Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
J. C. Penney Company, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (herein
referred to as the Company), does hereby certify:
First: That at a meeting of the Board of Directors of the Company held on
March 21, 2006, resolutions were duly adopted setting forth proposed amendments
to the Restated Certificate of Incorporation of the Company, declaring said
amendments to be advisable and directing that said amendments be submitted for
consideration by stockholders at the Annual Meeting of Stockholders of the
Company to be held on May 19, 2006. The resolutions setting forth the proposed
amendments are as follows:
RESOLVED that the Board of Directors adopts and declares advisable,
amendments to Articles Sixth and Ninth of the Company's Restated
Certificate of Incorporation ("Charter Amendments"), in the form submitted
to the meeting:
Article Sixth shall be amended to read in its entirety as follows:
Sixth: (a) Except as otherwise provided for or fixed by or pursuant to
the provisions of Article Fourth of this Certificate of Incorporation
relating to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon
liquidation to elect additional directors under specified circumstances,
the number of directors of the Company shall be fixed from time to time by
or pursuant to the Bylaws of the Company. Subject to the provisions of this
Article Sixth below, until the 2009 annual meeting of stockholders when the
following classification shall cease, the directors, other than those who
may be elected pursuant to the
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aforesaid provisions of said Article Fourth, shall be classified, with
respect to the time for which they severally hold office, into three
classes, as nearly equal in number as possible, as shall be provided in the
manner specified in the Bylaws of the Company, the first such class to be
originally elected for a term expiring at the annual meeting of
stockholders to be held in 1986, the second such class to be originally
elected for a term expiring at the annual meeting of stockholders to be
held in 1987, and the third such class to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 1988, with
each director in each class to hold office until his or her successor is
elected and qualified. At each annual meeting of stockholders until the
2007 annual meeting of stockholders, the successors of the class of
directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders to be held
in the third year following the year of their election, with each director
in each such class to hold office until his or her successor is elected and
qualified. Directors elected at and after the 2007 annual meeting of
stockholders shall hold office until the first annual meeting of
stockholders following their election and until a successor shall have been
elected and qualified or until the director's prior death, resignation or
removal.
(b) Advance notice of stockholder nominations for the election of
directors shall be given in the manner provided by the Bylaws of the
Company at the time in effect.
(c) Except as otherwise provided for or fixed by or pursuant to the
provisions of Article Fourth of this Certificate of Incorporation relating
to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to
elect additional directors under specified circumstances, newly-created
directorships resulting from any increase in the number of directors and
any vacancies on the
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Board of Directors resulting from death, resignation, disqualification,
removal, or other cause shall be filled only by the affirmative vote of a
majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with
the preceding sentence shall hold office until the next succeeding annual
meeting of stockholders following such director's election and until such
director's successor shall have been elected and qualified, including in
circumstances where such director's predecessor was elected to a longer
term. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(d) Except as otherwise provided for or fixed by or pursuant to the
provisions of Article Fourth of this Certificate of Incorporation relating
to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to
elect additional directors under specified circumstances, any director may
be removed from office, with or without cause, but only by the affirmative
vote of at least 80% of the combined voting power of the then-outstanding
shares of all classes and series of stock of the Company entitled to vote
generally in the election of directors ("Voting Stock"), voting together as
a single class (it being understood that for the purposes of this Article
Sixth, each share of the Voting Stock shall have the number of votes
granted to it in accordance with Article Fourth of this Certificate of
Incorporation).
(e) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of at least a majority
of the combined voting power of the Voting Stock, voting together as a
single class, shall be required to alter, amend, or repeal, or adopt any
provision inconsistent with, this Article Sixth.
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Article Ninth shall be amended to read in its entirety as follows:
Ninth: The Board of Directors shall have the power to make, alter,
amend, or repeal, or adopt any provision inconsistent with, the Bylaws
(except insofar as the Bylaws adopted by the stockholders shall otherwise
provide). Any Bylaws made by the directors under the powers conferred
hereby may be altered, amended, or repealed, and any provisions
inconsistent therewith may be adopted, by the directors or by the
stockholders. Notwithstanding the foregoing and anything contained in this
Certificate of Incorporation to the contrary, Section 2 of Article II, and
Sections 12 and 15 of Article III of the Bylaws, all as in effect
simultaneously with the effectiveness of this Article, shall not be
altered, amended, or repealed, and no provision inconsistent therewith
shall be adopted, without the affirmative vote of at least 80% of the
combined voting power of the then-outstanding shares of all classes and
series of stock of the Company entitled to vote generally in the election
of directors ("Voting Stock"), voting together as a single class (it being
understood that for the purposes of this Article Ninth, each share of the
Voting Stock shall have the number of votes granted to it in accordance
with Article Fourth of this Certificate of Incorporation). Notwithstanding
anything contained in this Certificate of Incorporation to the contrary,
the affirmative vote of at least 80% of the Voting Stock, voting together
as a single class, shall be required to alter, amend, or repeal, or adopt
any provision inconsistent with, this Article Ninth.
Second: That thereafter, pursuant to resolution of its Board of
Directors, at the Annual Meeting of Stockholders of the Company duly called
and held on May 19, 2006, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware, the necessary number of
shares as required by statute and the Company's Restated Certificate of
Incorporation were voted in favor of the amendments.
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Third: That the amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment to be executed this 19th day of May 2006.
J. C. Penney Company, Inc.
/s/ Joanne L. Bober
-----------------------------
By: Joanne L. Bober
Executive Vice President,
General Counsel and Secretary
RESTATED CERTIFICATE OF INCORPORATION
OF
J. C. PENNEY COMPANY, INC.
* * * * *
The present name of the company is J. C. Penney Company, Inc. The company
was incorporated under the name "J. C. Penney Holdings, Inc." by the filing of
its original Certificate of Incorporation with the Secretary of State of the
State of Delaware on January 22, 2002. This Restated Certificate of
Incorporation of the company only restates and integrates and does not further
amend the provisions of the company's Restated Certificate of Incorporation and
there is no discrepancy between the provisions of the company's Restated
Certificate of Incorporation and the provisions of this Restated Certificate of
Incorporation. This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Section 245 of the General Corporation Law of
the State of Delaware. The Restated Certificate of Incorporation of the company
is hereby restated to read in its entirety as follows:
First: The name of the corporation (which is herein referred to as the
Company) shall be J. C. Penney Company, Inc.
Second: The address of the Company's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle Delaware 19801. The name of the Company's registered agent
at such address is The Corporation Trust Company.
Third: The purpose of the Company is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
Fourth: The total number of shares of all classes of stock which the
Company shall have authority to issue is 1,275,000,000 shares, of which
25,000,000 shares shall be shares of Preferred Stock without par value
(hereinafter called Preferred Stock) and 1,250,000,000 shares shall be shares of
Common Stock of 50(cent) par value (hereinafter called Common Stock).
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock as Preferred Stock of one or more series
and in connection with the creation of any such series to fix by the resolution
or resolutions providing for the issue of shares thereof the designation,
powers, preferences, and relative, participating, optional, or other special
rights of such series, and the qualifications, limitations, or restrictions
thereof. Such authority of the Board of Directors with respect to each such
series shall include, but not be limited to, the determination of the following:
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(a) the distinctive designation of, and the number of shares
comprising, such series, which number may be increased (except where
otherwise provided by the Board of Directors in creating such series) or
decreased (but not below the number of shares thereof then outstanding)
from time to time by like action of the Board of Directors;
(b) the dividend rate or amount for such series, the conditions and
dates upon which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class or classes
or any other series of any class or classes of stock, and whether such
dividends shall be cumulative, and if so, from which date or dates for such
series;
(c) whether or not the shares of such series shall be subject to
redemption by the Company and the times, prices, and other terms and
conditions of such redemption;
(d) whether or not the shares of such series shall be subject to the
operation of a sinking fund or purchase fund to be applied to the purchase
or redemption of such shares and if such a fund be established, the amount
thereof and the terms and provisions relative to the application thereof;
(e) whether or not the shares of such series shall be convertible into
or exchangeable for shares of any other class or classes, or of any other
series of any class or classes, of stock of the Company and if provision be
made for conversion or exchange, the times, prices, rates, adjustments, and
other terms and conditions of such conversion or exchange;
(f) whether or not the shares of such series shall have voting rights,
in addition to the voting rights provided by law, and if they are to have
such additional voting rights, the extent thereof;
(g) the rights of the shares of such series in the event of any
liquidation, dissolution, or winding up of the Company or upon any
distribution of its assets; and
(h) any other powers, preferences, and relative, participating,
optional, or other special rights of the shares of such series, and
qualifications, limitations, or restrictions thereof, to the full extent
now or hereafter permitted by law and not inconsistent with the provisions
hereof.
All shares of any one series of Preferred Stock shall be identical in all
respects except as to the dates from which dividends thereon shall be
cumulative. All series of the Preferred Stock shall rank equally and be
identical in all respects except as otherwise provided in the resolution or
resolutions providing for the issue of any series of Preferred Stock.
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Whenever dividends upon the Preferred Stock at the time outstanding, to the
extent of the preference to which such stock is entitled, shall have been paid
in full or declared and set apart for payment for all past dividend periods, and
after the provisions for any sinking or purchase fund or funds for any series of
Preferred Stock shall have been complied with, the Board of Directors may
declare and pay dividends on the Common Stock, payable in cash, stock, or
otherwise, and the holders of shares of Preferred Stock shall not be entitled to
share therein, subject to the provisions of the resolution or resolutions
creating any series of Preferred Stock.
In the event of any liquidation, dissolution, or winding up of the Company
or upon the distribution of the assets of the Company, all assets and funds of
the Company remaining, after the payment to the holders of the Preferred Stock
of the full preferential amounts to which they shall be entitled as provided in
the resolution or resolutions creating any series thereof, shall be divided and
distributed among the holders of the Common Stock ratably, except as may
otherwise be provided in any such resolution or resolutions. Neither the merger
or consolidation of the Company with another corporation nor the sale or lease
of all or substantially all the assets of the Company shall be deemed to be a
liquidation, dissolution, or winding up of the Company or a distribution of its
assets.
Except as otherwise required by law or provided by a resolution or
resolutions of the Board of Directors creating any series of Preferred Stock,
the holders of Common Stock shall have the exclusive power to vote and shall
have one vote in respect of each share of such stock held and the holders of
Preferred Stock shall have no voting power whatsoever. Except as otherwise
provided in such a resolution or resolutions, the authorized shares of any class
or classes may be increased or decreased by the affirmative vote of the holders
of a majority of the outstanding shares of stock of the Company entitled to
vote.
Pursuant to the authority conferred by this Article Fourth upon the Board
of Directors of the Company, the Board of Directors created a series of
1,600,000 shares of Preferred Stock designated as Series A Junior Participating
Preferred Stock by filing a Certificate of Designations of the Company with the
Secretary of State of the State of Delaware (the "Secretary of State") and the
voting powers, designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or restrictions
thereof, of the Company's Series A Junior Participating Preferred Stock are set
forth in Exhibit A hereto and are incorporated herein by reference.
Pursuant to the authority conferred by this Article Fourth upon the Board
of Directors of the Company, the Board of Directors created a series of
1,400,000 shares of Preferred Stock designated as Series B ESOP Convertible
Preferred Stock by filing a Certificate of Designations of the Company with the
Secretary of State and the voting powers, designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the Company's Series
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B ESOP Convertible Preferred Stock are set forth in Exhibit B hereto and are
incorporated herein by reference.
Fifth: In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly authorized
and empowered:
(a) to make, alter, and repeal the Bylaws of the Company, subject to
the power of the stockholders of the Company to alter or repeal any Bylaw
made by the Board of Directors;
(b) subject to the laws of the State of Delaware, from time to time to
sell, lease, or otherwise dispose of any part or parts of the properties of
the Company and to cease to conduct the business connected therewith or
again to resume the same, as it may deem best; and
(c) in addition to the powers and authorities hereinbefore and by the
laws of the State of Delaware conferred upon the Board of Directors, to
exercise all such powers and to do all such acts and things as may be
exercised or done by the Company; subject, nevertheless, to the provisions
of said laws, of the Certificate of Incorporation as from time to time
amended of the Company, and of its Bylaws.
