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CERTIFICATE OF DESIGNATIONS
of
Series B Convertible Preferred Stock
of
ADVANCE PARADIGM, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
ADVANCE PARADIGM, INC., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in its Amended and Restated
Certificate of Incorporation (as may be amended from time to time, the
"Certificate of Incorporation"), the Board of Directors of the Corporation (the
"Board of Directors") has duly adopted the following resolutions:
WHEREAS, Article IV of the Certificate of Incorporation authorizes the
issuance by the Corporation, from time to time, of 5,000,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Stock"), in one or more series
or classes, having such powers, designations, preferences and relative,
participating, optional and other special rights, including voting rights, and
qualifications, limitations and restrictions as the Board of Directors
determines;
WHEREAS, pursuant to Article IV of the Certificate of Incorporation and
in accordance with Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors has adopted the following resolutions creating
a series of its Preferred Stock;
RESOLVED, that a series of authorized Preferred Stock of the Corporation
be, and it hereby is, created and that the powers, designations, preferences and
relative, participating, optional and other special rights, including voting
rights, and qualifications, limitations and restrictions of such series of
Preferred Stock are as follows:
Section 1. Designation and Number.
(a) Such series of Preferred Stock is designated as Series B Convertible
Preferred Stock (the "Series B Preferred Stock"), and the number of shares
constituting such series is 84,146 shares. A total of six shares of Series B-1
Preferred Stock shall be initially issued, and 84,140 shares of Series B
Preferred Stock shall be reserved for
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issuance pursuant to the JLL Exchange Agreement and may not be issued for any
other purpose.
(b) Shares of Series B Preferred Stock issued and reacquired in any
manner by the Corporation, including by purchase or redemption, shall (upon
compliance with any applicable provisions of DGCL) have the status of authorized
and unissued shares of the class of Preferred Stock undesignated as to series
and may be redesignated and reissued as part of any series of Preferred Stock
other than as Series B Preferred Stock.
Section 2. Definitions. The following terms, as used in this Certificate
of Designations, shall have the following meanings:
"Additional Shares of Common Stock" means all shares of Common
Stock issued or sold by the Corporation after the Issue Date, whether or
not subsequently reacquired or retired by the Corporation, other than
shares of Common Stock: (i) issued upon the conversion or exchange of
any series or class of Capital Stock issued and outstanding on the Issue
Date into another series or class of Capital Stock of the Corporation
without any additional consideration to the Corporation by the holder
thereof; (ii) issued upon conversion of any shares of Series A Preferred
Stock or Series B Preferred Stock into any class or series of Common
Stock; (iii) issued upon the exercise of options or warrants that have
been issued prior to, and are outstanding as of, the Issue Date; (iv)
issued upon exercise of options granted prior to the 120th day following
the Issue Date to employees, consultants, officers or directors of the
Corporation pursuant to any stock option plan in effect on the Issue
Date and consistent with past practice, but in any event not in excess
of 25,000 shares of Common Stock during such 120-day period; (v) issued
prior to the 120th day following the Issue Date to customers in the
ordinary course of business consistent with past practice, but in any
event not in excess of 25,000 shares of Common Stock during such 120-day
period; (vi) issued upon exercise of the Senior Subordinated Notes
Warrants; and (vii) issued upon the exercise of the Management Options.
"Affiliate" means, with respect to any specified Person, any
other Person which, directly or indirectly, controls, is controlled by
or is under direct or indirect common control with, such specified
Person. Control of any Person shall consist of the power to direct the
management and policies of such Person (whether through the ownership of
voting securities, by contract, as trustee or otherwise) and shall be
deemed to exist upon the ownership of securities entitling the holder
thereof to exercise more than 20% of the voting power in the election of
directors of such Person (or other persons or bodies performing similar
functions).
"Board of Directors" has the meaning set forth in the Preamble
hereto.
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"Business Day" means any day except Saturday, Sunday and any day
on which banking institutions in New York City, New York generally are
authorized or required by law or other governmental action to be closed.
"Capital Stock" means (i) all shares, interests, participations
or other equivalents (however designated) of capital stock of the
Corporation, including each class or series of Common Stock or Preferred
Stock, and (ii) any option, warrant or other arrangement representing
the right to purchase or otherwise acquire any of the foregoing,
including any securities convertible or exchangeable into any of the
foregoing.
"Certificate of Incorporation" has the meaning set forth in the
Preamble hereto.
"Change of Control" means the occurrence of either of the
following: (i) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than the Excluded
Holders, is or becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a person shall be deemed
to have "beneficial ownership" of all securities that such person has
the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than
40% of the total issued Common Stock or total issued Voting Stock of the
Corporation; or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Class A
and Class C Directors (together with any new Class A or Class C
Directors whose election by the Board of Directors or whose nomination
for election by the stockholders of the Corporation was approved by a
vote of a majority of the Class A and Class C Directors then still in
office who were either Class A or Class C Directors at the beginning of
such period or whose election or nomination for election was previously
so approved) cease to constitute a majority of the Class A and Class C
Directors then in office.
"Class A Directors" has the meaning given to it in the
Stockholders' Agreement.
"Class B Common Stock" means the Class B-1 Common Stock and the
Class B-2 Common Stock.
"Class B-1 Common Stock" means the Class B-1 Common Stock to be
created as a separate class of Common Stock following Stockholder
Approval pursuant to the Restated Certificate of Incorporation.
"Class B-1 Directors" has the meaning set forth in Section 10(f).
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"Class B-2 Common Stock" means the Class B-2 Common Stock to be
created as a separate class of Common Stock following Stockholder
Approval pursuant to the Restated Certificate of Incorporation.
"Class B-2 Directors" means the Directors designated by holders
of Series A-2 Preferred Stock pursuant to the Series A-2 Certificate of
Designations.
"Class C Directors" has the meaning given to it in the
Stockholders' Agreement.
"Common Stock" means the common stock, par value $0.01 per share,
of the Corporation, whether voting or non-voting, of any series or class
(including Regular Common Stock and, following Stockholder Approval, the
Class B Common Stock).
"Consolidated Cash Flow" has the meaning given to such term in
the Senior Subordinated Notes Indenture.
"Consolidated Interest Expense" means, with respect to any
specified Person for any period, the sum, without duplication, of: (i)
the consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued, including original issue
discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with capital lease obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings and net of the effect of all payments
made or received pursuant to hedging obligations and excluding
amortization of deferred financing costs, plus (ii) the consolidated
interest of such Person and its Subsidiaries that was capitalized during
such period, plus (iii) any interest expense on Indebtedness of another
Person that is guaranteed by that Person or any of its Subsidiaries or
secured by a mortgage, lien, pledge, charge, encumbrance or other
security interests on assets of such Person or any of its Subsidiaries.
"Conversion" means a Mandatory Conversion or an Optional
Conversion.
"Conversion Date" means, (i) in the case of Optional Conversions,
the date on which the certificates for shares of Series B Preferred
Stock to be converted are surrendered to the Corporation and, (ii) in
the case of a Mandatory Conversion, the date of filing of the Restated
Certificate of Incorporation pursuant to the DGCL with the Secretary of
State of the State of Delaware following receipt of Stockholder
Approval.
"Conversion Price" has the meaning set forth in Section 7(c).
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"Conversion Ratio" has the meaning set forth in Section 7(c).
"Convertible Securities" means any evidences of indebtedness,
shares (other than shares of Regular Common Stock) or other securities
that, by their terms, are directly or indirectly convertible into or
exchangeable for Additional Shares of Common Stock. For avoidance of
doubt, it is stipulated that the following are not Convertible
Securities: (i) shares of Series A Preferred Stock issued as a dividend
on shares of Series A Preferred Stock; and (ii) shares of Series B
Preferred Stock issued in accordance with the JLL Exchange Agreement.
"Corporation" has the meaning set forth in the Preamble hereto.
"Current Market Price" means, as of any date, the average of the
daily Market Prices of the Regular Common Stock for twenty consecutive
trading days immediately preceding such date.
"Current Series B Amount" means, as of any date of determination,
(i) the number of shares of Series B Preferred Stock issued and
outstanding on such date, plus (ii) the number of shares of Series B
Preferred Stock issuable on such date under the JLL Exchange Agreement
upon the exchange into Series B Preferred Stock of all shares of Regular
Common Stock that may be so exchanged pursuant to the JLL Exchange
Agreement on such date.
"DGCL" means the General Corporation Law of the State of
Delaware.
