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EXHIBIT 99.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ADVANCE PARADIGM, INC.
Advance Paradigm, Inc. a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Advance Paradigm, Inc. The Corporation
was originally incorporated under the name "Advance Pharmacy Services,
Inc." and filed its original Certificate of Incorporation (the "Original
Certificate") with the Secretary of State of the State of Delaware on
July 27, 1993. An Amended and Restated Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on October 7,
1996. A Certificate of Merger, whereby Advance Health Care, Inc. merged
with and into the Corporation, was filed with the Secretary of State of
the State of Delaware on October 11, 1996. A first Certificate of
Amendment to the Amended and Restated Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on October
11, 1996. A second Certificate of Amendment to the Amended and Restated
Certificate of Incorporation was filed with the Secretary of State of
the State of Delaware on November 12, 1999 (the Amended and Restated
Certificate of Incorporation, as so amended by the first and second
Certificate of Amendment, the "First Certificate"). A Certificate of
Designations of Series A-1 11% Preferred Stock, a Certificate of
Designations of Series A-2 11% Preferred Stock, and a Certificate of
Designations of Series B Convertible Preferred Stock were filed with the
Secretary of State of the State of Delaware on October 2, 2000.
2. This Second Amended and Restated Certificate of Incorporation (this
"Certificate"), which amends, restates and supersedes the provisions of
the First Certificate as originally filed and thereafter amended as
described in paragraph 1 above, was duly adopted by the Board of
Directors of the Corporation in accordance with the provisions of
Sections 242 and 245 of the General Corporation Law of the State of
Delaware, as amended from time to time (the "DGCL"), and was duly
adopted by the stockholders of the Corporation in accordance with the
applicable provisions of Sections 242 and 245 of the DGCL.
3. Capitalized terms used in this Certificate shall have the meaning given
to such terms in Article IV.
4. The text of the First Certificate, as amended, is hereby amended,
restated and superseded to read in its entirety as follows:
ARTICLE I
Name
The name of the Corporation is AdvancePCS.
ARTICLE II
Registered Office
The address of the registered office of the Corporation in the State of
Delaware is 2711 Fentonville Road, Suite 400, Wilmington. The name of its
registered agent is Prentiss-Hall Corporation System, Inc.
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ARTICLE III
Purposes
The purpose for which the Corporation is organized is the transaction of any
or all lawful acts and activities for which corporations may be incorporated
under the DGCL.
ARTICLE IV
Definitions
The capitalized terms used in any exhibit hereto shall have the meanings
given to them in such exhibit. The following terms, as used in this
Certificate, shall have the following meanings:
"Additional Shares of Common Stock" means all shares of Common Stock
issued or sold by the Corporation after the Effective 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 Effective Date into
another series or class of Capital Stock of the Corporation without any
additional consideration to the Corporation by the holder thereof,
including shares of Common Stock issued upon conversion of any shares of
Series A Preferred Stock into any class or series of Common Stock; (ii)
issued upon conversion of Class B-1 Common Stock or Class B-2 Common Stock
into Class A Common Stock; (iii) issued upon exercise of options granted to
employees, consultants, officers or directors of the Corporation pursuant
to any stock option plan, in effect on the Effective Date; (iv) issued upon
exercise of the Senior Subordinated Notes Warrants; and (v) 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" means the board of directors of the Corporation.
"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.
"By-Laws" means the by-laws of the Corporation as in effect from time to
time.
"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" has the meaning given in paragraph 2 of the Introduction.
"Class A Common Stock" has the meaning given in Section 5.1.
"Class A Directors" means those persons designated as the initial Class
A Directors as contemplated by the Stockholders Agreement and such other
persons elected as Class A Directors pursuant to
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Article VIII. Only a person who is an officer or employee of the
Corporation or its Subsidiaries shall be qualified for election as, and to
serve as, a Class A Director.
"Class B Common Stock" means the Class B-1 Common Stock and the Class B-
2 Common Stock.
"Class B-1 Common Stock" has the meaning given in Section 5.1.
"Class B-2 Common Stock" has the meaning given in Section 5.1.
"Class B Directors" means the Class B-1 Directors and the Class B-2
Directors.
"Class B-1 Directors" means those persons serving as Class B-1 Directors
on the Effective Date pursuant to Section 10(f) of the Series B Certificate
of Designations and such other persons elected by holders of Class B-1
Common Stock pursuant to Article VIII.
"Class B-2 Directors" means (i) so long as shares of Series A-2
Preferred Stock are outstanding, those persons serving as Class B-2
Directors pursuant to Section 10(c) of the Series A-2 Certificate of
Designations and (ii) following the conversion of Series A-2 Preferred
Stock into Class B-2 Common Stock, such other persons elected by holders of
Class B-2 Common Stock pursuant to Article VIII.
"Class C Directors" means those persons designated as the initial Class
C Directors as contemplated by the Stockholders Agreement and such other
persons elected as Class C Directors pursuant to Article VIII. Only a
person who qualifies as an independent director of the Corporation shall be
qualified for election as, and to serve as, a Class C Director. Independent
director shall have the meaning given to it, (i) if the Nasdaq National
Market is the principal national securities market or quotation system on
which the Class A Common Stock is listed, authorized for trading or quoted,
in the rules of the Nasdaq National Market as in effect from time to time,
or (ii) if the Nasdaq National Market is not the principal national
securities exchange or quotation system on which the Class A Common Stock
is listed, authorized for trading or quoted, in the rules or regulations of
the national securities exchange or quotation system on which the Class A
Common Stock is listed, authorized for trading or quoted.
"Class D Director" means the person designated as the initial Class D
Director as contemplated by the Stockholders Agreement and such other
persons elected as the Class D Director pursuant to Article VIII.
"Class D Termination Date" means the later of (a) October 2, 2002 and
(b) the earlier to occur of (i) the holders of Series A-2 Preferred Stock
and Class B Common Stock having the right to elect or designate, in the
aggregate, two or less Class B Directors pursuant to Article VIII and the
Series A-2 Certificate of Designations and (ii) the sum of the Current
Class B-1 Amount and the Current Class B-2 Amount, representing, in the
aggregate, less than 50% of the Initial Class B Amount.
"Common Stock" means the Class A Common Stock, the Class B-1 Common
Stock and the Class B-2 Common Stock.
"Consolidated Cash Flow" has the meaning given to such term in the
indenture for the Senior Subordinated Notes.
"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
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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 an Optional Conversion, the
date on which the certificates for shares of Class B Common Stock to be
converted in such Optional Conversion are surrendered to the Corporation
and (ii) in the case of a Mandatory Conversion, the date on which the
Prohibited Transfer resulting in such Mandatory Conversion or the Mandatory
Conversion Event occurs.
"Conversion Ratio" has the meaning given in Section 5.3.7(c).
"Convertible Securities" means any evidences of indebtedness, shares
(other than shares of Common Stock) or other securities that, by their
terms, are directly or indirectly convertible into or exchangeable for
Additional Shares of Common Stock.
"Corporation" has the meaning given in the Introduction.
"Current Class B-1 Amount" means, as of any date of determination, (i)
the number of shares of Class B-1 Common Stock issued and outstanding on
such date; plus (ii) the number of shares of Class B-1 Common Stock
issuable upon the conversion on such date of all of the shares of Series A-
1 Preferred Stock issued and outstanding on such date pursuant to the
Series A-1 Certificate of Designations.
"Current Class B-2 Amount" means, as of any date of determination, (i)
if shares of Series A-2 Preferred Stock are issued and outstanding as of
such date, the number of shares of Class B-2 Common Stock issuable upon the
conversion on such date of all of the shares of Series A-2 Preferred Stock
issued and outstanding on such date pursuant to the Series A-2 Certificate
of Designations, and (ii) otherwise, the number of shares of Class B-2
Common Stock issued and outstanding on such date.
"Current Market Price" means, as of any date, the average of the daily
Market Prices of the Class A Common Stock for twenty consecutive trading
days immediately preceding such date.
"DGCL" has the meaning given in paragraph 2 of the Introduction.
"Director" means a member of the Board of Directors.
"Effective Date" means the date of the filing of this Certificate with
the Secretary of State of the State of Delaware.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"First Certificate" has the meaning given in paragraph 1 of the
Introduction.
"GAAP" means accounting principles and practices generally accepted from
time to time in the United States as in effect on the Effective Date.
"Indebtedness" has the meaning given to such term in the Senior
Subordinated Notes Indenture.
"Initial Class B Amount" means the Initial Class B-1 Amount plus the
Initial Class B-2 Amount.
"Initial Class B-1 Amount" means, as of any date of determination, the
number of shares of Class B-1 Common Stock issuable upon the conversion of
65,854 shares of Series A-1 Preferred Stock
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and 84,146 shares of Series B Preferred Stock pursuant to the Series A-1
Certificate of Designations and the Series B Certificate of Designations,
respectively, at the respective conversion ratios therefor in effect on the
date of the initial filing of such certificates of designations with the
Secretary of State of the State of Delaware pursuant to the DGCL
(regardless of the number of shares of Series B Preferred Stock issued and
outstanding on such date and assuming that this Certificate was in full
force and effect on such date), in each case as adjusted for stock
dividends and distributions, and subdivisions, combinations or
consolidations of stock on or prior to such date of determination.
"Initial Class B-2 Amount" means, as of any date of determination, the
number of shares of Class B-2 Common Stock issuable upon the conversion of
125,000 shares of Series A-2 Preferred Stock pursuant to the Series A-2
Certificate of Designations at the conversion ratio therefor in effect on
the date of the initial filing of the Series A-2 Certificate of
Designations with the Secretary of State of the State of Delaware pursuant
to the DGCL (assuming that this Certificate was in full force and effect on
such date), in each case as adjusted for stock dividends and distributions,
and subdivisions, combinations or consolidations of stock on or prior to
such date of determination.
"Interest Coverage Ratio" means, as of any date of determination, 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.
"JLL" has the meaning given in Section 5.3.11.
"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 October 2, 2000.
"Mandatory Conversion" has the meaning set forth in Section 5.3.7(b).
"Mandatory Conversion Event" means the occurrence of both of the
following: (i) the sum of the Current Class B-1 Amount and the Current
Class B-2 Amount representing less than 10% of the Initial Class B Amount;
and (ii) neither the holders of Class B Common Stock nor the holders of
Series A-2 Preferred Stock being entitled to elect a Director pursuant to
Article VIII or the Series A-2 Certificate of Designations, as the case may
be.
"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
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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 holders of a majority of the
outstanding shares of Class B Common 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
Class B Common 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 Effective Date
by the Corporation for cash consideration, other than: (i) Capital Stock
issued upon the conversion or exchange of any series or class of Capital
Stock issued and outstanding on the Effective Date into another series or
class of Capital Stock of the Corporation without any additional
consideration to the Corporation by the holder thereof; (ii) shares of
Class B Common Stock issued upon conversion of any shares of Series A
Preferred Stock or Series B Preferred Stock into Class B Common Stock;
(iii) Capital Stock issued upon conversion of any Class B Common Stock into
Class A Common Stock; (iv) dividends or distributions payable in Capital
Stock effected in accordance with Section 5.3.3; (v) Capital Stock issued
upon the exercise of options or warrants that have been issued prior to,
and are outstanding as of, the Effective Date, including the Management
Options and the Senior Subordinated Notes Warrants; (vi) Capital Stock
issued to employees, consultants, officers or directors of the Corporation
pursuant to any stock option plan in effect on October 2, 2000 and
consistent with past practice or adopted after October 2, 2000; (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; and (viii) 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 October 2, 2000 but not previously expended.
"Non-Class B Directors" means any Director who is neither a Class B-1
Director nor a Class B-2 Director.
"Optional Conversion" has the meaning set forth in Section 5.3.7(a).
"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
rights, options or warrants to subscribe for, purchase or otherwise acquire
the shares of Common Stock referred to in clause (iii) of the definition of
Additional Shares of Common Stock are not Options.
"Original Certificate" has the meaning given in paragraph 1 of the
Introduction.
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"Permitted Transferee" has the meaning set forth in Section 5.3.11.
"Person" means any corporation, limited liability company, partnership,
trust, organization, association, other entity or individual.
"Preemptive Rights Notice" has the meaning given in Section 5.3.9(a).
"Preemptive Rights Portion" has the meaning given in Section 5.3.9(a).
"Preferred Stock" has the meaning given in Section 5.2.
"Prohibited Transfer" means any Transfer of shares of Class B Common
Stock not permitted by Section 5.3.11.
"Restricted Holder" means a record holder of shares of Class B-1 Common
Stock or Class B-2 Common Stock.
"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 as of October 2, 2000, among the
Corporation, as borrower, the subsidiary guarantors parties thereto as
subsidiary guarantors, 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 Subordinated Notes" means the Corporation's Senior Subordinated
Notes due 2010 issued October 2, 2000 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
deferrals, renewals, extensions, replacements, refinancings or refundings
thereof, or amendments, modifications 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 principal amount of $200,000,000 were issued, as the same may
be amended from time to time.
"Senior Subordinated Notes Warrants" means the warrants to purchase
Class A Common Stock issued on October 2, 2000 to Rite Aid Corporation.
"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 (i) prior to the
Effective Date, 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 October 2, 2000, and (ii) following the Effective
Date, Exhibit A hereto, in each case as amended, supplemented or restated
from time to time.
"Series A-2 Certificate of Designations" means (i) prior to the
Effective Date, the Certificate of Designations for the Series A-2
Preferred Stock filed pursuant to the DGCL with the Secretary of State of
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the State of Delaware on October 2, 2000, and (ii) following the Effective
Date, Exhibit B hereto, in each case amended, supplemented or restated from
time to time.
"Series A Preferred Stock" means the Series A-1 Preferred Stock and the
Series A-2 Preferred Stock.
"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 Certificate of Designations" means (i) prior to the Effective
Date, the Certificate of Designations for the Series B Preferred Stock
filed pursuant to the DGCL with the Secretary of State of the State of
Delaware on October 2, 2000, and (ii) following the Effective Date, Exhibit
C hereto, in each case as amended, supplemented or restated from time to
time.
"Series B Preferred Stock" means the Preferred Stock designated by the
Board of Directors as Series B Convertible 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 B Certificate of Designations. For
avoidance of doubt, it is expressly stipulated that all issued and
outstanding shares of Series B Preferred Stock will automatically be
converted into Class B-1 Common Stock on the Effective Date, and thereafter
such converted shares of Series B Preferred Stock shall have the status of
authorized but unissued shares of Preferred Stock and the Series B
Preferred Stock shall no longer be a designated series of Preferred Stock.
"Stockholders' Agreement" means the Stockholders' Agreement, dated as of
October 2, 2000, 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 transferee) sale,
transfer, assignment, grant of participation interest in, option, pledge,
hypothecation, encumbrance or other disposition.
"Voting Default" means the taking of any of the actions set forth in
clauses (i) through (ix) of Section 5.3.10(b) or any of the actions set
forth in Section 5.3.10(c) in violation of the provisions of such sections.
"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.
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ARTICLE V
Capital Stock
Section 5.1 Authorized Capital Stock. The aggregate number of shares of
capital stock that the Corporation is authorized to issue is 105,000,000
shares, consisting of (a) 86,250,000 shares of Class A Common Stock, par value
$.01 per share (the "Class A Common Stock"), (b) 7,500,000 shares of Class B-1
Common Stock, par value $.01 per share (the "Class B-1 Common Stock"), (c)
6,250,000 shares of Class B-2 Common Stock, par value $.01 per share (the
"Class B-2 Common Stock"), and (d) 5,000,000 shares of preferred stock, par
value $.01 per share (the "Preferred Stock").
Upon the effectiveness of this Certificate pursuant to the DGCL (the
"Effective Time"), each share of common stock, par value $0.01 per share, of
the Corporation issued and outstanding immediately prior to the Effective Time
shall be reclassified, changed, converted and exchanged into one share of Class
A Common Stock. From and after the Effective Time, stock certificates that
immediately prior to the Effective Time represented such shares of common stock
shall automatically and without the necessity of presenting the same for
exchange, represent shares of Class A Common Stock.
Section 5.2 Preferred Stock. Of the authorized Preferred Stock, 65,854
shares are designated Series A-1 11% Preferred Stock (the "Series A-1 Preferred
Stock"), 125,000 shares are designated Series A-2 11% Preferred Stock (the
"Series A-2 Preferred Stock"), and 84,146 shares are designated Series B
Convertible Preferred Stock (the "Series B Preferred Stock"). The respective
rights, preferences and powers, and the restrictions, qualifications and
limitations thereon, granted to and imposed on the Series A-1 Preferred Stock,
Series A-2 Preferred Stock and Series B Preferred Stock are set forth in
Exhibits A, B and C, respectively, to this Certificate and incorporated herein
by reference. Except for the Series A-1 Preferred Stock, Series A-2 Preferred
Stock and Series B Preferred Stock, all shares of Preferred Stock may be
issued, from time to time, with such powers, designations, preferences and
relative, participating, optional or other special rights, including voting
rights, and qualifications, limitations or restrictions thereof as shall be
stated and expressed in the resolution or resolutions providing for the issue
of such series adopted by the Board of Directors in accordance with this
Certificate and the DGCL.