Sixth: (a) Except as otherwise provided for or fixed by or pursuant to the
provisions of Article Fourth of this Certificate of Incorporation relating to
the rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation to elect additional
directors under specified circumstances, the number of directors of the Company
shall be fixed from time to time by or pursuant to the Bylaws of the Company.
The directors, other than those who may be elected pursuant to the aforesaid
provisions of said Article Fourth, shall be classified, with respect to the time
for which they severally hold office, into three classes, as nearly equal in
number as possible, as shall be provided in the manner specified in the Bylaws
of the Company, the first such class to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 1986, the second
such class to be originally elected for a term expiring at the annual meeting of
stockholders to be held in 1987, and the third such class to be originally
elected for a term expiring at the annual meeting of stockholders to be held in
1988, with each director in each class to hold office until his or her successor
is elected and qualified. At each annual meeting of stockholders beginning with
the annual meeting of stockholders to be held in 1986, the successors of the
class of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders to be held in
the third year following the year of their election, with each director in each
such class to hold office until his or her successor is elected and qualified.
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(b) Advance notice of stockholder nominations for the election of directors
shall be given in the manner provided by the Bylaws of the Company at the time
in effect.
(c) Except as otherwise provided for or fixed by or pursuant to the
provisions of Article Fourth of this Certificate of Incorporation relating to
the rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation to elect additional
directors under specified circumstances, newly-created directorships resulting
from any increase in the number of directors and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal, or other
cause shall be filled only by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.
(d) Except as otherwise provided for or fixed by or pursuant to the
provisions of Article Fourth of this Certificate of Incorporation relating to
the rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation to elect additional
directors under specified circumstances, any director may be removed from
office, with or without cause, but only by the affirmative vote of at least 80%
of the combined voting power of the then-outstanding shares of all classes and
series of stock of the Company entitled to vote generally in the election of
directors ("Voting Stock"), voting together as a single class (it being
understood that for the purposes of this Article Sixth, each share of the Voting
Stock shall have the number of votes granted to it in accordance with Article
Fourth of this Certificate of Incorporation).
(e) Notwithstanding anything contained in this Certificate of Incorporation
to the contrary, the affirmative vote of at least 80% of the combined voting
power of the Voting Stock, voting together as a single class, shall be required
to alter, amend, or repeal, or adopt any provision inconsistent with, this
Article Sixth.
Seventh: Section 1. The vote of stockholders of the Company required to
approve any Business Combination shall be as set forth in this Article Seventh.
The term "Business Combination", as well as other capitalized terms used in this
Article Seventh, shall have the respective meanings ascribed to them in Section
3 of this Article Seventh.
Irrespective of any affirmative vote required by law or by this Certificate
of Incorporation, and except as otherwise expressly provided in Section 2 of
this Article Seventh:
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(i) any merger or consolidation of the Company or any Subsidiary with
(a) any Interested Stockholder or (b) any other Person (whether or not
itself an Interested Stockholder or an Affiliate of an Interested
Stockholder) which is, or after such merger or consolidation would be, an
Interested Stockholder or an Affiliate of an Interested Stockholder,
(ii) any sale, lease, exchange, mortgage, pledge, transfer, or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate of any Interested Stockholder of
any assets of the Company or any Subsidiary having an aggregate Fair Market
Value of $100 million or more,
(iii) any sale, lease, exchange, mortgage, pledge, transfer, or other
disposition (in one transaction or a series of transactions) to the Company
or any Subsidiary of any assets of any Interested Stockholder or any
Affiliate of any Interested Stockholder having an aggregate Fair Market
Value of $100 million or more,
(iv) any issuance or transfer by the Company or any Subsidiary (in one
transaction or a series of transactions) of any securities of the Company
or any Subsidiary to any Interested Stockholder or any Affiliate of any
Interested Stockholder in exchange for cash, securities, or other property
(or a combination thereof) having an aggregate Fair Market Value of $100
million or more,
(v) the adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of any Interested
Stockholder or any Affiliate of any Interested Stockholder, or
(vi) any reclassification of securities (including any reverse stock
split), or recapitalization of the Company, or any merger or consolidation
of the Company with any of its Subsidiaries or any other transaction
(whether or not with or into or otherwise involving an Interested
Stockholder), which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class of equity,
or securities convertible into any equity, securities of the Company or any
Subsidiary, as the case may be, which is, directly or indirectly, owned by
any Interested Stockholder or any Affiliate of any Interested Stockholder,
shall require the affirmative vote of at least 80% of the combined voting
power of the then-outstanding shares of all classes and series of stock of the
Company entitled to vote generally in the election of directors ("Voting
Stock"), voting together as a single class (it being understood that for the
purposes of this Article Seventh, each share of Voting Stock shall have the
number of votes granted to it in accordance with Article Fourth of this
Certificate of Incorporation). Such affirmative vote shall be required
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notwithstanding the fact that no vote may be required, or that a lesser
percentage may otherwise be applicable, by law or in any agreement with any
national securities exchange or otherwise.
Section 2. Any Business Combination which meets all the conditions
specified in either paragraph A or paragraph B below shall not be subject to the
provisions of Section 1 of this Article Seventh and shall require only such
affirmative vote as is required by law and any other provision of this
Certificate of Incorporation:
A. the Business Combination shall have been approved by a majority of the
Disinterested Directors;
- or -
B. all the following conditions with respect to such Business Combination
shall have been met:
(i) the aggregate amount of cash and the Fair Market Value as of the
date of the consummation of the Business Combination of consideration other
than cash to be received per share by holders of Common Stock in such
Business Combination, shall be at least equal in value to the higher of the
following:
(a) if applicable, the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealers' fees, and option
costs) paid by the Interested Stockholder (before or after becoming an
Interested Stockholder), or any Affiliate or Associate thereof, in
acquiring Beneficial Ownership of any shares of Common Stock (1) within the
two-year period immediately prior to the first public announcement of the
proposal of the Business Combination ("Announcement Date") or (2) in the
transaction in which it became an Interested Stockholder, whichever is
higher; or
(b) the Fair Market Value per share of Common Stock of the Company (1)
on the Announcement Date, or (2) on the date on which the Interested
Stockholder became an Interested Stockholder ("Determination Date"),
whichever is higher;
(ii) the aggregate amount of cash and the Fair Market Value as of the date
of the consummation of the Business Combination of consideration other than cash
to be received per share by holders of shares of any class or series of
outstanding Voting Stock other than Common Stock shall be at least equal to the
highest of the following (it being intended that the requirements of this
paragraph B(ii) of this Section 2 of Article Seventh shall be required to be met
with respect to every class or series, as the case may be, of outstanding Voting
Stock, whether or not the Interested Stockholder has previously acquired any
shares of such class or series of Voting Stock):
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(a) if applicable, the highest per share price (including any
brokerage commissions, transfer taxes, soliciting dealers' fees, and option
costs) paid by the Interested Stockholder (before or after becoming an
Interested Stockholder) for any shares of such class or series of Voting
Stock acquired by it (1) within the two-year period immediately prior to
the Announcement Date or (2) in the transaction in which it became an
Interested Stockholder, whichever is higher;
(b) if applicable, the highest preferential amount per share to which
the holders of shares of such class or series, as the case may be, of
Voting Stock are entitled in the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the Company; or
(c) the Fair Market Value per share of such class or series, as the
case may be, of Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher;
(iii) the price determined in accordance with paragraphs B(i) and B(ii) of
this Section 2 of Article Seventh shall be subject to appropriate adjustment in
the event of any stock dividend, stock split, combination of shares, or similar
event;
(iv) the consideration to be received by the holders of a specified class
or series of outstanding Voting Stock (including Common Stock) shall be in cash
or in the same form as that which the Interested Stockholder has previously paid
for shares of such class or series of Voting Stock; if the Interested
Stockholder had paid for shares of any class or series of Voting Stock with
varying forms of consideration, the form of consideration for such class or
series of Voting Stock shall, at the option of the Interested Stockholder, be
either cash or the form used to acquire the largest number of shares of such
class or series of Voting Stock previously acquired by it;
(v) after such Interested Stockholder has become an Interested Stockholder
and prior to the consummation of such Business Combination: (a) except as
approved by a majority of the Disinterested Directors, there shall have been no
failure to declare and pay at the regular date therefor any full quarterly
dividends (whether or not cumulative) on the outstanding Preferred Stock; (b)
there shall have been (i) no reduction in the annual rate of dividends payable
or last paid, as the case may be, on the Common Stock (except as necessary to
reflect any subdivision of such Common Stock) except as approved by a majority
of the Disinterested Directors and (ii) an increase in the annual rate of
dividends last paid on the Common Stock, as necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization, or any similar transaction which has the effect of reducing the
number of outstanding shares of such Common Stock, unless the failure so to
increase such annual rate shall have been approved by a majority of the
Disinterested Directors; and (c) such Interested Stockholder shall not
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have acquired Beneficial Ownership of any additional shares of Voting Stock,
except as part of the transaction which resulted in such Interested Stockholder
becoming an Interested Stockholder;
(vi) after such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as a stockholder), of any loans,
advances, guarantees, pledges, or other financial assistance or any tax credits
or other tax advantages provided by, or as a result of its equity position in,
the Company, whether in anticipation of or in connection with such Business
Combination or otherwise; and
(vii) a proxy statement or information statement describing the proposed
Business Combination (and including the views of the Disinterested Directors, if
requested by the Disinterested Directors, and of an independent investment
banker, if any, selected by such Disinterested Directors with respect to the
proposed Business Combination) and complying with the disclosure and other
requirements of the Securities Exchange Act of 1934 and the rules and
regulations thereunder (or any subsequent provisions replacing such requirements
of such Act, rules, or regulations) shall be mailed at least 30 days prior to
the consummation of such Business Combination (whether or not such proxy
statement or information statement is required to be mailed pursuant to such Act
or subsequent provisions) to stockholders of the Company.
Section 3. For purposes of this Article Seventh:
A. An "Affiliate" of, or a Person "Affiliated" with, a specified Person,
shall mean a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified.
B. "Announcement Date" shall have the meaning set forth in paragraph
B(i)(a) of Section 2 of this Article Seventh.
C. The term "Associate" used to indicate a relationship with any Person
shall mean (1) any corporation or organization (other than the Company or any
Subsidiary), of which such Person is an officer or partner or is, directly or
indirectly, the Beneficial Owner of 10% or more of any class of equity
securities, (2) any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as a trustee or in a
similar fiduciary capacity, and (3) any relative or spouse of such Person, or
any relative of such spouse, who has the same home as such Person or who is a
director or officer of the Company or any Subsidiary.
D. A Person shall be a "Beneficial Owner" of any Voting Stock:
(i) which such Person or any of its Affiliates or Associates owns,
directly or indirectly;
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(ii) which such Person or any of its Affiliates or Associates has (a)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement, or
understanding or upon the exercise of conversion rights, exchange rights,
warrants, or options, or otherwise, or (b) the right to vote (whether or
not irrevocable) pursuant to any agreement, arrangement, or understanding;
or
(iii) which is Beneficially Owned, directly or indirectly, by another
Person with which such Person or any of its Affiliates or Associates has
any agreement, arrangement, or understanding for the purpose of acquiring,
holding, voting, or disposing of any shares of Voting Stock,
and any Voting Stock of which a Person shall be the Beneficial Owner shall be
"Beneficially Owned" by, or be under the "Beneficial Ownership" of, such Person.