"Director" means a member of the Board of Directors.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Excluded Holders" means (i) the Corporation and its
Subsidiaries, (ii) the Principals and the Related Parties of the
Principals, (iii) the Permitted Transferees, and the Affiliates of
Permitted Transferees, and (iv) the holders of shares of Series A-1
Preferred Stock and Series A-2 Preferred Stock on the Issue Date and the
"Permitted Transferees" (as defined in the Series A-1 Certificate of
Designations or the Series A-2 Certificate of Designations, as the case
may be) and the Affiliates of the Persons referred in this clause (iv),
and (v) any Person permitted or required to receive shares of Series B
Preferred Stock pursuant to the JLL Exchange Agreement, the Permitted
Transferees of such Persons (assuming that such Persons are Holders) and
the Affiliates of the Persons referred to in this clause (v).
"GAAP" means accounting principles and practices generally
accepted from time to time in the United States as in effect on the
Issue Date.
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"Holder" means a record holder of shares of Series B Preferred
Stock.
"Indebtedness" has the meaning given to such term in the Senior
Subordinated Notes Indenture.
"Interest Coverage Ratio" means, as of any determination date,
the ratio of Consolidated Cash Flow to Consolidated Interest Expense
during the four-quarter period of the most recent four consecutive
fiscal quarters ending prior to such determination date. In the event of
any incurrence, assumption, guarantee, repayment, repurchase or
redemption of any Indebtedness (other than ordinary working capital
borrowings, excluding borrowings under the Senior Credit Facility)
subsequent to the commencement of the period for which the Interest
Coverage Ratio is being calculated and on or prior to the date or event
for which the calculation of the Interest Coverage Ratio is made (the
"Calculation Date"), then the Interest Coverage Ratio shall be
calculated giving effect to the incurrence, assumption, guarantee,
repayment, repurchase or redemption of such Indebtedness, and the use of
the proceeds therefrom, as if the same had occurred at the beginning of
the applicable four-quarter period.
"Initial Series B Amount" means, as of any date of determination,
(i) the number of shares of Series B Preferred Stock issued on the Issue
Date plus (ii) the number of shares of Series B Preferred Stock issuable
on the Issue Date under the JLL Exchange Agreement upon the exchange
into Series B Preferred Stock of all shares of Regular Common Stock that
may be so exchanged pursuant to the JLL Exchange Agreement, in each case
as adjusted for stock dividends or distributions and subdivisions,
combinations or consolidations of stock on or prior to such date of
determination. For avoidance of doubt, it is stipulated that the Initial
Series B Amount on the Issue Date is 84,146.
"Issue Date" means the date of the filing of this Certificate of
Designations according to the DGCL with the Secretary of State of the
State of Delaware.
"JLL" has the meaning set forth in Section 12.
"JLL Exchange Agreement" means the Exchange Agreement dated as of
the Issue Date between the Corporation and Joseph Littlejohn & Levy Fund
III, L.P., a Delaware limited partnership, relating to the exchange of
shares of Regular Common Stock into shares of Series B Preferred Stock,
as the same may be amended, supplemented or restated from time to time.
"Junior Stock" has the meaning set forth in Section 3(a).
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"Liquidation Event" means any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation.
"Liquidation Preference" means, for each share of Series B
Preferred Stock as of any date, (i) $1,000, plus (ii) all accumulated
and unpaid cash dividends and distributions on such share as of such
date, plus (iii) the Market Price of all other accumulated and unpaid
dividends and distributions on such share as of such date.
"Management Options" means options to purchase up to an aggregate
of 1,790,000 shares of Common Stock at an initial exercise price of $20
per share issued to officers and employees on or before the Issue Date.
For purposes of this Certificate of Designations, the Management Options
shall be deemed issued before the Issue Date.
"Mandatory Conversion" has the meaning set forth in Section 7(b).
"Mandatory Redemption Obligation" means the Corporation's
redemption obligation set forth in Section 6.
"Mandatory Redemption Price" has the meaning set forth in Section
6(a).
"Market Price" means: (a) with respect to any security, on any
given day, (i) if such security is listed or authorized for trading on a
national securities exchange, the last sale price of such security,
regular way, on such date, or if no such sale takes place on such date,
the average of the closing bid and asked prices thereof, on such date,
in each case as officially reported on the principal national securities
exchange on which such security is listed or authorized for trading,
(ii) if such security is not listed or authorized for trading on a
national securities exchange but is quoted on the Nasdaq National
Market, (A) the price of the last trade, as reported on the Nasdaq
National Market, not identified as having been reported late to such
system, or (B) if such security is so traded, but no such last trade
information is so reported, the average of the last bid and ask prices,
as those prices are reported on the Nasdaq National Market, (iii) if
such security is not listed or authorized for trading on a national
securities exchange or the Nasdaq National Market or any comparable
system but has a nationally recognized existing trading market, the
average of the closing bid and asked prices as furnished by two members
of the National Association of Securities Dealers, Inc. selected from
time to time by the Corporation for that purpose or (iv) if such
security is not listed or authorized for trading on a national
securities exchange or the Nasdaq National Market or any comparable
system and does not have a nationally recognized existing trading
market, the fair value of such security as (A) determined by an
agreement between the Corporation and the
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Holders of a majority of the outstanding shares of Series B Preferred
Stock or (B) if the Corporation and such Holders fail to agree,
determined jointly by an independent investment banking firm retained
by the Corporation and by an independent investment banking firm
retained by such Holders, or (C) if the Corporation or such Holders
shall fail so to retain an independent investment banking firm within
five Business Days of the retention of such firm by the Corporation or
such Holders, as the case may be, determined solely by the firm so
retained or (D) if the firms so retained by the Corporation and by
such Holders shall be unable to reach a joint determination within 15
Business Days of the retention of the last firm so retained,
determined by another independent investment banking firm chosen by
the first two such firms; and (b) with respect to any other asset or
property, the fair market value of such asset or property as (i)
determined by an agreement between the Corporation and the Holders of
a majority of the outstanding shares of Series B Preferred Stock or
(ii) if the Corporation and such Holders fail to agree, determined
jointly by an independent investment banking firm retained by the
Corporation and by an independent investment banking firm retained by
such Holders, or (iii) if the Corporation or such Holders shall fail
so to retain an independent investment banking firm within five
Business Days of the retention of such firm by the Corporation or such
Holders, as the case may be, determined solely by the firm so retained
or (iv) if the firms so retained by the Corporation and by such
Holders shall be unable to reach a joint determination within 15
Business Days of the retention of the last firm so retained,
determined by another independent investment banking firm chosen by
the first two such firms.
"New Securities" means any Capital Stock issued after the Issue
Date, other than (i) Capital Stock issued upon the conversion or
exchange of any series or class of Capital Stock issued and outstanding
on the Issue Date into another series or class of Capital Stock of the
Corporation without any additional consideration to the Corporation by
the holder thereof; (ii) Capital Stock issued upon conversion of any
shares of Series A Preferred Stock or Series B Preferred Stock into any
class or series of Common Stock; (iii) shares of Series A Preferred
Stock issued as a dividend on any shares of Series A Preferred Stock;
(iv) dividends or distributions payable in shares of Capital Stock
effected in accordance with Section 8(a); (v) Capital Stock issued upon
the exercise of options or warrants that have been issued prior to, and
are outstanding as of, the Issue Date; (vi) Capital Stock issued to
employees, consultants, officers or directors of the Corporation
pursuant to any stock option plan in effect on the Issue Date and
consistent with past practice or pursuant to a stock option plan adopted
after the Issue Date; (vii) Capital Stock issued to holders of Series A
Preferred Stock pursuant to the exercise by such holders of their
preemptive rights contained in the applicable Series A Certificate of
Designations; (viii) Capital Stock issued upon exercise of the Senior
Subordinated Notes Warrants;
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(ix) Common Stock issued upon exercise of the Management Options; (x)
Capital Stock issued to customers in the ordinary course of business
consistent with past practice, subject to a maximum amount, in any
fiscal year of the Corporation, equal or equivalent to (A) 0.5% of the
weighted average number of issued and outstanding shares of Common
Stock during such fiscal year plus (B) the number of shares permitted
under clause (A) for any fiscal year ending after the Issue Date but
not previously expended in prior fiscal years; and (xi) shares of
Series B Preferred Stock issued in accordance with the JLL Exchange
Agreement.
"Non-Class B Director" means any Director who is neither a Class
B-1 Director nor a Class B-2 Director.
"Options" means rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock
or Convertible Securities. For avoidance of doubt, it is stipulated that
the following are not Options: (i) any rights, options or warrants to
subscribe for, purchase or otherwise acquire the shares of Common Stock
referred to in clause (iv) or (v) of the definition of Additional Shares
of Common Stock; and (ii) any right or option to acquire shares of
Series B Preferred Stock pursuant to the JLL Exchange Agreement.