Section 5.3 Common Stock.
5.3.1 Generally. Except as otherwise provided in this Certificate or as
required by the DGCL, all shares of Class A Common Stock, Class B-1 Common
Stock and Class B-2 Common Stock shall be identical in all respects and shall
entitle the holders thereof to the same rights, powers and preferences.
5.3.2 Issuance of Class B Common Stock. Shares of Class B-1 Common Stock and
Class B-2 Common Stock may only be issued upon the conversion of Series A-1
Preferred Stock, Series A-2 Preferred Stock or Series B Preferred Stock, as
applicable, into Class B-1 Common or Class B-2 Common Stock, as applicable, in
accordance with the applicable Series A Certificate of Designations or the
Series B Certificate of Designations, as the case may be, or in accordance with
this Section 5.3, and may not be issued for any other purpose.
5.3.3 Dividends and Distributions. Subject to the rights of holders of
Preferred Stock, holders of Common Stock shall be entitled to receive such
dividends and other distributions in cash, stock or property of the Company as
may be declared and paid thereon by the Board of Directors from time to time.
The holders of the Class A Common Stock, the Class B-1 Common Stock and the
Class B-2 Common Stock shall be entitled to receive and to share equally and
ratably, share and share alike, any such dividends and other distributions,
subject to the following:
(i) if the Conversion Ratio on the record date for payment of any such
dividend or distribution is other than one, then the amount of such
dividend or distribution allocated between the shares of Class A Common
Stock, on the one hand, and the shares of Class B Common Stock, on the
other hand, shall be adjusted to be proportionate based on the Conversion
Ratio then in effect; and
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(ii) if the dividends or distributions that are declared are payable in
shares of Common Stock, such dividends or distributions will be declared at
the same rate on each such class of Common Stock, and the dividends or
distributions payable to holders of Class A Common Stock will be paid in
Class A Common Stock, the dividends or distributions payable to holders of
Class B-1 Common Stock will be paid in Class B-1 Common Stock and the
dividends or distributions payable to holders of Class B-2 Common Stock
will be paid in Class B-2 Common Stock.
5.3.4 Liquidation. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation and
distribution in full of preferential amounts (if any) to be distributed to the
holders of shares of Preferred Stock, the holders of shares of Class A Common
Stock, Class B-1 Common Stock and Class B-2 Common Stock shall be entitled to
share equally, on a share for share basis, in the remaining net assets of the
Corporation available for distribution to the stockholders of the Corporation.
Notwithstanding anything in the foregoing to the contrary, if the Conversion
Ratio at the time of the liquidation, dissolution or winding up of the affairs
of the Corporation is other than one, then the net assets of the Corporation
allocated between the shares of Class A Common Stock, on the one hand, and the
shares of Class B Common Stock, on the other hand, shall be adjusted to be
proportionate based on the Conversion Ratio then in effect. Neither the
consolidation nor the merger of the Corporation with or into any other Person,
nor the sale, transfer or lease of all or substantially all of the assets of
the Corporation shall itself be deemed to be a liquidation, dissolution or
winding up of the affairs of the Corporation within the meaning of this Section
5.3.4.
5.3.5 Subdivisions, Combinations or Consolidations of Common Stock. The
Corporation may not subdivide, combine, consolidate or reclassify any class of
Common Stock without subdividing, combining, consolidating or reclassifying
each other class of Common Stock on an equal per share basis. Without limiting
the generality of the foregoing:
(i) in the event the outstanding shares of any class of Common Stock are
subdivided or reclassified into a greater number of shares of Common Stock,
then and in each such case the Corporation shall effect a corresponding
subdivision or reclassification of the outstanding shares of each other
class of Common Stock into a greater number of shares of each such class on
an equal and proportionate basis; and
(ii) in the event the outstanding shares of any class of Common Stock
are combined, consolidated or reclassified into a lesser number of shares
of such Common Stock, then and in each such case the Corporation shall
effect a corresponding combination, consolidation or reclassification of
the outstanding shares of each other class of Common Stock into a lesser
number of shares of each such class on an equal and proportionate basis.
5.3.6 Consolidation Merger, Sale of Assets, 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 but, in connection with such consolidation
or merger, the shares of any class 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 transaction or
series of transactions related to such transfer), then, and in each such event,
holders of each class of Common Stock shall be entitled to receive the stock
and other securities, cash and property, if any, to be received as a result of
any such transaction on an equal per share basis with the holders of each other
class of Common Stock, except that if the Conversion Ratio at the time of any
such transaction is other than one, then the stock and other securities, cash
and property, to be allocated between the shares of Class A Common Stock, on
the one hand, and shares of Class B Common Stock, on the other hand, shall be
adjusted to be proportionate based on the Conversion Ratio then in effect.
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5.3.7 Conversion of Class B Common Stock.
(a) Optional Conversion. Subject to and in compliance with the provisions of
this Section 5.3.7, each holder of shares of Class B Common Stock may, at any
time and from time to time, at such holder's election, convert any or all
outstanding shares of Class B Common Stock of such holder into shares of Class
A Common Stock (such conversion, an "Optional Conversion").
(b) Mandatory Conversion. Subject to the provisions of this Section 5.3.7,
(i) upon the occurrence of a Prohibited Transfer, all of the outstanding shares
of Class B Common Stock being Transferred in such Prohibited Transfer shall
automatically convert into shares of Class A Common Stock, and (ii) upon the
occurrence of a Mandatory Conversion Event, all of the outstanding shares of
Class B Common Stock shall automatically convert into shares of Class A Common
Stock (any such conversion, a "Mandatory Conversion").
(c) Conversion Ratio. Upon any Optional Conversion or a Mandatory
Conversion, the holder of the shares of Class B Common Stock being converted
shall receive a number of shares of Class A Common Stock equal to the product
of (A) the number of shares of Class B Common Stock being converted and (B) the
Conversion Ratio then in effect. The "Conversion Ratio" shall initially be one,
and shall be subject to adjustment from time to time pursuant to Section 5.3.8.
