by telegram, telex or
facsimile transmission and will be deemed given or delivered, unless earlier
received: (1) if sent by certified or registered mail, return receipt requested,
five calendar days after being deposited in the United States mail, postage
prepaid; (2) if sent by Express Mail, Federal Express or similar overnight
delivery service for next Business Day delivery, the next Business Day after
being entrusted to such service, with delivery charges prepaid or charged to the
sender's account; (3) if sent by telegram or telex or facsimile transmission, on
the date sent and (4) if delivered by hand, on the date of delivery. No failure
on the part of the Corporation to give any notice required by any provision of
this resolution, nor any delay or defect in any such notice which is given or
delivered or in the giving or delivery thereof, shall adversely affect the
rights which the holders of the Series C Preferred Stock or the holders of the
Investor Preferred Stock would have if such notice had been duly given on a
timely basis, and such holders shall be entitled to exercise such rights from
and at any time after
they acquire actual knowledge of the matters required to be set forth in such
notice.
17. Specific Performance; Injunctive Relief. In addition to any other
rights or remedies which may be available at law, in equity or by contract, any
holder from time to time of shares of Series C Preferred Stock shall be entitled
to obtain in any court of competent jurisdiction specific performance of, or an
injunction or other order restraining any act or proposed act by the Corporation
which would result in a violation of, any of the terms or provisions of this
resolution.
18. Amendment; Voting Rights.
(a) This resolution may be amended from time to time by the Board of
Directors with the affirmative vote or written consent of the Majority Holders
and, if any Series B Shares are outstanding, with the affirmative vote or
written consent of the holders of a majority of the Series C Shares then
outstanding; provided, however, any such amendment which, by its terms, would
have an adverse effect upon the shares of Series C Preferred Stock of any
holders that does not affect all shares of Series C Preferred Stock on an equal
per share basis shall also require the prior approval of such holder. Unless
otherwise required by mandatory provisions of applicable law or the Series B
Certificate of Designation, no vote or consent of the holders of any other class
or series of the Corporation's stock shall be necessary.
(b) The Series C Shares shall not carry voting rights except as
provided in this resolution and except for any voting rights to which the
holders thereof may be or become entitled under the General Corporation Law of
the State of Delaware as in effect from time to time (or any successor statutory
provisions) or other applicable law. The foregoing shall not prevent the
Corporation from granting, by contract (including the Stockholders Agreement),
or otherwise, to any Holder or Holders of any Series C Shares any consent or
approval, veto or similar rights of any nature whatsoever.
(c) Without the consent of the holders of at least 80% of the number
of shares of Series C Preferred Stock then outstanding, the Corporation shall
not amend, alter or repeal any provision of the Corporation's Certificate of
Incorporation or any resolution of the Board of Directors establishing and
designating any series or class of capital stock and determining the relative
rights and preferences thereof, so as to effect any adverse change in the
rights, privileges, powers or preferences of the holders of the Series C
Preferred Stock.
19. Decisions by Holders Generally. Unless otherwise expressly provided
herein, all decisions and determinations required or permitted to be made
hereunder by the Holders (including any decision as to whether to give any
consent or approval) shall be made by the Majority Holders. To the maximum
extent permitted by law, each Person who is or shall become a holder of any
Series C Share waives all fiduciary duties to such Person, if any, that the
Majority Holders, the Majority Senior Holders, any other Holder of any Series C
Share or any
holder of any Series B Share otherwise would or might have.
Dated: ___________, 1997
MENTUS MEDIA CORP.
By:
Name:
Title:
By:
Name:
Title: