Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction — Form S-4
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-4/A Amendment to Form S-4, Registration Statement 177 1.12M
2: EX-3.1 Restated Certificate of Incorporation 53 195K
3: EX-3.2 Amended and Restated By-Laws 9 37K
5: EX-4.11 Security Agreement Dated as of July 17, 1988 71 397K
6: EX-4.12 Subsidiary Security Agreement Dated July 17, 1998 29 135K
7: EX-4.13 Collateral Assignment of Patents, Trademarks Etc. 24 84K
4: EX-4.5 Warrant Agreement 61 243K
8: EX-5.1 Opinion re: Legality 2 13K
9: EX-10.1 Series A Purchase Agreement 61 261K
10: EX-10.2 Series B Purchase Agmt 59 249K
11: EX-10.69 Amendment to Loan and Security Agreement 7 30K
12: EX-10.70 Material Contract 23 79K
13: EX-10.78 Consulting Agreement 6 25K
14: EX-12.1 Statement re: Computation of Ratios 1 13K
15: EX-21.1 List of Subsidiaries of the Registrant 1 7K
16: EX-23.1 Consent of Experts or Counsel 1 8K
17: EX-23.2 Consent of Pricewaterhousecoopers LLP 1 9K
18: EX-25.1 Statement of Eligibilty and Qualification 4 17K
19: EX-99.1 Letter of Transmittal 15 70K
20: EX-99.2 Notice of Guaranteed Delivery 3 17K
21: EX-99.3 Exchange Agent Agreement 10 40K
RESTATED CERTIFICATE OF INCORPORATION
OF
DISCOVERY ZONE, INC.
DISCOVERY ZONE, INC. a corporation organized and existing
under the laws of the State of Delaware (hereinafter referred to as the
"Corporation"), hereby certifies as follows:
(1) The name of the Corporation is Discovery Zone, Inc. The
original Certificate of Incorporation of the Corporation was filed on
April 21, 1993. The name under which the Corporation was originally
incorporated was also "Blockbuster Children's Amusement Corporation."
(2) This Restated Certificate of Incorporation
("Certificate") further restates in its entirety the Certificate of
Incorporation of the Corporation.
(3) Pursuant to Section 245 of the General Corporation Law
of the State of Delaware, the text of the Certificate of Incorporation
is hereby restated to read in its entirety as follows:
ARTICLE I
The name of the Corporation is Discovery Zone, Inc.
ARTICLE II
The address of the Corporation's registered office in the
State of Delaware is The Corporation Trust Center, 1209 Orange Street in the
City of Wilmington, County of New Castle. The name of the Corporation's
registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation shall be to engage in any
lawful act or activity for which corporations may be organized and incorporated
under the General Corporation Law of the State of Delaware.
ARTICLE IV
SECTION 1. Authorized Capital. The total number of shares of
capital stock which the Corporation has authority to issue is
2,400,000,000 shares, consisting of:
2
(i) 10,000,000 shares of Preferred Stock, par value $.01
per share (the "Preferred Stock");
(ii) 2,200,000,000 shares of Class A Common Stock, par
value $.00017 per share (the "Class A Common
Stock"); and
(iii) 190,000,000 shares of Class B Common Stock, par
value $.00017 per share (the "Class B Common
Stock").
The Class A Common Stock and the Class B Common Stock are
hereafter collectively referred to as the "Common Stock." Immediately
upon the effectiveness of this amendment to Article IV of the
Certificate of Incorporation, each outstanding share of the
Corporation's common stock, par value $.01 per share, shall without
further action by the Corporation or the holder thereof be
reclassified, changed and converted into one share of Class A Common
Stock.
SECTION 2. Common Stock. Except as otherwise provided in this
Section 2 or as otherwise required by applicable law, all shares of
Class A Common Stock and Class B Common Stock shall be identical in
all respects and shall entitle the holders thereof to the same rights,
preferences and privileges, subject to the same qualifications,
limitations and restrictions, as set forth herein.
(A) Voting Rights. Except as otherwise provided in
this Section 2, or as otherwise required by applicable law, the
holders of Class A Common Stock shall be entitled to one vote per
share and shall have the exclusive right to vote for the election of
directors and on all matters to be voted on by the stockholders of the
Corporation, and the holders of Class B Common Stock shall have no
right to vote on any matters to be voted on by the stockholders of the
Corporation; provided that the holders of Class B Common Stock shall
have the right to vote one vote per share together with the Class A
Common Stock as one class on (i) any merger or consolidation of the
Corporation with or into another entity or entities, (ii) any sale of
all or substantially all of the Corporation's assets and (iii) any
amendment to the Certificate; and provided further that the holders of
Class B Common Stock shall have the right to vote as a separate class
on any merger or consolidation of the Corporation with or into another
entity or entities, or any recapitalization or reorganization, in
which shares of Class B Common Stock would receive or be exchanged for
consideration different on a per share basis from the consideration to
be received with respect to or in exchange for the shares of Class A
Common Stock or would otherwise be treated differently from shares of
Class A Common Stock in connection with such transaction.
(B) Dividends. As and when dividends are declared or
paid in respect of shares of Common Stock, whether in cash, property
or securities of the Corporation,
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the holders of Class A Common Stock and the holders of Class B Common
Stock shall be entitled to receive such dividends pro rata at the same
rate per share of each class of Common Stock; provided that (i) if
dividends are declared or paid in shares of Common Stock, the
dividends payable to the holders of Class A Common Stock shall be
payable in shares of Class A Common Stock and the dividends payable to
the holders of Class B Common Stock shall be payable in shares of
Class B Common Stock and (ii) if the dividends consist of other voting
securities of the Corporation, the Corporation shall make available to
each holder of Class B Common Stock, at such holder's request,
dividends consisting of non-voting securities (except as otherwise
required by law) of the Corporation which are otherwise identical to
the voting securities and which are convertible into such voting
securities on the same terms as the Class B Common Stock is
convertible into the Class A Common Stock.
(C) Liquidation. The holders of the Class A Common
Stock and the holders of the Class B Common Stock shall be entitled to
participate pro rata at the same rate per share of each class of
Common Stock in all distributions to the holders of Common Stock in
any liquidation, dissolution or winding up of the Corporation.
(D) Conversion.
(i) Conversion of Class B Common Stock. (a) In
connection with the occurrence of any Conversion Event, each holder of
Class B Common Stock shall be entitled to convert into an equal number
of shares of Class A Common Stock any or all of the shares of such
holder's Class B Common Stock being (or expected to be) distributed,
disposed of or sold in connection with such Conversion Event.
(b) For purposes of this Subsection (D) of
Section 2, a "Conversion Event" shall mean (1) any public offering or
public sale of securities of the Corporation (including a offering
registered under the Securities Act of 1933, as amended (the
"Securities Act") and a sale by the holders thereof pursuant to Rule
144 under the Securities Act or any similar rule then in force), (2)
any sale of securities of the Corporation to a person or group of
persons (within the meaning of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) if, after such sale, such person or group of
persons in the aggregate would own or control securities (provided
that such sale has been approved by the Corporation's Board of
Directors or a committee thereof), (3) any sale of securities of the
Corporation to a person or group of persons (within the meaning of the
1934 Act) if, after such sale, such person or group of persons in the
aggregate would own or control securities of the Corporation
(excluding any Class B Common Stock being converted and disposed of in
connection with such Conversion Event) which possess in the aggregate
the ordinary voting power to elect a majority of the Corporation's
directors, (4) any sale of securities of the Corporation to a person
or group of persons (within the meaning of the 1934 Act) if, after
such sale, such person or group
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of persons would not, in the aggregate, own, control or have the right
to acquire more than 2% of the outstanding securities of any class of
voting securities of the Corporation, and (5) a merger, consolidation
or similar transaction involving the Corporation if, after such
transaction, a person or group of persons (within the meaning of the
1934 Act) in the aggregate would own or control securities
representing a majority of the Company's outstanding voting power
(provided that the transaction has been approved by the Corporation's
Board of Directors or a committee thereof). For purpose of this
Subsection (D) of Section 2, "person" shall include any natural person
and any corporation, partnership, limited liability company, joint
venture, trust, unincorporated organization and any other entity or
organization. The Corporation's directors shall use their best efforts
to ensure that holders of the Class B Common Stock receive shares of
non-voting common stock if, in connection with any merger,
consolidation or similar transaction involving the Corporation, shares
of capital stock are received by holders of Common Stock as
consideration in respect thereof.
(c) Each holder of Class B Common Stock
shall be entitled to convert shares of Class B Common Stock in
connection with any Conversion Event if such holder reasonably
believes that such Conversion Event shall be consummated, and a
written request for conversion from any holder of Class B Common Stock
to the Corporation stating such holder's reasonable belief that a
Conversion Event shall occur shall be conclusive and shall obligate
the Corporation to effect such conversion in a timely manner so as to
enable each such holder to participate in such Conversion Event. The
Corporation shall not cancel the shares of Class B Common Stock so
converted before the tenth day following such Conversion Event and
shall reserve such shares until such tenth day for reissuance in
compliance with the next sentence. If any shares of Class B Common
Stock are converted into shares of Class A Common Stock in connection
with a Conversion Event and such shares of Class A Common Stock are
not actually distributed, disposed of or sold pursuant to such
Conversion Event, such shares of Class A Common Stock shall be
promptly converted back into the same number of shares of Class B
Common Stock.
(ii) Conversion Procedure. (a) Unless
otherwise provided in connection with a Conversion Event of Class B
Common Stock, each conversion of shares of Class B Common Stock into
shares of Class A Common Stock shall be effected by the surrender of
the certificate or certificates representing the shares of Class B
Common Stock to be converted at the principal office of the
Corporation at any time during normal business hours, together with a
written notice by the holder of such Class B Common Stock stating that
such holder desires to convert the shares, or a stated number of the
shares, of Class B Common Stock represented by such certificate or
certificates into shares of Class A Common Stock. Unless otherwise
provided in connection with a Conversion Event, each conversion shall
be deemed to have been effected as of the close of business on the
date on which such certificate or certificates have been surrendered
and
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such notice has been received, and at such time the rights of the
holder of the converted Class B Common Stock, as such holder, shall
cease and the person or persons in whose name or names the certificate
or certificates for shares of Class A Common Stock are to be issued
upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Class A Common Stock represented
thereby.
(b) Promptly after the surrender of
certificates and the receipt of written notice, the Corporation shall
issue and deliver in accordance with the surrendering holder's
instructions (a) the certificate or certificates for the Class A
Common Stock issuable upon such conversion and (b) a certificate
representing any Class B Common Stock which was represented by the
certificate or certificates delivered to the Corporation in connection
with such conversion but which was not converted.
(c) The issuance of certificates for Class
A Common Stock upon conversion of Class B Common Stock shall be made
without charge to the holders of such shares for any issuance tax in
respect thereof or other cost incurred by the Corporation in
connection with such conversion and the related issuance of Class A
Common Stock.
(d) The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares
of Class A Common Stock, for the purpose of issuance upon the
conversion of the Class B Common Stock, such number of shares of Class
A Common Stock issuable upon the conversion of all outstanding Class B
Common Stock. All shares of Class A Common Stock which are so issuable
shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The
Corporation shall take all such actions as may be necessary to assure
that all such shares of Class A Common Stock may be so issued without
violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of
Common Stock may be listed (except for official notice of issuance
which shall be immediately transmitted by the Corporation upon
issuance).
(e) The Corporation shall not close its
books against the transfer of shares of Common Stock in any manner
which would interfere with the timely conversion of any shares of
Class B Common Stock. The Corporation shall assist and cooperate with
any holder of Common Stock required to make any governmental filings
or obtain any governmental approval prior to or in connection with any
conversion of Common Class B Stock hereunder (including, without
limitation, making any filings required to be made by the
Corporation).
(E) Stock Splits. If the Corporation in any manner
subdivides or combines the outstanding shares of one class of Common
Stock, the outstanding shares of
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the other class of Common Stock shall be proportionately subdivided or
combined in a similar manner.
(F) Registration of Transfer.. The Corporation shall
keep at its principal office (or such other place as the Corporation
reasonably designates) a register for the registration of shares of
Common Stock. Upon the surrender of any certificate representing
shares of any class of Common Stock at such place, the Corporation
shall, at the request of the registered holder of such certificate,
execute and deliver a new certificate or certificates in exchange
therefor representing in the aggregate the number of shares of such
class represented by the surrendered certificate, and the Corporation
forthwith shall cancel such surrendered certificate. Each such new
certificate shall be registered in such name and shall represent such
number of shares of such class as is requested by the holder of the
surrendered certificate and shall be substantially identical in form
to the surrendered certificate. The issuance of new certificates shall
be made without charge to the holders of the surrendered certificates
for any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such issuance.
(G) Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder
shall be satisfactory) of the ownership and the loss, theft,
destruction or mutilation of any certificate evidencing one or more
shares of any class of Common Stock, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a
financial institution or other institutional investor its own
agreement shall be satisfactory), or, in the case of any such
mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of such
class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate.
(H) Notices. All notices referred to herein shall be
in writing, shall be delivered personally or by first class mail,
postage prepaid, and shall be deemed to have been given when so
delivered or mailed to the Corporation at its principal executive
offices and to any stockholder at such holder's address as it appears
in the stock records of the Corporation (unless otherwise specified in
a written notice to the Corporation by such holder).
(I) Amendment and Waiver. No amendment or waiver of
any provision of this Section 2 shall be effective without the prior
approval of the holders of a majority of the then outstanding Class B
Common Stock voting as a separate class.
SECTION 3. Preferred Stock. Shares of Preferred Stock may be
issued from time to time in one or more series. The Board of Directors
is hereby authorized to fix the
7
voting rights, if any, designations, powers, preferences and the
relative, participation, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, of any unissued
series of Preferred Stock; and to fix the number of shares
constituting such series, and to increase or decrease the number of
shares of any such series (but not below the number of shares thereof
then outstanding). The Corporation shall be authorized to issue 1,000
shares of Series A Convertible Preferred Stock, par value $.01 per
share, the designations, powers, preferences and the relative,
participation, optional or other rights, if any, of which (in addition
to those set forth herein) are as set forth in the Certificate of
Designations attached hereto as Exhibit A.
Pursuant to the authority conferred by this Article IV,
the following series of Preferred Stock have been designated, each such
series consisting of such number of shares, with such voting powers and
with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof as are stated and expressed in the exhibit with
respect to such series attached hereto as specified below and
incorporated herein by reference:
Exhibit B: Series A Senior Cumulative Preferred Stock
Exhibit C: Series B Junior Cumulative Preferred Stock
ARTICLE V
Unless and except to the extent that the By-Laws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
To the fullest extent permitted by the General Corporation Law of
the State of Delaware as the same exists or may hereafter be amended, a director
of the Corporation shall not be liable to the Corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this paragraph shall be prospective only and shall
not adversely affect any limitation, right or protection of a director of the
Corporation existing at the time of such repeal or modification.
ARTICLE VI
SECTION 1. Definitions. For purposes of this Article VI, the
following terms shall have the following meanings:
"Board of Directors" means the Board of Directors of the
Corporation.