"Optional Conversion" has the meaning set forth in Section 7(a).
"Parity Stock" has the meaning set forth in Section 3(a).
"Permitted Transferee" has the meaning set forth in Section 12.
"Person" means any corporation, limited liability company,
partnership, trust, organization, association, other entity or
individual.
"Preemptive Rights Notice" has the meaning given in Section 9(a).
"Preemptive Rights Portion" has the meaning given in Section
9(a).
"Preferred Stock" has the meaning set forth in the Preamble
hereto.
"Principals" has the meaning given to such term in the Senior
Subordinated Notes Indenture.
"Redemption Date" has the meaning given in Section 6(b).
"Redemption Notice" has the meaning set forth in Section 6(b).
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"Related Parties" has the meaning given to such term in the
Senior Subordinated Notes Indenture.
"Regular Common Stock" means the class of Common Stock existing
on the Issue Date.
"Restated Certificate of Incorporation" means the Second Amended
and Restated Certificate of Incorporation of the Corporation in the form
attached as Exhibit B to the Stockholders' Agreement (as the same may
from time to time be amended (x) prior to Stockholder Approval, pursuant
to the Stockholders' Agreement, and (y) after Stockholder Approval,
pursuant to such Restated Certificate of Incorporation and the DGCL), to
be submitted for Stockholder Approval and following Stockholder Approval
filed according to the DGCL with the Secretary of State of the State of
Delaware.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Senior Credit Facility" means the credit facilities evidenced
by, and the loans and borrowings extended to the Corporation pursuant to
the $825 million Senior Credit Agreement, dated on or about the Issue
Date, among the Corporation, as borrower the subsidiary guarantors
parties thereto, the initial lenders, initial issuing bank and swing
line bank named therein, Bank of America, N.A., as Collateral Agent and
Administrative Agent, Bank One, N.A., as Documentation Agent, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as Book-Runner, Lead
Arranger and Syndication Agent, and Bank of America Securities LLC, as
Joint Book-Runner and Joint Lead Arranger, and any one or more
deferrals, renewals, extensions, replacements, refinancings or
refundings thereof, or amendments, modifications or supplements thereto
or replacements thereof (including, without limitation, any amendment
increasing the amount that may be borrowed thereunder) and any agreement
providing therefor whether by or with respect to the same or any other
agents, lenders, creditors or group of creditors (or any combination
thereof) and including related notes, guarantee agreements, security
agreements and other instruments executed in connection therewith.
"Senior Stock" has the meaning given in Section 3(a).
"Senior Subordinated Notes" means the Corporation's Senior
Subordinated Notes due 2010 issued on or about the Issue Date in the
initial principal amount of $200,000,000 (the "initial notes") and any
notes registered under the Securities Act that are issued in exchange
for such notes, and any
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deferrals, renewals, extensions, replacements, refinancings or
refundings thereof, or amendments or supplements thereto or
replacements thereof.
"Senior Subordinated Notes Indenture" means the Indenture, dated
as of October 2, 2000, between the Corporation and U.S. Trust of Texas,
N.A., as trustee pursuant to which the Corporation's Senior Subordinated
Notes due 2010 in the initial principal amount of $200,000,000 are
issued, as the same may be amended from time to time.
"Senior Subordinated Notes Warrants" means the warrants to
purchase Regular Common Stock issued on or about the Issue Date to Rite
Aid Corporation. For purposes of this Certificate of Designations, the
Senior Subordinated Notes Warrants shall be deemed to have been issued
before the Issue Date.
"Series A Preferred Stock" means the Series A-1 and Series A-2
Preferred Stock.
"Series A Certificates of Designations" means the Series A-1
Certificate of Designations and the Series A-2 Certificate of
Designations.
"Series A-1 Certificate of Designations" means the Certificate of
Designations for the Series A-1 Preferred Stock filed pursuant to the
DGCL with the Secretary of State of the State of Delaware on or about
the Issue Date, and as amended, supplemented or restated from time to
time.
"Series A-2 Certificate of Designations" means the Certificate of
Designations for the Series A-2 Preferred Stock filed pursuant to the
DGCL with the Secretary of State of the State of Delaware on or about
the Issue Date, and as amended, supplemented or restated from time to
time.
"Series A-1 Preferred Stock" means the Preferred Stock designated
by the Board of Directors as Series A-1 11% Preferred Stock and having
the powers, designations, preferences, and the relative, participating,
optional and other special rights and qualifications, limitations and
restrictions set forth in the Series A-1 Certificate of Designations.
"Series A-2 Preferred Stock" means the Preferred Stock designated
by the Board of Directors as Series A-2 11% Preferred Stock and having
the powers, designations, preferences, and the relative, participating,
optional and other special rights and qualifications, limitations and
restrictions set forth in the Series A-2 Certificate of Designations.
"Series B Preferred Stock" has the meaning set forth in
Section 1.
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"Stockholder Approval" means the approval by the stockholders of
the Corporation of the adoption of the Restated Certificate of
Incorporation and of the authorization and issuance of the Class B
Common Stock to be issued to the Holders and the holders of the Series A
Preferred Stock in accordance with the terms of this Certificate of
Designations and the Series A Certificates of Designations.
"Stockholders' Agreement" means the Stockholders' Agreement,
dated on or about the Issue Date, among the Corporation, Joseph,
Littlejohn & Levy Fund III, L.P., Rite Aid Corporation and the other
Persons named therein, as the same may be amended, supplemented or
restated from time to time
"Subsidiary" means, with respect to any specified Person: (i) any
corporation, association or other business entity of which more than 50%
of the total voting power of shares of capital stock or other equity
interests entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, managers or trustees thereof is at
the time owned or controlled, directly or indirectly, by a Person or one
or more of the other Subsidiaries of that Person (or a combination
thereof); and (ii) any partnership (A) the sole general partner or the
managing general partner of which is the Person or a Subsidiary of that
Person or (B) the only general partners of which are the Person or one
or more Subsidiaries of that Person (or any combination thereof).
"Transfer" means any direct or indirect (including, without
limitation, through the transfer of a controlling interest in a
Permitted Transferee) sale, transfer, assignment, grant of participation
interest in, option, pledge, hypothecation, encumbrance or other
disposition.
"Voting Default" means the taking of (i) any of the actions set
forth in clauses (i) through (xii) of Section 10(c) in violation of the
provisions of Section 10(c) or (ii) any of the actions set forth in
Section 10(d) in violation of the provisions Section 10(d).
"Voting Stock" means, with respect to any Person, the Capital
Stock of any class or kind ordinarily having the power to vote generally
for the election of directors (or other persons or bodies performing
similar functions) of such Person.
Section 3. Rank.
(a) The Series B Preferred Stock shall, with respect to dividends and
distributions and upon a Liquidation Event, rank:
(i) senior to (A) all classes or series of Common Stock and (B)
each other class or series of Capital Stock of the Corporation hereafter
created the
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terms of which do not expressly provide that it ranks senior to, or on
a parity with, the Series B Preferred Stock as to dividends and
distributions and upon a Liquidation Event (all of the foregoing
collectively referred to as "Junior Stock");
(ii) on a parity with (A) the Series A Preferred Stock and (B)
each other series of Preferred Stock hereafter created the terms of
which expressly provide that such class or series ranks on a parity with
the Series B Preferred Stock as to dividends and distributions and upon
a Liquidation Event (collectively referred to as "Parity Stock"); and
(iii) junior to each series or class of Preferred Stock hereafter
created the terms of which expressly provide that such class or series
ranks senior to the Series B Preferred Stock as to dividends and
distributions and upon a Liquidation Event (collectively referred to as
"Senior Stock").
(b) The respective definitions of Junior Stock, Parity Stock and Senior
Stock shall also include any options, warrants or other rights exercisable or
exchangeable for or convertible into any of the Junior Stock, Parity Stock or
Senior Stock, as the case may be.
Section 4. Dividends.
(a) In the event the Corporation at any time or from time to time makes,
or fixes a record date for the determination of holders of Common Stock entitled
to receive, any dividend or distribution on shares of any class or series of
Common Stock (other than any dividend or distribution payable in shares of
Common Stock effected in accordance with Section 8(a)), then and in each such
event each Holder shall be entitled to receive the amount of such dividend or
distribution that such Holder would have received had its shares of Series B
Preferred Stock been converted into Common Stock pursuant to Section 7
immediately prior to the record date for such dividend or distribution.
