CERTIFICATE OF DESIGNATION OF
PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF
SERIES B 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
ELGAR HOLDINGS, INC.
(Pursuant to Section 151(g) of the General Corporation Law of the State of
Delaware)
Elgar Holdings, Inc., a corporation organized and existing under the laws
of the State of Delaware (hereinafter the "Company"), DOES HEREBY CERTIFY THAT,
pursuant to authority conferred upon the Board of Directors of the Company (the
"Board of Directors") by the certificate of incorporation of the Company, as
amended, the Board of Directors unanimously adopted the following resolutions on
May 15, 1998 authorizing the issuance of the Series B 6% Cumulative Convertible
Preferred Stock of the Company, which resolutions are still in full force and
effect and are not in conflict with any provisions of the certificate of
incorporation or bylaws of the Company:
RESOLVED, that pursuant to the authority presently granted to and vested in
the Board of Directors of the Company under the provisions of the Certificate of
Incorporation of the Company and pursuant to the provisions of Section 151(g) of
the General Corporation Law of the State of Delaware, this Board of Directors
hereby creates a series of Preferred Stock to consist of 5,000 shares, and
hereby fixes the powers, preferences, relative participating, voting, optional
and other special rights, and the qualifications, limitations and restrictions
thereof, as follows:
1. DESIGNATION AND AMOUNT. The shares of such series of Preferred Stock
shall be designated as "Series B 6% Cumulative Convertible Preferred Stock" (the
"Series B Preferred Stock"), and the number of shares constituting such series
shall be 5,000. The initial liquidation preference of the Series B Preferred
Stock shall be $1,000 per share (the "Stated Liquidation Value").
2. RANK. The Series B Preferred Stock shall, with respect to rights on
bankruptcy, liquidation, winding up, dissolution and dividends, rank (i) junior
to the Series A 10% Cumulative Redeemable Preferred Stock of the Company (the
"Series A Preferred Stock") and (ii) senior to the Company's Common Stock, par
value $0.01 per share (the "Common Stock"), and to all other classes and series
of stock of the Company now or hereafter authorized, issued or outstanding,
other than any class or series of stock of the Company expressly designated as
being on a parity with ("Parity Securities") or senior to the Series B Preferred
Stock. Such other classes or series of stock of the Company not expressly
designated as being on a parity with or senior to the Series B Preferred Stock
are referred to hereafter as "Junior Securities." The rights of holders of
shares of the Series B Preferred Stock are subordinate to the rights of the
Company's general creditors, including the holders of the Company's 9-7/8%
Senior Notes due 2008 (the "Senior Notes").
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3. DIVIDENDS.
(a) The holders of shares of the Series B Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, dividends payable semi-annually in arrears on
April 30 and October 31 of each year (each such date, a "Dividend Payment
Date"), except that if any Dividend Payment Date is not a Business Day (as
defined below), then such semi-annual dividend shall be payable on the next
succeeding Business Day and such next succeeding Business Day will be the
Dividend Payment Date. Dividends shall be payable to holders of the Series B
Preferred Stock at the annual rate of 6% times the sum of (i) the Stated
Liquidation Value and (ii) accrued but unpaid dividends as of the immediately
preceding Dividend Payment Date, compounded semi-annually. Dividends shall be
payable in cash only to holders of record at the close of business on the date
specified by the Board of Directors at the time such dividend is declared (the
"Record Date"). Any such Record Date shall be not less than 10 days and not
more than 60 days prior to the relevant Dividend Payment Date. All dividends
paid with respect to shares of the Series B Preferred Stock shall be paid PRO
RATA to the holders entitled thereto.
(b) Dividends on the Series B Preferred Stock shall accrue and be
cumulative on a semi-annual basis (whether or not declared and whether or not
funds are legally available for the payment thereof) from the Issue Date (as
defined below). The semi-annual dividend period shall be computed on the basis
of a 360-day year of twelve 30-day months.