"Indenture" means the Indenture, dated as of July 16, 1998
among the Corporation, certain subsidiaries of the Corporation named
therein and the Trustee.
8
"Issue Date" means the original date of issuance of the
Notes.
"Maturity Date" means May 1, 2002, the maturity date of the
Notes.
"Noteholder Nominees" means individuals designated for
nomination to the Board of Directors by the Trustee or by the holders
of the Notes pursuant to the provisions of the Indenture, including
Additional Noteholder Nominees (as defined below).
"Notes" means the 13 1/2% Senior Collateralized Notes due
2002 of the Company in the aggregate principal amount of $20,000,000,
issued under the Indenture.
"Trustee" means Firststar Bank of Minnesota, in its capacity
as trustee under the Indenture and any successor trustee pursuant to
the provisions of the Indenture.
SECTION 2. Board of Directors. From and after the Issue date
and until the date on which all outstanding Notes have been paid in
full, the following provisions shall apply:
(i) From and after the Issue Date and until the
Stockholders' Agreement is terminated, the Board of Directors shall
consist of 11 directors; provided, however, that the number of
directors constituting the Board of Directors may be reduced to less
than 11 (but in any event not less than two directors), if the Board
of Directors so approves pursuant to a unanimous vote.
(ii) From and after the Issue Date and until the
Stockholders' Agreement is terminated, the Board of Directors of the
Corporation (the "Board of Directors") shall not adopt any new
provisions, or amend any existing provisions of its Amended and
Restated By-Laws, except, in either case, by a unanimous vote of the
directors of the Corporation.
SECTION 3. Approval of Bankruptcy Filings. The Corporation
shall not, and shall not permit any subsidiary of the Corporation to
(i) file a voluntary case or proceeding under any applicable
bankruptcy law with respect to the Corporation or any Subsidiary of
the Corporation, (ii) consent to the appointment of a custodian on the
Corporation's behalf for substantially all of the Corporation's or any
such subsidiary of the Corporation's assets, (iii) consent to,
acquiesce in, support, encourage, suggest or assist in, the
institution of a bankruptcy or insolvency proceeding against the
Corporation or any such subsidiary of the Corporation, as applicable,
or (iv) make any general assignment, or permit any such subsidiary of
the Corporation to make any general assignment, for the benefit of
creditors, unless any such action described in clauses (i) through
(iv) has been approved by a unanimous vote of the Board.
9
ARTICLE VII
From and after the Issue Date and until the Stockholders'
Agreement is terminated, the Board of Directors shall not adopt any new
provisions, or amend any existing provisions of its Amended and Restated
Certificate of Incorporation without the unanimous consent of the shareholders;
provided that, if an event occurs as a result of which the Noteholder
Representatives constitute a majority of the Board of Directors, the Amended and
Restated Certificate of Incorporation may be amended by stockholders
representing a majority of the votes to be cast.
ARTICLE VIII
SECTION 1. Elimination of Certain Liability of Directors. A
director of the Corporation shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the General Corporation Law of the State of
Delaware as the same exists of may hereafter be amended.
Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a director of the Corporation
existing hereunder with respect to any act or omission occurring prior to such
repeal or modification.
SECTION 2. Indemnification and Insurance.
(a) Right to Indemnification. Each person who was or is made
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment, to
the fullest extent permitted by law, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines,
amounts paid or to be paid in settlement, and excise taxes or penalties arising
under the Employee Retirement Income Security Act of 1974) reasonably incurred
or suffered by such person in connection therewith and such indemnification
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure
10
to the benefit of his or her heirs, executors and administrators; provided,
however, that, except as provided in paragraph (b) of this Section 2, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors. The
right to indemnification conferred in this Section shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the General Corporation Law of the State of Delaware requires,
the payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise. The Corporation may, by action of the Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under
paragraph (a) of this Section 2 is not paid in full by the Corporation within
thirty days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the General Corporation Law of the State
of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, By-law, agreement, vote of
stockholders or disinterested directors or otherwise.
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(d) Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State of Delaware.
ARTICLE IX
Intentionally Omitted.
ARTICLE X
Restrictions with respect to transfers of shares of capital
stock of the Corporation may be contained in the By-Laws of the Corporation, in
any agreement among some or all of the stockholders of the Corporation or in the
terms of such shares or of any agreement or securities providing for the
issuance of such shares.
ARTICLE XI
Preemptive rights to acquire shares of capital stock of the
Corporation may be contained in the By-Laws of the Corporation and in any
agreement among some or all of the stockholders of the Corporation including,
without limitation, the Stockholders' Agreement.
ARTICLE XII
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
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IN WITNESS WHEREOF, said Discovery Zone, Inc. has caused this
Certificate to be signed by Scott W. Bernstein, its Chief Executive Officer and
President, this 29th day of September, 1998.
DISCOVERY ZONE, INC.
By: /s/ Scott W. Bernstein
------------------------------------
Name: Scott W. Bernstein
Title: Chief Executive Officer
and President
EXHIBIT A
SERIES A CONVERTIBLE PREFERRED STOCK
1. DESIGNATION AND AMOUNT. The Corporation is authorized to
issue shares of a series of preferred stock of the Corporation, which series
shall be designated "Series A Convertible Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting such Series A Preferred
Stock shall be 1,000.
2. DIVIDENDS.
(a) No dividends will be paid on the Series A Preferred
Stock.
(b) Notwithstanding the provisions of Section 2(a) above, for
so long as any shares of Series A Preferred Stock remain outstanding, the
Corporation shall not pay any dividend or other distribution, whether in cash or
other property, on any capital stock of the Corporation ranking on liquidation
junior in preference to the Series A Preferred Stock (collectively, the "Junior
Stock"), without the prior affirmative vote or written consent of (i) Wafra
Acquisition Fund 6, L.P. ("WAF-6"), for so long WAF-6 shall hold at least 1,000
shares of Series A Preferred Stock, and (ii) a majority of the holders of Series
A Preferred Stock at any time as WAF-6 shall hold less than 1,000 shares of
Series A Preferred Stock; provided that, if such vote or consent is given, (i)
with respect to dividends payable in cash, the holders of shares of Series A
Preferred Stock shall receive a pro rata share of any such dividend or other
distribution as if such shares of Series A Preferred Stock had been fully
converted into shares of Common Stock, par value $.01 per share (the "Common
Stock"), of the Corporation and (ii) with respect to dividends payable in shares
of capital stock of the Corporation, the Conversion Price (as defined in Section
5(b) below) shall be adjusted in accordance with the provisions of Section 6
below.
(c) Notwithstanding the provisions of Section 2(b) above,
following the consummation of a Qualified Initial Public Offering (as defined in
the Stock Purchase Agreement, dated as of July 21, 1997 (the "Stock Purchase
Agreement"), by and among the Corporation, Birch Holdings L.L.C. (together with
Birch Acquisition L.L.C. and each of their respective Related Parties, as such
term is defined in the Stock Purchase Agreement being collectively referred to
herein as "Birch") and WAF-6, the Corporation may declare a dividend or other
distribution in cash without the prior affirmative vote or written consent of
either (i) WAF-6, for so long as WAF-6 shall hold at least 1,000 shares of
Series A Preferred Stock, and (ii) a majority of the holders of shares of Series
A Preferred Stock, at any time as WAF-6 shall hold less than 1,000 shares of
Series A Preferred Stock, as the case may be; provided that the holders of
shares of Series A Preferred Stock shall receive a pro rata share of any such
dividend or other distribution as if such shares of Series A Preferred Stock had
been fully converted into shares of Common Stock.
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3. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of Series A Preferred
Stock shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, after and subject to the payment
in full of all amounts required to be distributed to the holders of any other
series of Preferred Stock of the Corporation ranking on liquidation prior and in
preference to the Series A Preferred Stock (such Preferred Stock being referred
to hereinafter as "Senior Preferred Stock") upon such liquidation, dissolution
or winding up, but before any payment shall be made to the holders of Junior
Stock, an amount equal to $15,000 per share plus dividends, if any, thereon
declared but unpaid (subject to adjustment in the event of any stock dividend,
stock split, stock distribution or combination with respect to such shares). If
upon any such liquidation, dissolution or winding up of the Corporation, the
remaining assets of the Corporation available for the distribution to its
stockholders after payment in full of amounts required to be paid or distributed
to holders of Senior Preferred Stock shall be insufficient to pay the holders of
the Series A Preferred Stock the full amount to which they shall be entitled,
the holders of Series A Preferred Stock and any class of stock ranking on
liquidation on a parity with the Series A Preferred Stock (the "Parity Stock"),
shall share ratably in any distribution of the remaining assets and funds of the
Corporation in proportion to the respective amounts which would otherwise be
payable in respect to the shares held by the holders of Series A Preferred Stock
and the holders of Parity Stock upon such distribution if all amounts payable on
or with respect to said shares were paid in full.
(b) After the payment of all preferential amounts required to
be paid to the holders of Senior Preferred Stock, the holders of Series A
Preferred Stock and the holders of Parity Stock upon the dissolution,
liquidation or winding up of the Corporation, the holders of shares of Junior
Stock then outstanding shall be entitled to receive the remaining assets and
funds of the Corporation available for distribution to its stockholders.
(c) The merger or consolidation of the Corporation into or
with another corporation, the merger or consolidation of any other corporation
into or with the Corporation, or the sale, conveyance, mortgage, pledge or lease
of all or substantially all the assets of the Corporation shall not be deemed to
be a liquidation, dissolution or winding up of the Corporation for purposes of
this Section 3.
4. VOTING.
(a) Each issued and outstanding share of Series A Preferred
Stock shall be entitled to the number of votes equal to the number of shares of
Common Stock into which each such share is convertible (as adjusted from time to
time pursuant to Section 6 hereof), at each meeting of stockholders of the
Corporation with respect to any and all matters presented to the stockholders of
the Corporation for their action or consideration. Except as provided by law, by
the provisions of paragraphs (b) and (c) of this Section 4 or by the provisions
establishing any
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other series of preferred stock of the Corporation, the holders of Series A
Preferred Stock and holders of any other outstanding preferred stock of the
Corporation shall vote together with the holders of Common Stock as a single
class.
(b) In addition to any other rights provided by law, the
Corporation shall not, without first obtaining the prior affirmative vote or
written consent of (i) WAF-6, for so long as WAF-6 shall hold at least 1,000
shares of Series A Preferred Stock, or (ii) a majority of the holders of shares
of Series A Preferred Stock, at any time as WAF-6 shall hold less than 1,000
shares of Series A Preferred Stock, as the case may be:
(i) Amend or repeal any provision of the Certificate of
Incorporation or the Corporation's By-Laws, if such action would alter
or adversely change the preferences, rights, privileges or powers of,
or the restrictions provided for the benefit of, the holders of Series
A Preferred Stock or increase the number of shares of Series A
Preferred Stock authorized thereby; and
(ii) Enter into any transaction with Birch.
(c) The Corporation will not, and will not permit any of its
Subsidiaries (as defined in the Stock Purchase Agreement) to, directly or
indirectly, enter into or permit to exist any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any services) with, or for the
benefit of, any of its officers, directors or beneficial owners of more than 10%
of the Common Stock then outstanding (each such Person, an "Affiliate," and each
such transaction, an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted pursuant to this paragraph and (y) Affiliate Transactions
on terms that are no less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's length basis from
a Person that is not an Affiliate of the Corporation or such Subsidiary.
Notwithstanding the provisions of Section 4(a) above and other than all
transactions between the Corporation and Birch which shall be subject to the
provisions of Section 4(b)(ii) above, all Affiliate Transactions and each series
of related Affiliate Transactions which are similar or part of a common plan,
involving aggregate payments or other property with a fair market value in
excess of $2,000,000 shall be approved by a majority of the disinterested
members of the Board or the board of directors of such Subsidiary, as the case
may be; such approval to be evidenced by a resolution stating that such board of
directors has determined that such transaction complies with the foregoing
provisions which shall be delivered to WAF-6 for so long as WAF-6 shall hold any
shares of Series A Preferred Stock. If the Corporation or any Subsidiary shall
enter into an Affiliate Transaction (or a series of related Affiliate
Transactions which are similar or part of a common plan) that involves an
aggregate fair market value of more than $5,000,000, the Corporation or such
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to the Corporation from a financial point of view from an
Independent Financial Advisor (as defined in the Indenture, dated as of July 22,
1997 (the "Indenture"), by and among the Corporation, the
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Subsidiary Guarantors named therein and State Street Bank and Trust Company, as
Trustee (as used in this Certificate, all references to the Indenture refer to
the Indenture as in effect on the Closing Date (as defined in the Stock Purchase
Agreement), and are without regard to any subsequent amendment(s) thereto) and
deliver such opinion to WAF-6 for so long as WAF-6 shall hold any shares of
Series A Preferred Stock. Notwithstanding the foregoing, the restrictions set
forth in this Section 4(c) shall not apply to (i) reasonable fees and expenses
and compensation paid to, and any indemnity provided on behalf of, officers,
director, employees or consultants of the Corporation or any Subsidiary, as
determined in good faith by the Board or senior management of the Corporation,
and (ii) transactions exclusively between the Corporation and any wholly owned
Subsidiary or exclusively between or among any wholly owned Subsidiaries.
5. OPTIONAL CONVERSION.
(a) Each share of Series A Preferred Stock may be converted
at any time, at the option of the holders of the Series A Preferred Stock, in
the manner hereinafter provided, into fully-paid and nonassessable shares of
Common Stock, provided, however, that on any redemption of any Series A
Preferred Stock or any liquidation of the Corporation, the right of conversion
shall terminate at the close of business on the full business day next preceding
the date fixed for such redemption or for the payment of any amounts
distributable on liquidation to the holders of the Series A Preferred Stock.
(b) The initial conversion rate (the per share equivalent of
(i) 18.5% of the then outstanding shares of Common Stock on a fully diluted
basis, divided by (ii) 1,000) for the Series A Preferred Stock shall be
1,191.6260 shares of Common Stock for each one share of Series A Preferred Stock
surrendered for conversion. The applicable conversion rate and Conversion Price
from time to time in effect is subject to adjustment as hereinafter provided.
For purposes of this Section 5, the term "fully diluted" shall give effect to
the exercise of all warrants, stock options and stock appreciation rights in
respect of the Common Stock and other securities convertible into or
exchangeable for Common Stock (whether outstanding on the Issuance Date, granted
or reserved for granting or issuance), other than stock options or stock
appreciation rights in respect of Common Stock granted, reserved or available
for granting (the exercise of which would not result in dilution to WAF-6 in an
amount in excess of 10% as calculated on a fully diluted basis) under the
Corporation's 1997 Stock Incentive Plan (the "Stock Incentive Plan").
(c) The Corporation shall not issue fractions of shares of
Common Stock upon conversion of Series A Preferred Stock or scrip in lieu
thereof. If any fraction of a share of Common Stock would, except for the
provisions of this paragraph (b), be issuable upon conversion of any Series A
Preferred Stock, the Corporation shall in lieu thereof pay to the holders of the
Series A Preferred Stock an amount in cash equal to the current value of such
fraction, calculated to the nearest one-hundredth (1/100) of a share, to be
computed (i) if the Common Stock is listed on any national securities exchange
on the basis of the last sales price of the Common Stock on such exchange (or
the quoted closing bid price if there shall have been no sales) on the date of
conversion, or (ii) if the Common Stock shall not be listed, on the basis of
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the mean between the closing bid and asked prices for the Common Stock on the
date of conversion as reported by Nasdaq, and if there are not such closing bid
and asked prices, on the basis of the Fair Market Value (as determined in
Section 10 below) per share as determined in good faith after due inquiry by the
Board.
(d) Whenever the conversion rate shall be adjusted as
provided in Section 6 hereof, the Corporation shall forthwith file at each
office designated for the conversion of Series A Preferred Stock, a statement,
signed by the Chairman of the Board, the President, any Vice President or
Treasurer of the Corporation, showing in reasonable detail the facts requiring
such adjustment and the conversion rate that will be effective after such
adjustment. Promptly after delivery of such statement, the Corporation shall
also cause a notice setting forth any such adjustments to be sent by mail, first
class, postage prepaid, to each record holder of Series A Preferred Stock at his
or its address appearing on the stock register. If such notice relates to an
adjustment resulting from an event referred to in paragraph 6(g), such notice
shall be included as part of the notice required to be mailed and published
under the provisions of paragraph 6(g) hereof.
(e) In order to exercise the conversion privilege, the holder
of each share of Series A Preferred Stock shall surrender the certificate
representing such share, duly endorsed or assigned to the Corporation, or in
blank, at the principal office of the transfer agent (or if no transfer agent
shall be at the time appointed, then to the Corporation at its principal
office), and shall give written notice to the Corporation at such office that
they elect to convert the share represented by such certificate, or a specified
portion thereof. Unless the shares issuable on conversion are to be issued in
the same name as the name in which such share of Series A Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or such holder's duly authorized attorney and an amount sufficient
to pay any transfer tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid). The Corporation shall pay any
issue and other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock upon conversion of the Series A Preferred Stock;
provided, however, that the Corporation shall not be required to pay any tax or
taxes which may be payable in respect of any transfer involved in the issue and
delivery of any shares of Common Stock issued and delivered upon conversion of
the Series A Preferred Stock to a person(s) with name(s) other than the name(s)
in which the Series A Preferred Stock is registered and the Corporation shall
not be required to issue or deliver such Common Stock unless or until the
person(s) requesting the issuance thereof shall have paid to the Corporation the
amount of such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid. The date of receipt by the transfer
agent or by the Corporation, as the case may be, of the certificate(s) and
notice shall be the conversion date. As soon as practicable after receipt of
such notice and the surrender of the certificate(s) for shares of Series A
Preferred Stock as aforesaid, the Corporation shall cause to be issued and
delivered at such office to the holders of the Series A Preferred Stock, as
applicable, or on its written order, certificate(s) for the number of full
shares of Common Stock issuable on such conversion in accordance with the
provisions hereof and cash
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as provided in paragraph (b) of this Section 5 in respect of any fraction of a
share of Common Stock otherwise issuable upon such conversion.
(f) The Corporation shall, at all times as any shares of
Series A Preferred Stock shall be outstanding, reserve and keep available out of
its authorized but unissued stock, for the purposes of effecting the conversion
of the Series A Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Series A Preferred Stock. Before taking any action
which would cause an adjustment reducing the Conversion Rate below the then
existing par value of the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock, the Corporation will take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Corporation
may validly and legally issue fully-paid and nonassessable shares of such Common
Stock at such adjusted conversion rate.
(g) Upon any such conversion, no adjustment to the conversion
rate shall be made for accrued and unpaid dividends on the Series A Preferred
Stock surrendered for conversion or on the Common Stock so delivered.
(h) All shares of Series A Preferred Stock which shall have
been surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such shares, including the rights,
if any, to receive notices and to vote, shall forthwith cease and terminate
except only the right of the holder thereof to receive shares of Common Stock in
exchange therefor and payment of any accrued and unpaid dividends thereon. Any
shares of Series A Preferred Stock so converted shall be retired and canceled
and shall not be reissued, and the Corporation may from time to time take such
appropriate action as may be necessary to reduce the then authorized number of
shares of Series A Preferred Stock accordingly.
6. ANTI-DILUTION PROVISIONS. The number and kind of shares
issuable upon the conversion of shares of Series A Preferred Stock shall be
subject to adjustment from time to time as follows:
(a) Stock Dividends. If, at any time after the Issuance Date,
(i) the Corporation shall pay a stock dividend or other distribution
payable in shares of capital stock of the Corporation or (ii) the
number of shares of Common Stock shall have been increased by a
subdivision or split-up of shares of Common Stock, then, on the date
of the payment of such dividend or distribution (retroactive to the
record date) or immediately after the effective date of subdivision or
split-up, as the case may be, the number of shares of Common Stock to
be delivered upon conversion of shares of Series A Preferred Stock
will be increased so that the holders of shares of Series A Preferred
Stock will be entitled to receive the number of shares of Common Stock
that such holders would have owned immediately following such action
had such shares of Series A Preferred Stock been converted immediately
prior thereto or, in the case of a stock dividend or other
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distribution payable in shares of capital stock of the Corporation,
prior to the record date for determination of shareholders entitled
thereto.
(b) Combination of Stock. If the number of shares of Common
Stock outstanding at any time after the Issuance Date shall have been
decreased by a combination of the outstanding shares of Common Stock,
then, immediately after the effective date of such combination, the
number of shares of Common Stock to be delivered upon conversion of
each share of Series A Preferred Stock will be decreased so that the
holders of shares of Series A Preferred Stock thereafter will be
entitled to receive the number of shares of Common Stock that such
holders would have owned immediately following such action had such
shares of Series A Preferred Stock been converted immediately prior
thereto.
(c) Reorganization, Etc. If any capital reorganization of the
Corporation, or any reclassification of the Common Stock, or any
consolidation of the Corporation with or merger of the Corporation
with or into any other person or any sale, lease or other transfer of
all or substantially all of the assets of the Corporation to any other
person, shall be effected in such a way that the holders of Common
Stock shall be entitled to receive stock, other securities or assets
(whether such stock, other securities or assets are issued or
distributed by the Corporation or another person) with respect to or
in exchange for Common Stock, then, upon conversion of each share of
Series A Preferred Stock, the holders of shares of Series A Preferred
Stock shall have the right to receive the kind and amount of stock,
other securities or assets receivable upon such reorganization,
reclassification, consolidation, merger or sale, lease or other
transfer by a holder of the number of shares of Common Stock that such
holders would have been entitled to receive upon conversion of such
shares of Series A Preferred Stock had such shares been converted
immediately before such reorganization, reclassification,
consolidation, merger or sale, lease or other transfer, subject to
adjustments (as determined in good faith by the Board) that shall be
as nearly equivalent as may be practicable to the adjustments provided
for in this Section 6.
(d) Stock and Rights Offering at Less than Fair Market Value.
(1) If at any time after the Issuance Date, the Corporation shall (x)
issue to holders of Common Stock, (y) issue or sell or (z) fix a
record date for the issuance to holders of its Common Stock of (A)
Common Stock or (B) rights, options or warrants entitling the holders
thereof to subscribe for or purchase Common Stock (or securities
convertible or exchangeable into or exercisable for Common Stock) (any
of the foregoing being referred to herein as "Convertible
Securities"), in any such case, at a price per share (or having a
conversion, exchange or exercise price per share) that is less than
Fair Market Value (as determined below) on the date of such issuance
or such record date, then, immediately after the date of such issuance
or sale or on such record date, the number of shares of Series A
Preferred Stock shall be increased so that the holders of shares of
Series A Preferred Stock thereafter will be entitled to receive the
number of shares of Common Stock determined
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by multiplying the number of shares of Common Stock such holders would
have been entitled to receive immediately before the date of such
issuance or sale or such record date, had such holders converted their
shares of Series A Preferred Stock immediately prior thereto by a
fraction, the numerator of which will be the number of shares of
Common Stock outstanding on such date plus the number of additional
shares of Common Stock offered for subscription or purchase (or into
which the Convertible Securities so offered are initially convertible
or exchangeable or exercisable, as the case may be), and the
denominator of which will be the number of shares of Common Stock
outstanding on such date plus the number of shares of Common Stock
that the aggregate offering price of the total number of shares so
offered for subscription or purchase (or the aggregate initial
conversion price, exchange price or exercise price of the Convertible
Securities, as the case may be, so offered) would purchase at such
Fair Market Value.
(2) If at any time after the Issuance Date, the Corporation
shall distribute to all holders of Common Stock any shares of capital
stock of the Corporation (other than Common Stock) or evidences of its
indebtedness or assets (excluding cash dividends or cash distributions
paid from retained earnings of the Corporation) or rights or warrants
to subscribe for or purchase any of its securities (excluding those
referred to in Section 6(d)(1) above) (any of the foregoing being
referred to herein as "Securities"), then in each such case, unless
the Corporation elects to reserve shares or other units of such
Securities for distribution to the holders of shares of Series A
Preferred Stock upon conversion thereof so that, in addition to the
shares of Common Stock issuable upon conversion thereof, such holders
will receive upon such conversion the amount and kind of such
Securities that such holders would have received if the holders had,
immediately prior to the record date for the distribution of the
Securities, converted the Series A Preferred Stock, then the number of
shares of Common Stock issuable upon conversion shall be increased so
that the holders thereafter shall be entitled to receive the number of
shares of Common Stock determined by multiplying the number of shares
of Common Stock such holders would have been entitled to receive
immediately before such record date, had the holders converted the
Series A Preferred Stock immediately prior thereto, by a fraction, the
numerator of which shall be the Fair Market Value per share of the
Common Stock on such record date, and the denominator of which shall
be such Fair Market Value per share of Common Stock minus the then
fair market value (as reasonably determined in good faith by an
independent appraiser) of the portion of the Securities so distributed
applicable to one share of Common Stock.
(e) Above Fair Market Value Repurchases of Common Stock. If,
at any time or from time to time after the Issuance Date, the
Corporation or any Subsidiary thereof shall repurchase, by self-tender
offer or otherwise, any shares of Common Stock of the Corporation (or
any Convertible Security) at a weighted average purchase price in
excess of the Fair Market Value thereof, on the Business Day (as
defined below) immediately prior to the earliest of (i) the date of
such repurchase, (ii) the commencement of an offer to repurchase or
(iii) the public announcement of either (such date being referred to
as the
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"Determination Date"), the number of shares of Common Stock issuable
upon conversion of the Series A Preferred Stock shall be increased so
that the holders of shares of Series A Preferred Stock thereafter will
be entitled to receive the number of shares of Common Stock determined
by multiplying the number of shares of Common Stock such holders would
have been entitled to receive before the Determination Date, had the
holders converted their shares of Series A Preferred Stock immediately
prior thereto, by a fraction, the numerator of which shall be the
product of (1) the number of shares of Common Stock outstanding
immediately prior to such Determination Date minus the number of
shares of Common Stock (or shares of Common Stock into which the
Convertible Securities are convertible or exchangeable or exercisable,
as the case may be) represented by the securities repurchased or to be
purchased by the Corporation or any Subsidiary thereof in such
repurchase and (2) the Fair Market Value of a share of Common Stock
immediately prior to such Determination Date, and the denominator of
which shall be (x) the product of (A) the number of shares of Common
Stock outstanding immediately prior to the Determination Date and (B)
the Fair Market Value of a share of Common Stock immediately prior to
such Determination Date minus (y) the sum of (1) the aggregate
consideration paid by the Corporation in connection with such
repurchase and (2) in the case of Convertible Securities, the
additional consideration required to be received by the Corporation
upon the conversion, exchange or exercise of such securities.
(f) If, at any time after the Issuance Date and for so long
as shares of Series A Preferred Stock shall continue to be
outstanding, the Corporation shall issue shares of Common Stock or
Convertible Securities to holders of Disputed Claims (as defined in
the Third Amended Plan of Reorganization, dated March 11, 1997) in
settlement of such Claims, in the aggregate, in excess of the amounts
set forth in Section 4.3(a)(i)(x) and Section 4.3(a)(vi) of the Stock
Purchase Agreement, then on the date of any such issuance, the number
of shares of Common Stock issuable upon conversion of the shares of
Series A Preferred Stock shall be increased so that the number of
shares of Common Stock issuable to the holder(s) of Series A Preferred
Stock on the date of any such issuance (after giving effect to any
such issuance) and the number of shares of such holder(s) as of the
Closing Date shall equal the same percentage of the total number of
shares of Common Stock outstanding, on a fully diluted basis (without
giving effect to the exercise of any options granted pursuant to the
Stock Incentive Plan). However, if the Corporation shall, in the
resolution of such Disputed Claim, issue less than all of the shares
set forth in Section 4.3(a)(i)(x) and Section 4.3(a)(vi) of the Stock
Purchase Agreement, the remaining shares may be distributed to the
holders of Common Stock without adjustment of the shares of Common
Stock issuable upon conversion of the shares of Series A Preferred
Stock pursuant to this Section 6.
(g) Carryover. Notwithstanding any other provision of this
Section 6, no adjustment shall be made to the number of shares of
Common Stock to be delivered to the holders of shares of Series A
Preferred Stock if such adjustment represents less than 1% of the
number of shares to be so delivered, but any lesser adjustment shall
be carried
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forward and shall be made at the time and together with the earlier to
occur of (i) the conversion of all or any portion of such holder's
shares of Series A Preferred Stock and (ii) the next subsequent
adjustment that, together with any adjustments so carried forward,
shall amount to 1% or more of the number of shares to be so delivered.
(h) No Adjustments for Certain Incentive Compensation or
Issuance of Series A Preferred Stock Shares. Notwithstanding any other
provision hereof, it is expressly understood that the Series A
Preferred Stock shall not be adjusted with respect to (a) Common Stock
or Convertible Securities, in any case, that may be issued to any of
the Corporation's officers or employees pursuant to any employee
benefit plan, stock incentive plan, bonus plan or employment
arrangement (including the Stock Incentive Plan) (each, a "Plan"), to
the extent that (A) such Common Stock, rights, options or warrants,
together with all such other Common Stock, rights, options or warrants
previously issued to any officers or employees of the Corporation
pursuant to any such Plan, represent 10% or less of the outstanding
Common Stock on a fully diluted basis (including the shares of Series
A Preferred Stock issued to WAF-6 on the Issuance Date), calculated as
of the Issuance Date and (B) the purchase, conversion, exchange or
exercise price per share of Common Stock, as the case may be, of each
such share of Common Stock, right, option, or warrant is not less than
the book value per share of Common Stock as of the Issuance Date,
without giving effect to the issuance and sale of the Warrants (as
defined in the Stock Purchase Agreement), or (b) the issuance of any
shares of Common Stock upon conversion thereof.
(i) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale
of securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good
faith assist in the carrying out of all the provisions of this Section
6 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders
of shares of Series A Preferred Stock against impairment. Without
limiting the generality of the foregoing, the Corporation will not
increase the par value of any shares of Common Stock receivable on the
conversion of the Series A Preferred Stock above the amount payable
therefor on such conversion.
(j) The Corporation, in its sole discretion, shall have the
right at any time, or from time to time, to increase the number of
shares of Common Stock issuable upon the conversion of the Series A
Preferred Stock, including as it considers to be advisable in order
that any event treated for federal income tax purposes as a dividend
of stock or stock rights shall not be taxable to recipients.
(k) Other Adjustments. If any event occurs as to which the
foregoing provisions of this Section 6 are not strictly applicable or,
if strictly applicable, would not,
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in the good faith judgment of the Board, fairly protect the conversion
rights of the holder of shares of Series A Preferred Stock in
accordance with the essential intent and principles of this Section 6,
then the Board shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles,
as shall be reasonably necessary, in the good faith opinion of the
Board, to protect such purchase rights as aforesaid, but in no event
shall any such adjustment have the effect of adversely affecting the
holders of shares of Series A Preferred Stock.
7. OPTIONAL REDEMPTION.
(a) From and after the earliest to occur of (i) the sale,
assignment, transfer, lease, conveyance or other disposition of all or
substantially all of the assets of the Corporation to any Person, in a single
transaction or series of related transactions; (ii) the consolidation or merger,
in a single transaction or series of related transactions, of the Corporation
with or into another Person pursuant to which the Corporation is not the
surviving entity; (iii) the consolidation or merger, in a single transaction or
series of related transactions, of the Corporation with or into another Person
pursuant to which the Corporation is the surviving entity (a "Forward Merger")
and (w) the shareholders of the Corporation immediately preceding such Forward
Merger will not continue to own at least a majority of the outstanding shares of
capital stock of the Corporation on a fully diluted basis following the
consummation of such Forward Merger, (x) as a direct or indirect result of such
Forward Merger, a Change of Control (as defined in the Indenture) shall have
occurred, (y) the net worth of the Corporation immediately following the
consummation of such Forward Merger shall not at least equal the net worth of
the Corporation immediately preceding such Forward Merger or (z) immediately
following the consummation of such Forward Merger, the Corporation would not be
permitted to incur any additional Indebtedness pursuant to Section 4.12 of the
Indenture; and (iv) the expiration of the sixty-second month following the date
of closing of the Offering (as defined in the Stock Purchase Agreement), the
holders of the Series A Preferred Stock may elect to cause the Corporation, upon
written notice given to the Corporation by the holders (the "Redemption
Notice"), to redeem all of the shares of the Series A Preferred Stock (to the
extent that such redemption shall not violate any applicable provisions of the
laws of the State of Delaware) at a price per share (subject to adjustment in
the event of any stock dividend, stock split, stock distribution or combination
with respect to such shares), plus an amount equal to any dividends declared but
unpaid thereon, equal to the greater of (x) $15,000 and (y) if the Common Stock
shall not at such time be listed on a national securities exchange or quoted on
Nasdaq, the value of the number of shares of Common Stock into which each share
of Series A Preferred Stock is then convertible based on the appraised value of
the Corporation as determined by a qualified Independent Appraiser reasonably
acceptable to the holders of the Series A Preferred Stock as of the 90th day
following the date of the Redemption Notice, which appraised value shall be
determined as though the Corporation had consummated an initial public offering
of Common Stock (in which WAF-6 had participated) on the date of such Redemption
Notice (such amount is hereinafter referred to as the "Redemption Price"). If
the Corporation is unable at any Redemption Date (as defined below) to redeem
any shares of Series A Preferred Stock then to be redeemed because
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such redemption would violate the applicable laws of the State of Delaware, then
the Corporation shall redeem such shares as soon thereafter as redemption would
not violate such laws. Notwithstanding the foregoing, the provisions of this
Section 7 shall not apply in the event of an internal reorganization of the
Corporation involving only the Corporation and its wholly owned Subsidiaries
pursuant to which the Corporation is the surviving entity.
(b) The date fixed for any such redemption (the "Redemption
Date") shall be the first business day which is at least 180 days after the date
of delivery of the Redemption Notice. On or prior to each Redemption Date, the
holders of the Series A Preferred Stock shall surrender their certificate(s)
representing such shares to the Corporation, in the manner and at the place
designated in the Redemption Notice, and thereupon the Redemption Price of such
shares shall be payable to the holders of the Series A Preferred Stock and each
surrendered certificate shall be canceled. From and after the Redemption Date,
unless there shall have been a default in payment of the Redemption Price, all
rights of the holders of the Series A Preferred Stock designated for redemption
in the Redemption Notice as holders of Series A Preferred Stock (except the
right to receive the Redemption Price without interest upon surrender of their
certificate(s)) shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.
(c) Except as provided in paragraph (a) above, the
Corporation shall have no right to redeem the shares of Series A Preferred
Stock. Shares of Series A Preferred Stock so redeemed shall be permanently
retired, shall no longer be deemed outstanding and shall not under any
circumstances be reissued, and the Corporation may from time to time take such
appropriate corporate action as may be necessary to reduce the authorized Series
A Preferred Stock accordingly. Nothing herein contained shall prevent or
restrict the purchase by the Corporation, from time to time either at public or
private sale, of the whole or any part of the Series A Preferred Stock at such
price or prices as the Corporation may determine, subject to the provisions of
applicable law.
8. SUBSCRIPTION RIGHT.
(a) If at any time after the date hereof the Corporation
proposes to issue, other than in an underwritten offering, equity securities of
any kind (the term "equity securities" shall include for these purposes any
warrants, options or other rights to acquire equity securities and debt
securities convertible into equity securities of the Corporation (except for any
issuances under any stock incentive or other similar plan of the Corporation
hereafter created and approved by the Board)), then the Corporation shall:
(i) give at least five business days' advance written notice
to the holders of the Series A Preferred Stock setting forth in
reasonable detail: (1) the designation and all of the terms and
provisions of the securities proposed to be issued (the "Proposed
Securities"), including, where applicable, the voting powers,
preferences and relative
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participating, optional or other special rights, and the
qualification, limitations or restrictions thereof and interest rate
and maturity; (2) the price and other terms of the proposed sale of
such securities; (3) the amount of such securities proposed to be
issued; and (4) such other information as may be reasonably required
in order to evaluate the proposed issuance; and
(ii) offer to sell to the holders of the Series A Preferred
Stock a portion of the Proposed Securities equal to a percentage
determined by dividing (x) the number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock then held by
all holders of the Series A Preferred Stock, by (y) the total number
of Common Shares then outstanding on a fully diluted basis (without
giving effect to the exercise of any options granted under the Stock
Incentive Plan).
(b) The holders of the Series A Preferred Stock shall have
the option to accept such offer as to any or all of the shares so offered within
10 days after receipt of such notice from the Corporation. To the extent that
the Corporation offers two or more Proposed Securities in units, the holders of
the Series A Preferred Stock must purchase such units as a whole and will not be
given the opportunity to purchase only one of the Proposed Securities
constituting such unit.
(c) Upon the expiration of the offering period described
above, the Corporation shall be free to sell such Proposed Securities that the
holders of the Series A Preferred Stock have not elected to purchase during the
90 days following such expiration on terms and conditions no more favorable to
the purchasers thereof than those offered to the holders of the Series A
Preferred Stock. Any Proposed Securities offered or sold by the Corporation
after such 90-day period must be reoffered to the holders of the Series A
Preferred Stock pursuant to this Section 8. The election by the holders of the
Series A Preferred Stock not to exercise their subscription rights under this
Section 8 in any one instance shall not affect their right (other than in
respect of a reduction in its percentage of holdings of capital stock of the
Corporation) as to any subsequent issuance of Proposed Securities by the
Corporation. Any sale of Proposed Securities by the Corporation without first
giving the holders of the Series A Preferred Stock the rights described in this
Section 8 shall be void and of no force and effect.
(d) The rights and obligations of this Section 8 shall
terminate on the date the Common Stock is quoted on Nasdaq or listed on any
national securities exchange.
9. REPURCHASE RIGHT.
(a) If (A) the Corporation, in a single transaction or series
of related transactions, (i) sells, assigns, transfers, leases, conveys or
otherwise disposes of all or substantially all of the assets of the Corporation
to any Person; (ii) consolidates or merges with or into another Person and the
Corporation is not the surviving entity; or (iii) consummates a Forward Merger
and (w) the shareholders of the Corporation immediately preceding such
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Forward Merger will not continue to own at least a majority of the outstanding
shares of capital stock of the Corporation on a fully diluted basis following
the consummation of such Forward Merger, (x) as a direct or indirect result of
such Forward Merger, a Change of Control (as defined in the Indenture) shall
have occurred, (y) the net worth of the Corporation immediately following the
consummation of such Forward Merger shall not at least equal the net worth of
the Corporation immediately preceding such Forward Merger, or (z) immediately
following the consummation of such Forward Merger, the Corporation would not be
permitted to incur any additional Indebtedness pursuant to Section 4.12 of the
Indenture, and (B) the consideration payable in respect of any event described
in the immediately preceding clause (i), (ii) or (iii) does not consist solely
of cash (a "Repurchase Event"), the Corporation shall offer to repurchase (a
"Repurchase Offer"), in accordance with the procedures set forth in this Section
9, all shares of Series A Preferred Stock or shares of Common Stock issuable
upon conversion thereof at the per share Fair Market Value of the Common Stock
issuable upon conversion thereof (the "Repurchase Price"). The Corporation
shall, subject to the provisions described in this Section 9, be required to
purchase all of the shares of Series A Preferred Stock or Common Stock issuable
upon conversion thereof properly tendered pursuant to a Repurchase Offer and not
withdrawn. Notwithstanding the foregoing, the provisions of this Section 9 shall
not apply in the event of an internal reorganization of the Corporation
involving only the Corporation and its wholly owned Subsidiaries pursuant to
which the Corporation is the surviving entity.
(b) The Repurchase Offer shall remain open for at least 20
Business Days and until the close of business on the fifth Business Day prior to
the Repurchase Date (as hereinafter defined).
(c) Not later than the 30th day following the occurrence of a
Repurchase Event, the Corporation shall mail to each holder of shares of Series
A Preferred Stock or shares of Common Stock issuable upon conversion thereof a
notice (the "Repurchase Notice") stating, among other things:
(1) that a Repurchase Event has occurred and that such holder
has the right to require the Corporation to repurchase such holder's
shares, or portion thereof, at the Repurchase Price;
(2) any information regarding such Repurchase Event required
to be furnished under applicable federal and State securities laws,
rules and regulations;
(3) a purchase date (the "Repurchase Date"), which shall be
on a Business Day and no earlier than 30 days nor later than 60 days
after the occurrence of a Repurchase Event;
(4) that any shares of Series A Common Stock not tendered or
accepted for payment shall be subject to appropriate adjustment as
required by Section 6 hereof; and
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(5) the instructions a holder must follow in order to have
shares of Series A Preferred Stock or shares of Common Stock issuable
upon conversion thereof repurchased in accordance with this Section 9.
No failure of the Corporation to give the foregoing notice
shall limit any right of any holder right to exercise a repurchase right
hereunder.
(d) To exercise the repurchase right, the holder must
deliver, on or before the fifth calendar day prior to the Repurchase Date
(provided that the Repurchase Notice shall have been delivered to each holder at
least ten calendar days prior to the Repurchase Date), written notice of the
Corporation (or an agent designated by the Corporation for such purpose) of the
exercise of such repurchase right, together with the holders certificates with
respect to which the right is being exercised, duly endorsed for transfer.
(e) On the Repurchase Date, the Corporation shall (i) accept
for payment shares of Series A Preferred Stock or shares of Common Stock
issuable upon conversion thereof tendered pursuant to the Repurchase Notice,
(ii) appoint a depository or paying agent, deposit with such depository or
paying agent money sufficient to pay the Repurchase Price of all shares of
Series A Preferred Stock or shares of Common Stock issuable upon conversion
thereof so tendered and (iii) deliver to the holders of shares of Series A
Preferred Stock or shares of Common Stock issuable upon conversion thereof so
accepted together with an Officers' Certificate stating the shares tendered to
the Corporation. The depository, the Corporation or the paying agent, as the
case may be, shall promptly mail to the holders whose shares are so accepted
payment in an amount equal to the Repurchase Price, and the Corporation shall
promptly issue and mail to holders new Series A Preferred Stock or Common Stock
certificates, as the case may be, representing the tendered but unpurchased
number of shares of Series A Preferred Stock or Common Stock, as applicable. The
Corporation will publicly announce the results of the Repurchase Offer on or as
soon as practicable after the Repurchase Date.
(f) The Corporation, to the extent applicable and if required
by law, will comply with the Securities Exchange Act of 1934, as amended, and
any other federal and state securities laws, rules and regulations that may then
be applicable to any offer by the Corporation to purchase the shares of Series A
Preferred Stock or shares of Common Stock issuable upon conversion thereof
pursuant to the provisions of this Section 9.
10. DEFINITIONS. As used in this Certificate, the following
terms shall have the following respective meanings:
"Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions
in The City of New York are authorized or obligated by law or
executive order to be closed.
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"Fair Market Value" means, with respect to any share of
Common Stock, as of the date of determination:
(a) If the Common Stock is listed or admitted for
trading on a national securities exchange or stock market
(including, if applicable, the Nasdaq Stock Market), the Fair
Market Value shall be the average of the closing sales prices
for the 30 consecutive trading days ended immediately
preceding the date in question of the Common Stock on the
principal national securities exchange on which the Common
Stock is listed or admitted for trading; or, if not quoted on
any national securities exchange or stock market, the average
of the highest reported bid and lowest reported asked
quotation during the 30 consecutive trading days immediately
preceding the date in question; or
(b) If the Common Stock is not so listed or admitted to
unlisted trading privileges or if such a sale is not made on
at least 25 of such days, the Fair Market Value shall be as
reasonably determined in good faith by the Board (which
determination shall be reasonably described in the written
notice delivered to the holder of shares of Series A
Preferred Stock) or, if an objection is made to such
determination by a Qualifying Holder of shares of Series A
Preferred Stock (as defined below) in accordance with the
following sentence, as determined by a qualified Independent
Appraiser in accordance with the following sentence. In the
event that any Qualifying Holder of shares of Series A
Preferred Stock shall object to the determination of the
Board of the Fair Market Value by delivering written notice
to the Corporation within ten Business Days following the
receipt by such Qualifying Holder of shares of Series A
Preferred Stock of such determination of the Board, the Fair
Market Value shall instead be determined by a qualified
Independent Appraiser reasonably acceptable to the holders of
the Series A Preferred Stock. The term "Qualifying Holder of
shares of Series A Preferred Stock" shall include any holder
of shares of Series A Preferred Stock that, at the time of
any objection to the determination of the Board of the Fair
Market Value, beneficially owns, together with its
Affiliates, at least 10% of the Common Stock on a fully
diluted basis. The determination of the Board of the Fair
Market Value shall be binding and conclusive if no objection
is made to such determination by a Qualifying Holder of
shares of Series A Preferred Stock. The fees and expenses of
any qualified Independent Appraiser determining the Fair
Market Value shall be borne by the Corporation and the
determination by such qualified Independent Appraiser of the
Fair Market Value shall be binding and conclusive.
"Independent Appraiser" means any nationally recognized
investment banking or accounting firm (other than any investment
banking firm or accounting firm having a significant ongoing
relationship in the Corporation or any of its Affiliates at the time
of the appraisal) selected in good faith by the Board.
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"Person" means an individual, corporation, partnership,
association, trust, joint venture, unincorporated organization, other
entity or group (as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended).
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EXHIBIT B
SERIES A SENIOR CUMULATIVE PREFERRED STOCK
1. DESIGNATION AND AMOUNT.
The shares of such senior cumulative preferred stock shall be
designated "14 1/2% Series A Senior Cumulative Preferred Stock" (the "Series A
Senior Preferred Stock"), par value $.01 per share, liquidation preference of
$25.00 per share (the "Liquidation Preference"). The number of shares
constituting such Series A Senior Preferred Stock shall be 80,000.
2. RANKING.
(a) With respect to the payment of dividends, repurchases,
redemptions and rights upon liquidation, dissolution or winding up of the
affairs of the Corporation, the Series A Senior Preferred Stock shall rank:
(i) senior and prior to (A) the Class A Voting Common
Stock, par value $.00017 per share (the "Voting Common
Stock") of the Corporation and the Class B Nonvoting Common
Stock, par value $.00017 per share (the "Nonvoting Common
Stock" and together with the Voting Common Stock, the "Common
Stock") of the Corporation, (B) the 14 1/2% Series B Junior
Redeemable Preferred Stock, par value $.01 per share,
liquidation preference $25.00 per share (the "Series B Junior
Preferred Stock") of the Corporation, (C) the Series A
Convertible Preferred Stock (the "Convertible Preferred
Stock") of the Corporation and (D) any other series or class
of the Corporation's capital stock that (x) expressly ranks
junior to the Series A Senior Preferred Stock with respect to
the payment of dividends, repurchases, redemptions and rights
upon liquidation, dissolution or winding up of the affairs of
the Corporation or (y) does not expressly provide that it
ranks senior to or on a parity with the Series A Senior
Preferred Stock as to the payment of dividends, repurchases,
redemptions and rights upon liquidation, dissolution or
winding up of the affairs of the Corporation (collectively,
the "Junior Preferred Stock"), if any;
(ii) pari passu with any class or series of capital
stock ranking on a parity with the Series A Senior Preferred
Stock with respect to the payment of dividends, repurchases,
redemptions and rights upon liquidation, dissolution or
winding up of the affairs of the Corporation ("Parity
Preferred Stock"), if any; and
(iii) junior to any class or series of capital stock
expressly ranking senior and prior to the Series A Senior
Preferred Stock with respect to the payment of
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dividends, repurchases and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation
("Senior Preferred Stock"); if any.
3. DIVIDENDS.
(a) Holders of the Series A Senior Preferred Stock will be
entitled to receive, when, as and if declared by the Board, out of funds legally
available therefor, dividends on the Series A Senior Preferred Stock at an
annual rate of 14 1/2% of the Accumulated Value (equivalent to a quarterly rate
of 3.625% of the Accumulated Value calculated as of the preceding Dividend
Payment Date) per share of Series A Senior Preferred Stock. Dividends on shares
of Series A Senior Preferred Stock shall be fully cumulative, compounding
quarterly (whether or not declared) and shall accrue and accumulate from the
most recent date to which dividends have been paid in full or, if no dividends
have been paid, from the date of original issuance of the shares of Series A
Senior Preferred Stock, and shall be payable in cash quarterly in arrears, when,
as and if declared by the Board out of funds legally available for the payment
of dividends on February 1, May 1, August 1 and November 1 of each year (each, a
"Dividend Payment Date"), commencing August 1, 1998 except that, if any Dividend
Payment Date is not a Business Day (as defined in Section 13 hereof), then the
Dividend Payment Date shall be on the first succeeding Business Day. Each
dividend shall be paid to the holders of record of shares of Series A Senior
Preferred Stock as they appear on the stock register of the Corporation at the
close of business on such record dates (each, a "Dividend Payment Record Date"),
as shall be fixed by the Board, which date shall be not more than 60 days nor
fewer than 10 days preceding each Dividend Payment Date for which the Board has
declared that dividends will be paid. Dividends payable for any partial dividend
period shall be computed on the basis of a 360-day year of twelve 30-day months.
Dividends on account of arrears for any past dividend periods may be declared
and paid at any time, without reference to any regular Dividend Payment Date, to
holders of record on a date, not exceeding 60 days nor fewer than 10 days
preceding the date on which dividends in arrears will be paid, as may be fixed
by the Board. For purposes of this Certificate of Designations, "Accumulated
Value" means the Liquidation Preference plus any accumulated and unpaid
dividends (whether or not declared) on the shares of Series A Senior Preferred
Stock that are not declared and paid in cash as of the Dividend Payment Date
preceding the date of determination.
(b) If at any time the Corporation issues or has outstanding
any class or series of Senior Preferred Stock, no dividends shall be paid or
declared and set apart for payment on, and no purchase, redemption or other
acquisition shall be made by the Corporation of, any shares of Series A Senior
Preferred Stock or Parity Preferred Stock unless and until all accrued and
unpaid dividends on the shares of any such Senior Preferred Stock have been paid
or declared and set apart for payment.
(c) No dividends shall be paid or declared and set apart for
payment on any shares of Common Stock, Series B Junior Preferred Stock,
Convertible Preferred Stock or Junior Preferred Stock unless and until all
accrued and unpaid dividends on the shares of Series A Senior Preferred Stock
shall have been paid in full. No shares of Common Stock, Series B Junior
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Preferred Stock, Convertible Preferred Stock or any Junior Preferred Stock shall
be repurchased, redeemed (whether by way of mandatory or optional redemption) or
otherwise acquired by the Corporation until all shares of Series A Senior
Preferred Stock have been repurchased or redeemed by the Corporation and all
accrued and unpaid dividends thereon have been paid in full.
(d) Unless and until all accrued but unpaid dividends in
respect of prior dividend payment periods on the shares of Series A Senior
Preferred Stock and any Parity Preferred Stock at such time outstanding have
been paid in full or a sum sufficient for such payment is declared and set
apart, all accrued dividends upon the shares of the Series A Senior Preferred
Stock or Parity Preferred Stock shall be declared pro rata with respect to all
the shares of Series A Senior Preferred Stock and Parity Preferred Stock then
outstanding, so that the amounts of dividends, if any, declared on the shares of
Series A Senior Preferred Stock and Parity Preferred Stock shall in all cases
bear to each other the same proportion that, at the time of such declaration,
all accrued but unpaid dividends in respect of prior dividend payment periods on
the shares of Series A Senior Preferred Stock and the shares of Parity Preferred
Stock, respectively, bear to each other. In addition, no shares of Parity
Preferred Stock shall be repurchased, redeemed (whether by way of mandatory or
optional redemption) or otherwise acquired unless the shares of Series A Senior
Preferred Stock are concurrently repurchased or redeemed on a pro rata basis.
4. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) The liquidation value of the shares of Series A Senior
Preferred Stock, in case of the voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, shall be the
Liquidation Preference of $25.00 per share, plus an amount equal to the accrued
and unpaid dividends thereon, whether or not declared, to the payment date (the
"Liquidation Value").
(b) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the holders of shares of Series A
Senior Preferred Stock (i) shall not be entitled to receive the Liquidation
Value of the shares held by them until payment in full or provision has first
been made for the payment of all claims of creditors (unless expressly
subordinated to the Series A Senior Preferred Stock) of the Corporation and the
liquidation preference, and any accrued and unpaid dividends thereof, on any
shares of Senior Preferred Stock shall have been paid in full and (ii) shall be
entitled to receive the Liquidation Value of such shares held by them (x) in
preference to and in priority over any distributions in respect of the shares of
Common Stock, the Series B Junior Preferred Stock, the Convertible Preferred
Stock and any Junior Preferred Stock and (y) ratably and on a pari passu basis
with any shares of Parity Preferred Stock. Upon payment in full of the
Liquidation Value, the holders of shares of Series A Senior Preferred Stock
shall not be entitled to any further participation in any distribution of assets
by the Corporation. Subject to clause (i) above, if the assets of the
Corporation are not sufficient to pay in full the Liquidation Value payable to
the holders of shares of Series A Senior Preferred Stock and the liquidation
preference, and any accrued and unpaid dividends in respect
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thereof payable to the holders of shares of any Parity Preferred Stock, the
holders of all such shares shall share ratably in accordance with the respective
preferential amounts payable on such shares in any distribution.
(c) Neither a consolidation or merger of the Corporation with
or into any other entity, nor a merger of any other entity with or into the
Corporation, nor a sale or transfer of all or any part of the Corporation's
assets or cash, securities or other property shall be considered a liquidation,
dissolution or winding up of the affairs of the Corporation within the meaning
of this Section 4.
5. VOTING. The holders of shares of Series A Senior Preferred
Stock shall have no voting rights whatsoever, except for any voting rights to
which they may be entitled under the laws of the State of Delaware, and except
as follows:
(a) Without first obtaining the prior affirmative vote or
written consent of the holders of a majority of the shares of Series A Senior
Preferred Stock, the Corporation shall not:
(i) alter any provision of the Series A Senior Preferred
Stock or this Certificate of Designations;
(ii) amend or repeal any provision of the Certificate of
Incorporation or the Corporation's By-Laws, if such action would alter
or adversely change the preferences, rights, privileges or powers of,
or the restrictions provided for the benefit of, the holders of Series
A Senior Preferred Stock or increase the number of shares of Series A
Senior Preferred Stock authorized thereby or authorize any class or
series of Senior Preferred Stock; or
(iii) enter into any transaction with Birch (defined
below), except for transactions with Birch that are expressly
contemplated in agreements (other than where such agreements expressly
require such consent) between the Corporation and Birch in effect on
or prior to the date of issuance of the Series A Senior Preferred
Stock (the "Issue Date").
(b) The Corporation will not, and will not permit any of its
Subsidiaries (as defined in the Series A Preferred Unit Purchase Agreement,
dated as of July 13, 1998 (the "Series A Preferred Unit Purchase Agreement") by
and among the Corporation, Birch Holdings L.L.C. (together with Birch
Acquisition L.L.C. and each of their respective Related Parties, as such term is
defined in the Series A Preferred Unit Purchase Agreement, being collectively
referred to herein as "Birch"), Wafra Acquisition Fund 6, L.P. ("WAF-6") and
Wafra Fund Management Ltd. ("WFML")) to, directly or indirectly, enter into or
permit to exist any transaction or series of related transactions (including,
without limitation, the purchase, sale, lease or exchange of any property or the
rendering of any services) with, or for the benefit of, any of its officers,
directors or beneficial owners of more than 10% of the Common Stock then
outstanding (each such
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Person, an "Affiliate," and each such transaction, an "Affiliate Transaction"),
other than (x) Affiliate Transactions permitted pursuant to this paragraph and
(y) Affiliate Transactions on terms that are no less favorable than those that
might reasonably have been obtained in a comparable transaction at such time on
an arm's length basis from a Person that is not an Affiliate of the Corporation
or such Subsidiary. Other than all transactions between the Corporation and
Birch which shall be subject to the provisions of Section 5(b)(iii) above, all
Affiliate Transactions and each series of related Affiliate Transactions which
are similar or part of a common plan, involving aggregate payments or other
property with a fair market value in excess of $2,000,000 shall be approved by a
majority of the disinterested members of the Board or the board of directors of
such Subsidiary, as the case may be; such approval to be evidenced by a
resolution stating that such board of directors has determined that such
transaction complies with the foregoing provisions which shall be delivered to
WAF-6 and WFML, for so long as WAF-6 or WFML shall hold any shares of Series A
Senior Preferred Stock, and to permitted transferees, successors and assigns of
WAF-6 or WFML for so long as such parties are the holders of at least 25% of the
outstanding shares of Series A Senior Preferred Stock. If the Corporation or any
Subsidiary shall enter into an Affiliate Transaction (or a series of related
Affiliate Transactions which are similar or part of a common plan) that involves
an aggregate fair market value of more than $5,000,000, the Corporation or such
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to the Corporation from a financial point of view from an
Independent Financial Advisor (as defined in the Indenture, dated as of July 16,
1998 (the "Indenture"), by and among the Corporation, the Subsidiary Guarantors
named therein and Firststar Bank of Minnesota, as Trustee, (as used in this
Certificate, all references to the Indenture refer to the Indenture as in effect
on the Issue Date and are without regard to any subsequent amendment(s) thereto)
and deliver such opinion to WAF-6 and WFML, for so long as WAF-6 or WFML shall
hold any shares of Series A Senior Preferred Stock. Notwithstanding the
foregoing, the restrictions set forth in this Section 5(b) shall not apply to
(i) reasonable fees and expenses and compensation paid to, and any indemnity
provided on behalf of, officers, directors, employees or consultants of the
Corporation or any Subsidiary, as determined in good faith by the Board or
senior management of the Corporation, and (ii) transactions exclusively between
the Corporation and any wholly owned Subsidiary or exclusively between or among
any wholly owned Subsidiaries.
6. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) The Corporation, at the option of the Board, may, subject
to the provisions of Section 6(f) hereof, redeem at any time or from time to
time, all or any part of the outstanding shares of Series A Senior Preferred
Stock at a redemption price equal to 100% of the Liquidation Preference,
together with accrued and unpaid dividends (whether or not declared) to the date
of redemption.
(b) In the event that fewer than all the outstanding shares
of Series A Senior Preferred Stock are to be redeemed, the shares to be redeemed
shall be selected pro rata or by lot
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or by any other method as may be determined by the Board in its sole discretion
to be equitable, provided that only whole shares shall be selected for
redemption.
(c) In the event the Corporation shall redeem shares of
Series A Senior Preferred Stock, notice of such redemption shall be given by
first class mail, postage prepaid, mailed not less than thirty (30) nor more
than sixty (60) days prior to the redemption date, to each record holder of the
shares to be redeemed, at such holder's address as the same appears on the books
of the Corporation. Each such notice shall state: (i) the redemption date; (ii)
the total number of shares of Series A Senior 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 and (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date.
(d) If notice shall have been given as provided in Section
6(c) and the Corporation shall have provided moneys at the time and place
specified for the payment of the redemption price pursuant to such notice, then
from and after the redemption date, dividends on the shares of Series A Senior
Preferred Stock so called for redemption shall cease to accrue, such shares
shall no longer be deemed to be outstanding, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from the
Corporation the redemption price without interest) shall cease. Upon surrender
(in accordance with the notice) of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board shall so require and
the notice shall so state), such shares shall be redeemed by the Corporation at
the redemption price set forth in Section 6(a). In case fewer than all of the
shares represented by any such certificate are to be redeemed, a new certificate
shall be issued representing the unredeemed shares, without cost to the holder
thereof.
(e) Shares of Series A Senior Preferred Stock redeemed
pursuant to Sections 6, 7 or 8 hereof shall be permanently retired, shall no
longer be deemed outstanding and shall not under any circumstances be reissued,
and the Corporation may from time to time take such appropriate corporate action
as may be necessary to reduce the authorized Series A Senior Preferred Stock
accordingly.