(b) So long as any shares of the Series B Preferred Stock are
outstanding:
(i) No dividend or distribution (other than dividends on Series A
Preferred Stock payable solely in shares of Series A Preferred Stock
paid in accordance with the applicable Series A Certificate of
Designations) may be declared or paid or set apart for payment on any
Parity Stock by the Corporation, directly or indirectly, unless in each
case (A) such dividend or distribution is required by the terms of such
Parity Stock pursuant to the certificate of designations for such Parity
Stock (or other instrument pursuant to which such Parity Stock was
created and setting forth the powers, designations, preferences and
other special rights and qualifications, limitations and restrictions of
such Parity Stock) as in effect on the initial issuance of such Parity
Stock and (B) all accumulated and unpaid dividends and distributions due
to be paid on the Series
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B Preferred Stock have been or contemporaneously are paid or are being
paid on a pro rata basis with any such Parity Stock.
(ii) Except to the extent otherwise provided in Section 6(f), no
Parity Stock may be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available to a sinking
fund for the redemption of any shares of such stock) by the Corporation,
directly or indirectly, unless (x) all accumulated and unpaid dividends
and distributions due to be paid on the Series B Preferred Stock, or the
redemption payments required by Section 6, have been or are
contemporaneously are paid, and (y) (A) such redemption, purchase or
acquisition is required by the certificate of designations for such
Parity Stock (or other instrument pursuant to which such Parity Stock
was created and setting forth the powers, designations, preferences and
other special rights and qualifications, limitations and restrictions of
such Parity Stock) as in effect on the initial issuance of such Parity
Stock and the issuance of such Parity Stock was approved by the Holders
in accordance with Section 10(c)(iv) or (B) such redemption, purchase or
acquisition is made with the approval of the Holders in accordance with
Section 10(c)(vi).
(c) So long as any shares of the Series B Preferred Stock are
outstanding, no dividends or other distribution may be declared or paid or set
apart for payment on any Junior Stock by the Corporation, directly or
indirectly, nor may any Junior Stock be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such stock) by the
Corporation, directly or indirectly, other than (i) a redemption, purchase or
other acquisition of shares of Common Stock made solely pursuant to the terms of
an employee incentive or benefit plan of the Corporation or its Subsidiaries,
(ii) a dividend or other distribution on shares of Common Stock effected in
accordance with Section 4(a) or 8(a), and (iii) dividends or distributions made
solely in Junior Stock effected in accordance with Section 8(a).
Section 5. Liquidation Rights.
(a) Upon the occurrence of a Liquidation Event, subject to the rights of
holders of Senior Stock and Parity Stock, each Holder shall be entitled to be
paid, before any distribution is made on any Junior Stock, out of the assets of
the Corporation available for distribution to its stockholders an amount per
share in cash equal to the greater of (i) the Liquidation Preference, as of the
date fixed for the Liquidation Event, for each outstanding share of Series B
Preferred Stock held by such Holder and (ii) the amount such Holder would have
received upon such final distribution if all outstanding shares of Series B
Preferred Stock had been converted into shares of Common Stock pursuant to
Section 7 and all outstanding shares of Series A Preferred Stock had been
converted into shares of Common Stock pursuant to the Series A Certificates of
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Designations immediately prior to such Liquidation Event (assuming such
conversion is permissible under the terms thereof).
(b) If the assets distributable in any such Liquidation Event to the
Holders and to the holders of outstanding shares of all Parity Stock are
insufficient to permit the payment to such holders of the full preferential
amounts to which they may be entitled, such assets shall be distributed ratably
among the holders of the outstanding shares of Series B Preferred Stock and
Parity Stock in proportion to the full preferential amount each such holder
would otherwise be entitled to receive.
(c) For purposes of this Section 5, a Liquidation Event shall, at the
election of the Holders of a majority of the outstanding shares of Series B
Preferred Stock, voting separately as a single class, include (i) the
consolidation or merger of the Corporation into any other corporation or entity
if the Corporation is not the continuing or surviving corporation or entity of
such consolidation or merger, (ii) the consolidation or merger of any other
corporation or entity into the Corporation with the Corporation being the
continuing or surviving corporation if, in connection with such consolidation or
merger, the shares of Common Stock are changed into or exchanged for stock or
other securities of any other Person or cash or any other property, and (iii)
the transfer by the Corporation of all or substantially all of its properties or
assets to any other corporation or entity (other than to a wholly-owned
Subsidiary of the Corporation if such Subsidiary remains wholly owned by the
Corporation after such transfer or any other transaction or series of
transactions related to such transfer).
(d) After payment of the full preferential amount to which the Holders
are entitled pursuant to this Section 5, the Holders shall not be entitled to
any further participation in any distribution of assets of the Corporation, and
all rights of the Holders with respect to their Series B Preferred Stock shall
terminate.
Section 6. Redemption.
(a) The Corporation shall redeem, to the extent of funds legally
available therefor (determined pursuant to Section 6(e)), in the manner provided
for in this Section 6 all of the then outstanding shares of Series B Preferred
Stock at the Liquidation Preference as of the Redemption Date (the "Mandatory
Redemption Price") on (i) the eleventh anniversary of the Issue Date or (ii) in
the event a Change of Control of the Corporation has occurred, upon receipt of
notice (no later than 30 days following the later of the occurrence of such
Change of Control or public announcement of the occurrence of such Change of
Control) from the Holders of a majority of the outstanding shares of Series B
Preferred Stock demanding a redemption of the outstanding shares of Series B
Preferred Stock. The Corporation shall pay the Mandatory Redemption Price in
cash. The date for any such redemption (the "Redemption Date") shall be (A) in
the case of a redemption occurring pursuant to clause (i) of this Section 6(a),
the date of the eleventh
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anniversary of the Issue Date, or if such date is not a Business Day, the first
Business Day following such date, and (B) in the case of a redemption occurring
pursuant to clause (ii) of this Section 6(a), a date to be fixed by the
Corporation that is a Business Day no earlier than the 30 days and no later than
60 days following the notice referred to in clause (ii) of this Section 6(a).
(b) No later than 20 days and no earlier than 60 days prior to the
Redemption Date, the Corporation shall give written notice (the "Redemption
Notice") to each Holder at such Holder's address as it appears on the stock
books of the Corporation. The Redemption Notice shall state:
(i) whether the redemption is pursuant to clause (i) or (ii) of
Section 6(a);
(ii) the Mandatory Redemption Price;
(iii) Redemption Date; and
(iv) the location (which shall be in New York City, New York) at
which the Holder is to surrender to the Corporation (or its agent), for
redemption, its certificate or certificates representing its shares of
Series B Preferred Stock, and the manner for the surrender of such
certificate or certificates.
(c) Each Holder shall surrender the certificate or certificates
representing its shares of Series B Preferred Stock to the Corporation, duly
endorsed (or otherwise in proper form for transfer, as determined by the
Corporation), in the manner and at the place designated in the Redemption
Notice. On the Redemption Date, the Corporation shall pay, or cause to be paid,
the full Mandatory Redemption Price for the shares so surrendered in cash (i) to
the Person whose name appears on such certificate or certificates as the owner
thereof, and, upon such payment, each surrendered certificate shall be canceled
and retired and (ii) if such certificate is not surrendered by a Holder but the
Holder certifies to the Corporation that the certificate or certificates
representing its shares of Series B Preferred Stock have been lost, stolen or
destroyed and executes an agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection with such lost,
stolen or destroyed certificates (and, if requested by the Corporation, posts a
customary bond reasonably satisfactory to the Corporation to cover such loss),
to such Holder.
(d) Unless the Corporation defaults in the payment of the applicable
Mandatory Redemption Price, all rights of the Holders with respect to their
Series B Preferred Stock, other than the right to receive the Mandatory
Redemption Price, shall terminate on the Redemption Date.
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(e) For the purpose of determining whether funds are legally available
for redemption of Series B Preferred Stock pursuant to this Section 6, (i) the
Corporation shall value its assets at the highest amount permissible under
applicable law, (ii) if the redemption is pursuant to clause (ii) of Section
6(a), the Corporation may, at its option, set aside the funds necessary to
prepay, redeem or offer to purchase any Indebtedness of the Corporation or its
Subsidiaries that, by its terms, has to be prepaid or redeemed, or requires that
the Corporation or its Subsidiaries extend to the holders thereof an offer to
purchase such Indebtedness, including the Senior Credit Facility and the Senior
Subordinated Notes, and (iii) the Corporation may, at its option, set aside the
funds necessary to satisfy any dividend, redemption or other obligations with
respect to any Senior Stock or Parity Stock required by the certificate of
designations for such Senior Stock or Parity Stock (or other instrument pursuant
to which such Senior Stock or Parity Stock was created and setting forth the
powers, designations, preferences and other special rights and qualifications,
limitations and restrictions of such Senior Stock or Parity Stock).