(c) So long as any shares of the Series B Preferred Stock are outstanding,
the Company shall not, without the prior consent of the holders of at least
fifty-one percent (51%) of the shares of outstanding Series B Preferred Stock,
(i) make any payment on account of, or set apart for payment money for a sinking
or other similar fund for, the purchase, redemption or retirement of, any Junior
Securities (other than dividends or distributions payable in additional shares
of Junior Securities to holders of Junior Securities); (ii) permit any
corporation or other entity directly or indirectly controlled by the Company to
purchase or redeem any Junior Securities; (iii) declare, pay or set apart for
payment, or permit any corporation or other entity directly or indirectly
controlled by the Company to declare, pay or set apart for payment, any dividend
or make any distribution or payment on any Junior Securities or Parity
Securities, whether directly or indirectly and whether in cash, obligations or
shares of the Company or other property (other than dividends or distributions
payable in additional shares of Junior Securities to holders of Junior
Securities); or (iv) make any payment on account of, or set apart for payment
money for a sinking or other similar fund for, the purchase, redemption or
retirement of, any Parity Securities, whether directly or indirectly, and
whether in cash, obligations, shares of the Company or other property (other
than payments solely of Junior Securities), and shall not permit any corporation
or other entity directly or indirectly controlled by the Company to purchase or
redeem any Parity Securities, unless prior to or at the time of such payment or
setting apart for payment, the Company shall have repurchased, redeemed or
retired shares of the Series B Preferred Stock on a PRO RATA basis, in
proportion to the respective Liquidation Preferences (as defined in the
Certificate of Incorporation or applicable Certificate of Designation) of the
Series B Preferred Stock and the Parity Securities as to which such sinking fund
or similar fund payment, or such purchase, redemption or retirement, is being
effected.
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(d) Notwithstanding anything contained herein to the contrary, no
dividends on shares of Series B Preferred Stock shall be authorized or declared
by the Board of Directors of the Company or paid or set apart for payment by the
Company at such time as the terms and provisions of any agreement of the
Company, including any agreement relating to its indebtedness, prohibits such
authorization, declaration, payment or setting apart for payment or provides
that such authorization, declaration, payment or setting apart for payment would
constitute a breach thereof or a default thereunder, or to the extent such
declaration or payment shall be restricted or prohibited by law.
4. LIQUIDATION PREFERENCE.
(a) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Company, the holders of shares of Series B
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Company available for distribution to its stockholders an amount in cash
equal to 100% of the Stated Liquidation Value for each share outstanding, plus
an amount in cash equal to all accrued but unpaid dividends thereon (whether or
not declared) as provided in Section 3(b) above, without interest, to the date
of liquidation, dissolution or winding up (such amount the "Liquidation
Preference"), before any payment shall be made or any assets distributed to the
holders of any of the Junior Securities. If the assets of the Company are not
sufficient to pay in full the Liquidation Preference payable to the holders of
outstanding shares of the Series B Preferred Stock and any Parity Securities,
then the holders of all such shares shall share ratably in such distribution of
assets in accordance with the amount which would be payable on such distribution
if the amounts to which the holders of outstanding shares of Series B Preferred
Stock and the holders of outstanding shares of such Parity Securities are
entitled were paid in full.
(b) For the purposes of this Section 4, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with any one or more
other corporations shall be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Company, unless such voluntary sale,
conveyance, exchange or transfer shall be in connection with a plan of
liquidation, dissolution or winding up of the Company.
5. REDEMPTION.
(a) OPTIONAL REDEMPTION. The Company may, at its option, redeem at any
time, out of funds legally available therefor, in the manner provided in
Section 6 hereof, all or any portion of the shares of the Series B Preferred
Stock, at a redemption price per share equal to 100% of the Liquidation
Preference thereof on the date of redemption, including dividends accrued
through the Dividend Payment Date immediately preceding the redemption date,
though not including any dividends for any period after such Dividend Payment
Date; PROVIDED, HOWEVER, that any such optional redemption by the Company shall
be on a PRO RATA basis and for whole shares of the Series B Preferred Stock;
PROVIDED, FURTHER, HOWEVER, that the Company may redeem fractional shares of
Series B Preferred Stock pursuant to this Section 5(a) in the event
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that after such redemption a holder of Series B Preferred Stock would be left
with less than one full share of Series B Preferred Stock.