E. "Business Combination" shall mean any transaction which is referred to
in any one or more of clauses (i) through (vi) of Section 1 of this Article
Seventh.
F. In the event of any Business Combination in which the Company survives,
the phrase "consideration other than cash to be received" as used in paragraphs
B(i) and (ii) of Section 2 of this Article Seventh shall include shares of
Common Stock and shares of any other class or series of outstanding Voting Stock
retained by the holders of such shares, or both.
G. "Determination Date" shall have the meaning set forth in paragraph
B(i)(b) of Section 2 of this Article Seventh.
H. "Disinterested Director" shall mean any member of the Board of Directors
who is not an Affiliate, an Associate, or a nominee of the Interested
Stockholder and who was a member of the Board of Directors prior to the time
that the Interested Stockholder became an Interested Stockholder, and any
successor of a Disinterested Director who is not an Affiliate or Associate of
the Interested Stockholder and is recommended to succeed a Disinterested
Director by a majority of Disinterested Directors then on the Board of
Directors.
I. "Fair Market Value" shall mean: (i) in the case of stock, the highest
closing sale price of a share of such stock during the 30 calendar day period
immediately preceding the date in question on the Composite Tape for New York
Stock Exchange-Listed Stocks, or, if such stock is not quoted on such Composite
Tape, on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during
10
<page>
the 30 calendar day period immediately preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations System or
any system then in use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as determined by a
majority of the Disinterested Directors; and (ii) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as determined by a majority of the Disinterested Directors.
J. "Interested Stockholder" shall mean any Person (other than the Company,
any Subsidiary, or any employee benefit plan of the Company or any Subsidiary)
who or which:
(i) is the Beneficial Owner, directly or indirectly, of at least 10%
of the Voting Stock;
(ii) is an Affiliate of the Company and at any time within the
two-year period immediately prior to the date in question was the
Beneficial Owner, directly or indirectly, of at least 10% of the Voting
Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period immediately
prior to the date in question Beneficially Owned by any Interested
Stockholder, if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933, as amended.
For purposes of determining whether a person is an Interested Stockholder, the
number of shares of Voting Stock deemed to be outstanding shall include shares
deemed owned through application of paragraph D of this Section 3, but shall not
include any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement, or understanding or upon exercise of conversion rights,
warrants, or options, or otherwise.
K. "Person" shall mean any individual, firm, trust, partnership,
association, corporation, or other entity.
L. "Subsidiary" shall mean any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the Company.
M. "Voting Stock" shall have the meaning set forth in Section 1 of
this Article Seventh.
Section 4. A majority of the Disinterested Directors shall have the power
and duty to determine for the purposes of this Article Seventh, on the basis of
information known to them after reasonable inquiry, (A) whether a person is an
11
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Interested Stockholder, (B) the number of shares of Voting Stock beneficially
owned by any person, (C) whether a Person is an Affiliate or Associate of
another, and (D) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the issuance or
transfer of securities by the Company or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $100 million or more. A
majority of the Disinterested Directors shall have the further power to
interpret all the terms and provisions of this Article Seventh.
Section 5. Nothing contained in this Article Seventh shall be construed to
relieve any interested Stockholder from any fiduciary obligation imposed by law.
Section 6. Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws (and notwithstanding the fact that a lesser
percentage may otherwise be specified by law, this Certificate of Incorporation,
or the Bylaws), the affirmative vote of at least 80% of the Voting Stock, voting
together as a single class (it being understood that for the purposes of this
Article Seventh, each share of the Voting Stock shall have the number of votes
granted to it in accordance with Article Fourth of this Certificate of
Incorporation), shall be required to alter, amend, or repeal, or adopt any
provisions inconsistent with, this Article Seventh.
Eighth: Any action required or permitted to be taken by the holders of the
Voting Stock must be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by such holders.
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, the affirmative vote of at least 80% of the combined voting power of
the then-outstanding shares of all classes and series of stock of the Company
entitled to vote generally in the election of directors ("Voting Stock"), voting
together as a single class (it being understood that for the purposes of this
Article Eighth, each share of the Voting Stock shall have the number of votes
granted to it in accordance with Article Fourth of this Certificate of
Incorporation), shall be required to alter, amend, or repeal, or adopt any
provisions inconsistent with, this Article Eighth.
Ninth: The Board of Directors shall have the power to make, alter, amend,
or repeal, or adopt any provision inconsistent with, the Bylaws (except insofar
as the Bylaws adopted by the stockholders shall otherwise provide). Any Bylaws
made by the directors under the powers conferred hereby may be altered, amended,
or repealed, and any provisions inconsistent therewith may be adopted, by the
directors or by the stockholders. Notwithstanding the foregoing and anything
contained in this Certificate of Incorporation to the contrary, Section 2 of
Article II, and Sections 3, 12, 13, and 15 of Article III of the Bylaws, all as
in effect simultaneously with the effectiveness of this Article, shall not be
altered, amended, or repealed, and no provision inconsistent therewith shall be
adopted, without the affirmative vote of at least 80% of the combined voting
power of the then-outstanding shares of all classes and series of stock of the
Company entitled to vote generally in the election of directors ("Voting
Stock"), voting together as a single class (it being understood that for the
purposes of this Article Ninth, each share of the Voting Stock shall have the
number of votes granted to it in
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accordance with Article Fourth of this Certificate of Incorporation).
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, the affirmative vote of at least 80% of the Voting Stock, voting
together as a single class, shall be required to alter, amend, or repeal, or
adopt any provision inconsistent with, this Article Ninth.
Tenth: A director of the Company shall not be personally liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law is hereafter amended to permit
further limitation on or elimination of the personal liability of the Company's
directors for breach of fiduciary duty, then a director of the Company shall be
exempt from such liability for any such breach to the full extent permitted by
the Delaware General Corporation Law as so amended from time to time. Any repeal
or modification of the foregoing provisions of this Article Tenth, or the
adoption of any provision inconsistent herewith, shall not adversely affect any
right or protection of a director of the Company hereunder in respect of any act
or omission of such director occurring prior to such repeal, modification, or
adoption of an inconsistent provision.
13
IN WITNESS WHEREOF, the undersigned has executed this Restated Certificate
of Incorporation this 20th day of February, 2002.
J. C. PENNEY COMPANY, INC.
By: /s/ Charles R. Lotter
------------------------
Charles R. Lotter
Executive Vice President,
Secretary and
General Counsel
14
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
J. C. PENNEY COMPANY, INC.
Pursuant to Section 151 of the Delaware
General Corporation Law
J. C. Penney Company, Inc. (f/k/a J. C. Penney Holdings, Inc.), a company
organized and existing under the laws of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY that pursuant to authority conferred on the Board of
Directors of the Company by its Certificate of Incorporation and the provisions
of Section 151(g) of the General Corporation Law of the State of Delaware, the
Board of Directors on January 22, 2002 adopted the following resolution:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Company in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Company be, and hereby is,
created and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional or other special rights of the
shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
-------------------------
designated "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting such series shall be
1,600,000.
Section 2. Dividends and Distributions.
----------------------------
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of Series A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, (i) cash dividends in an amount per share (rounded to
the nearest cent) equal to 1,000 times the aggregate per share amount of all
cash dividends declared or paid on the Common Stock, 50(cent) par value per
share, of the Company (the "Common Stock") and (ii) a preferential cash dividend
("Preferential Dividend"), if any, on the first day of February, May, August and
November of each year (each a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount equal to $50.00
per share of Series A Preferred Stock less the per share amount of all cash
dividends declared on the Series A Preferred Stock pursuant to clause (i) of
this sentence since the immediately preceding Quarterly Dividend Payment Date
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred Stock. In the
event the Company shall, at any time after the issuance of any share or fraction
of a share of Series A
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Preferred Stock, make any distribution on the shares of Common Stock of the
Company, whether by way of a dividend or a reclassification of stock, a
recapitalization, reorganization or partial liquidation of the Company or
otherwise, which is payable in cash or any debt security, debt instrument, real
or personal property or any other property (other than cash dividends subject to
the immediately preceding sentence and other than a distribution of shares of
Common Stock or other capital stock of the Company and other than a distribution
of rights or warrants to acquire any such share, including any debt security
convertible into or exchangeable for any such share), at a price less than the
Current Market Price of such share, then, and in each such event the Company
shall simultaneously pay on each then outstanding share of Series A Preferred
Stock of the Company a distribution, in like kind, of 1,000 times such
distribution paid on a share of Common Stock (subject to the provisions for
adjustment hereinafter set forth). The dividends and distributions on the Series
A Preferred Stock to which holders thereof are entitled pursuant to clause (i)
of the first sentence of this paragraph and the second sentence of this
paragraph are hereinafter referred to as "Participating Dividends," and the
multiple of such cash and noncash dividends on the Common Stock applicable to
the determination of the Participating Dividends, which shall be 1,000 initially
but shall be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "Dividend Multiple". In the event the Company shall at any
time after March 26, 1999 (the "Effective Date") declare or pay any dividend or
make any distribution on Common Stock payable in shares of Common Stock, or
effect a subdivision or split or a combination, consolidation or reverse split
of the outstanding shares of Common Stock into a greater or lesser number of
shares of Common Stock, or issue any of its capital stock in a reclassification
of the Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then in each such case the Dividend Multiple thereafter applicable
to the determination of the amount of Participating Dividends which holders of
shares of Series A Preferred Stock shall be entitled to receive shall be the
Dividend Multiple applicable immediately prior to such event multiplied by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided for or fixed by or pursuant to the
provisions of Article Fourth of the Certificate of Incorporation of the Company
relating to the rights of holders of any class or series of stock having a
preference over the Common Stock as to dividends, the Company shall declare each
Participating Dividend at the same time it declares any cash or noncash dividend
or distribution on the Common Stock in respect of which a Participating Dividend
is required to be paid. No cash or noncash dividend or distribution on the
Common Stock in respect of which a Participating Dividend is required shall be
paid or set aside for payment on the Common Stock unless a Participating
Dividend in respect of such dividend or distribution on the Common Stock shall
be simultaneously paid or set aside for payment on the Series A Preferred Stock.
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(C) Preferential Dividends shall begin to accumulate on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issuance of any shares of Series A Preferred Stock.
Accumulated but unpaid Preferential Dividends shall cumulate but shall not bear
interest. Preferential Dividends paid on the shares of Series A Preferred Stock
in an amount less than the total amount of such dividends at the time
accumulated and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
Section 3. Voting Rights. The holders of shares of Series A Preferred Stock
shall have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the Company. The
number of votes which a holder of Series A Preferred Stock is entitled to cast,
as the same may be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Vote Multiple." In the event the Company shall
at any time after the Effective Date declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or split or a
combination, consolidation or reverse split of the outstanding shares of Common
Stock into a greater or lesser number of shares of Common Stock, or issue any of
its capital stock in a reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then in each such case the
Vote Multiple thereafter applicable to the determination of the number of votes
per share to which holders of shares of Series A Preferred Stock shall be
entitled after such event shall be the Vote Multiple immediately prior to such
event multiplied by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation, in any resolution or resolutions of the Board of Directors of the
Company providing for the issue of any other series of Preferred Stock or by
law, the holders of shares of Series A Preferred Stock, the holders of shares of
Common Stock and the holders of shares of any other class or series of capital
stock of the Company entitled to vote generally for the election of directors
shall vote together as one class on all matters submitted to a vote of
stockholders of the Company.