(f) Notwithstanding the provisions of Sections 6, 7 or 8,
unless the full cumulative dividends on all outstanding shares of Senior
Preferred Stock or Parity Preferred Stock shall have been paid or
contemporaneously are declared and paid through the last Dividend Payment Date
no shares of Series A Senior Preferred Stock may be redeemed pursuant to
Sections 6, 7 or 8 hereof, and the Corporation shall not purchase or otherwise
acquire any shares of Series A Senior Preferred Stock.
7. REDEMPTION AT THE OPTION OF THE HOLDERS.
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(a) Subject to the provisions of Section 6(f) hereof, from
and after the earliest to occur of (i) the sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Corporation to any Person, in a single transaction or series of related
transactions; (ii) the consolidation or merger, in a single transaction or
series of related transactions, of the Corporation with or into another Person
pursuant to which the Corporation is not the surviving entity or (iii) the
consolidation or merger, in a single transaction or series of related
transactions, of the Corporation with or into another Person pursuant to which
the Corporation is the surviving entity (a "Forward Merger") and (w) the
shareholders of the Corporation immediately preceding such Forward Merger will
not continue to own at least a majority of the outstanding shares of capital
stock of the Corporation on a fully diluted basis following the consummation of
such Forward Merger, (x) as a direct or indirect result of such Forward Merger,
a Change of Control (as defined in the Indenture) shall have occurred, (y) the
net worth of the Corporation immediately following the consummation of such
Forward Merger shall not at least equal the net worth of the Corporation
immediately preceding such Forward Merger or (z) immediately following the
consummation of such Forward Merger, the Corporation would not be permitted to
incur any additional Indebtedness pursuant to Section 4.12 of the Indenture, the
holders of the Series A Senior Preferred Stock may elect to cause the
Corporation, upon written notice given to the Corporation by the holders (a
"Redemption Notice"), to redeem all or a portion of the shares of Series A
Senior Preferred Stock held by such holders (to the extent that such redemption
shall not violate any applicable provisions of the laws of the State of
Delaware) at a redemption price equal to 100% of the Liquidation Preference,
together with accrued and unpaid dividends (whether or not declared) to the
Holder Redemption Date (as defined below). If the Corporation is unable at any
Holder Redemption Date to redeem any shares of Series A Senior Preferred Stock
then to be redeemed because such redemption would violate the applicable
provisions of the laws of the State of Delaware or any rights of any Senior
Preferred Stock or any covenants or other obligations of the Corporation under
the Indenture or the indenture dated as of July 22, 1997 (the "Existing
Indenture") among the Corporation, the Subsidiary Guarantors named therein and
State Street Bank and Trust Company, then the Corporation shall redeem such
shares as soon thereafter as redemption would not violate such laws, rights or
covenants. Notwithstanding the foregoing, the provisions of this Section 7 shall
not apply in the event of an internal reorganization of the Corporation
involving only the Corporation and its wholly owned Subsidiaries pursuant to
which the Corporation is the surviving entity.
(b) The date fixed for any such redemption pursuant to
Section 7(a) (the "Holder Redemption Date") shall be the first Business Day
which is at least 30 days after the date of delivery of the redemption notice to
the Corporation. On or prior to each Holder Redemption Date, the holders of
Series A Senior Preferred Stock which have given the Corporation a Redemption
Notice shall surrender their certificate(s) representing such shares to the
Corporation, in the manner and at the place to be designated by the Corporation,
and thereupon the redemption price of such shares shall be payable to such
holders of Series A Senior Preferred Stock and each surrendered certificate
shall be canceled. From and after the Holder Redemption Date, unless there shall
have been a default in payment of the redemption price, all rights of the
holders of
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Series A Senior Preferred Stock designated for redemption in the Redemption
Notice as holders of Series A Senior Preferred Stock (except the right to
receive the redemption price without interest upon surrender of their
certificate(s)) shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.
8. MANDATORY REDEMPTION. (a) Subject to the provisions of
Section 6(f) hereof, all shares of Series A Senior Preferred Stock shall be
redeemed on November 1, 2002 (the "Mandatory Redemption Date") at a redemption
price equal to 100% of the Liquidation Preference, together with accrued and
unpaid dividends (whether or not declared) to the Mandatory Redemption Date.
(b) Written notice of such redemption shall be given by first
class mail, postage prepaid, mailed not less than thirty (30) nor more than
sixty (60) days prior to the Mandatory Redemption Date, to each record holder of
the shares of Series A Senior Preferred Stock, at such holder's address as the
same appears on the books of the Corporation. Such notice shall state: (i) the
redemption date; (ii) that all outstanding shares of Series A Senior Preferred
Stock are to be redeemed; (iii) the redemption price; (iv) the place or places
where certificates for such shares are to be surrendered for payment of the
redemption price and (v) that dividends on the shares to be redeemed will cease
to accrue on such Mandatory Redemption Date. On or prior to each Mandatory
Redemption Date, the holders of the Series A Senior Preferred Stock shall
surrender their certificate(s) representing such shares to the Corporation, in
the manner and at the place to be designated by the Corporation, and thereupon
the redemption price of such shares shall be payable to the holders of the
Series A Senior Preferred Stock and each surrendered certificate shall be
canceled. From and after the Mandatory Redemption Date, unless there shall have
been a default in payment of the redemption price, all rights of the holders of
the Series A Senior Preferred Stock (except the right to receive the redemption
price without interest upon surrender of their certificate(s)) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever.
(c) If the Corporation is unable at the Mandatory Redemption
Date to redeem any shares of Series A Senior Preferred Stock then to be redeemed
because such redemption would violate the applicable provisions of the laws of
the State of Delaware or any rights of any Senior Preferred Stock or any
covenants or other obligations of the Corporation under the Indenture or the
Existing Indenture, then (i) the Corporation shall redeem such shares of Series
A Senior Preferred Stock as soon thereafter as redemption would not violate such
laws, rights or covenants and (ii) until all of the shares of Series A Senior
Preferred Stock shall have been redeemed in full and all accrued and unpaid
dividends thereon (whether or not declared) have been paid in full, the holders
of the Series A Senior Preferred Stock, shall have the option (in their sole
discretion), in addition to any other rights such holders may have, voting
separately as a class, to appoint up to two (2) directors (inclusive of any
directors which the holders of the shares
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of Series A Senior Preferred Stock shall have the right to appoint under the
Series A Senior Preferred Unit Purchase Agreement ) to the Corporation's Board
of Directors.
9. CONVERSION AT THE OPTION OF THE CORPORATION.
(a) If the Corporation completes a Qualified Initial Public
Offering (as defined in the Series A Senior Preferred Unit Purchase Agreement)
that results in the Corporation receiving net proceeds (gross proceeds of the
offering less underwriters' discounts and commissions) of not less than $20.0
million then, simultaneously with the closing of the Qualified Initial Public
Offering, the Corporation may, at its option, convert all or any portion of the
outstanding shares of Series A Senior Preferred Stock into an amount of
fully-paid nonassessable shares of Common Stock, the value of which shall be
equal to the aggregate Liquidation Preference of the shares of Series A Senior
Preferred Stock to be converted. For the purposes of such conversion, the value
of the shares of Common Stock shall be equal to the price per share of Common
Stock paid by the public in the Qualified Initial Public Offering.
Notwithstanding the foregoing, no shares of Series A Senior Preferred Stock
shall be converted pursuant to this Section 9(a) unless (x) the Corporation
shall have paid to each holder of Series A Senior Preferred Stock in full, in
cash all accrued and unpaid dividends (whether or not declared) to the
conversion date on the shares of Series A Senior Preferred Stock to be so
converted, (y) a pro rata amount of shares of Series B Junior Preferred Stock
and any other Junior Preferred Stock shall have been or simultaneously be so
converted and (z) any requirements of the HSR Act (defined below) shall have
been complied with.
(b) The Corporation shall not issue fractions of shares of
Common Stock upon conversion of any shares of Series A Senior Preferred Stock.
If any fraction of a share of Common Stock would be otherwise issuable upon
conversion of shares of Series A Senior Preferred Stock under Section 9(a), the
Corporation shall pay to such holders of Series A Senior Preferred Stock in lieu
thereof an amount in cash equal to the value of such fraction, calculated to the
nearest one-hundredth (1/100) of a share of Common Stock.
(c) In the event that fewer than all the outstanding shares
of Series A Senior Preferred Stock are to be converted, the shares to be so
converted shall be selected pro rata or by lot or by any other method as may be
determined by the Board in its sole discretion to be equitable, provided that
only whole shares shall be selected for conversion.
(d) In the event the Corporation shall elect to convert
shares of the Series A Senior Preferred Stock pursuant to this Section 9, notice
of such conversion shall be given by first class mail, postage prepaid, mailed
not less than thirty (30) days prior to the conversion date, to each record
holder of the shares to be converted, at such holder's address as the same
appears on the books of the Corporation. Each such notice shall state: (i) the
conversion date; (ii) the total number of shares of Series A Senior Preferred
Stock to be converted and, if fewer than all the shares held by such holder are
to be converted, the number of such shares to be converted from such holder;
(iii) the number of shares of Common Stock (or cash in lieu of fractional shares
of
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Common Stock pursuant to paragraph (b) above) into which such holder's shares of
Series A Senior Preferred Stock will be converted or an explanation of the
method by which such number of shares of Common Stock (or cash) will be
determined on the conversion date; (iv) the place or places where certificates
for such shares are to be surrendered in exchange for shares of Common Stock and
(v) that dividends on the shares of Series A Senior Preferred Stock to be
converted will cease to accrue on such conversion date.
(e) The holder of each share of Series A Senior Preferred
Stock called for conversion shall surrender the certificate representing such
share, duly endorsed or assigned to the Corporation, or in blank, at the
principal office of the transfer agent set forth in the notice of conversion (or
if no transfer agent shall be at the time appointed, then to the Corporation at
the place set forth in the notice. Unless the shares of Common Stock issuable on
conversion are to be issued in the same name as the name in which such share of
Series A Senior Preferred Stock is registered, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form satisfactory
to the Corporation, duly executed by the holder or such holder's duly authorized
attorney and an amount sufficient to pay any transfer tax (or evidence
reasonably satisfactory to the Corporation demonstrating that such taxes have
been paid). The Corporation shall pay any issue and other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock upon
conversion of the Series A Senior Preferred Stock; provided, however, that the
Corporation shall not be required to pay any tax or taxes which may be payable
in respect of any transfer involved in the issue and delivery of any shares of
Common Stock issued and delivered upon conversion of the Series A Senior
Preferred Stock to a person(s) with name(s) other than the name(s) in which the
Series A Senior Preferred Stock is registered and the Corporation shall not be
required to issue or deliver such Common Stock unless or until the person(s)
requesting the issuance thereof shall have paid to the Corporation the amount of
such tax or shall have established to the satisfaction of the Corporation that
such tax has been paid. As soon as practicable after the surrender of the
certificate(s) for shares of Series A Senior Preferred Stock as aforesaid, the
Corporation shall cause to be issued and delivered to the holders of the Series
A Senior Preferred Stock, or on its written order, certificate(s) for the number
of full shares of Common Stock issuable on such conversion in accordance with
the provisions hereof and cash as provided in paragraph (b) of this Section 9 in
respect of any fraction of a share of Common Stock otherwise issuable upon such
conversion.
(f) From and after the conversion date, dividends on the
shares of the Series A Senior Preferred Stock so called for conversion shall
cease to accrue, such shares shall no longer be deemed to be outstanding, and
all rights with respect to such shares, including the rights, if any, to receive
notices and to vote, shall forthwith cease and terminate except only the right
of the holder thereof to receive shares of Common Stock in exchange therefor and
payment of any accrued and unpaid dividends thereon to the conversion date. Any
shares of Series A Senior Preferred Stock so converted shall be retired and
canceled and shall not be reissued, and the Corporation may from time to time
take such appropriate action as may be necessary to reduce the then authorized
number of shares of Series A Senior Preferred Stock accordingly.
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(g) The Corporation agrees that, in each case where the
conversion of shares of Series A Senior Preferred Stock into share of Common
Stock pursuant to this section may require the prior compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), from and after the date (the "HSR Date") on which any of WAF-6, WFML, or
any of their respective Affiliates, successors or permitted transferees (any of
such parties, a "HSR Holder") notifies the Corporation that compliance is so
required under the HSR Act prior to such conversion or exercise, as the case may
be, the Corporation and any such HSR Holders shall use their respective best
efforts to cause the termination of all waiting periods under the HSR Act, in
respect of such conversion of Series A Senior Preferred Stock or issuance of
such Common Stock. The Corporation shall pay all fees and expenses of the
Holders incurred in compliance with this Section, including their respective
reasonable legal fees and expenses and all filing fees required by the HSR Act.
The Corporation shall provide each Holder with all such information in respect
of the Corporation as such Holder may request to enable such Holders to
determine whether the conversion of shares of Series A Senior Preferred Stock or
issuance of such Common Stock may require compliance with the HSR Act.
10. SUBSCRIPTION RIGHT.
(a) If at any time after the date hereof, the Corporation
proposes to issue, other than in an underwritten offering, equity securities of
any kind (the term "equity securities" shall include for these purposes any
warrants, options or other rights to acquire equity securities and debt
securities convertible into equity securities of the Corporation (except for any
issuances under any employee stock incentive or other similar plan of the
Corporation hereafter created and approved by the Board)), then the Corporation
shall:
(i) give at least ten Business Days' advance written notice
to the holders of the Series A Senior Preferred Stock setting forth in
reasonable detail: (1) the designation and all of the terms and
provisions of the securities proposed to be issued (the "Proposed
Securities") including, where applicable, the voting powers,
preferences and relative participating, optional or other special
rights, and the qualification, limitations or restrictions thereof and
interest rate and maturity; (2) the price and other terms of the
proposed sale of such securities; (3) the amount of such securities
proposed to be issued; and (4) such other information as may be
reasonably required in order to evaluate the proposed issuance; and
(ii) subject to the rights of the holders of any Senior
Preferred Stock, offer to sell to each holder of shares of Series A
Senior Preferred Stock an amount of Proposed Securities the value of
which (as determined by reference to the price per share in the
proposed offering) shall not be less than the aggregate Liquidation
Preference plus accrued and unpaid dividends thereon (whether or not
declared) of each holders's shares of Series A Senior Preferred Stock;
or in the event that the total purchase price of all the Proposed
Securities is less than the aggregate Liquidation Preference plus
accrued and unpaid dividends thereon (whether or not declared) of all
outstanding shares of Series A
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Senior Preferred Stock, the Corporation shall offer to sell to each
holder a pro rata amount of all the Proposed Securities.
(b) The holders of Series A Senior Preferred Stock shall have
the option to accept such offer as to any or all of the shares so offered within
10 days after receipt of such notice from the Corporation. To the extent that
the Corporation offers two or more Proposed Securities in units, the holders of
Series A Senior Preferred Stock must purchase such units as a whole and shall
not be given the opportunity to purchase only one of the Proposed Securities
constituting such unit.