(d) Conversion Mechanics.
(i) In the case of an Optional Conversion, the holder of the shares of
Class B Common 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 Class B Common 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 Class A Common Stock in
any name other than the name or names set forth on the certificates for the
shares of Class B Common Stock unless the requirements of the Stockholders'
Agreement relating to the transfer of shares of Class B Common Stock have
been complied with or waived by the Corporation.
(ii) In the event of a Mandatory Conversion, (A) if such Mandatory
Conversion is pursuant to clause (i) of Section 5.3.7(b), all shares of
Class B Common Stock Transferred in the related Prohibited Transfer, and
(B) if such Mandatory Conversion is pursuant to clause (ii) of Section
5.3.7(b), all outstanding shares of Class B Common Stock, shall be
converted automatically without any further action by the holder or holders
thereof 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 A Common Stock issuable upon
such Mandatory Conversion upon the surrender of certificates representing
the corresponding shares of Class B Common Stock, in the same name as the
name in which such shares of Class B Common Stock are registered.
(iii) Notwithstanding clause (i) or (ii) of this Section 5.3.7(d), if
the holder of any share or shares of Class B Common 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 Class A Common Stock issuable
upon any Optional Conversion or Mandatory Conversion, as the case may be,
in the name of such holder.
(iv) In connection with any Conversion, as promptly as practicable after
the delivery by a holder of shares of Class B Common Stock of the
certificates for shares of Class B Common Stock (or in the case
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of a lost certificate, the certification, the agreement and, if requested,
posting of the bond described in clause (iii) of this Section 5.3.7(d)),
the Corporation shall issue and shall deliver to such holder, or, on the
holder's written order, to the holder's transferee, (A) a certificate or
certificates for the whole number of shares of Class A Common Stock
issuable upon the Conversion of such shares in accordance with the
provisions of this Section 5.3.7, (B) any cash adjustment required pursuant
to Section 5.3.7(g), and (C) in the event of an Optional Conversion in
part, a certificate or certificates for the whole number of shares of Class
B Common 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
Class A Common Stock shall be issuable upon such Conversion shall be deemed
to have become the holder of record of the shares of Class A Common Stock
represented thereby at such time on the applicable Conversion Date and such
Conversion shall be into a number of whole shares of Class A Common Stock
equal to the product of the number of shares of Class B Common Stock
surrendered multiplied by the Conversion Ratio in effect on the applicable
Conversion Date. All shares of Class A Common Stock delivered upon
conversion of the Class B Common 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 Class B
Common 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 Class A Common Stock
and other amounts payable pursuant to this Section 5.3.7 and, in the event
of an Optional Conversion in part, a certificate or certificates
representing the shares of Class B Common 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 Class A Common
Stock as shall be required for the purpose of effecting Conversions of Class B
Common Stock (including the Conversion of all shares of Class B Common Stock
issuable from time to time upon conversion of shares of Series A-1 Preferred
Stock or Series A-2 Preferred Stock). Prior to the delivery of any Class A
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 Class A Common Stock upon any Conversion, other than any
tax payable in respect of any transfer involved in the issue or delivery of
shares of Class A Common Stock in a name other than that of the holder of the
Class B Common Stock to be converted. The Corporation shall have the right not
to issue or deliver any shares of Class A Common Stock in a name other than
that of the holder of the Class B Common Stock to be converted unless and until
the Person requesting such issuance 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 Class A 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 Class A Common Stock on the Conversion
Date.
(h) No Impairment. The Corporation will not, through any reorganization,
transfer of assets, consolidation, merger, dissolution, issuance or sale of
securities or any other voluntary action, 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 5.3.7 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 Class B Common Stock against impairment. Without limiting the
generality of the foregoing, the
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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 Class A 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 Ratio if the total number of shares of
Class A Common Stock issuable after the action upon the Conversion of all of
the Class B Common Stock (including the Conversion of all shares of Class B
Common Stock issuable from time to time upon conversion of shares of Series A-1
Preferred Stock or Series A-2 Preferred Stock) will exceed the total number of
shares of Class A Common Stock then authorized by this Certificate of
Incorporation and available for the purpose of issuance upon such Conversion.
5.3.8 Adjustments to Conversion Ratio.
(a) Adjustment of Conversion Ratio Upon Issuance of Additional Shares of
Common Stock. In the event the Corporation, at any time after the Effective
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 Conversion Ratio shall be
adjusted, concurrently with such issue or sale, by multiplying the Conversion
Ratio then in effect by a fraction, (i) the numerator of which shall be (A) the
number of shares of Common Stock outstanding immediately prior to such issuance
or sale plus (B) the number of shares of Additional Shares of Common Stock so
issued or sold, 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 shares of Common Stock that 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. The provisions of this Section
5.3.8(a) shall not apply to any issuance or sale of Additional Shares of Common
Stock subject to the provisions of Sections 5.3.3 or 5.3.5.
(b) Issuances of Securities Deemed Issuances of Additional Shares of Common
Stock. In the event (x) the Corporation at any time after the Effective 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 (y) 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 Ratio
shall be adjusted in accordance with Section 5.3.8(a) 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 5.3.8(b):
(1) no further adjustment in the applicable Conversion Ratio shall be
made upon the subsequent issuance 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 Ratio 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 Ratio 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
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(3) no readjustment pursuant to the preceding clause (2) shall have the
effect of decreasing the applicable Conversion Ratio to an amount which is
less than the higher of (A) the applicable Conversion Ratio on the original
adjustment date and (B) the applicable Conversion Ratio 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 issuance, 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.