(C) In the event that the Preferential Dividends accrued on the Series A
Preferred Stock for four or more consecutive quarterly periods shall not have
been declared and paid or set apart for payment, the holders of record of the
Series A Preferred Stock, voting together with the holders of record of any
other series of Preferred Stock of the Company which shall then have the right,
expressly granted by the Certificate of Incorporation of the Company or in any
resolution or resolutions of the Board of Directors of the Company providing for
the issue of such shares of Preferred
A-3
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Stock, to elect directors upon such a default in the payment of dividends by the
Company shall have the right, at the next meeting of stockholders called for the
election of directors, voting together as a class, to elect two members to the
Board of Directors, which directors shall be in addition to the number provided
for pursuant to the Company's Bylaws prior to such event, to serve until the
next Annual Meeting and until their successors are elected and qualified or
their earlier resignation, removal or incapacity or until such earlier time as
all accrued and unpaid Preferential Dividends upon the outstanding shares of
Series A Preferred Stock shall have been paid (or set aside for payment) in
full. The holders of shares of Series A Preferred Stock shall continue to have
the right to elect directors as provided by the immediately preceding sentence
until all accrued and unpaid Preferential Dividends upon the outstanding shares
of Series A Preferred Stock shall have been paid (or set aside for payment) in
full. Such directors may be removed and replaced by such stockholders, and
vacancies in such directorships may be filled only by such stockholders (or by
the remaining director elected by such stockholders, if there be one) in the
manner permitted by law. Subject to the foregoing, any directors elected
pursuant to this paragraph 3(C) shall be elected annually and shall not
constitute members of any Class of directors as contemplated by Article Sixth of
the Company's Certificate of Incorporation.
(D) Except as otherwise required by law or set forth herein, holders of
Series A Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote as set
forth herein) for the taking of any corporate action.
Section 4. Certain Restrictions.
----------------------
(A) Whenever Preferential Dividends or Participating Dividends are in
arrears or the Company shall be in default in payment thereof, thereafter and
until all accrued and unpaid Preferential Dividends and Participating Dividends,
whether or not declared, on shares of Series A Preferred Stock outstanding shall
have been paid or set aside for payment in full, and in addition to any and all
other rights which any holder of shares of Series A Preferred Stock may have in
such circumstances, the Company shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration, any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends or make any other distributions on any
shares of stock ranking on a parity as to dividends with the Series A
Preferred Stock, unless dividends are paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are payable or
in arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) except as permitted by subparagraph (iv) of this paragraph (A),
redeem or purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, provided that
the Company may at
A-4
<page>
any time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any stock of the Company ranking junior
(both as to dividends and upon liquidation, dissolution or winding up) to
the Series A Preferred Stock; or (iv) purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any shares of
stock ranking on a parity with the Series A Preferred Stock (either as to
dividends or upon liquidation, dissolution or winding up), except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the Company
ranking junior to the Series A Preferred Stock unless the Company could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such shares at
such time and in such manner.
(C) The Company shall not issue any shares of Series A Preferred Stock
except upon exercise of Rights issued pursuant to that certain Rights Agreement
between the Company and the Rights Agent, a copy of which is on file with the
Secretary of the Company at the principal executive office of the Company and
shall be made available to holders of record of Common Stock or Series A
Preferred Stock without charge upon written request therefor addressed to the
Secretary of the Company. Notwithstanding the foregoing sentence, nothing
contained in the provisions hereof shall prohibit or restrict the Company from
issuing for any purpose any series of Preferred Stock with rights and privileges
similar to, different from, or greater than, those of the Series A Preferred
Stock.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-------------------
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
upon their retirement and cancellation shall become authorized but unissued
shares of Preferred Stock, without designation as to series, and such shares may
be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors.
Section 6. Liquidation, Dissolution or Winding Up. Upon any voluntary or
----------------------------------------
involuntary liquidation, dissolution or winding up of the Company, no
distribution shall be made (i) to the holders of shares of stock ranking junior
to the Series A Preferred Stock (either as to dividends or upon liquidation,
dissolution or winding up) unless the holders of shares of Series A Preferred
Stock shall have received, subject to adjustment as hereinafter provided, the
greater of (A) $1,000 ($1.00 per one one-thousandth of a share) plus an amount
equal to all accumulated and unpaid dividends and distributions
A-5
<page>
thereon, whether or not declared, to the date of such payment, and (B) the
amount equal to 1,000 times the aggregate amount to be distributed per share to
holders of Common Stock, as the same may be adjusted as hereinafter provided, or
(ii) to the holders of stock ranking on a parity upon liquidation, dissolution
or winding up with the Series A Preferred Stock, unless simultaneously therewith
distributions are made ratably on the Series A Preferred Stock and all other
shares of such parity stock in proportion to the total amounts to which the
holders of shares of Series A Preferred Stock are entitled under clause (i)(A)
of this sentence and to which the holders of such parity shares are entitled, in
each case upon such liquidation, dissolution or winding up. The amount to which
holders of Series A Preferred Stock shall be entitled upon liquidation,
dissolution or winding up of the Company pursuant to clause (i)(B) of the
foregoing sentence is hereinafter referred to as the "Participating Liquidation
Amount," and the multiple of the amount to be distributed to holders of shares
of Common Stock upon the liquidation, dissolution or winding up of the Company
applicable pursuant to said clause to the determination of the Participating
Liquidation Amount, which shall be 1,000 but may be adjusted from time to time
as hereinafter provided, is hereinafter referred to as the "Liquidation
Multiple." In this event the Company shall at any time after the Effective Date
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or effect a subdivision or split or a combination, consolidation or reverse
split of the outstanding shares of Common Stock into a greater or lesser number
of shares of Common Stock, or issue any of its capital stock in a
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then in each such case the Liquidation Multiple
thereafter applicable to the determination of the Participating Liquidation
Amount to which holders of Series A Preferred Stock shall be entitled after such
event shall be the Liquidation Multiple applicable immediately prior to such
event multiplied by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 7. Certain Reclassifications and Other Events.
-----------------------------------------------------
(A) In the event that holders of shares of Common Stock receive after the
Effective Date, in respect of their shares of Common Stock any share of capital
stock of the Company (other than any share of Common Stock of the Company),
whether by way of reclassification, recapitalization, reorganization, dividend
or other distribution or otherwise ("Transaction"), then in each such event the
dividend rights, voting rights and rights upon the liquidation, dissolution or
winding up of the Company of the shares of Series A Preferred Stock shall be
adjusted so that after such event the holders of Series A Preferred Stock shall
be entitled, in respect of each share of Series A Preferred Stock held, in
addition to such rights in respect thereof to which such holder was entitled
immediately prior to such adjustment, to (i) such additional dividends as equal
the Dividend Multiple in effect immediately prior to such Transaction multiplied
by the additional dividends which the holder of a share of Common Stock shall be
entitled to receive by virtue of the receipt in the Transaction of such capital
stock, (ii) such
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additional voting rights as equal the Vote Multiple in effect immediately prior
to such Transaction multiplied by the additional voting rights which the holder
of a share of Common Stock shall be entitled to receive by virtue of the receipt
in the Transaction of such capital stock and (iii) such additional distributions
upon liquidation, dissolution or winding up of the Company as equal the
Liquidation Multiple in effect immediately prior to such Transaction multiplied
by the additional amount which the holder of a share of Common Stock shall be
entitled to receive upon liquidation, dissolution or winding up of the Company
by virtue of the receipt in the Transaction of such capital stock, as the case
may be, all as provided by the terms of such capital stock.
(B) In the event that holders of shares of Common Stock
receive after the Effective Date, in respect of their shares of Common Stock any
right or warrant to purchase Common Stock (including as such a right, for all
purposes of this paragraph, any security convertible into or exchangeable for
Common Stock) at a purchase price per share less than the Current Market Price
(as hereinafter defined) of a share of Common Stock on the date of issuance of
such right or warrant, then in each such event the dividend rights, voting
rights and rights upon the liquidation, dissolution or winding up of the Company
of the shares of Series A Preferred Stock shall each be adjusted so that after
such event the Dividend Multiple, the Vote Multiple and the Liquidation Multiple
shall each be the product of the Dividend Multiple, the Vote Multiple and the
Liquidation Multiple, as the case may be, in effect immediately prior to such
event multiplied by a fraction the numerator of which shall be the number of
shares of Common Stock outstanding immediately before such issuance of rights or
warrants plus the maximum number of shares of Common Stock which could be
acquired upon exercise in full of all such rights or warrants and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the number of shares
of Common Stock which could be purchased, at the Current Market Price of the
Common Stock at the time of such issuance, by the maximum aggregate
consideration payable upon exercise in full of all such rights or warrants.
(C) In the event that holders of shares of Common Stock receive after the
Effective Date in respect of their shares of Common Stock any right or warrant
to purchase capital stock of the Company (other than shares of Common Stock),
including as such a right, for all purposes of this paragraph, any security
convertible into or exchangeable for capital stock of the Company, (other than
Common Stock), at a purchase price per share less than the Fair Market Value of
such shares of capital stock on the date of issuance of such right or warrant,
then in each such event the dividend rights, voting rights and rights upon
liquidation, dissolution or winding up of the Company of the shares of Series A
Preferred Stock shall each be adjusted so that after such event each holder of a
share of Series A Preferred Stock shall be entitled, in respect of each share of
Series A Preferred Stock held, in addition to such rights in respect thereof to
which such holder was entitled immediately prior to such event, to receive (i)
such additional dividends as equal the Dividend Multiple in effect immediately
prior to such event multiplied, first, by the additional dividends to which the
holder of a share of Common Stock shall be entitled upon exercise of such right
or warrant by virtue of the capital stock which could be acquired upon such
exercise and multiplied again by the Discount Fraction (as hereinafter defined),
(ii) such additional voting rights as equal the Vote Multiple in effect
immediately prior to such event multiplied, first, by the additional voting
rights to which the holder of a share of Common Stock shall be entitled upon
exercise of such right or warrant by
A-7
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virtue of the capital stock which could be acquired upon such exercise and
multiplied again by the Discount Fraction and (iii) such additional distribution
upon liquidation, dissolution or winding up of the Company as equal the
Liquidation Multiple in effect immediately prior to such event multiplied,
first, by the additional amount which the holder of a share of Common Stock
shall be entitled to receive upon liquidation, dissolution or winding up of the
Company upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise and multiplied again by the Discount
Fraction. For purposes of this paragraph, the "Discount Fraction" shall be a
fraction the numerator of which shall be the difference between the Current
Market Price of a share of the capital stock subject to a right or warrant
distributed to holders of shares of Common Stock as contemplated by this
paragraph immediately after the distribution thereof and the purchase price per
share for such share of capital stock pursuant to such right or warrant and the
denominator of which shall be the Current Market Price of a share of such
capital stock immediately after the distribution of such right or warrant.
(D) For purposes of this Certificate of Designations, the "Current Market
Price" of a share of capital stock of the Company (including a share of Common
Stock) on any date shall be deemed to be the average of the daily closing price
per share thereof over the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however, that, in
the event that such Current Market Price of any such share of capital stock is
determined during a period which includes any date that is within 30 Trading
Days after (i) the ex-dividend date for a dividend or distribution on stock
payable in shares of such stock or securities convertible into shares of such
stock, or (ii) the effective date of any subdivision, split, combination,
consolidation, reverse stock split or reclassification of such stock, then and
in each such event, the Current Market Price shall be appropriately adjusted by
the Board of Directors to reflect the Current Market Price of such stock to take
into account ex-dividend or post-effective date trading. The closing price for
any day shall be the last sale price, regular way, or, in case, no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way (in either case, as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange), or, if the shares are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares are listed or
admitted to trading or, if the shares are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in use, or if on any such
date the shares are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a
A-8
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professional market maker making a market in the shares selected by the Board of
Directors. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares are listed or admitted to
trading is open for the transaction of business or, if the shares are not listed
or admitted to trading on any national securities exchange, on which the New
York Stock Exchange or such other national securities exchange as may be
selected by the Board of Directors is open. If the shares are not publicly held
or not so listed or traded on any day within the period of 30 Trading Days
applicable to the determination of Current Market Price thereof as aforesaid,
"Current Market Price" shall mean the fair market value thereof per share as
determined in good faith by the Board of Directors. In either case referred to
in the foregoing sentence, the determination of Current Market Price shall be
described in a statement filed with the Secretary of the Company.