(b) REDEMPTION UPON CHANGE OF CONTROL. Upon the occurrence of a Change of
Control (as defined below), the Series B Preferred Stock shall be redeemable at
the option of the holders thereof, in whole or in part, at a redemption price
per share equal to 100% of the Liquidation Preference on the date of redemption,
including dividends accrued through the Dividend Payment Date immediately
preceding the redemption date, though not including any dividends for any period
after such Dividend Payment Date; PROVIDED, HOWEVER, that the Company will not
be obligated to redeem, and will not redeem or call for redemption, any Series B
Preferred Stock upon a Change of Control until it has repurchased or redeemed
(x) such of the $90,000,000 original principal amount of Senior Notes then
outstanding as the Company is required to repurchase in connection with a change
of control pursuant to the terms of the Indenture, dated as of February 3, 1998,
between the Company and United States Trust Company, relating to the Senior
Notes and (y) such of the shares of Series A Preferred Stock then outstanding as
the Company is required to repurchase pursuant to the Certificate of Designation
relating thereto; PROVIDED, FURTHER, that any such redemption (and the Company's
obligations with respect thereto) shall be subject in all respects to the
applicable restrictions contained in the Credit Agreement, dated as of February
3, 1998, among the Company, Elgar Electronics Corporation, a wholly owned
subsidiary of the Company, and Bankers Trust Company, as agent, as amended and
restated by the parties thereto on the Issue Date, and as such agreement may be
amended or supplemented thereafter. Subject to the foregoing provisos, the
Company shall redeem, out of funds legally available therefor, the number of
shares specified in the holders' notices of election to redeem pursuant to
Section 6(b) hereof on the date fixed for redemption.
6. PROCEDURE FOR REDEMPTION.
(a) In the event that the Company shall redeem shares of Series B
Preferred Stock pursuant to Section 5(a) hereof, notice of such redemption shall
be mailed by first-class mail, postage prepaid, and mailed not less than 30 days
nor more than 60 days prior to the redemption date to the holders of record of
the shares to be redeemed at their respective addresses as they shall appear in
the records of the Company; PROVIDED, HOWEVER, that failure to give such notice
or any defect therein or in the mailing thereof shall not affect the validity of
the proceeding for the redemption of any shares so to be redeemed except as to
the holder to whom the Company has failed to give such notice or except as to
the holder to whom notice was defective. Each such notice shall state: (i) the
redemption date; (ii) the number of shares of Series B Preferred Stock to be
redeemed and, if less than all the shares held by such holders are to be
redeemed, the number of such shares to be redeemed from such holders; (iii) the
redemption price and form of consideration; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the redemption
price; and (v) that dividends on the shares to be redeemed will cease to accrue
on such redemption date. Any redemption of less than all the shares of Series B
Preferred Stock pursuant to Section 5(a) shall be made on a PRO RATA basis to
all holders of Series B Preferred Stock.
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(b) If a Change of Control should occur, then, subject to Section 5(b)
above, within 30 days of the occurrence of such Change of Control, the Company
shall give written notice by first-class mail, postage prepaid, to each holder
of Series B Preferred Stock at its address as it appears in the records of the
Company, which notice shall set forth (in addition to the information required
by the next succeeding paragraph): (i) each holder's right to require the
Company to redeem shares of Series B Preferred Stock held by such holder as a
result of such Change of Control; (ii) the redemption price; (iii) the
redemption date (which date shall be no earlier than 30 days and no later than
60 days from the date the notice in respect of such Change of Control is
mailed); (iv) the procedures to be followed by such holder in exercising its
right of redemption, including the place or places where certificates for such
shares are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on the redemption
date. In the event a holder of shares of Series B Preferred Stock shall elect
to require the Company to redeem any or all of such shares of Series B Preferred
Stock, such holder shall deliver, within 20 days of the mailing to it of the
Company's notice described in this Section 6(b), a written notice stating such
holder's election and specifying the number of shares to be redeemed pursuant to
Section 5(b) hereof.