(c) Certificate as to Adjustments. Upon the occurrence of each adjustment or
readjustment of the applicable Conversion Ratio pursuant to this Section 5.3.8,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
shares of Series A Preferred Stock and Class B Common Stock 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 Ratio 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 of shares of Series A
Preferred Stock or Class B Common Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (i) the applicable Conversion
Ratio at the time in effect, and showing how it was calculated, and (ii) the
number of shares of Class A 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 Class B Common Stock, the
Corporation will have the certificates referred to in this Section 5.3.8(c)
prepared and delivered by an internationally recognized independent accounting
firm.
5.3.9 Preemptive Rights.
(a) The Corporation shall provide each holder of Class B Common Stock 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 of
Class B Common Stock 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 of Class B Common Stock, be
based upon the ratio of (i) the number of shares of Class A Common Stock into
which such holder's Class B Common Stock would be convertible 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 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).
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(b) A holder of Class B Common Stock may exercise its rights under this
Section 5.3.9 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 holder 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 of
Class B Common Stock 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 of Class B Common Stock exercising preemptive rights
pursuant to this Section 5.3.9 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 5.3.9.
(d) Other than as provided in this Certificate with respect to the Class B
Common Stock or Series A Preferred Stock or as specifically authorized in the
certificate of designation establishing the terms of any other series of
Preferred Stock or in an agreement approved by the Board of Directors, no
holder of shares of any class or series of capital stock shall be entitled to
any preemptive or preferential right to purchase or subscribe to the Capital
Stock.
5.3.10 Voting Rights.
(a) General. Except as otherwise provided in this Certificate or required by
law, (i) the holders of the Common Stock shall be entitled to vote on all
matters requiring stockholder action, each outstanding share of Class A Common
Stock shall entitle the holder thereof to one vote on each matter properly
submitted to the stockholders of the Corporation for their vote and each share
of Class B Common Stock shall entitle the holder thereof to a number of votes
equal to the number of votes which could be cast in such vote by a holder of
the shares of Class A Common Stock into which such share of Class B Common
Stock is convertible on the record date for such vote, and (ii) the holders of
the Class A Common Stock, Class B-1 Common Stock and Class B-2 Common Stock
shall vote together as one class on all such matters. Notwithstanding the
foregoing, unless otherwise required by law, (i) except as set forth in
Sections 5.3.10(b) and 5.3.10(c) with respect to holders of Class B Common
Stock, holders of Common Stock, as such, shall not be entitled to vote on any
amendment to this Certificate (or on any amendment to a certificate of
designations of any series of Preferred Stock) that only alters or changes the
powers, preferences, rights or other terms of one or more outstanding series or
class of Preferred Stock if the holders of such series or class of Preferred
Stock are entitled to vote or consent, either separately or together with the
holders of one or more other such series or classes of Preferred Stock, on such
amendment pursuant to this Certificate (or pursuant to a certificate of
designations of any series of Preferred Stock) or pursuant to the DGCL, (ii)
holders of Class A Common Stock, as such, shall not be entitled to vote on any
matter submitted to a vote of the holders of Class B Common Stock pursuant to
Sections 5.3.10(b) and 5.3.10(c), (iii) holders of Class A Common Stock and
Class B Common Stock shall be entitled to vote for Directors only as set forth
in Article VIII below, and (iv) holders of Common Stock, as such, shall not be
entitled to vote on or consent to any matter submitted to a vote of any series
of Preferred Stock in which the holders of such series of Preferred Stock,
either separately or together with any other series of Preferred Stock, are
entitled to vote pursuant to this Certificate or a certificate of designations
of a series of Preferred Stock, unless otherwise provided in such certificate
of designations.
(b) Matters Subject to Approval of Holders of Class B Common Stock. In
addition to any other voting rights provided in this Certificate or required by
law, the affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Class B-1 Common Stock and Class B-2 Common Stock voting
or consenting, as the case may be, together as a separate class shall be
required for the Corporation to:
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(i) amend or repeal any provision of, or add any provision to, this
Certificate or the By-Laws so as to affect adversely the powers, rights,
preferences including, without limitation, the conversion rights (including
the Conversion Ratio) or voting rights, of the shares of Class B-1 Common
Stock or Class B-2 Common Stock;
(ii) amend or repeal any provision of, or add any provision to, either
of the Series A Certificates of Designations;
(iii) authorize the issuance of or issue any additional shares of Class
B-1 Common Stock or Class B-2 Common Stock, other than upon the conversion
of the Series A-1 Preferred Stock, Series A-2 Preferred Stock and Series B
Preferred Stock, or pursuant to the provisions of Section 5.3.3. or Section
5.3.5;
(iv) 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 (iv) unless the Indebtedness so
incurred remains outstanding for at least 30 consecutive days following the
initial incurrence thereof;
(v) voluntarily file for bankruptcy, liquidation, dissolution or winding
up of the Corporation;
(vi) increase the number of Directors to more than eleven, unless (A)
the holders of Class B-1 Common Stock are entitled to elect an additional
Class B-1 Director pursuant to Section 8.4, (B) the holders of Class B-2
Common Stock are entitled to elect an additional Class B-2 Director
pursuant to Section 8.4, (C) 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 as provided in this
Certificate, or (D) such increase is otherwise permitted in this
Certificate;
(vii) have less than three 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, disqualification or
removal of such a Director, not have another employee or officer promptly
elected or appointed as a Director to fill such vacancy) as provided in
this Certificate;
(viii) 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, or (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 or such other national securities exchange upon
which the Corporation's securities may be listed for trading from time to
time, 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 such national
securities exchange, 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
(ix) enter into any agreement with any Affiliate of the Corporation
(other than Subsidiaries of the Corporation) involving amounts in excess of
$5 million.