Section 8. Consolidation, Merger, etc. In the event that the Company shall
-----------------------------
enter into any consolidation, merger, combination or other transaction in which
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such event each
outstanding share of Series A Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and other property (payable in like kind), as the case may be,
for which or into which each share of Common Stock is changed or exchanged
multiplied by the highest of the Dividend Multiple, the Vote Multiple or the
Liquidation Multiple in effect immediately prior to such event.
Section 9. Effective Time of Adjustments.
------------------------------
(A) Adjustments to the Series A Preferred Stock required by the provisions
hereof shall be effective as of the time at which the event requiring such
adjustments occurs.
(B) The Company shall give prompt written notice to each holder of a share
of Series A Preferred Stock of the effect on any shares of any adjustment to the
dividend rights, voting rights or rights upon liquidation, dissolution or
winding up of the Company required by the provisions hereof. Notwithstanding the
foregoing sentence, the failure of the Company to give such notice shall not
affect the validity of or the force or effect of or the requirement for such
adjustment.
Section 10. No Redemption. The shares of Series A Preferred Stock shall not
--------------
be redeemable at the option of the Company or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Company may acquire
shares of Series A Preferred Stock in any other manner permitted by law, the
provisions of the Certificate of Designations setting forth the rights, powers
and preferences of the Series A Preferred Stock and the Certificate of
Incorporation of the Company.
Section 11. Ranking. Unless otherwise provided in the Certificate of
---------
Incorporation or a certificate of designations relating to a subsequent series
of Preferred Stock of the Company, the Series A Preferred Stock shall rank
junior to all other series
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of the Company's Preferred Stock as to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up, and senior to
the Common Stock.
Section 12. Amendment. After the Distribution Date (as defined in the
----------
Rights Agreement), the provisions of the Certificate of Designations setting
forth the rights, powers and preferences of the Series A Preferred Stock and the
Certificate of Incorporation shall not be amended in any manner which would
materially affect the rights, privileges or powers of the Series A Preferred
Stock without, in addition to any other vote of stockholders required by law,
the affirmative vote of the holders of 66 2/3% of more of the outstanding shares
of Series A Preferred Stock, voting together as a single class.
A-10
EXHIBIT B
CERTIFICATE OF DESIGNATIONS
OF
SERIES B ESOP CONVERTIBLE PREFERRED STOCK
OF
J. C. PENNEY COMPANY, INC.
Pursuant to Section 151 of the
Delaware General Corporation Law
J. C. Penney Company, Inc. (f/k/a J. C. Penney Holdings, Inc.), a
corporation organized and existing under the Laws of the State of Delaware (the
"Company"), DOES HEREBY CERTIFY that, pursuant to the authority conferred upon
the Board of Directors by its Certificate of Incorporation and the provisions of
Section 151(g) of the General Corporation Law of the State of Delaware, the
Board of Directors adopted the following resolution:
RESOLVED that, pursuant to the authority vested in the Board of Directors
of the Company in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Company be, and it hereby is,
created, and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional or other special rights of the
shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
Section 1. Designation and Amount; Special Purpose Restricted Transfer
------- ---------------------------------------------------------------
Issue.
- -----
(A) The shares of this series of Preferred Stock shall be designated as
Series B ESOP Convertible Preferred Stock ("Series B Preferred Stock") and the
number of shares constituting such series shall be 1,400,000.
(B) Shares of Series B Preferred Stock shall be issued only to a trustee
acting on behalf of an employee stock ownership plan or other employee benefit
plan of the Company. In the event of any transfer of shares of Series B
Preferred Stock to any person other than any such plan trustee, the shares of
Series B Preferred Stock so transferred, upon such transfer and without any
further action by the Company or the holder, shall be automatically converted
into shares of Common Stock on the terms otherwise provided for the conversion
of shares of Series B Preferred Stock into shares of Common Stock pursuant to
Section 5 hereof and no such transferee shall have any of the voting powers,
preferences and relative, participating, optional or special rights ascribed to
shares of Series B Preferred Stock hereunder but, rather, only the powers and
rights pertaining to the Common Stock into which such shares of Series B
Preferred Stock shall be so converted. Certificates representing shares of
Series B Preferred Stock shall be legended to reflect such restrictions on
transfer. Notwithstanding the foregoing provisions of this paragraph (B) of
Section 1, shares of Series B Preferred
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Stock (i) may be converted into shares of Common Stock as provided by Section 5
hereof and the shares of Common Stock issued upon such conversion may be
transferred by the holder thereof as permitted by law and (ii) shall be
redeemable by the Company upon the terms and conditions provided by Sections 6,
7 and 8 hereof.
Section 2. Dividends and Distributions.
------- ---------------------------
(A) Subject to the provisions for adjustment hereinafter set forth, the
holders of shares of 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, cash dividends ("Preferred Dividends") in an amount per
share equal to $47.40 per share per annum, and no more, payable semi-annually,
one-half on the first day of January and one-half on the first day of July of
each year (each a "Dividend Payment Date") commencing on January 1, 1989, to
holders of record at the start of business on such Dividend Payment Date.
Preferred Dividends shall begin to accrue on outstanding shares of Series B
Preferred Stock from the date of issuance of such shares of Series B Preferred
Stock. Preferred Dividends shall accrue on a daily basis whether or not the
Company shall have earnings or surplus at the time, but Preferred Dividends
accrued after January 1, 1989 on the shares of Series B Preferred Stock for any
period less than a full semi-annual period between Dividend Payment Dates shall
be computed on the basis of a 360-day year of 30-day months. A fully semi-annual
dividend payment of $23.70 per share shall accrue for the period from the date
of issuance until June 30, 2002. Accumulated but unpaid Preferred Dividends
shall cumulate as of the Dividend Payment Date on which they first become
payable, but no interest shall accrue on accumulated but unpaid Preferred
Dividends.
(B) So long as any Series B Preferred Stock shall be outstanding, no
dividend shall be declared or paid or set apart for payment on any other series
of stock ranking on a parity with the Series B Preferred Stock as to dividends,
unless there shall also be or have been declared and paid or set apart for
payment on the Series B Preferred Stock, like dividends for all dividend payment
periods of the Series B Preferred Stock ending on or before the dividend payment
date of such parity stock, ratably in proportion to the respective amounts of
dividends accumulated and unpaid through such dividend payment period on the
Series B Preferred Stock and accumulated and unpaid or payable on such parity
stock through the dividend payment period on such parity stock next preceding
such dividend payment date. In the event that full cumulative dividends on the
Series B Preferred Stock have not been declared and paid or set apart for
payment when due, the Company shall not declare or pay or set apart for payment
any dividends or make any other distributions on, or make any payment on account
of the purchase, redemption or other retirement of any other class of stock or
series thereof of the Company ranking, as to dividends or as to distributions in
the event of a liquidation, dissolution or
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winding-up of the Company, junior to the Series B Preferred Stock until full
cumulative dividends on the Series B Preferred Stock shall have been paid or
declared and provided for; provided, however, that the foregoing shall not apply
to (i) any dividend payable solely in any shares of any stock ranking, as to
dividends or as to distributions in the event of a liquidation, dissolution or
winding-up of the Company, junior to the Series B Preferred Stock, or (ii) the
acquisition of shares of any stock ranking, as to dividends or as to
distributions in the event of a liquidation, dissolution or winding up of the
Company, junior to the Series B Preferred Stock either (A) pursuant to any
employee or director incentive or benefit plan or arrangement (including any
employment, severance or consulting agreement) of the Company or any subsidiary
of the Company heretofore or hereafter adopted or (B) in exchange solely for
shares of any other stock ranking junior to the Series B Preferred Stock.
Section 3. Voting Rights. The holders of shares of Series B Preferred Stock
------- -------------
shall have the following voting rights:
(A) The holders of Series B Preferred Stock shall be entitled to vote on
all matters submitted to a vote of the holders of Common Stock of the Company,
voting together with the holders of Common Stock as one class. Each share of the
Series B Preferred Stock shall be entitled to the number of votes equal to the
number of shares of Common Stock into which such share of Series B Preferred
Stock could be converted on the record date for determining the stockholders
entitled to vote, rounded to the nearest one-tenth of a vote; it being
understood that whenever the "Conversion Price" (as defined in Section 5 hereof)
is adjusted as provided in Section 9 hereof, the voting rights of the Series B
Preferred Stock shall also be similarly adjusted.
(B) Except as otherwise required by law or set forth herein, holders of
Series B Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for the taking of any corporate
action; provided, however, that the vote of at least 66-2/3% of the outstanding
shares of Series B Preferred Stock, voting separately as a series, shall be
necessary to adopt any alteration, amendment or repeal of any provision of the
Restated Certificate of Incorporation of the Company, as amended, or this
Resolution (including any such alteration, amendment or repeal effected by any
merger or consolidation in which the Company is the surviving or resulting
corporation) if such amendment, alteration or repeal would alter or change the
powers, preferences or special rights of the shares of Series B Preferred Stock
so as to affect them adversely.
Section 4. Liquidation, Dissolution or Winding Up.
------- --------------------------------------
(A) Upon any voluntary or involuntary liquidation, dissolution or winding
up of the Company, the holders of Series B Preferred Stock shall be entitled to
receive out of assets of the Company which remain after satisfaction in full of
all valid claims of creditors of the Company and which are available for payment
to stockholders and subject to the rights of the holders of any stock of the
Company ranking senior to or on a parity with the Series B Preferred Stock in
respect of distributions upon liquidation, dissolution or winding up of the
Company, before any amount shall be paid or distributed among the holders of
Common Stock or any other shares ranking junior to the Series B Preferred Stock
in respect of distributions upon liquidation, dissolution or
B-3
<page>
winding up of the Company, liquidating distributions in the amount of $600.00
per share, plus an amount equal to all accumulated and unpaid dividends thereon
to the date fixed for distribution, and no more. If upon any liquidation,
dissolution or winding up of the Company, the amounts payable with respect to
the Series B Preferred Stock and any other stock ranking as to any such
distribution on a parity with the Series B Preferred Stock are not paid in full,
the holders of the Series B Preferred Stock and such other stock shall share
ratably in any distribution of assets in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full
amount to which they are entitled as provided by the foregoing provisions of
this paragraph 4(A), the holders of shares of Series B Preferred Stock shall not
be entitled to any further right or claim to any of the remaining assets of the
Company.
(B) Neither the merger or consolidation of the Company with or into any
other corporation, nor the merger or consolidation of any other corporation with
or into the Company, nor the sale, transfer or lease of all or any portion of
the assets of the Company, shall be deemed to be a dissolution, liquidation or
winding up of the affairs of the Company for purposes of this Section 4, but the
holders of Series B Preferred Stock shall nevertheless be entitled in the event
of any such merger or consolidation to the rights provided by Section 8 hereof.
(C) Written notice of any voluntary or involuntary liquidation, dissolution
or winding up of the Company, stating the payment date or dates when, and the
place or places where, the amounts distributable to holders of Series B
Preferred Stock in such circumstances shall be payable, shall be given by
first-class mail, postage prepaid, mailed not less than twenty (20) days prior
to any payment date stated therein, to the holders of Series B Preferred Stock,
at the address shown on the books of the Company or any transfer agent for the
Series B Preferred Stock.
Section 5. Conversion into Common Stock.
------- ----------------------------
(A) A holder of shares of Series B Preferred Stock shall be entitled, at
any time prior to the close of business on the date fixed for redemption of such
shares pursuant to Section 6, 7 or 8 hereof, to cause any or all of such shares
to be converted into shares of Common Stock, initially at a conversion rate
equal to the ratio of $600.00 to the amount which initially shall be $60.00 and
which shall be adjusted as hereinafter provided (and, as so adjusted, is
hereinafter sometimes referred to as the "Conversion Price") (that is, a
conversion rate initially equivalent to ten shares of Common Stock for each
share of Series B Preferred Stock so converted but that is subject to adjustment
as the Conversion Price is adjusted as hereinafter provided).