(f) If on the Redemption Date funds of the Corporation legally available
therefor are insufficient to pay the Mandatory Redemption Price in full for all
the shares of Series B Preferred Stock, the Corporation shall (i) use funds to
the extent legally available for such purpose, (ii) effect the Mandatory
Redemption Obligation pro rata according to the number of shares of Series B
Preferred Stock held by each holder and (iii) pay interest at the rate of 10%
per annum on any unpaid portion of the Mandatory Redemption Price on a quarterly
basis. If the Corporation is unable or fails to discharge its Mandatory
Redemption Obligation, the Mandatory Redemption Obligation shall be discharged
as soon as the Corporation is able to discharge the Mandatory Redemption
Obligation. If and so long as the Mandatory Redemption Obligation is not fully
discharged, the Corporation may not, directly or indirectly, (A) redeem,
purchase, or otherwise acquire any Parity Stock or Junior Stock or discharge any
mandatory or optional redemption, sinking fund or other similar obligation in
respect of any Parity Stock or Junior Stock (except in connection with a
redemption, sinking fund or other similar obligation regarding Parity Stock
(including the Series A Preferred Stock) being satisfied on a pro rata basis) or
(B) declare or make any dividend or distribution in respect of any Junior Stock.
(g) Notwithstanding the foregoing, each Holder may, at any time prior to
the close of business on the Business Day immediately preceding the Redemption
Date, elect to convert, pursuant to Section 7(a), all or any portion of its
shares of Series B Preferred Stock into Common Stock in lieu of any redemption
of its Series B Preferred Stock. Upon such Optional Conversion, such Holder
shall no longer be entitled to any payment in connection with the redemption for
the Series B Preferred Stock so converted.
(h) The Corporation need not establish any sinking fund for the
Mandatory Redemption Obligation.
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Section 7. Conversion.
(a) Optional Conversion. Subject to and in compliance with the
provisions of this Section 7, each Holder may, at any time and from time to
time, at such Holder's election, convert any or all outstanding shares of Series
B Preferred Stock of such Holder into shares of Regular Common Stock (such
conversion, an "Optional Conversion"). Notwithstanding any call for redemption
pursuant to Section 6, the right to convert shares pursuant to the Optional
Conversion shall terminate at the close of business on the Business Day
immediately preceding the Redemption Date, unless the Corporation defaults in
making payment of the Mandatory Redemption Price in full on the Redemption Date.
(b) Mandatory Conversion. Subject to the provisions of this Section 7,
upon the occurrence of the Stockholder Approval and the filing of the Restated
Certificate of Incorporation pursuant to the DGCL with the Secretary of State of
the State of Delaware, all of the outstanding shares of Series B Preferred Stock
shall automatically convert into shares of Class B-1 Common Stock (such
conversion, a "Mandatory Conversion").
(c) Conversion Ratio. The number of shares of Regular or Class B-1
Common Stock deliverable upon Conversion of one share of Series B Preferred
Stock, adjusted as provided in Section 8, is referred to in this Certificate of
Designations as the "Conversion Ratio." The Conversion Ratio as of any date
shall be an amount equal to the Liquidation Preference as of such date divided
by the Conversion Price. The "Conversion Price" will initially be $20.00,
subject to adjustment from time to time pursuant to Section 8.
(d) Conversion Mechanics.
(i) In the case of an Optional Conversion, the Holder of the
shares of Series B Preferred Stock to be converted shall surrender the
certificate representing such shares at the principal office of the
Corporation, with a written notice of election to convert completed and
signed, specifying the number of shares to be converted. Unless the
shares issuable on such Optional Conversion are to be issued in the same
name as the name in which such shares of Series B Preferred Stock are
registered, each share surrendered for such Optional Conversion shall be
accompanied by instruments of transfer, in form satisfactory to the
Corporation, duly executed by the Holder or the Holder's duly authorized
attorney. The Corporation shall not be obligated to issue certificates
for shares of Common Stock in any name other than the name or names set
forth on the certificates for the shares of Series B Preferred Stock
unless the requirements of the Stockholders' Agreement relating to the
transfer of shares of Series B Preferred Stock have been complied with
or waived by the Corporation.
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(ii) In the event of a Mandatory Conversion, the outstanding
shares of Series B Preferred Stock shall be converted automatically
without any further action by the Holders and whether or not the
certificates representing such shares are surrendered at the office of
the Corporation. The Corporation shall issue certificates representing
the shares of Class B-1 Common Stock issuable upon such Mandatory
Conversion upon the surrender of certificates representing the
corresponding shares of Series B Preferred Stock, in the same name as
the name in which such shares of Series B Preferred Stock are
registered.
(iii) Notwithstanding clause (i) or (ii) of this Section 7(d), if
the Holder of any share or shares of Series B Preferred Stock certifies
to the Corporation that the certificates representing such share or
shares have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection with such lost, stolen or destroyed
certificates (and, if requested by the Corporation, posts a customary
bond reasonably satisfactory to the Corporation to cover such loss),
then the Corporation shall issue certificates representing the Regular
Common Stock or Class B-1 Common Stock issuable upon any Optional
Conversion or Mandatory Conversion, as the case may be, in the name of
such holder.
(iv) As promptly as practicable after the delivery by the Holder
of the certificates for shares of Series B Preferred Stock (or in the
case of a lost certificate, the certification, the agreement and, if
requested, posting of the bond described in clause (iii) of this Section
7(d)), the Corporation shall issue and shall deliver to such Holder, or,
subject to compliance with the provisions Section 12 and the
Stockholders' Agreement relating to the transfer of shares of Series B
Preferred Stock, on the Holder's written order to the Holder's
transferee, (A) a certificate or certificates for the whole number of
shares of Regular or Class B-1 Common Stock issuable upon the Conversion
of such shares in accordance with the provisions of this Section 7, (B)
any cash adjustment required pursuant to Section 7(g), and (C) in the
event of an Optional Conversion in part, a certificate or certificates
for the whole number of shares of Series B Preferred Stock not being so
converted.
(v) Each Conversion shall be deemed to have been effected
immediately prior to the close of business on the applicable Conversion
Date. The Person in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon such Conversion shall
be deemed to have become the holder of record of the shares of Common
Stock represented thereby at such time on the applicable Conversion Date
and such Conversion shall be into a number of whole shares of Common
Stock equal to the product of the number of shares of Series B Preferred
Stock surrendered multiplied by the Conversion Ratio in effect on the
applicable Conversion Date. All shares of Common Stock
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delivered upon conversion of the Series B Preferred Stock will upon
delivery be duly and validly issued and fully paid and non-assessable,
free of all liens, pledges and other security interests and not
subject to any preemptive rights. As of the effective time of such
Conversion, the shares of Series B Preferred Stock to be so converted
will no longer be deemed to be outstanding and all rights of a holder
with respect to such shares so converted shall immediately terminate
except the right to receive the Common Stock and other amounts payable
pursuant to this Section 7 and, in the event of an Optional Conversion
in part, a certificate or certificates representing the shares of
Series B Preferred Stock not converted.
(e) Reservation of Shares; Compliance with Laws. The Corporation
covenants that it will at all times reserve and keep available, free from
preemptive rights, such number of its authorized but unissued shares of Regular
Common Stock as shall be required for the purpose of effecting Optional
Conversions of the Series B Preferred Stock. Promptly (and in any event no later
than two Business Days) following receipt of Stockholder Approval, the
Corporation shall file the Restated Certificate of Incorporation pursuant to the
DGCL with the Secretary of State of the State of Delaware. Prior to the delivery
of any Common Stock that the Corporation is obligated to deliver upon an
Optional Conversion or Mandatory Conversion, the Corporation shall comply with
all applicable federal and state laws and regulations which require action to be
taken by the Corporation.
(f) Transfer Taxes, etc. The Corporation will pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock upon any Conversion, other than any
tax payable in respect of any transfer involved in the issue or delivery of
shares of Common Stock in a name other than that of the Holder of the Series B
Preferred Stock to be converted. The Corporation shall have the right not to
issue or deliver any shares of Common Stock in a name other than that of the
Holder of the Series B Preferred Stock to be converted unless and until the
Person requesting such issue or delivery has paid to the Corporation the amount
of any such tax or has established, to the satisfaction of the Corporation, that
such tax has been paid.
(g) No Fractional Shares. No fractions of shares of Common Stock shall
be required to be issued to a Holder in connection with a Conversion. In lieu
thereof, the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Current Market Price per share of Regular Common Stock on the Conversion
Date.