(c) So long as the sum of the Current Class B-1 Amount and the Current Class
B-2 Amount is equal to or greater than 25% of the Initial Class B Amount and
equal to or greater than 5% of the total issued and outstanding shares of
Common Stock (assuming 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), in
addition to any other voting rights provided in this Certificate or required by
law, the affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Class B-1 Common Stock and Class B-2 Common Stock voting
or consenting, as the case may be, together as a separate class, shall be
required for the Corporation to undertake, effect or consummate any transaction
or series of
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transactions (i) described in clauses (i) through (iii) of Section 5.3.6, (ii)
involving a merger or consolidation of the Corporation with or into any Person,
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.
5.3.11 Transfer Restrictions. Any Transfer of shares of Class B Common Stock
by a Restricted Holder to a Person other than a Permitted Transferee shall
result in the automatic conversion (pursuant to Section 5.3.7(b)) into shares
of Class A Common Stock of the shares of Class B Common Stock of such
Restricted Holder so transferred. The Corporation may, at its discretion, as a
condition to the transfer or registration of transfer of Class B Common 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" means,
(a) with respect to a holder of Class B-1 Common Stock, (i) any direct or
indirect Subsidiary of any Person who was a record holder of Series B Preferred
Stock on the date of the initial filing of the Series B Certificate of
Designations, (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 individual who was a
record holder of Series A-1 Preferred Stock or Series B Preferred Stock, (v)
the spouses and the lineal descendants of any individual who owned shares of
Series A-1 Preferred Stock or Series B Preferred Stock on the date of the
initial filing of the Series A-1 Certificate of Designations and the Series B
Certificate of Designations, 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 (A) an individual
who was a holder of Series A-1 Preferred Stock or Series B Preferred Stock on
the date of the initial filing of the Series A-1 Certificate of Designations
and the Series B Certificate of Designations, and (B) the Persons referred to
in clause (v), and (b) with respect to a holder of Class B-2 Common Stock, (i)
any Subsidiary of such holder, (ii) Rite Aid Corporation, a Delaware
corporation, and any direct or indirect Subsidiary of Rite Aid Corporation, and
(iii) any Person who is an institutional lender acquiring such shares of Class
B-2 Common Stock or a security interest therein or pledge thereof from any
Person referred to in clause (ii) as security for Indebtedness of such Person
referred to in clause (ii) (including any such acquisition upon foreclosure).
ARTICLE VI
Term
The Corporation is to have perpetual existence.
ARTICLE VII
Winding up; Receivership
Whenever a compromise or arrangement is proposed between the Corporation and
its creditors or any class of them and/or between the 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 the Corporation under the provisions of
Section 291 of the DGCL, or on the application of trustees in dissolution or of
any receiver or receivers appointed for the Corporation under the provisions of
Section 279 of the DGCL, 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 the Corporation, as the case may be, agree to any compromise or
arrangement and to
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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 the Corporation, as the case may be,
and also on the Corporation.
ARTICLE VIII
Board of Directors; By-Laws
Section 8.1 General Powers. Except as otherwise expressly provided in this
Certificate, the property, affairs and business of the Corporation shall be
managed under the direction of the Board of Directors and, except as otherwise
expressly provided by the DGCL, this Certificate or the By-Laws, all of the
powers of the Corporation shall be vested in the Board of Directors.
Section 8.2 Number of Directors. The number of Directors of the Corporation
shall initially be 11 and shall initially consist of three Class A Directors,
two Class B-1 Directors, two Class B-2 Directors, three Class C Directors and
one Class D Director. The number of Directors shall be subject to increase or
decrease (i) as provided in this Certificate, (ii) pursuant to the terms of any
Preferred Stock issued by the Corporation with the approval of a majority of
the Class A Directors, a majority of the Class C Directors, and all of the
Class B Directors, or (iii) as otherwise may be determined by the unanimous
approval of the Board.
Section 8.3 Reduction in Number of Class B Directors.
8.3.1 Reduction in Class B-1 Directors. Notwithstanding Section 8.2, if, at
any time, (i) the Current Class B-1 Amount shall represent less than 50% of the
Initial Class B-1 Amount, then the number of Class B-1 Directors shall be
reduced by one and the term of the Class B-1-II Director shall automatically
terminate, and (ii) the Current Class B-1 Amount shall represent less than 10%
of the Initial Class B-1 Amount, then the number of Class B-1 Directors shall
be reduced to zero Class B-1 Directors and the term of the Class B-1-I Director
shall automatically terminate.
8.3.2 Reduction in Class B-2 Directors. Notwithstanding Section 8.2, if, at
any time after the second anniversary of the Effective Date, (i) the Current
Class B-2 Amount shall represent less than 50% of the Initial Class B-2 Amount,
then the number of Class B-2 Directors shall be reduced by one and the term of
the Class B-2-II Director shall automatically terminate, and (ii) the Current
Class B-2 Amount shall represent less than 10% of the Initial Class B-2 Amount,
then the number of Class B-2 Directors shall be reduced to zero Class B-2
Directors and the term of the Class B-2-I Director shall automatically
terminate.
8.3.3 Reduction in Total Directors. Upon any reduction in the number of
Class B-1 Directors or Class B-2 Directors pursuant to the terms of this
Certificate, the total number of total Directors shall automatically be reduced
by the number of the reduction in the number of Class B-1 Directors or Class B-
2 Directors, as applicable.
Section 8.4 Right of Holders to Elect Additional Directors. Notwithstanding
Sections 8.2 or 8.3, if a Voting Default shall occur after the Effective Date
and:
(i) if there are shares of Class B-1 Common Stock issued and outstanding
at the time of such Voting Default, then the total number of Directors
shall be increased by one additional Director, which is hereby deemed to be
a Class B-1 Director, and the total number of Directors constituting the
Class B-1 Directors shall be automatically increased by one and (A) prior
to the first annual meeting of stockholders after such Voting Default, such
additional Director shall be designated by the Class B-1 Directors, and (B)
at and following the first annual meeting of stockholders after the date of
such Voting Default, such additional Director shall be elected by the
holders of shares of Class B-1 Common Stock, voting or consenting
separately as a single class; and
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(ii) if there are shares of Class B-2 Common Stock issued and
outstanding at the time of such Voting Default, then the total number of
Directors shall be increased by one additional Director, which is hereby
deemed to be a Class B-2 Director, and the total number of Directors
constituting the Class B-2 Directors shall be automatically increased by
one and (A) prior to the first annual meeting of stockholders after such
Voting Default, such additional Director shall be designated by the Class
B-2 Directors, and (B) following the first annual meeting of stockholders
after the date of such Voting Default, such additional Director shall be
elected by the holders of shares of Class B-2 Common Stock voting or
consenting separately as a single class.