(B) Any holder of shares of Series B Preferred Stock desiring to convert
such shares into shares of Common Stock shall surrender the certificate or
certificates representing the shares of Series B Preferred Stock being
converted, duly assigned or endorsed for transfer to the Company (or accompanied
by duly executed stock powers relating thereto), at the principal executive
office of the Company or the offices of the transfer agent for the Series B
Preferred Stock or such office or offices in the continental
B-4
<page>
United States of an agent for conversion as may from time to time be designated
by notice to the holders of the Series B Preferred Stock by the Company or the
transfer agent for the Series B Preferred Stock, accompanied by written notice
of conversion. Such notice of conversion shall specify (i) the number of shares
of Series B Preferred Stock to be converted and the name or names in which such
holder wishes the certificate or certificates for Common Stock and for any
shares of Series B Preferred Stock not to be so converted to be issued, and (ii)
the address to which such holder wishes delivery to be made of such new
certificates to be issued upon such conversion.
(C) Upon surrender of a certificate representing a share or shares of
Series B Preferred Stock for conversion, the Company shall issue and send by
hand delivery (with receipt to be acknowledged) or by first-class mail, postage
prepaid, to the holder thereof or to such holder's designee, at the address
designated by such holder, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled upon conversion.
In the event that there shall have been surrendered a certificate or
certificates representing shares of Series B Preferred Stock, only part of which
are to be converted, the Company shall issue and deliver to such holder or such
holder's designee a new certificate or certificates representing the number of
shares of Series B Preferred Stock which shall not have been converted.
(D) The issuance by the Company of shares of Common Stock upon a conversion
of shares of Series B Preferred Stock into shares of Common Stock made at the
option of the holder thereof shall be effective as of the earlier of (i) the
delivery to such holder or such holder's designee of the certificates
representing the shares of Common Stock issued upon conversion thereof or (ii)
the commencement of business on the second business day after the surrender of
the certificate or certificates for the shares of Series B Preferred Stock to be
converted, duly assigned or endorsed for transfer to the Company (or accompanied
by duly executed stock powers relating thereto) as provided by this Resolution.
On and after the effective day of conversion, the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock, but no
allowance or adjustment shall be made in respect of dividends payable to holders
of Common Stock in respect of any period prior to such effective date. The
Company shall not be obligated to pay any dividends which shall have been
declared and shall be payable to holders of shares of Series B Preferred Stock
on a Dividend Payment Date if such Dividend Payment Date for such dividend shall
coincide with or be on or subsequent to the effective date of conversion of such
shares.
(E) The Company shall not be obligated to deliver to holders of Series B
Preferred Stock any fractional share or shares of Common Stock issuable upon any
conversion of such shares of Series B Preferred Stock, but in lieu thereof may
make a cash payment in respect thereof in any manner permitted by law.
(F) Whenever the Company shall issue shares of Common Stock upon conversion
of shares of Series B Preferred Stock as contemplated by this Section 5, the
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<page>
Company shall issue together with each such share of Common Stock one right to
purchase Series A Preferred Stock of the Company (or other securities in lieu
thereof) pursuant to the Rights Agreement between the Company and the Rights
Agent, as such agreement may from time to time be amended, or any rights issued
to holders of Common Stock of the Company in addition thereto or in replacement
therefor, whether or not such rights shall be exercisable at such time, but only
if such rights are issued and outstanding and held by other holders of Common
Stock of the Company at such time and have not expired.
(G) The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for issuance upon the conversion of
shares of Series B Preferred Stock as herein provided, free from any preemptive
rights, such number of shares of Common Stock as shall from time to time be
issuable upon the conversion of all the shares of Series B Preferred Stock then
outstanding. The Company shall prepare and shall use its best efforts to obtain
and keep in force such governmental or regulatory permits or other
authorizations as may be required by law, and shall comply with all requirements
as to registration or qualification of the Common Stock, in order to enable the
Company lawfully to issue and deliver to each holder of record of Series B
Preferred Stock such number of shares of its Common Stock as shall from time to
time be sufficient to effect the conversion of all shares of Series B Preferred
Stock then outstanding and convertible into shares of Common Stock.
During the Twelve
Month Period Price Per
Beginning July 2 Share
------------------ ---------
1988 .....................................$647.40
1989 .....................................$642.66
1990 .....................................$637.92
1991 .....................................$633.18
1992 .....................................$628.44
1993 .....................................$623.70
1994 .....................................$618.96
1995 .....................................$614.22
1996 .....................................$609.48
1997 .....................................$604.74
Section 6. Redemption At the Option of the Company.
------- ---------------------------------------
(A) The Series B Preferred Stock shall be redeemable, in whole or in part,
at the option of the Company at any time after July 1, 1991 or on or before July
1991 if permitted by paragraph (C) or (D) of this Section 6, at the following
redemption prices: $600.00 per share, plus, in each case, an amount equal to all
accumulated and unpaid dividends thereon to the date fixed for redemption.
Payment of the redemption price shall be made by the Company in cash or shares
of Common Stock, or a combination thereof, as permitted by paragraph (E) of this
Section 6. From and after the date fixed
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for redemption, dividends on shares of Series B Preferred Stock called for
redemption will cease to accrue, such shares will no longer be deemed to be
outstanding and all rights in respect of such shares of the Company shall cease,
except the right to receive the redemption price. If less than all of the
outstanding shares of Series B Preferred Stock are to be redeemed, the Company
shall either redeem a portion of the shares of each holder determined pro rata
based on the number of shares held by each holder or shall select the shares to
be redeemed by lot, as may be determined by the Board of Directors of the
Company.
(B) Unless otherwise required by law, notice of redemption will be sent to
the holders of Series B Preferred Stock at the address shown on the books of the
Company or any transfer agent for the Series B Preferred Stock by first class
mail, postage prepaid, mailed not less than twenty (20) days nor more than sixty
(60) days prior to the redemption date. Each such notice shall state: (i) the
redemption date; (ii) the total number of shares of the Series B Preferred Stock
to be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; (v) that dividends on
the shares to be redeemed will cease to accrue on such redemption date; and (vi)
the conversion rights of the shares to be redeemed, the period within which
conversion rights may be exercised, and the Conversion Price and number of
shares of Common Stock issuable upon conversion of a share of Series B Preferred
Stock at the time. Upon surrender of the certificates for any shares so called
for redemption and not previously converted (properly endorsed or assigned for
transfer, if the Board of Directors of the Company shall so require and the
notice shall so state), such shares shall be redeemed by the Company at the date
fixed for redemption and at the redemption price set forth in this Section 6.
(C) In the event of a change in the federal tax law of the United States of
America which has the effect of precluding the Company from claiming any of the
tax deductions for dividends paid on the Series B Preferred Stock when such
dividends are used as provided under Section 404(k)(2) of the Internal Revenue
Code of 1986, as amended and in effect on the date shares of Series B Preferred
Stock are initially issued, the Company may, in its sole discretion and
notwithstanding anything to the contrary in paragraph (A) of this Section 6,
elect to redeem such shares for the amount payable in respect of the shares upon
liquidation of the Company pursuant to Section 4 hereof.
(D) Notwithstanding anything to the contrary in paragraph (A) of this
Section 6, the Company may elect to redeem any or all of the shares of Series B
Preferred Stock at any time on or prior to July 1, 1991 on the terms and
conditions set forth in paragraphs (A) and (B) of this Section 6, if the last
reported sales price, regular way, of a share of Common Stock, 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, on the principal national
securities exchange on which such stock is listed or admitted to
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trading or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
or, if the Common Stock is not quoted on such National Market System, the
average of the closing bid and asked prices in over-the-counter market as
reported by NASDAQ, for at least twenty (20) trading days within a period of
thirty (30) consecutive trading days ending within five (5) days of the notice
of redemption equals or exceeds one hundred fifty percent (150%) of the
Conversion Price (giving effect equitably in making such calculation to any
adjustments required by Section 9 hereof).
(E) The Company, at its option, may make payment of the redemption price
required upon redemption of shares of Series B Preferred Stock in cash or in
shares of Common Stock, or in a combination of such shares and cash, any such
shares to be valued for such purpose at their Fair Market Value (as defined in
paragraph (G) of Section 9 hereof, provided, however, that in calculating their
Fair Market Value the Adjustment Period shall be deemed to be the five (5)
consecutive trading days preceding, and including, the date of redemption).
Section 7. Other Redemption Rights.
------- -----------------------
Shares of Series B Preferred Stock shall be redeemed by the Company for
cash or, if the Company so elects, in shares of Common Stock, or a combination
of such shares and cash, any such shares of Common Stock to be valued for such
purpose as provided by paragraph (E) of Section 6, at a redemption price of
$600.00 per share plus accumulated and unpaid dividends thereon to the date
fixed for redemption, at the option of the holder, at any time and from time to
time upon notice to the Company given not less than five (5) business days prior
to the date fixed by the holder in such notice for such redemption, when and to
the extent necessary (i) for such holder to provide for distributions required
to be made under, or to satisfy an Investment election provided to participants
in accordance with, the J. C. Penney Company, Inc. Savings, Profit-Sharing and
Stock Ownership Plan, dated and effective as of August 22, 1988, as the same may
be amended, or any successor plan (the "plan") to participants in the Plan or
(ii) for such holder to make payment of principal, interest or premium due and
payable (whether as scheduled or upon acceleration) on the 8.17% ESOP Notes Due
July 1, 1998 of the trust under the Plan or any indebtedness incurred by the
holder for the benefit of the Plan.
Section 8. Consolidation, Merger, etc,
------- --------------------------
(A) In the event that the Company shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged solely for or changed,
reclassified or converted solely into stock of any successor or resulting
company (including the Company) that constitutes "qualifying employer
securities" with respect to a holder of Series B Preferred Stock within the
meaning of Section 409(l) of the Internal Revenue Code of 1986, as amended, and
Section 407(c)(5) of the Employee Retirement Income Security Act of 1974, as
amended, or any successor provisions of
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law, and, if applicable, for a cash payment in lieu of fractional shares, if
any, the shares of Series B Preferred Stock of such holder shall be assumed by
and shall become preferred stock of such successor or resulting company, having
in respect of such company insofar as possible the same powers, preferences and
relative, participating, optional or other special rights (including the
redemption rights provided by Sections 6, 7 and 8 hereof), and the
qualifications, limitations or restrictions thereon, that the Series B Preferred
Stock had immediately prior to such transaction, except that after such
transaction each share of the Series B Preferred Stock shall be convertible,
otherwise on the terms and conditions provided by Section 5 hereof, into the
qualifying employer securities so receivable by a holder of the number of shares
of Common Stock into which such shares of Series B Preferred Stock could have
been converted immediately prior to such transaction if such holder of Common
Stock failed to exercise any rights of election to receive any kind or amount of
stock, securities, cash or other property (other than such qualifying employer
securities and a cash payment, if applicable, in lieu of fractional shares)
receivable upon such transaction (provided that, if the kind or amount of
qualifying employer securities receivable upon such transaction is not the same
for each non-electing share, then the kind and amount of qualifying employer
securities receivable upon such transaction for each non-electing share shall be
the kind and amount so receivable per share by a plurality of the non-electing
shares). The rights of the Series B Preferred Stock as preferred stock of such
successor or resulting company shall successively be subject to adjustments
pursuant to Section 9 hereof after any such transaction as nearly equivalent to
the adjustments provided for by such section prior to such transaction. The
Company shall not consummate any such merger, consolidation or similar
transaction unless all then outstanding shares of the Series B Preferred Stock
shall be assumed and authorized by the successor or resulting company as
aforesaid.