(h) No Impairment. The Corporation will not, through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid the observance or performance of
any of the terms to be
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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 7 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 the Series B Preferred Stock
against impairment. Without limiting the generality of the foregoing, the
Corporation (i) will take all such action as may be necessary or appropriate in
order that the Corporation may validly and legally issue fully paid
nonassessable shares of Common Stock on any Conversion, free of all preemptive
rights, and (ii) will not take any action which results in any adjustment of the
applicable Conversion Price if the total number of shares of Common Stock
issuable after the action upon the Conversion of all of the Series B Preferred
Stock will exceed the total number of shares of Common Stock then authorized by
the Corporation's Certificate of Incorporation and available for the purpose of
issue upon such Conversion.
Section 8. Adjustments to Conversion Price.
(a) Adjustment for Stock Dividends, Distributions and Subdivisions. In
the event the Corporation shall declare or pay any dividend or make any other
distribution on the Common Stock payable in shares of Common Stock, or shall
effect a subdivision of the outstanding Common Stock, into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock), then and in each such case the applicable
Conversion Price in effect immediately prior to such stock dividend,
distribution or subdivision shall, concurrently with the effectiveness of such
stock dividend, distribution or subdivision, be proportionately decreased,
subject to the following qualifications: (i) in the event such issuance is
declared but not effected, the applicable Conversion Price shall be readjusted
as if such issuance was not declared; and (ii) no adjustment in the Conversion
Price shall be made in the event the Holders simultaneously receive a dividend
or other distribution of such securities in an amount equal to the amount of
such securities as they would have received had the Series B Preferred Stock
been converted into Common Stock pursuant to Section 7 immediately prior to such
event (or, if applicable, the record date for such event).
(b) Adjustments for Combinations or Consolidation of Common Stock. In
the event the outstanding Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
then and in each such case the applicable Conversion Price in effect immediately
prior to such combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
(c) Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In the event the Corporation (i) consolidates with or
merges into any other corporation or entity and is not the continuing or
surviving corporation or entity of such consolidation or merger, (ii) permits
any other corporation or entity to consolidate with or merge into the
Corporation and the Corporation is the continuing or surviving corporation
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but, in connection with such consolidation or merger, the shares of Common Stock
are changed into or exchanged for stock or other securities of any other Person
or cash or any other property, or (iii) transfers all or substantially all of
its properties or assets, directly or indirectly, to any other corporation or
entity (other than to a wholly owned Subsidiary of the Corporation if such
Subsidiary remains wholly owned by the Corporation after such transfer or any
other transaction or series of transactions related to such transfer), then, and
in each such event, proper provision shall be made so that, upon the basis and
the terms and in the manner provided in this Section 8(c), each Holder, upon any
Conversion at any time after the consummation of such consolidation, merger or
transfer, shall be entitled to receive, in lieu of the shares of Common Stock
issuable upon any Conversion prior to such consummation, the stock and other
securities, cash and property to which such Holder would have been entitled upon
such consummation if such Holder had converted its Series B Preferred Stock
pursuant to Section 7 immediately prior to such consummation (or, if applicable,
any record date with respect to such transaction), subject to adjustments
(subsequent to such corporate action) as nearly equivalent as possible to the
adjustments provided for in this Section 8(c). Notwithstanding anything
contained herein to the contrary, (A) the Corporation will not effect any of the
transactions described in the clauses (i) through (iii) of this Section 8
unless, prior to the consummation thereof, each corporation (other than the
Corporation) which may be required to deliver any stock, securities, cash or
property upon the conversion of Series B Preferred Stock shall assume, by
written instrument, a copy of which shall be delivered to each Holder, the
obligation to deliver to such Holder such shares of stock, securities, cash or
property as such holder may be entitled to receive upon such conversion, and (B)
in the event the Holders of a majority of the outstanding shares of Series B
Preferred Stock, voting separately as a single class, elect to declare that any
of the transactions described in clauses (i) through (iii) constitute a
Liquidation Event, then the provisions of this Section 8(c) shall not apply to
such transaction and, in lieu thereof, the Holders shall be entitled to the
amounts set forth in Section 5 with respect to such Liquidation Event.
(d) Adjustments for Reclassification, Exchange and Substitution. If the
Common Stock issuable upon any Conversion is changed into the same or a
different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification or otherwise (other than a subdivision,
combination or consolidation of shares, or merger, consolidation or asset sale,
provided for in Sections 8(a), 8(b) and 8(c) or any reclassification resulting
from the adoption of the Restated Certificate of Incorporation), then and in
each such case the applicable Conversion Price then in effect shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted such that the Series B Preferred Stock shall be
convertible into, in lieu of the number of shares of Common Stock which the
Holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the Holders upon any
Conversion immediately before that change. No class or series of Common Stock
shall be so changed into shares of any other class or series of
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stock unless a proportional and equivalent change is made with respect to all
other classes or series of Common Stock. For avoidance of doubt, it is
stipulated that the provisions of this Section 8(d) shall not apply to any
exchange of shares of Common Stock into shares of Series B Preferred Stock
pursuant to the JLL Exchange Agreement.
(e) Adjustment of Conversion Price Upon Issuance of Additional Shares of
Common Stock. In the event the Corporation, at any time after the Issue Date,
issues or sells Additional Shares of Common Stock for a consideration per share
less than the Current Market Price in effect immediately prior to such issuance
or sale, then and in each such event, the applicable Conversion Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest cent) determined by multiplying the applicable Conversion Price by a
fraction (i) the numerator of which shall be (A) the number of shares of Common
Stock outstanding immediately prior to such issue or sale, plus (B) the number
of shares of Common Stock which the aggregate consideration received by the
Corporation for the total number of Additional Shares of Common Stock so issued
or sold would purchase at the Current Market Price in effect immediately prior
to such issuance or sale, and (ii) the denominator of which shall be (A) the
number of shares of Common Stock outstanding immediately prior to such issue or
sale plus (B) the number of Additional Shares of Common Stock so issued or sold.
The provisions of this Section 8(e) shall not apply to any issuance or sale of
Additional Shares of Common Stock for which an adjustment is provided under
Section 8(a).
(f) Issue of Securities Deemed Issue of Additional Shares of Common
Stock. In the event (i) the Corporation at any time after the Issue Date shall
issue, sell or grant any Options or Convertible Securities, or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities and (ii) the consideration
per share for the Additional Shares of Common Stock issuable upon the exercise
of such Options, or in the case of Convertible Securities, the conversion or
exchange of such Convertible Securities shall be less than the Current Market
Price in effect immediately prior to such issue, sale or grant, or such record
date, as the case may be, then, and in each such case, (A) the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be issuances of Additional Shares of
Common Stock issued as of the time of such issue, sale or grant or, in case such
a record date shall have been fixed, as of the close of business on such record
date, and (B) the Conversion Price shall be adjusted in accordance with Section
8(e) on the date of and immediately prior to such issue, sale or grant, or the
record date, as the case may be. In any such case in which Additional Shares of
Common Stock are deemed to be issued or sold pursuant to this Section 8(f):
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(1) no further adjustment in the applicable Conversion Price
shall be made upon the subsequent issue of Convertible Securities or
Common Stock upon the exercise of such Options or conversion or exchange
of such Convertible Securities;
(2) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any decrease in the
consideration payable to the Corporation, or increase in the number of
Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the adjustments to the Conversion Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such decrease or
increase becoming effective, be recomputed (and the Conversion Price
shall automatically be adjusted as so recomputed) to reflect such
increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities which are
outstanding at such time; and
(3) no readjustment pursuant to the preceding clause (2) shall
have the effect of increasing the applicable Conversion Price to an
amount which exceeds the lower of (A) the applicable Conversion Price on
the original adjustment date and (B) the applicable Conversion Price
that would have resulted from any issuance of Additional Shares of
Common Stock between the original adjustment date and such readjustment
date.
The consideration per share deemed to be received by the Corporation for
Additional Shares of Common Stock relating to Options and Convertible
Securities, shall be determined by dividing (x) the total amount, if any,
actually received by the Corporation as consideration for the issue, sale, grant
or assumption of such Options or Convertible Securities, plus the minimum
aggregate amount of additional consideration (as set forth in the instruments
relating to such Options or Convertible Securities without regard to any
provision contained therein for a subsequent adjustment of such consideration)
payable to the Corporation upon the exercise in full of such Options or the
conversion or exchange in full of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise in full of such Options for
Convertible Securities and the conversion or exchange in full of such
Convertible Securities, by (y) the maximum number of Additional Shares of Common
Stock (as set forth in the instruments relating to such Options or Convertible
Securities, without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(g) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the applicable Conversion Price pursuant to this
Section 8, the Corporation at its expense shall promptly compute such adjustment
or readjustment in
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accordance with the terms hereof and furnish to each Holder a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based, including a statement of
(i) the consideration received or to be received by the Corporation for any
Additional Shares of Common Stock, or any Options or Convertible Securities, as
the case may be, issued or sold or deemed to have been issued, (ii) the number
of shares of Common Stock outstanding or deemed to be outstanding, and (iii) the
applicable Conversion Price in effect immediately prior to such issue or sale
and as adjusted and readjusted on account thereof. The Corporation shall, upon
the written request at any time of any Holder, furnish or cause to be furnished
to such holder a like certificate setting forth (i) the applicable Conversion
Price at the time in effect, and showing how it was calculated, and (ii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon a Conversion. At the request of the Holders
of a majority of the then outstanding Series B Preferred Stock, the Corporation
will have the certificates referred to in this Section 8(g) prepared and
delivered by an internationally recognized independent accounting firm.