(c) Notice by the Company having been mailed as provided in Section 6(a)
hereof, or notice of election having been mailed by the holders as provided in
Section 6(b) hereof, and provided that on or before the applicable redemption
date funds necessary for such redemption shall have been set aside by the
Company, separate and apart from its other funds, in trust for the PRO RATA
benefit of the holders of the shares of Series B Preferred Stock so called for
or entitled to redemption, so as to be and to continue to be available therefor,
then, from and after the redemption date, dividends on the shares of Series B
Preferred Stock so called for or entitled to redemption shall cease to accrue,
and said shares shall no longer be deemed to be outstanding and shall not have
the status of shares of Series B Preferred Stock, and all rights of the holders
thereof as stockholders of the Company (except the right to receive the
applicable redemption price and any accrued and unpaid dividends from the
Company to the date of redemption) shall cease, unless the Company defaults in
the payment of the redemption price, in which case all rights of the holders of
Series B Preferred Stock shall continue until the redemption price is paid.
Upon surrender of the certificates for any shares so redeemed (properly endorsed
or assigned for transfer, if the Board of Directors of the Company shall so
require and a notice by the Company shall so state), such shares shall be
redeemed by the Company at the applicable redemption price as aforesaid. In
case fewer than all the shares represented by any such certificate are redeemed,
a new certificate or certificates shall be issued representing the unredeemed
shares without cost to the holder thereof. Any funds set aside in trust for the
holders of Series B Preferred Stock pursuant to this Section 6(c) which remain
unclaimed on the second anniversary of the applicable redemption date shall be
released or repaid to the Company, after which the holders of shares called for
redemption shall be entitled to receive payment of the redemption price only
from the Company.
7. REACQUIRED SHARES. Shares of Series B Preferred Stock that have been
issued and reacquired in any manner, including shares reacquired by redemption
or shares converted into Common Stock pursuant to Section 9 below, shall (upon
compliance with any applicable provisions of the laws of the State of Delaware)
have the status of authorized and unissued shares
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of the class of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock other than
the Series B Preferred Stock.
8. VOTING RIGHTS. Except as specifically provided in this Section 8 and
except for any additional voting rights provided by law, the holders of Series B
Preferred Stock shall have no voting rights. The Certificate of Incorporation
of the Company shall not be amended in any manner that would adversely alter or
change the powers, preferences or special rights of the Series B Preferred Stock
as set forth herein without the affirmative vote of the holders of at least
fifty-one percent (51%) of the outstanding shares of Series B Preferred Stock.
9. CONVERSION RIGHTS. The rights of the holders of shares of Series B
Preferred Stock to convert such shares into shares of Common Stock (the
"Conversion Rights"), and the terms and conditions of such conversion, shall be
as follows:
(a) RIGHT TO CONVERT.
(i) At any time following a Triggering Event (as defined below), each
holder of shares of the Series B Preferred Stock shall have the right and option
to convert all, but not less than all, of such shares into that number of fully
paid and nonassessable shares of Common Stock determined in accordance with the
provisions of this Section 9. In order to convert shares of the Series B
Preferred Stock into shares of Common Stock, the holder thereof shall surrender
the certificate or certificates therefor, duly endorsed, at the office of the
Company or to the transfer agent for the Series B Preferred Stock or the Common
Stock, together with written notice to the Company stating that he, she or it
elects to convert the same and setting forth the name or names in which he, she
or it wishes the certificate or certificates for Common Stock to be issued (the
"Conversion Notice"). In the event of a redemption of the Series B Preferred
Stock pursuant to Section 5 above, any holder that does not timely deliver such
Conversion Notice and surrender such certificate or certificates prior to the
date of redemption specified in any notice delivered pursuant to Section 6 above
shall be deemed to have waived his, her or its right to conversion, and such
shares shall be subject to the Company's right of redemption pursuant to Section
5 above.
(ii) The Company shall, as soon as practicable after the surrender of
the certificate or certificates evidencing shares of Series B Preferred Stock
for conversion at the office of the Company or the transfer agent for the Series
B Preferred Stock or the Common Stock, issue to each holder of such shares, or
such holder's nominee or nominees, a certificate or certificates evidencing the
number of shares of Common Stock to which such holder shall be entitled. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series B Preferred Stock
to be converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the recordholder or holders of such shares of Common Stock at such date and
shall, with respect to such shares, have only those rights of a holder of Common
Stock of the Company.