(B) In the event that the Company shall consummate any consolidation or
merger or similar transaction, however named, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged for or changed,
reclassified or converted into other stock or securities or cash or any other
property, or any combination thereof, other than any such consideration which is
constituted solely of qualifying employer securities (as referred to in
paragraph (A) of this Section 8) and cash payments, if applicable, in lieu of
fractional shares, outstanding shares of Series B Preferred Stock shall, without
any action on the part of the Company or any holder thereof (but subject to
paragraph (C) of this Section 8), be deemed converted by virtue of such merger,
consolidation or similar transaction immediately prior to such consummation into
the number of shares of Common Stock into which such shares of Series B
Preferred Stock could have been converted at such time and each share of Series
B Preferred Stock shall, by virtue of such transaction and on the same terms as
apply to the holders of Common Stock, be converted into or exchanged for the
aggregate amount of stock, securities, cash or other property (payable in like
kind) receivable by a holder of the number of shares of Common Stock into which
such shares of Series B Preferred Stock could have been converted immediately
prior to such transaction if such holder of Common Stock failed to exercise any
rights of election as to the kind or amount of stock, securities, cash or other
property receivable upon such transaction (provided that, if the kind or amount
of stock, securities, cash or other
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property receivable upon such transaction is not the same for each non-electing
share, then the kind and amount of stock, securities, cash or other property
receivable upon such transaction for each non-electing share shall be the kind
and amount so receivable per share by a plurality of the non-electing shares).
(C) In the event the Company shall enter into any agreement providing for
any consolidation or merger or similar transaction described in paragraph (B) of
this Section 8, then the Company shall as soon as practicable thereafter (and in
any event at least ten (10) business days before consummation of such
transaction) give notice of such agreement and the material terms thereof to
each holder of Series B Preferred Stock and each such holder shall have the
right to elect, by written notice to the Company, to receive, upon consummation
of such transaction (if and when such transaction is consummated), from the
Company or the successor of the Company, in redemption and retirement of such
Series B Preferred Stock, a cash payment equal to the amount payable in respect
of shares of Series B Preferred Stock upon liquidation of the Company pursuant
to Section 4 hereof. No such notice of redemption shall be effective unless
given to the Company prior to the close of business on the fifth business day
prior to consummation of such transaction, unless the Company or the successor
of the Company shall waive such prior notice, but any notice of redemption so
given prior to such time may be withdrawn by notice of withdrawal given to the
Company prior to the close of business on the fifth business day prior to
consummation of such transaction.
Section 9. Anti-dilution Adjustment.
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(A) In the event the Company shall, at any time or from time to time while
any of the shares of the Series B Preferred Stock are outstanding, (i) pay a
dividend or make a distribution in respect of the Common Stock in shares of
Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
in each case whether by reclassification of shares, recapitalization of the
Company (including a recapitalization effected by a merger or consolidation to
which Section 8 hereof does not apply) or otherwise, the Conversion Price in
effect immediately prior to such action shall be adjusted by multiplying such
Conversion Price by the fraction the numerator of which is the number of shares
of Common Stock outstanding immediately before such event and the denominator of
which is the number of shares of Common Stock outstanding immediately after such
event. An adjustment made pursuant to this paragraph 9(A) shall be given effect,
upon payment of such a dividend or distribution, as of the record date for the
determination of shareholders entitled to receive such dividend or distribution
(on a retroactive basis) and in the case of a subdivision or combination shall
become effective immediately as of the effective date thereof.
(B) In the event that the Company shall, at any time or from time to time
while any of the shares of Series B Preferred Stock are outstanding, issue to
holders of shares of Common Stock as a dividend or distribution, including by
way of a reclassification of shares or a recapitalization of the Company, any
right or warrant to purchase shares of Common Stock (but not including as such a
right or warrant any
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security convertible into or exchangeable for shares of Common Stock) at a
purchase price per share less than the Fair Market Value (as hereinafter
defined) of a share of Common Stock on the date of issuance of such right or
warrant, then, subject to the provisions of paragraphs (E) and (F) of this
Section 9, the Conversion Price shall be adjusted by multiplying such Conversion
Price by the fraction the numerator of which shall be the number of shares of
Common Stock outstanding immediately before such issuance of rights or warrants
plus the number of shares of Common Stock which could be purchased at the Fair
Market Value of a share of Common Stock at the time of such issuance for the
maximum aggregate consideration payable upon exercise in full of all such rights
or warrants and the denominator of which shall be the number of shares of Common
Stock outstanding immediately before such issuance of rights or warrants plus
the maximum number of shares of Common Stock that could be acquired upon
exercise in full of all such rights and warrants.
(C) In the event the Company shall, at any time or from time to time while
any of the shares of Series B Preferred Stock are outstanding, issue, sell or
exchange shares of Common Stock (other than pursuant to any right or warrant to
purchase or acquire shares of Common Stock (including as such a right or warrant
any security convertible into or exchangeable for shares of Common Stock) and
other than pursuant to any employee or director incentive or benefit plan or
arrangement, including any employment, severance or consulting agreement, of the
Company or any subsidiary of the Company heretofore or hereafter adopted) for a
consideration having a Fair Market Value on the date of such issuance, sale or
exchange less than the Fair Market Value of such shares on the date of such
issuance, sale or exchange, then, subject to the provisions of paragraphs (E)
and (F) of this Section 9, the Conversion Price shall be adjusted by multiplying
such Conversion Price by the fraction the numerator of which shall be the sum of
(i) the Fair Market Value of all the shares of Common Stock outstanding on the
day immediately preceding the first public announcement of such issuance, sale
or exchange plus (ii) the Fair Market Value of the consideration received by the
Company in respect of such issuance, sale or exchange of shares of Common Stock,
and the denominator of which shall be the product of (i) the Fair Market Value
of a share of Common Stock on the day immediately preceding the first public
announcement of such issuance, sale or exchange multiplied by (ii) the sum of
the number of shares of Common Stock outstanding on such day plus the number of
shares of Common Stock so issued, sold or exchanged by the Company. In the event
the Company shall, at any time or from time to time while any shares of Series B
Preferred Stock are outstanding, issue, sell or, exchange any right or warrant
to purchase or acquire shares of Common Stock (including as such a right or
warrant any security convertible into or exchangeable for shares of Common
Stock), other than any such issuance to holders of shares of Common Stock as a
dividend or distribution (including by way of a reclassification of shares or a
recapitalization of the Company) and other than pursuant to any employee or
director incentive or benefit plan or arrangement (including any employment,
severance or consulting agreement) of the Company or any subsidiary of the
Company heretofore or hereafter adopted, for a consideration having a Fair
Market Value on the date of such Issuance, sale or exchange less than the
Non-Dilutive Amount (as hereinafter defined), then, subject to the provisions of
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paragraphs (E) and (F) of this Section 9, the Conversion Price shall be adjusted
by multiplying such Conversion Price by a fraction the numerator of which shall
be the sum of (i) the Fair Market Value of all the shares of Common Stock
outstanding on the day immediately preceding the first public announcement of
such issuance, sale or exchange plus (ii) the Fair Market Value of the
consideration received by the Company in respect of such issuance, sale or
exchange of such right or warrant plus (iii) the Fair Market Value at the time
of such issuance of the consideration which the Company would receive upon
exercise in full of all such rights or warrants, and the denominator of which
shall be the product of (i) the Fair Market Value of a share of Common Stock on
the day immediately preceding the first public announcement of such issuance,
sale or exchange multiplied by (ii) the sum of the number of shares of Common
Stock outstanding on such day plus the maximum number of shares of Common Stock
which could be acquired pursuant to such right or warrant at the time of the
issuance, sale or exchange of such right or warrant (assuming shares of Common
Stock could be acquired pursuant to such right or warrant at such time).
(D) In the event the Company shall, at any time or from time to time while
any of the shares of Series B Preferred Stock are outstanding, make an
Extraordinary Distribution (as hereinafter defined) in respect of the Common
Stock, whether by dividend, distribution, reclassification of shares or
recapitalization of the Company (including a recapitalization or
reclassification effected by a merger or consolidation to which Section 8 hereof
does not apply) or effect a Pro Rate Repurchase (as hereinafter defined) of
Common Stock, the Conversion Price in effect immediately prior to such
Extraordinary Distribution or Pro Rata Repurchase shall, subject to paragraphs
(E) and (F) of this Section 9, be adjusted by multiplying such Conversion Price
by the fraction the numerator of which is (i) the product of (x) the number of
shares of Common Stock outstanding immediately before such Extraordinary
Distribution or Pro Rate Repurchase multiplied by (y) the Fair Market Value (as
herein defined) of a share of Common Stock on the record date with respect to an
Extraordinary Distribution, or on the applicable expiration date (including all
extensions thereof) of any tender offer which is a Pro Rata Repurchase, or on
the date of purchase with respect to any Pro Rata Repurchase which is not a
tender offer, as the case may be, minus (ii) the Fair Market Value of the
Extraordinary Distribution or the aggregate purchase price of the Pro Rata
Repurchase, as the case may be, and the denominator of which shall be the
product of (A) the number of shares of Common Stock outstanding immediately
before such Extraordinary Dividend or Pro Rata Repurchase minus, in the case of
a Pro Rata Repurchase, the number of shares of Common Stock repurchased by the
Company multiplied by (B) the Fair Market Value of a share of Common Stock on
the record date with respect to an Extraordinary Distribution or on the
applicable expiration date (including all extensions thereof) of any tender
offer which is a Pro Rata Repurchase or on the date of purchase with respect to
any Pro Rata Repurchase which is not a tender offer, as the case may be. The
Company shall send each holder of Series B Preferred Stock (i) notice of its
intent to make any dividend or distribution and (ii) notice of any offer by the
Company to make a Pro Rata Repurchase, in each case at the same time as, or as
soon as practicable after, such offer is first communicated (including by
announcement of a record date in accordance with the rules of any stock exchange
on which the Common
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Stock is listed or admitted to trading) to holders of Common Stock. Such notice
shall indicate the intended record date and the amount and nature of such
dividend or distribution, or the number of shares subject to such offer for a
Pro Rata Repurchase and the purchase price payable by the Company pursuant to
such offer, as well as the Conversion Price and the number of shares of Common
Stock into which a share of Series B Preferred Stock may be converted at such
time.
(E) Notwithstanding any other provisions of this Section 9, the Company
shall not be required to make any adjustment of the Conversion Price unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the Conversion Price. Any lesser adjustment shall be carried forward and shall
be made no later than the time of, and together with, the next subsequent
adjustment which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least one percent (1%) in
the Conversion Price.
(F) If the Company shall make any dividend or distribution on the Common
Stock or issue any Common Stock, other capital stock or other security of the
Company or any rights or warrants to purchase or acquire any such security,
which transaction does not result in an adjustment to the Conversion Price
pursuant to the foregoing provisions of this Section 9, the Board of Directors
of the Company shall consider whether such action is of such a nature that an
adjustment to the Conversion Price should equitably be made in respect of such
transaction. If in such case the Board of Directors of the Company determines
that an adjustment to the Conversion Price should be made, an adjustment shall
be made effective as of such date, as determined by the Board of Directors of
the Company. The determination of the Board of Directors of the Company as to
whether an adjustment to the Conversion Price should be made pursuant to the
foregoing provisions of this paragraph 9(F), and, if so, as to what adjustment
should be made and when, shall be final and binding on the Company and all
stockholders of the Company. The Company shall be entitled to make such
additional adjustments in the Conversion Price, in addition to those required by
the foregoing provisions of this Section 9, as shall be necessary in order that
any dividend or distribution in shares of capital stock of the Company,
subdivision, reclassification or combination of shares of stock of the Company
or any recapitalization of the Company shall not be taxable to holders of the
Common Stock.