Section 9. Preemptive Rights.
(a) The Corporation shall provide each Holder with a written notice (a
"Preemptive Rights Notice") of any proposed issuance by the Corporation of any
New Securities at least 30 days prior to the proposed issuance date. Such notice
shall specify the price at which the New Securities are to be issued and the
other material terms of the issuance. Each Holder shall be entitled to purchase,
at the price and on the terms at which such New Securities are proposed to be
issued and specified in such Preemptive Rights Notice, such Holder's Preemptive
Rights Portion of such class of the New Securities proposed to be issued.
"Preemptive Rights Portion" means the pro rata portion of New Securities
proposed to be issued by the Corporation, which amount shall, for each Holder,
be based upon the ratio of (i) the number of shares of Common Stock that such
Holder would receive upon the Conversion of its shares of Series B Preferred
Stock into Common Stock pursuant to Section 7 immediately prior to the issuance
of the New Securities to (ii) the total number of issued and outstanding shares
of Common Stock immediately prior to the issuance of the New Securities
(assuming (A) the conversion of all securities convertible into, and the
exercise of all options, warrants or other arrangements representing the right
to purchase or otherwise acquire any shares of Common Stock and (B) the receipt
of Stockholder Approval and the filing of the Restated Certificate of
Incorporation according to the DGCL with the Secretary of State of the State of
Delaware).
(b) A Holder may exercise its rights under this Section 9 by delivering
written notice of its election to purchase New Securities to the Corporation
within 15 days of receipt of the Preemptive Rights Notice. A delivery of such a
written notice (which notice shall specify the amount of New Securities to be
purchased by the Shareholder
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submitting such notice) by such Holder shall constitute a binding agreement of
such Holder to purchase, at the price and on the terms specified in the
Preemptive Rights Notice, the number of New Securities specified in such
Holder's written notice.
(c) In the case of any issuance of New Securities, the Corporation shall
have 90 days from the date of the Preemptive Rights Notice to consummate the
proposed issuance of any or all of such New Securities which the Holders have
not elected to purchase at the price and upon terms that are not materially less
favorable to the Corporation than those specified in the Preemptive Rights
Notice. At the consummation of such issuance, the Corporation shall issue
certificates representing the New Securities to be purchased by each Holder
exercising preemptive rights pursuant to this Section 9 registered in the name
of such Holder, against payment by such Holder of the purchase price for such
New Securities. If the Corporation proposes to issue such New Securities after
such 90-day period, it shall again comply with the procedures set forth in this
Section. 9.
Section 10. Voting Rights.
(a) The Holders shall not be entitled to any voting rights, except as
hereinafter provided in this Section 10 or as otherwise provided by DGCL or
other applicable law.
(b) Except as otherwise required by law, each share of Series B
Preferred Stock shall entitle the Holder thereof to vote on all matters
submitted to a vote of the holders of the Regular Common Stock, voting together
with the holders of the Regular Common Stock (and any other shares of Capital
Stock which by its terms is entitled to vote together with the Regular Common
Stock as a single class) on all matters as to which the holders of the Regular
Common Stock shall be entitled to vote, other than (i) the election or removal
of Directors and (ii) for matters for which applicable law requires the vote or
consent of the holders of the Regular Common Stock as a separate class. With
respect to any such vote, each share of Series B Preferred Stock shall entitle
the Holder thereof to cast the number of votes equal to the number of votes
which could be cast in such vote by a holder of the shares of Regular Common
Stock into which such share of Series B Preferred Stock is convertible on the
record date for such vote or, if no such record date is established, on the date
of any written consent of stockholders. Notwithstanding anything to the contrary
contained herein, except as otherwise required by law, any action required or
permitted to be taken by the Holders of Series B Preferred Stock at any meeting
of the Holders of Series B Preferred Stock may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by Holders who would have been entitled to
cast the minimum number of votes which would be necessary to authorize such
action at a meeting at which all Holders of Series B Preferred Stock entitled to
vote thereon were present and voting.
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(c) So long as the Current Series B Amount is equal to or greater than
10% of the Initial Series B Amount, the affirmative vote of the Holders of at
least a majority of the then outstanding shares of Series B Preferred Stock
voting or consenting, as the case may be, separately as a single class shall be
required for the Corporation to:
(i) amend or repeal any provision of, or add any provision to,
the Corporation's certificate of incorporation or by-laws so as to
affect adversely the powers, rights, preferences (including, without
limitation, liquidation preferences, conversion price and redemption
provisions) or voting rights of the shares of Series B Preferred Stock;
provided that the filing of the Restated Certificate of Incorporation
pursuant to the DGCL with the Secretary of State of the State of
Delaware shall not require prior approval of the Holders pursuant to
this Section 10(c);
(ii) amend or repeal any provision of, or add any provision to,
this Certificate of Designations or either of the Series A Certificates
of Designations;
(iii) authorize or issue any additional shares of Series B
Preferred Stock, other than pursuant to the JLL Exchange Agreement;
(iv) authorize or create any class or series of Senior Stock or
Parity Stock, or issue any shares of Senior Stock or Parity Stock,
except in either case for the authorization and creation of the Series A
Preferred Stock and the issuance of shares of Series A Preferred Stock
(including issuances of shares of Series A Preferred Stock as a dividend
on the Series A Preferred Stock in accordance with the applicable Series
A Certificate of Designations) in accordance with the Series A
Certificates of Designations;
(v) reclassify any shares of Junior Stock into shares of Parity
Stock or Senior Stock, or any shares of Parity Stock into shares of
Senior Stock, for avoidance of doubt it being stipulated that any
exchange of shares of Regular Common Stock into shares of Series B
Preferred Stock shall not be deemed a reclassification of such stock or
require the approval of the Holders pursuant to this Section 10(c);
(vi) repurchase or redeem any Capital Stock of the Corporation,
other than (A) the Series A Preferred Stock issued on the Issue Date or
issued as a dividend on the Series A Preferred Stock in accordance with
the applicable Series A Certificates of Designations and (B) the
redemption of the Series B Preferred Stock pursuant to Section 6, for
avoidance of doubt it being stipulated that any exchange of shares of
Regular Common Stock into shares of Series B Preferred Stock shall not
be deemed a redemption or repurchase of such stock or require the
approval of the Holders pursuant to this Section 10(c);
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(vii) incur, or permit any of its Subsidiaries to incur, any
Indebtedness (other than any Indebtedness under the Senior Credit
Facility or the Senior Subordinated Notes) that would result in the
Corporation having an Interest Coverage Ratio of less than 1.50:1.00;
provided that such incurrence shall not constitute a violation of this
clause (vii) unless the Indebtedness so incurred remains outstanding for
at least 30 consecutive days following the initial incurrence thereof;
(viii) voluntarily file for bankruptcy, liquidation, dissolution
or winding up of the Corporation;
(ix) increase the number of Directors to more than eleven, unless
the Holders are entitled to elect an additional Class B-1 Director
pursuant to clause (v) of Section 10(f), or the holders of Series A-2
Preferred Stock are entitled to elect an additional Class B-2 Director
pursuant to the Series A-2 Certificate of Designations, in which case
the number of Directors may be increased by the number of such
additional Directors;
(x) have less than three of the employees or officers of the
Corporation or its Subsidiaries serve as Directors (and in the event of
any vacancy resulting from the death, disability, resignation or removal
of such a Director, not have another employee or officer of the
Corporation or its Subsidiaries elected or appointed promptly as a
Director to fill such vacancy);
(xi) modify or repeal any of the provisions of the By-Laws (A)
requiring that, the Board of Directors meet no less frequently than once
in every calendar quarter, (B) requiring that each committee of the
Board of Directors (including any audit or compensation committee, but
excluding any nominating committees for the nomination of Directors)
have, as members, a proportional number of Class B-1 Directors and Class
B-2 Directors, as a group (in relation to the total number of
Directors), unless (1) such representation is prohibited by applicable
law or rules of the Nasdaq National Market, in which case such
committees shall have, as members, the maximum number of Class B-1
Directors and Class B-2 Directors permitted by applicable law and rules
of the Nasdaq National Market, or (2) the Class B-1 Directors and Class
B-2 Directors elect not to serve on any such committee, or (C) relating
to the number, election, powers or rights of Class B-1 Directors, Class
B-2 Directors or Non-Class B Directors; or
(xii) enter into any agreement with any Affiliate of the
Corporation (other than Subsidiaries of the Corporation) involving
amounts in excess of $5 million.