(b) CONVERSION OF PREFERRED STOCK. Each share of Series B Preferred Stock
shall be convertible into the number of shares of Common Stock which results
from dividing the Stated
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Liquidation Value (without any adjustment for the accrued but unpaid dividends
thereon) by the Conversion Price per share in effect at the time of conversion;
PROVIDED, HOWEVER, that any fractional number of shares of Common Stock shall be
rounded up to the next whole share. Upon conversion of the Series B Preferred
Stock, holders of shares of Series B Preferred Stock shall not be entitled to
receive any accrued but unpaid dividends as of the conversion date.
(c) CONVERSION PRICE. The conversion price of each share of Series B
Preferred Stock shall initially be $10.00, which the Board of Directors of the
Company has determined to be equal to or greater than the fair market value of
the Common Stock on the Issue Date (the "Conversion Price") , and shall be
subject to adjustment from time to time as provided herein.
(d) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If outstanding shares
of the Common Stock of the Company shall be subdivided into a greater number of
shares, or a dividend in Common Stock or other securities of the Company
convertible into or exchangeable for Common Stock (in which latter event the
number of shares of Common Stock issuable upon the conversion or exchange of
such securities shall be deemed to have been distributed), shall be paid in
respect of the Common Stock of the Company, the Conversion Price for each share
of Series B Preferred Stock in effect immediately prior to such subdivision or
at the record date of such dividend shall, simultaneously with the effectiveness
of such subdivision or immediately after the record date of such dividend, be
proportionately reduced, and conversely, if outstanding shares of the Common
Stock of the Company shall be combined into a smaller number of shares, the
Conversion Price for each share of Series B Preferred Stock in effect
immediately prior to such combination shall simultaneously with the
effectiveness of such combination, be proportionately increased.
Notwithstanding the foregoing, no adjustment of the Conversion Price for the
Series B Preferred Stock shall be required unless such adjustment would require
an increase or decrease of at least 1% in such price; PROVIDED, HOWEVER, that
any adjustments which by reason of this subparagraph (d) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this subparagraph (9)(d) shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case may be.
Any adjustment to the Conversion Price under this Section 9(d) shall become
effective at the close of business on the date the subdivision, dividend or
combination referred to herein becomes effective.
(e) REORGANIZATIONS, MERGERS AND CONSOLIDATIONS. In the event of any
capital reorganization, or the consolidation or merger of the Company with or
into another entity (collectively referred to hereinafter as "Reorganizations"),
unless the Company exercises its right to redeem the Series B Preferred Stock
pursuant to Section 5(a) above, the holders of the Series B Preferred Stock
shall thereafter be entitled to receive upon conversion of the Series B
Preferred Stock the kind and number of shares of Common Stock or other
securities or property (including cash) of the Company (or other corporation
resulting from such consolidation or surviving such merger or to which such
properties and assets shall have been sold or otherwise transferred), that the
holders would have been entitled to receive had such holders converted their
Series B Preferred Stock into shares of Common Stock immediately prior to such
Reorganization. In addition, upon the occurrence of such a Reorganization,
appropriate adjustment shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter
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of the holders of the Series B Preferred Stock, to the end that the provisions
set forth herein (including the specified changes and other adjustments to the
Conversion Price) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares, other securities or property thereafter
receivable upon conversion of the Series B Preferred Stock. The provisions of
this Section 9(e) shall similarly apply to successive Reorganizations. Any
agreement entered into by the Company relating to any Reorganization shall make
appropriate provision for the conversions described herein.
(f) CONVERSION PRICE ADJUSTMENT CERTIFICATE. Whenever the Conversion
Price is adjusted as herein provided, the Company shall promptly file with the
Secretary or transfer agent an officer's certificate setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment, which certificate shall be conclusive
evidence of the correctness of such adjustment absent manifest error. Promptly
after delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted Conversion Price
and the effective date of such adjustment and shall mail such notice of such
adjustment of the Conversion Price to the holder of each share of Series B
Preferred Stock at such holder's last address as shown on the stock records of
the Company.
(g) TRIGGERING EVENTS. A Triggering Event shall mean (i) a Change of
Control, (ii) an initial public offering of any class of equity securities of
the Company pursuant to the Securities Act of 1933, as amended, (iii) the
delivery of a notice of redemption pursuant to Section 6(a) above and (iv) the
fifth anniversary of the Issue Date.
10. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of Series B Preferred Stock, such numbers of its shares of Common Stock
as shall from time to time be sufficient to effect a conversion of all
outstanding shares of the Series B Preferred Stock, and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all the outstanding shares of the Series B Preferred
Stock, the Company shall promptly seek such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose. In the event of the consolidation or merger of the Company with
another corporation where the Company is not the surviving corporation,
effective provisions shall be made in the articles or certificate of
incorporation, merger or consolidation, or otherwise of the surviving
corporation so that such corporation will at all times reserve and keep
available a sufficient number of shares of Common Stock or other securities or
property to provide for the conversion of the Series B Preferred Stock in
accordance with the provisions of this Section 10.
11. NOTICES. All notices referred to herein, except as otherwise
expressly provided, shall be made by registered or certified mail, return
receipt requested, postage prepaid and shall be deemed to have been given when
so mailed to the holder at the address for such holder maintained by the
Company.
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12. REMEDIES. Any holder of Series B Preferred Stock may proceed to
protect and enforce his, her or its rights and the rights of other holders by
any available remedy by proceeding at law or in equity to protect and enforce
any such rights, whether for the specific enforcement of any provision in this
Certificate of Designation or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
13. DEFINITIONS. For the purposes of this Certificate of Designation, the
following terms shall have the meanings indicated:
"Affiliate" shall mean, with respect to any specified person, (a) any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person or (b) any other person that
owns, directly or indirectly, 10% or more of such specified person's capital
stock or any executive officer or director of any such specified person or other
person or, with respect to any natural person, any person having a relationship
with such person by blood, marriage or adoption not more remote than first
cousin. For the purposes of this definition, "control," when used with respect
to any specified person, means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Beneficial Owner" shall have the meaning ascribed to such term or the term
"beneficial ownership" in Rule 13d-3 and Rule 13d-5 under the Securities
Exchange Act of 1934, as amended, except that a person shall be deemed have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in New York, New York are authorized or obligated by
law or executive order to close.
"Change of Control" shall mean such time after the Issue Date as either:
(i) prior to the initial public offering by the Company of any class of
its Common Stock, the consummation of any transaction the result of which is
that the Principals and their Related Parties become the Beneficial Owners, in
the aggregate, of less than 50% of the Common Stock of the Company;
(ii) after the initial public offering by the Company of any class of its
Common Stock, any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act), other than the Principals and their Related Parties, becomes,
directly or indirectly, the Beneficial Owner, by way of merger, consolidation or
otherwise, of 51% or more of the Common Stock of the Company and such person is
or becomes, directly or indirectly, the Beneficial Owner of a greater percentage
of the voting power of the Common Stock of the Company, calculated on a fully
diluted basis, than the percentage Beneficially Owned by the Principals and
their Related Parties; or
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(iii) the Company (A) effects the sale, lease or transfer of all or
substantially all of the assets of the Company to any person or group, or (B)
any wholly-owned subsidiary of the Company effects the sale, lease or transfer
of all or substantially all of the assets of such subsidiary to any person or
group, if such assets constitute substantially all of the assets of the Company
and its subsidiaries, taken as a whole.
"Junior Securities" shall have the meaning set forth in Section 2 hereof.
"Issue Date" shall mean the first date on which shares of Series B
Preferred Stock are issued.
"Liquidation Preference" shall have the meaning set forth in Section 4
hereof.
"Parity Securities" shall have the meaning set forth in Section 2 hereof.
"Person" shall mean any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Principals" shall mean (i) J.F. Lehman & Company ("Lehman"), (ii) each
Affiliate of Lehman as of the Issue Date, (iii) J.F. Lehman Equity Investors I.,
L.P., (iv) JFL-EEC LLC and (v) each officer or employee (including their
respective immediate family members) of Lehman as of the Issue Date.
"Related Party" shall mean with respect to any Principal (A) any
controlling stockholder or 80% (or more) owned subsidiary of such Principal or
(B) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (A).
IN WITNESS WHEREOF, Elgar Holdings, Inc. has caused this Certificate to be
executed by its Secretary this 26th day of May, 1998.
ELGAR HOLDINGS, INC.
By: /s/ Keith Oster
------------------------
Keith Oster, Secretary
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