(G) For purposes of this Resolution, the following definitions shall apply:
"Extraordinary Distribution" shall mean any dividend or other distribution
(effected while any of the shares of Series B Preferred Stock are outstanding)
(i) of cash, where the aggregate amount of such cash dividend or distribution
together with the amount of all cash dividends and distributions made during the
preceding period of 12 months, when combined with the aggregate amount of all
Pro Rata Repurchases (for this purpose, including only that portion of the
aggregate purchase price of such Pro Rata Repurchase which is in excess of the
Fair Market Value of the Common Stock repurchased as determined on the
applicable expiration date (including all extensions thereof) of any tender
offer or exchange offer which is a Pro Rata Repurchase, or the
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date of purchase with respect to any other Pro Rata Repurchase which is not a
tender offer or exchange offer made during such period), exceeds twelve and
one-half percent (12-1/2%) of the aggregate Fair Market Value of all shares of
Common Stock outstanding on the record date for determining the shareholders
entitled to receive such Extraordinary Distribution and (ii) any shares of
capital stock of the Company (other than shares of Common Stock), other
securities of the Company (other than securities of the type referred to in
paragraph (B) of this Section 9), evidences of indebtedness of the Company or
any other person or any other property (including shares of any subsidiary of
the Company), or any combination thereof. The Fair Market Value of an
Extraordinary Distribution for purposes of paragraph (D) of this Section 9 shall
be the sum of the Fair Market Value of such Extraordinary Distribution plus the
amount of any cash dividends which are not Extraordinary Distributions made
during such twelve month period and not previously included in the calculation
of an adjustment pursuant to paragraph (D) of this Section 9.
"Fair Market Value" shall mean, as to shares of Common Stock or any other
class of capital stock or securities of the Company or any other issuer which
are publicly traded, the average of the Current Market Prices (as hereinafter
defined) of such shares or securities for each day of the Adjustment Period (as
hereinafter defined). "Current Market Price" of publicly traded shares of Common
Stock or any other class of capital stock or other security of the Company or
any other issuer for a day shall mean the last reported sales price, regular
way, or, in case no sale takes place on such day, the average of the reported
closing bid and asked prices, regular way, in either case as reported on the Now
York Stock Exchange Composite Tape or, if such security is not listed or
admitted to trading on the New York Stock Exchange, 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 System or, if such security is not quoted on such
National Market System, the average of the closing bid and asked prices on each
such day in the over-the-counter market as reported by NASDAQ or, if bid and
asked prices for such security on each such day shall not have been reported
through NASDAQ, the average of the bid and asked prices for such day 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 of the
Company or a committee thereof on each trading day during the Adjustment Period.
"Adjustment Period" shall mean the period of five (5) consecutive trading days,
selected by the Board of Directors of the Company or a committee thereof, during
the 20 trading days preceding, and including, the date as of which the Fair
Market Value of a security is to be determined. The "Fair Market Value" of any
security which is not publicly traded or of any other property shall mean the
fair value thereof as determined by an independent investment banking or
appraisal firm experienced in the valuation of such securities or property
selected in good faith by the Board of Directors of the Company or a committee
thereof, or, if no such investment banking or appraisal firm is in the good
faith judgment of the Board of Directors or such committee available to make
such determination, as determined in good faith by the Board of Directors of the
Company or such committee.
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"Non-Dilutive Amount" in respect of an issuance, sale or exchange by the
Company of any right or warrant to purchase or acquire shares of Common Stock
(including any security convertible into or exchangeable for shares of Common
Stock) shall mean the remainder of (i) the product of the Fair Market Value of a
share of Common Stock on the day preceding the first public announcement of such
issuance, sale or exchange multiplied by the maximum number of shares of Common
Stock which could be acquired on such date upon the exercise in full of such
rights and warrants (including upon the conversion or exchange of all such
convertible or exchangeable securities), whether or not exercisable (or
convertible or exchangeable) at such date, minus (ii) the aggregate amount
payable pursuant to such right or warrant to purchase or acquire such maximum
number of shares of Common Stock; provided, however, that in no event shall the
Non-Dilutive Amount be less than zero. For purposes of the foregoing sentence,
in the case of a security convertible into or exchangeable for shares of Common
Stock, the amount payable pursuant to a right or warrant to purchase or acquire
shares of Common Stock shall be the Fair Market Value of such security on the
date of the issuance, sale or exchange of such security by the Company.
"Pro Rata Repurchase" shall mean any purchase of shares of Common Stock by
the Company or any subsidiary thereof, whether for cash, shares of capital stock
of the Company, other securities of the Company, evidences of indebtedness of
the Company or any other person or any other property (including shares of a
subsidiary of the Company), or any combination thereof, effected while any of
the shares of Series B Preferred Stock are outstanding, pursuant to any tender
offer or exchange offer subject to Section 13(e) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or any successor provision of law, or
pursuant to any other offer available to substantially all holders of Common
Stock; provided, however, that no purchase of shares by the Company or any
subsidiary thereof made in open market transactions shall be deemed a Pro Rata
Repurchase. For purposes of this paragraph 9(G), shares shall be deemed to have
been purchased by the Company or any subsidiary thereof "in open market
transactions" if they have been purchased substantially in accordance with the
requirements of Rule 10b-18 as in effect under the Exchange Act, on the date
shares of Series B Preferred Stock are initially issued by the Company or on
such other terms and conditions as the Board of Directors of the Company or a
committee thereof shall have determined are reasonably designed to prevent such
purchases from having a material effect on the trading market for the Common
Stock.
(H) Whenever an adjustment to the Conversion Price and the related voting
rights of the Series B Preferred Stock is required pursuant to this Resolution,
the Company shall forthwith place on file with the transfer agent for the Common
Stock and the Series B Preferred Stock if there be one, and with the Secretary
of the Company, a statement signed by two officers of the Company stating the
adjusted Conversion Price determined as provided herein and the resulting
conversion ratio, and the voting rights (as appropriately adjusted), of the
Series B Preferred Stock. Such statement shall set forth in reasonable detail
such facts as shall be necessary to show the reason and the manner of computing
such adjustment, including any determination of Fair Market Value
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involved in such computation. Promptly after each adjustment to the Conversion
Price and the related voting rights of the Series B Preferred Stock, the Company
shall mail a notice thereof and of the then prevailing conversion ratio to each
holder of shares of the Series B Preferred Stock.
Section 10. Ranking Attributable Capital and Adequacy of Surplus;
------- -------------------------------------------------------------
Retirement of Shares.
- --------------------
(A) The Series B Preferred Stock shall rank senior to the Series A
Preferred Stock and the Common Stock as to the payment of dividends and the
distribution of assets on liquidation, dissolution and winding up of the
Company, and, unless otherwise provided in the Restated Certificate of
Incorporation of the Company, as amended, or a Certificate of Designations
relating to a subsequent series of Preferred Stock, without par value, of the
Company, the Series B Preferred Stock shall rank junior to all other series of
the Company's Preferred Stock, without par value, as to the payment of dividends
and the distribution of assets on liquidation, dissolution or winding up.
(B) The capital of the Company allocable to the Series B Preferred Stock
for purposes of the Delaware General Corporation Law (the "Corporation Law")
shall be $600.00 per share. In addition to any vote of stockholders required by
law, the vote of the holders of a majority of the outstanding shares of Series B
Preferred Stock shall be required to increase the par value of the Common Stock
or otherwise increase the capital of the Company allocable to the Common Stock
for the purpose of the Corporation Law if, as a result thereof, the surplus of
the Company for purposes of the Corporation Law would be less than the amount of
Preferred Dividends that would accrue on the then outstanding shares of Series B
Preferred Stock during the following three years.
(C) Any shares of Series B Preferred Stock acquired by the Company by
reason of the conversion or redemption of such shares as provided by this
Resolution, or otherwise so acquired, shall be retired as shares of Series B
Preferred Stock and restored to the status of authorized but unissued shares of
preferred stock, without par value, of the Company, undesignated as to series,
and may thereafter be reissued as part of a new series of such preferred stock
as permitted by law.
Section 11. Miscellaneous.
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(A) All notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon the earlier of receipt thereof
or three (3) business days after the mailing thereof if sent by registered mail
(unless first-class mail shall be specifically permitted for such notice under
the terms of this Resolution) with postage prepaid, addressed: (i) if to the
Company, to its office at 14841 North Dallas Parkway, Dallas Texas 75240
(Attention: Secretary) or to the transfer agent for the Series B Preferred
Stock, or other agent of the Company designated as permitted by this Resolution
or (ii) if to any holder of the Series B Preferred Stock or
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Common Stock, as the case may be, to such holder at the address of such holder
as listed in the stock record books of the Company (which may include the
records of any transfer agent for the Series B Preferred Stock or Common Stock,
as the case may be) or (iii) to such other address as the Company or any such
holder, as the case may be, shall have designated by notice similarly given.
(B) The term "Common Stock" as used in this Resolution means the Company's
Common Stock of 50(cent) par value, as the same exists at the date of filing of
a Certificate of Designations relating to Series B Preferred Stock or any other
class of stock resulting from successive changes or reclassification of such
Common Stock consisting solely of changes in par value, or from par value to no
par value, or from no par value to par value. In the event that, at any time as
a result of an adjustment made pursuant to Section 9 of this Resolution, the
holder of any share of the Series B Preferred Stock upon thereafter surrendering
such shares for conversion shall become entitled to receive any shares or other
securities of the Company other than shares of Common Stock, the Conversion
Price in respect of such other shares or securities so receivable upon
conversion of shares of Series B Preferred Stock shall thereafter be adjusted,
and shall be subject to further adjustment from time to time, in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to
Common Stock contained in Section 9 hereof, and the provisions of Sections 1
through 8 and 10 and 11 of this Resolution with respect to the Common Stock
shall apply on like or similar terms to any such other shares or securities.
(C) The Company shall pay any and all stock transfer and documentary stamp
taxes that may be payable in respect of any issuance or delivery of shares of
Series B Preferred Stock or shares of Common Stock or other securities issued on
account of Series B Preferred Stock pursuant hereto or certificates representing
such shares or securities. The Company shall not, however, be required to pay
any such tax which may be payable in respect of any transfer involved in the
issuance or delivery of shares of Series B Preferred Stock or Common Stock or
other securities in a name other than that in which the shares of Series B
Preferred Stock with respect to which such shares or other securities are issued
or delivered were registered, or in respect of any payment to any person with
respect to any such shares or securities other than a payment to the registered
holder thereof, and shall not be required to make any such issuance, delivery or
payment unless and until the person otherwise entitled to such issuance,
delivery or payment has paid to the Company the amount of any such tax or has
established, to the satisfaction of the Company, that such tax has been paid or
is not payable.
(D) In the event that a holder of shares of Series B Preferred Stock shall
not by written notice designate the name in which shares of Common Stock to be
issued upon conversion of such shares should be registered or to whom payment
upon redemption of shares of Series B Preferred Stock should be made or the
address to which the certificate or certificates representing such shares, or
such payment, should be sent, the Company shall be entitled to register such
shares, and make such payment, in the name of the holder of such Series B
Preferred Stock as shown on the
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records of the Company and to send the certificate or certificates representing
such shares, or such payment, to the address of such holder shown on the records
of the Company.
(E) Unless otherwise provided in the Restated Certificate of Incorporation,
as amended, of the Company, all payments in the form of dividends, distributions
on voluntary or involuntary dissolution, liquidation or winding-up or otherwise
made upon the shares of Series B Preferred Stock and any other stock ranking on
a parity with the Series B Preferred Stock with respect to such dividend or
distribution shall be made pro rata, so that amounts paid per share on the
Series B Preferred Stock and such other stock shall in all cases bear to each
other the same ratio that the required dividends, distributions or payments, as
the case may be, then payable per share on the shares of the Series B Preferred
Stock and such other stock bear to each other.
(F) The Company may appoint, and from time to time discharge and change, a
transfer agent for the Series B Preferred Stock. Upon any such appointment or
discharge of a transfer agent, the Company shall send notice thereof by
first-class mail, postage prepaid, to each holder of record of Series B
Preferred Stock.
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