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(d) So long as the Current Series B Amount is equal to or greater than
25% of the Initial Series B Amount, the Corporation may not, without the
approval of Holders of at least a majority of the then outstanding shares of
Series B Preferred Stock voting or consenting, as the case may be, separately as
a single class, undertake, effect or consummate any transaction or series of
transactions (i) described in clauses (i) through (iii) of Section 8(c), (ii)
involving a merger or consolidation, other than a merger or consolidation which
would result in the Voting Stock of the Corporation outstanding immediately
prior to such merger or consolidation continuing to represent more than 50% of
the combined voting power of the Voting Stock of the Corporation or the
surviving entity or parent thereof outstanding immediately after such merger or
consolidation or (iii) through which the Corporation causes a Change of Control
to be effected.
(e) The approval of Holders of at least 75% of the then outstanding
shares of Series B Preferred Stock voting or consenting, as the case may be,
shall be required for any amendment to this Certificate of Designations that
reduces the Liquidation Preference or the Mandatory Redemption Obligation or
amends the provisions of Section 3, 10(c) or 10(d) or this Section 10(e).
(f) The Holders voting or consenting, as the case may be, separately as
a single class, shall be entitled to elect Directors (the Directors so elected,
the "Class B-1 Directors") as follows:
(i) On the Issue Date, two individuals designated by the holders
of shares of Series B Preferred Stock shall be elected as Class B-1
Directors.
(ii) So long as the Current Series B Amount is equal to or
greater than 50% of the Initial Series B Amount, the Holders shall be
entitled to elect, voting as a separate class, two Class B-1 Directors.
(iii) So long as the Current Series B Amount is less than 50% but
equal to or greater than 10% of the Initial Series B Amount, the Holders
shall be entitled to elect, voting as a separate class, one Class B-1
Director.
(iv) The Holders shall not be entitled to elect any Director
pursuant to this Section 10(f) when the Current Series B Amount is less
than 10% of the Initial Series B Amount.
(v) In addition to the number of Class B-1 Directors provided in
the preceding clauses (ii) and (iii), if at any time a Voting Default
shall have occurred, the Holders shall be entitled, voting as a separate
class, to elect one additional Class B-1 Director.
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(vi) Upon any increase or decrease in the total number of Class
B-1 Directors pursuant to this Section 10(f), there shall be a
corresponding and equal increase or decrease in the total number of
Directors.
(vii) So long as the Holders of shares of Series B Preferred
Stock are entitled to elect Class B-1 Directors under this Section
10(f), at any annual meeting of stockholders, or special meeting held in
place thereof, the holders of shares of Series B Preferred Stock, voting
or consenting (as the case may be separately) as a single class, shall
be entitled to elect any Class B-1 Directors due to be elected at such
meeting pursuant to the terms of this Certificate of Designations. Any
vacancy occurring because of the death, disability, resignation or
removal of a Class B-1 Director shall be filled by the vote or consent
of the Holders. A Class B-1 Director may be removed without cause only
by the vote or consent of the Holders of a majority of the outstanding
shares of Series B Preferred Stock.
(g) In addition to any other vote required by law, the affirmative vote
of a majority of the Directors that are not employees or officers of the
Corporation or its Subsidiaries shall be required for any decision of the
Corporation regarding the appointment, removal or compensation of the
Corporation's Chief Executive Officer , or any transaction between the
Corporation (or any of its Subsidiaries) and the Corporation's Chief Executive
Officer (or his or her Affiliates).
Section 11. Reports and Notices.
(a) The Corporation will provide the Holders, at the Corporation's
expense, with the following:
(i) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the
Corporation, and in any event within 45 days thereafter, a consolidated
balance sheet of the Corporation and its Subsidiaries, as of the end of
each such quarterly period, and consolidated statements of income and
sources and applications of funds of the Corporation and its
Subsidiaries for such period and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles in
the United States consistently applied and setting forth in comparative
form the figures for the corresponding periods of the previous fiscal
year, subject to changes resulting from year end audit adjustments and
the absence of notes, together with a management's discussion and
analysis thereof, all in reasonable detail and certified by the
principal financial or accounting officer of the Corporation.
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(ii) As soon as practicable after the end of each fiscal year of
the Corporation, and in any event within 90 days thereafter, a
consolidated balance sheet of the Corporation and its Subsidiaries, as
at the end of such fiscal year, and consolidated statements of income
and sources and applications of funds of the Corporation and its
Subsidiaries, for such year, prepared in accordance with generally
accepted accounting principles in the United States consistently applied
and setting forth in each case in comparative form the figures for the
previous fiscal year, together with a management's discussion and
analysis thereof, all in reasonable detail and certified with an
unqualified audit opinion by independent public accountants of
recognized national standing selected by the Corporation.
So long as the Corporation is subject to the reporting requirements of the
Exchange Act, the Corporation's obligations to provide the information required
pursuant to clauses (i) and (ii) of this Section 11(a) shall be satisfied by the
filing by the Corporation of its quarterly reports on Form 10-Q and its annual
reports on Form 10-K, respectively, or any successor forms thereto, in
accordance with the Exchange Act.
(b) In the event that at any time after the date hereof, (i) the
Corporation shall adopt a dividend policy, change a previously adopted dividend
policy, or declare a dividend in the absence of, or in conflict with, a dividend
policy or declare any distribution with respect to the Common Stock, or (ii) the
Corporation shall declare any stock split, stock dividend, subdivision,
combination, or similar distribution with respect to the Common Stock,
regardless of the effect of any such event on the outstanding number of shares
of Common Stock (either such event hereinafter being referred to as a
"Notification Event"), then and in such case the Corporation shall cause to be
mailed to the Holders, not later than the earlier of the date public
announcement of the Notification Event is first made or the date ten days prior
to the record date, if any, in connection with such Notification Event, written
notice specifying the nature of such event and the effective date of, or the
date on which the books of the Corporation shall close or a record shall be
taken with respect to, such event. Such notice shall also set forth facts
indicating the effect of such action (to the extent such effect may be known at
the date of such notice) on the Conversion Price and the kind and amount of the
shares of stock or other securities or property issuable or distributable with
respect to the Series B Preferred Stock.
(c) The Corporation shall deliver to the Holders all notices and other
reports delivered to holders of Regular Common Stock, including all notices and
reports required by DGCL or other applicable laws.
Section 12. Transfer Restrictions. Any Transfer of shares of Series B
Preferred Stock prior to the 120th day following the Issue Date by a Holder to a
Person other than a Permitted Transferee shall result in the automatic
conversion of the transferee's shares of Series B Preferred Stock into shares of
Regular Common Stock
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pursuant to Section 7, effective as of the date on which certificates
representing the shares of Series B Preferred Stock are presented for transfer
on the stock transfer record books of the Corporation. The Corporation may, at
its discretion, as a condition to the transfer or registration of transfer of
Series B Preferred Stock to a purported Permitted Transferee, require the
furnishing of affidavits or other proof as it deems reasonably necessary to
establish that the proposed transferee is a Permitted Transferee. The term
"Permitted Transferee" of a Holder shall be (i) any direct or indirect
Subsidiary of any Person who was a Holder on the Issue Date, (ii) any investment
fund managed by Joseph Littlejohn & Levy, Inc., a Delaware corporation ("JLL"),
(iii) any Person who is or becomes an investor in a fund managed by JLL,
including Joseph Littlejohn & Levy Fund III, L.P., a Delaware limited
partnership, (iv) the heirs, executors, administrators, testamentary trustees or
legatees of any Holder who is an individual, (v) the spouses and the lineal
descendants of any individual who is a Holder on the Issue Date, and (vi) any
trust, the beneficiaries of which, or any corporation, limited liability company
or partnership, the stockholders, members or general or limited partners of
which include only the Persons referred to in clause (v).
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by David D. Halbert, its Chairman and Chief Executive
Officer, on this 2nd day of October, 2000.
ADVANCE PARADIGM, INC.
By: /s/ David D. Halbert
--------------------------
Name: David D. Halbert
Title: Chairman and Chief Executive
Officer