(c) Upon the expiration of the offering period described in
this Section 10, the Corporation shall be free to sell such Proposed Securities
that the holders of Series A Senior Preferred Stock have not elected to purchase
during the 90 days following such expiration on terms and conditions no more
favorable to the purchasers thereof than those offered to the holders of the
Series A Senior Preferred Stock. Any Proposed Securities offered or sold by the
Corporation after such 90-day period must be reoffered to the holders of the
Series A Senior Preferred Stock pursuant to this Section 10. The election by the
holders of the Series A Senior Preferred Stock not to exercise their
subscription rights under this Section 10 in any one instance shall not affect
their right as to any subsequent issuance of Proposed Securities by the
Corporation. Any sale of Proposed Securities by the Corporation without first
giving the holders of the Series A Senior Preferred Stock the rights described
in this Section 10 shall be void and of no force and effect.
(d) The rights and obligations of this Section 10 shall
terminate on the date that the Common Stock is quoted on the NASDAQ National
Market or listed on any national securities exchange; provided that any rights
substantially similar to those contemplated by this Section 10 as may be granted
to any Parity Preferred Stock or Junior Preferred Stock shall also be
terminated.
11. REMEDIES CUMULATIVE.
No failure or delay on the part of the holders of the Series
A Senior Preferred Stock in the exercise of any power, right or privilege under
this Certificate of Designations shall impair such power, right or privilege or
be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Certificate of Designations are
cumulative to and not exclusive of any rights or remedies otherwise available.
12. APPROVALS.
In the event the holders of Series A Senior Preferred Stock
shall have the right to approve any action, agreement (including, without
limitation, any modification, amendment or
B-12
waiver thereof) or circumstances, such approval shall require the approval of
50% of the shares of Series A Senior Preferred Stock outstanding at such time,
unless otherwise agreed by the holders of such percentage of shares, provided,
however, that any shares of Series A Senior Preferred Stock held by Birch or the
Corporation, or any of their respective Affiliates, shall not be entitled to
vote on any matter otherwise presented to a vote of the holders of shares of
Series A Senior Preferred Stock.
13. DEFINITIONS. As used in this Certificate, the following
terms shall have the following respective meanings:
"Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in The City
of New York are authorized or obligated by law or executive order to be closed.
"Person" means an individual, corporation, limited liability
company, partnership, limited partnership, association, trust, joint venture,
unincorporated organization, other entity or group (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended).
B-13
EXHIBIT C
SERIES B JUNIOR CUMULATIVE PREFERRED STOCK
1. DESIGNATION AND AMOUNT.
The shares of such junior cumulative preferred stock shall be
designated "14 1/2% Series B Junior Cumulative Preferred Stock" (the "Series B
Junior Preferred Stock"), par value $.01 per share, liquidation preference of
$25.00 per share (the "Liquidation Preference"). The number of shares
constituting such Series B Junior Preferred Stock shall be 340,000.
2. RANKING.
(a) With respect to the payment of dividends, repurchases,
redemptions and rights upon liquidation, dissolution or winding up of the
affairs of the Corporation, the Series B Junior Preferred Stock shall rank:
(i) senior and prior to (A) the Class A Voting Common
Stock, par value $.00017 per share (the "Voting Common
Stock") of the Corporation and the Class B Nonvoting Common
Stock, par value $.00017 per share (the "Nonvoting Common
Stock" and together with the Voting Common Stock, the "Common
Stock") of the Corporation and (B) any other series or class
of the Corporation's capital stock that (x) expressly ranks
junior to the Series B Junior Preferred Stock with respect to
the payment of dividends, repurchases, redemptions and rights
upon liquidation, dissolution or winding up of the affairs of
the Corporation or (y) does not expressly provide that it
ranks senior to or on a parity with the Series B Junior
Preferred Stock as to the payment of dividends, repurchases,
redemptions and rights upon liquidation, dissolution or
winding up of the affairs of the Corporation ("Junior
Preferred Stock"), if any;
(ii) pari passu with any class or series of capital stock
ranking on a parity with the Series B Junior Preferred Stock
with respect to the payment of dividends, repurchases,
redemptions and rights upon liquidation, dissolution or
winding up of the affairs of the Corporation ("Parity
Preferred Stock"), if any; and
(iii) junior to (A) the 14 1/2% Series A Senior Preferred
Stock of the Corporation (the "Series A Senior Preferred
Stock"), (B) the Series A Convertible Preferred Stock (the
"Convertible Preferred Stock") of the Corporation and (C) any
class or series of capital stock expressly ranking senior and
prior to the Series B Junior Preferred Stock with respect to
the payment of dividends, repurchases and rights upon
liquidation, dissolution, repurchases, redemptions or winding
up of the affairs of the Corporation ("Senior Preferred
Stock"); if any.
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3. DIVIDENDS.
(a) Holders of the Series B Junior Preferred Stock will be
entitled to receive, when, as and if declared by the Board, out of funds legally
available therefor, dividends on the Series B Junior Preferred Stock at an
annual rate of 14 1/2% of the Accumulated Value (equivalent to a quarterly rate
of 3.625% of the Accumulated Value calculated as of the preceding Dividend
Payment Date) per share of Series B Junior Preferred Stock. Dividends on shares
of Series B Junior Preferred Stock shall be fully cumulative, compounding
quarterly (whether or not declared) and shall accrue and accumulate from the
most recent date to which dividends have been paid in full or, if no dividends
have been paid, from the date of original issuance of the shares of Series B
Junior Preferred Stock, and shall be payable in cash quarterly in arrears, when,
as and if declared by the Board out of funds legally available for the payment
of dividends on February 1, May 1, August 1 and November 1 of each year (each, a
"Dividend Payment Date"), commencing August 1, 1998 except that, if any Dividend
Payment Date is not a Business Day (as defined in Section 13 hereof), then the
Dividend Payment Date shall be on the first succeeding Business Day. Each
dividend shall be paid to the holders of record of shares of Series B Junior
Preferred Stock as they appear on the stock register of the Corporation at the
close of business on such record dates (each, a "Dividend Payment Record Date"),
as shall be fixed by the Board, which date shall be not more than 60 days nor
fewer than 10 days preceding each Dividend Payment Date for which the Board has
declared that dividends will be paid. Dividends payable for any partial dividend
period shall be computed on the basis of a 360-day year of twelve 30-day months.
Dividends on account of arrears for any past dividend periods may be declared
and paid at any time, without reference to any regular Dividend Payment Date, to
holders of record on a date, not exceeding 60 days nor fewer than 10 days
preceding the date on which dividends in arrears will be paid, as may be fixed
by the Board. For purposes of this Certificate of Designations, "Accumulated
Value" means the Liquidation Preference plus any accumulated and unpaid
dividends (whether or not declared) on the shares of Series B Junior Preferred
Stock that are not declared and paid in cash as of the Dividend Payment Date
preceding the date of determination.
(b) No dividends shall be paid or declared and set apart for
payment on, and no purchase, redemption or other acquisition shall be made by
the Corporation of, any shares of Series B Junior Preferred Stock or Parity
Preferred Stock unless and until all accrued and unpaid dividends on the shares
of Series A Senior Preferred Stock, the Convertible Preferred Stock or any such
Senior Preferred Stock have been paid or declared and set apart for payment.
(c) No dividends (other than dividends payable solely in
shares of Common Stock or Junior Preferred Stock) shall be paid or declared and
set apart for payment on any shares of Common Stock or Junior Preferred Stock
unless and until all accrued and unpaid dividends on the shares of Series B
Junior Preferred Stock shall have been paid in full. No shares of Common Stock
or any Junior Preferred Stock shall be repurchased, redeemed (whether by way of
mandatory or optional redemption) or otherwise acquired by the Corporation until
all shares of Series B Junior Preferred Stock have been repurchased or redeemed
and all accrued and unpaid dividends have been paid in full by the Corporation.
C-2
(d) Unless and until all accrued but unpaid dividends in
respect of prior dividend payment periods on the shares of Series B Junior
Preferred Stock and any Parity Preferred Stock at such time outstanding have
been paid in full or a sum sufficient for such payment is declared and set
apart, all accrued dividends upon the shares of the Series B Junior Preferred
Stock or Parity Preferred Stock shall be declared pro rata with respect to all
the shares of Series B Junior Preferred Stock and Parity Preferred Stock then
outstanding, so that the amounts of dividends, if any, declared on the shares of
Series B Junior Preferred Stock and Parity Preferred Stock shall in all cases
bear to each other the same proportion that, at the time of such declaration,
all accrued but unpaid dividends in respect of prior dividend payment periods on
the shares of Series B Junior Preferred Stock and the shares of Parity Preferred
Stock, respectively, bear to each other. In addition, no shares of Parity
Preferred Stock shall be repurchased, redeemed (whether by way of mandatory or
optional redemption) or otherwise acquired unless the shares of Series B Junior
Preferred Stock are currently repurchased or redeemed on a pro rata basis.
4. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) The liquidation value of the shares of Series B Junior
Preferred Stock, in case of the voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, shall be the
Liquidation Preference of $25.00 per share, plus an amount equal to the accrued
and unpaid dividends thereon, whether or not declared, to the payment date (the
"Liquidation Value").
(b) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the holders of shares of Series B
Junior Preferred Stock (i) shall not be entitled to receive the Liquidation
Value of the shares held by them until payment in full or provision has first
been made for the payment of all claims of creditors (unless expressly
subordinated to the Series B Junior Preferred Stock) of the Corporation and the
liquidation preference, and any accrued and unpaid dividends thereof, on any
shares of the Series A Senior Preferred Stock, the Convertible Preferred Stock
or any Senior Preferred Stock shall have been paid in full and (ii) shall be
entitled to receive the Liquidation Value of such shares held by them (x) in
preference to and in priority over any distributions in respect of the shares of
Common Stock and any Junior Preferred Stock and (y) ratably and on a pari passu
basis with any shares of Parity Preferred Stock. Upon payment in full of the
Liquidation Value, the holders of shares of Series B Junior Preferred Stock
shall not be entitled to any further participation in any distribution of assets
by the Corporation. Subject to clause (i) above, if the assets of the
Corporation are not sufficient to pay in full the Liquidation Value payable to
the holders of shares of Series B Junior Preferred Stock and the liquidation
preference, and any accrued and unpaid dividends in respect thereof payable to
the holders of shares of any Parity Preferred Stock, the holders of all such
shares shall share ratably in accordance with the respective preferential
amounts payable on such shares in any distribution.
C-3
(c) Neither a consolidation or merger of the Corporation with
or into any other entity, nor a merger of any other entity with or into the
Corporation, nor a sale or transfer of all or any part of the Corporation's
assets or cash, securities or other property shall be considered a liquidation,
dissolution or winding up of the affairs of the Corporation within the meaning
of this Section 4.
5. VOTING. The holders of shares of Series B Junior Preferred
Stock shall have no voting rights whatsoever, except for any voting rights to
which they may be entitled under the laws of the State of Delaware, and except
as follows:
Without first obtaining the prior affirmative vote or written
consent of the holders of a majority of the shares of Series B Junior Preferred
Stock, the Corporation shall not:
(i) alter any provision of the Series B Junior Preferred
Stock or this Certificate of Designations; or
(ii) amend or repeal any provision of the Certificate of
Incorporation or the Corporation's By-Laws, if such action would alter
or adversely change the preferences, rights, privileges or powers of,
or the restrictions provided for the benefit of, the holders of Series
B Junior Preferred Stock or increase the number of shares of Series B
Junior Preferred Stock, Series A Senior Preferred Stock or Convertible
Preferred Stock authorized thereby or authorize a class or series of
Senior Preferred Stock.
6. REDEMPTION AT THE OPTION OF THE CORPORATION.
(a) The Corporation, at the option of the Board, may, subject
to the provisions of Section 6(f) hereof, redeem at any time or from time to
time, all or any part of the outstanding shares of Series B Junior Preferred
Stock at a redemption price equal to 100% of the Liquidation Preference,
together with accrued and unpaid dividends (whether or not declared) to the date
of redemption.
(b) In the event that fewer than all the outstanding shares
of Series B Junior Preferred Stock are to be redeemed, the shares to be redeemed
shall be selected pro rata or by lot or by any other method as may be determined
by the Board in its sole discretion to be equitable, provided that only whole
shares shall be selected for redemption.
(c) In the event the Corporation shall redeem shares of
Series B Junior Preferred Stock, notice of such redemption shall be given by
first class mail, postage prepaid, mailed not less than thirty (30) nor more
than sixty (60) days prior to the redemption date, to each record holder of the
shares to be redeemed, at such holder's address as the same appears on the books
of the Corporation. Each such notice shall state: (i) the redemption date; (ii)
the total number of shares of Series B Junior 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
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such holder; (iii) the redemption price; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the redemption
price and (v) that dividends on the shares to be redeemed will cease to accrue
on such redemption date.
(d) If notice shall have been given as provided in Section
6(c) and the Corporation shall have provided moneys at the time and place
specified for the payment of the redemption price pursuant to such notice, then
from and after the redemption date, dividends on the shares of Series B Junior
Preferred Stock so called for redemption shall cease to accrue, such shares
shall no longer be deemed to be outstanding, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from the
Corporation the redemption price without interest) shall cease. Upon surrender
(in accordance with the notice) of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board shall so require and
the notice shall so state), such shares shall be redeemed by the Corporation at
the redemption price set forth in Section 6(a). In case fewer than all of the
shares represented by any such certificate are to be redeemed, a new certificate
shall be issued representing the unredeemed shares, without cost to the holder
thereof.
(e) Shares of Series B Junior Preferred Stock redeemed
pursuant to Sections 6, 7 or 8 hereof shall be permanently retired, shall no
longer be deemed outstanding and shall not under any circumstances be reissued,
and the Corporation may from time to time take such appropriate corporate action
as may be necessary to reduce the authorized Series B Junior Preferred Stock
accordingly.
(f) Notwithstanding the foregoing provisions of Sections 6, 7
or 8 hereof, no shares of Series B Junior Preferred Stock shall be repurchased,
redeemed (whether by way of mandatory or optional redemption) or otherwise
acquired by the Corporation until all shares of Series A Senior Preferred Stock
have been repurchased or redeemed and all accrued and unpaid dividends have been
paid in full by the Corporation.
7. REDEMPTION AT THE OPTION OF THE HOLDERS.
(a) Subject to the provisions of Section 6(f) hereof, from
and after the earliest to occur of (i) the sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Corporation to any Person, in a single transaction or series of related
transactions; (ii) the consolidation or merger, in a single transaction or
series of related transactions, of the Corporation with or into another Person
pursuant to which the Corporation is not the surviving entity or (iii) the
consolidation or merger, in a single transaction or series of related
transactions, of the Corporation with or into another Person pursuant to which
the Corporation is the surviving entity (a "Forward Merger") and (w) the
shareholders of the Corporation immediately preceding such Forward Merger will
not continue to own at least a majority of the outstanding shares of capital
stock of the Corporation on a fully diluted basis following the consummation of
such Forward Merger, (x) as a direct or indirect result of such Forward Merger,
a Change of Control (as defined in the Indenture) shall have occurred, (y) the
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net worth of the Corporation immediately following the consummation of such
Forward Merger shall not at least equal the net worth of the Corporation
immediately preceding such Forward Merger or (z) immediately following the
consummation of such Forward Merger, the Corporation would not be permitted to
incur any additional Indebtedness pursuant to Section 4.12 of the Indenture, the
holders of the Series B Junior Preferred Stock may elect to cause the
Corporation, upon written notice given to the Corporation by the holders (a
"Redemption Notice"), to redeem all or a portion of the shares of Series B
Junior Preferred Stock held by such holders (to the extent that such redemption
shall not violate any applicable provisions of the laws of the State of
Delaware) at a redemption price equal to 100% of the Liquidation Preference,
together with accrued and unpaid dividends (whether or not declared) to the
Holder Redemption Date (as defined below). If the Corporation is unable at any
Holder Redemption Date to redeem any shares of Series B Junior Preferred Stock
then to be redeemed because such redemption would violate the applicable
provisions of the laws of the State of Delaware or any rights of any Series A
Senior Preferred Stock or any Senior Preferred Stock or any covenants or other
obligations of the Corporation under the Indenture or the indenture dated as of
July 22, 1997 (the "Existing Indenture") among the Corporation, the Subsidiary
Guarantors named therein and State Street Bank and Trust Company, then the
Corporation shall redeem such shares as soon thereafter as redemption would not
violate such laws, rights or covenants. Notwithstanding the foregoing, the
provisions of this Section 7 shall not apply in the event of an internal
reorganization of the Corporation involving only the Corporation and its wholly
owned Subsidiaries pursuant to which the Corporation is the surviving entity.
(b) The date fixed for any such redemption pursuant to
Section 7(a) (the "Holder Redemption Date") shall be the first Business Day
which is at least 30 days after the date of delivery of the redemption notice to
the Corporation. On or prior to each Holder Redemption Date, the holders of
Series B Junior Preferred Stock which have given the Corporation a Redemption
Notice shall surrender their certificate(s) representing such shares to the
Corporation, in the manner and at the place to be designated by the Corporation,
and thereupon the redemption price of such shares shall be payable to such
holders of Series B Junior Preferred Stock and each surrendered certificate
shall be canceled. From and after the Holder Redemption Date, unless there shall
have been a default in payment of the redemption price, all rights of the
holders of Series B Junior Preferred Stock designated for redemption in the
Redemption Notice as holders of Series B Junior Preferred Stock (except the
right to receive the redemption price without interest upon surrender of their
certificate(s)) shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.
8. MANDATORY REDEMPTION. (a) Subject to the provisions of
Section 6(f) hereof, all shares of Series B Junior Preferred Stock shall be
redeemed on November 1, 2002 (the "Mandatory Redemption Date") at a redemption
price equal to 100% of the Liquidation Preference, together with accrued and
unpaid dividends (whether or not declared) to the Mandatory Redemption Date.
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(b) Written notice of such redemption shall be given by first
class mail, postage prepaid, mailed not less than thirty (30) nor more than
sixty (60) days prior to the Mandatory Redemption Date, to each record holder of
the shares of Series B Junior Preferred Stock, at such holder's address as the
same appears on the books of the Corporation. Such notice shall state: (i) the
redemption date; (ii) that all outstanding shares of Series B Junior Preferred
Stock are to be redeemed; (iii) the redemption price; (iv) the place or places
where certificates for such shares are to be surrendered for payment of the
redemption price and (v) that dividends on the shares to be redeemed will cease
to accrue on such Mandatory Redemption Date. On or prior to each Mandatory
Redemption Date, the holders of the Series B Junior Preferred Stock shall
surrender their certificate(s) representing such shares to the Corporation, in
the manner and at the place to be designated by the Corporation, and thereupon
the redemption price of such shares shall be payable to the holders of the
Series B Junior Preferred Stock and each surrendered certificate shall be
canceled. From and after the Mandatory Redemption Date, unless there shall have
been a default in payment of the redemption price, all rights of the holders of
the Series B Junior Preferred Stock (except the right to receive the redemption
price without interest upon surrender of their certificate(s)) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever.
(c) If the Corporation is unable at the Mandatory Redemption
Date to redeem any shares of Series B Junior Preferred Stock then to be redeemed
because such redemption would violate the applicable provisions of the laws of
the State of Delaware or any rights of any Senior Preferred Stock or any
covenants or other obligations of the Corporation under the Indenture or the
Existing Indenture, then the Corporation shall redeem such shares of Series B
Junior Preferred Stock as soon thereafter as redemption would not violate such
laws, rights or covenants.
9. CONVERSION AT THE OPTION OF THE CORPORATION.
(a) If the Corporation completes a Qualified Initial Public
Offering (as defined in the Series B Preferred Unit Purchase Agreement dated as
of July 13, 1998 between the Corporation and Birch Acquisition L.L.C., DZ
Investors L.L.C. and Jefferies & Company, Inc.) that results in the Corporation
receiving net proceeds (gross proceeds of the offering less underwriters'
discounts and commissions) of not less than $20.0 million then, simultaneously
with the closing date of the Qualified Initial Public Offering, the Corporation
may, at its option, convert all or any portion of the outstanding shares of
Series B Junior Preferred Stock into an amount of fully-paid nonassessable
shares of Common Stock, the value of which shall be equal to the aggregate
Liquidation Preference of the shares of Series B Junior Preferred Stock to be
converted. For the purposes of such conversion, the value of the shares of
Common Stock shall be equal to the price per share of Common Stock paid by the
public in the Qualified Initial Public Offering. Notwithstanding the foregoing,
no shares of Series B Junior Preferred Stock shall be converted pursuant to this
Section 9(a) unless (x) the Corporation shall have paid to each holder of Series
B Junior Preferred Stock in full, in cash all accrued and unpaid dividends
(whether or not declared) to the conversion date on the shares of Series B
Junior Preferred Stock to be so
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converted, (y) a pro rata amount of shares of any Junior Preferred Stock shall
have been or simultaneously be so converted and (z) any requirements of the HSR
Act (defined below) shall have been complied with.
(b) The Corporation shall not issue fractions of shares of
Common Stock upon conversion of any shares of Series B Junior Preferred Stock.
If any fraction of a share of Common Stock would be otherwise issuable upon
conversion of shares of Series B Junior Preferred Stock under Section 9(a), the
Corporation shall pay to such holders of Series B Junior Preferred Stock in lieu
thereof an amount in cash equal to the value of such fraction, calculated to the
nearest one-hundredth (1/100) of a share of Common Stock.
(c) In the event that fewer than all the outstanding shares
of Series B Junior Preferred Stock are to be converted, the shares to be so
converted shall be selected pro rata or by lot or by any other method as may be
determined by the Board in its sole discretion to be equitable, provided that
only whole shares shall be selected for conversion.
(d) In the event the Corporation shall elect to convert
shares of the Series B Junior Preferred Stock pursuant to this Section 9, notice
of such conversion shall be given by first class mail, postage prepaid, mailed
not less than thirty (30) days prior to the conversion date, to each record
holder of the shares to be converted, at such holder's address as the same
appears on the books of the Corporation. Each such notice shall state: (i) the
conversion date; (ii) the total number of shares of Series B Junior Preferred
Stock to be converted and, if fewer than all the shares held by such holder are
to be converted, the number of such shares to be converted from such holder;
(iii) the number of shares of Common Stock (or cash in lieu of fractional shares
of Common Stock pursuant to paragraph (b) above) into which such holder's shares
of Series B Junior Preferred Stock will be converted or an explanation of the
method by which such number of shares of Common Stock (or cash) will be
determined on the conversion date; (iv) the place or places where certificates
for such shares are to be surrendered in exchange for shares of Common Stock and
(v) that dividends on the shares of Series B Junior Preferred Stock to be
converted will cease to accrue on such conversion date.
(e) The holder of each share of Series B Junior Preferred
Stock called for conversion shall surrender the certificate representing such
share, duly endorsed or assigned to the Corporation, or in blank, at the
principal office of the transfer agent set forth in the notice of conversion (or
if no transfer agent shall be at the time appointed, then to the Corporation at
the place set forth in the notice. Unless the shares of Common Stock issuable on
conversion are to be issued in the same name as the name in which such share of
Series B Junior Preferred Stock is registered, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form satisfactory
to the Corporation, duly executed by the holder or such holder's duly authorized
attorney and an amount sufficient to pay any transfer tax (or evidence
reasonably satisfactory to the Corporation demonstrating that such taxes have
been paid). The Corporation shall pay any issue and other taxes that may be
payable in respect of any issue or delivery of shares of Common Stock upon
conversion of the Series B Junior Preferred Stock; provided,
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however, that the Corporation shall not be required to pay any tax or taxes
which may be payable in respect of any transfer involved in the issue and
delivery of any shares of Common Stock issued and delivered upon conversion of
the Series B Junior Preferred Stock to a person(s) with name(s) other than the
name(s) in which the Series B Junior Preferred Stock is registered and the
Corporation shall not be required to issue or deliver such Common Stock unless
or until the person(s) requesting the issuance thereof shall have paid to the
Corporation the amount of such tax or shall have established to the satisfaction
of the Corporation that such tax has been paid. As soon as practicable after the
surrender of the certificate(s) for shares of Series B Junior Preferred Stock as
aforesaid, the Corporation shall cause to be issued and delivered to the holders
of the Series B Junior Preferred Stock, or on its written order, certificate(s)
for the number of full shares of Common Stock issuable on such conversion in
accordance with the provisions hereof and cash as provided in paragraph (b) of
this Section 9 in respect of any fraction of a share of Common Stock otherwise
issuable upon such conversion.
(f) From and after the conversion date, dividends on the
shares of the Series B Junior Preferred Stock so called for conversion shall
cease to accrue, such shares shall no longer be deemed to be outstanding, and
all rights with respect to such shares, including the rights, if any, to receive
notices and to vote, shall forthwith cease and terminate except only the right
of the holder thereof to receive shares of Common Stock in exchange therefor and
payment of any accrued and unpaid dividends thereon to the conversion date. Any
shares of Series B Junior Preferred Stock so converted shall be retired and
canceled and shall not be reissued, and the Corporation may from time to time
take such appropriate action as may be necessary to reduce the then authorized
number of shares of Series B Junior Preferred Stock accordingly.
(g) The Corporation agrees that, in each case where the
conversion of shares of Series B Junior Preferred Stock into share of Common
Stock pursuant to this section may require the prior compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), from and after the date (the "HSR Date") on which any Holder of shares of
Series B Junior Preferred Stock notifies the Corporation that compliance is so
required under the HSR Act prior to such conversion or exercise, as the case may
be, the Corporation and any such Holders shall use their respective best efforts
to cause the termination of all waiting periods under the HSR Act, in respect of
such conversion of Series B Junior Preferred Stock or issuance of such Common
Stock. The Corporation shall pay all fees and expenses of the Holders incurred
in compliance with this Section, including their respective reasonable legal
fees and expenses and all filing fees required by the HSR Act. The Corporation
shall provide each Holder with all such information in respect of the
Corporation as such Holder may request to enable such Holders to determine
whether the conversion of shares of Series B Junior Preferred Stock or issuance
of such Common Stock may require compliance with the HSR Act.
10. SUBSCRIPTION RIGHT.
(a) If at any time after the date hereof, the Corporation
proposes to issue, other than in an underwritten offering, equity securities of
any kind (the term "equity securities"
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shall include for these purposes any warrants, options or other rights to
acquire equity securities and debt securities convertible into equity securities
of the Corporation (except for any issuances under any employee stock incentive
or other similar plan of the Corporation hereafter created and approved by the
Board)), then the Corporation shall:
(i) give at least ten Business Days' advance written notice
to the holders of the Series B Junior Preferred Stock setting forth in
reasonable detail: (1) the designation and all of the terms and
provisions of the securities proposed to be issued (the "Proposed
Securities") including, where applicable, the voting powers,
preferences and relative participating, optional or other special
rights, and the qualification, limitations or restrictions thereof and
interest rate and maturity; (2) the price and other terms of the
proposed sale of such securities; (3) the amount of such securities
proposed to be issued; and (4) such other information as may be
reasonably required in order to evaluate the proposed issuance; and
(ii) subject to the rights of the holders of any Senior
Preferred Stock, offer to sell to each holder of shares of Series B
Junior Preferred Stock an amount of proposed Securities the value of
which (as determined by reference to the price per share in the
proposed offering) shall not be less than the aggregate Liquidation
Preference plus accrued and unpaid dividends thereon (whether or not
declared) of each holders's shares of Series B Junior Preferred Stock;
or in the event that the total purchase price of all the Proposed
Securities is less than the aggregate Liquidation Preference plus
accrued and unpaid dividends thereon (whether or not declared) of all
outstanding shares of Series B Junior Preferred Stock, the Corporation
shall offer to sell to each holder a pro rata amount of all the
Proposed Securities.
(b) The holders of Series B Junior Preferred Stock shall have
the option to accept such offer as to any or all of the shares so offered within
10 days after receipt of such notice from the Corporation. To the extent that
the Corporation offers two or more Proposed Securities in units, the holders of
Series B Junior Preferred Stock must purchase such units as a whole and shall
not be given the opportunity to purchase only one of the Proposed Securities
constituting such unit.
(c) Upon the expiration of the offering period described in
this Section 10, the Corporation shall be free to sell such Proposed Securities
that the holders of Series B Junior Preferred Stock have not elected to purchase
during the 90 days following such expiration on terms and conditions no more
favorable to the purchasers thereof than those offered to the holders of the
Series B Junior Preferred Stock. Any Proposed Securities offered or sold by the
Corporation after such 90-day period must be reoffered to the holders of the
Series B Junior Preferred Stock pursuant to this Section 10. The election by the
holders of the Series B Junior Preferred Stock not to exercise their
subscription rights under this Section 10 in any one instance shall not affect
their right as to any subsequent issuance of Proposed Securities by the
Corporation. Any sale of Proposed Securities by the Corporation without first
giving the holders
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of the Series B Junior Preferred Stock the rights described in this Section 10
shall be void and of no force and effect.
(d) The rights and obligations of this Section 10 shall
terminate on the date that the Common Stock is quoted on the NASDAQ National
Market or listed on any national securities exchange; provided that any rights
substantially similar to those contemplated by this Section 10 as may be granted
to any Parity Preferred Stock or Junior Preferred Stock shall also be
terminated.
11. REMEDIES CUMULATIVE.
No failure or delay on the part of the holders of the Series
B Junior Preferred Stock in the exercise of any power, right or privilege under
this Certificate of Designations shall impair such power, right or privilege or
be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this Certificate of Designations are
cumulative to and not exclusive of any rights or remedies otherwise available.
12. APPROVALS.
In the event the holders of Series B Junior Preferred Stock
shall have the right to approve any action, agreement (including, without
limitation, any modification, amendment or waiver thereof ) or circumstances,
such approval shall require the approval of 50% of the shares of Series B Junior
Preferred Stock outstanding at such time, unless otherwise agreed by the holders
of such percentage of shares.
13. DEFINITIONS. As used in this Certificate, the following
terms shall have the following respective meanings:
"Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in The City
of New York are authorized or obligated by law or executive order to be closed.
"Person" means an individual, corporation, limited liability
company, partnership, limited partnership, association, trust, joint venture,
unincorporated organization, other entity or group (as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended).
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Dates Referenced Herein and Documents Incorporated by Reference
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