Any additional Directors elected pursuant to this Section 8.4 shall not be
divided into classes pursuant to Section 8.5.6, the term of any such Director
elected by holders of Class B-1 Common Stock shall automatically terminate when
the number of Class B-1 Directors is reduced to zero pursuant to Section 8.3.1,
and the term of any such Director elected by holders of Class B-2 Common Stock
shall automatically terminate when the number of Class B-2 Directors is reduced
to zero pursuant to Section 8.3.2.
Section 8.5 Election of Directors.
8.5.1 Class A Directors. Prior to each annual meeting of stockholders, the
Corporation's nominees for Class A Directors standing for election at such
meeting shall be nominated by a majority of the Class A and Class C Directors
then in office. The Class A Directors shall be elected by plurality vote of the
holders of the shares of Class A Common Stock, voting or consenting (as the
case may be) separately as a single class. Each Class A Director so elected
shall at the time of such election be designated as a Class A-I Director, a
ClassA-II Director or a Class A-III Director, as applicable, and shall hold
office as set forth in Section 8.5.6.
8.5.2 Class B-1 Directors. Prior to each annual meeting of stockholders, the
Corporation's nominees for Class B-1 Directors standing for election at such
meeting shall be nominated by a majority of the Class B-1 Directors then in
office. The Class B-1 Directors shall be elected by plurality vote of the
holders of the shares of Class B-1 Common Stock, voting or consenting (as the
case may be) separately as a single class. Other than the Class B-1 Director
elected or appointed pursuant to Section 8.4, each Class B-1 Director so
elected, shall at the time of such election be designated as a Class B-1-I
Director or a Class B-1-II Director, as applicable, and shall hold office as
set forth in Section 8.5.6.
8.5.3 Class B-2 Directors. Prior to each annual meeting of stockholders, the
Corporation's nominees for Class B-2 Directors standing for election at such
meeting shall be nominated by a majority of the Class B-2 Directors then in
office. So long as there are any outstanding shares of Series A-2 Preferred
Stock, the Class B-2 Directors shall be elected by holders of Series A-2
Preferred Stock pursuant to the Series A-2 Certificate of Designations. From
and after the conversion of the Series A-2 Preferred Stock into Class B-2
Common Stock, the Class B-2 Directors shall be elected by plurality vote of the
holders of the shares of Class B-2 Common Stock, voting or consenting (as the
case may be) separately as a single class, present in person or by proxy at
such meeting and entitled to vote on the election of Class B-2 Directors. Other
than the Class B-2 Director elected or appointed pursuant to Section 8.4, each
Class B-2 Director so elected shall at the time of such election be designated
as a Class B-2-I Director or a Class B-2-II Director, as applicable, and shall
hold office as set forth in Section 8.5.6.
8.5.4 Class C Directors. Prior to each annual meeting of stockholders, the
Corporation's nominees for Class C Directors standing for election at such
meeting shall be nominated by vote of a majority of the Class A and Class C
Directors then in office. The Class C Directors shall be elected by plurality
vote of the holders of the shares of Class A Common Stock, voting or consenting
(as the case may be) separately as a single class. Each Class C Director so
elected shall at the time of such election be designated as a Class C-I
Director, a Class C-II Director or a Class C-III Director, as applicable, and
shall hold office as set forth in Section 8.5.6.
8.5.5 Class D Director. Prior to each annual meeting of stockholders the
record date for which is prior to the Class D Termination Date, the
Corporation's nominee for the Class D Director shall be an individual
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designated by vote of (i) a majority of the Class A Directors then in office,
and (ii) approved by all of the Class B Directors then in office, such approval
not to be unreasonably withheld. The Class D Director shall be elected by
plurality vote of the holders of the shares of Common Stock, voting together as
a single class. Following the Class D Termination Date, the class of Class C
Directors shall increase by one, the Class D Director then in office shall
become a Class C Director and the class of Class D Director shall cease to
exist.
8.5.6 Classification by Term of Office. The Class A Directors shall be
divided into three classes, designated Class A-I, Class A-II and Class A-III,
with one Class A-I Director, one Class A-II Director and one Class A-III
Director. The Class B-1 Directors shall be divided into two classes, designated
Class B-1-I, and Class B-1-II, with one Class B-1-I and one Class B-1-II
Director. The Class B-2 Directors shall be divided into two classes, designated
Class B-2-I and B-2-II, with one Class B-2-I Director and one Class B-2-II
Director. The Class C Directors shall be divided into three classes, designated
Class C-I, Class C-II and Class C-III, with one Class C-I Director, one Class
C-II Director and one Class C-III Director. The term of the initial Class A-I,
Class B-1-I, Class B-2-I and Class C-I Directors shall terminate on the first
annual meeting of stockholders of the Corporation following the Effective Date,
the term of the initial Class A-II, Class B-1-II, Class B-2-II and Class C-II
Directors shall terminate on the second annual meeting of stockholders of the
Corporation following the Effective Date, and the term of the initial Class A-
III, Class C-III Director and Class D Director shall terminate on the third
annual meeting of stockholders of the Corporation following the Effective Date.
At each annual meeting of stockholders of the Corporation, successors to the
Directors whose terms expire at that annual meeting shall be elected for a term
of office to expire at the third succeeding annual meeting of stockholders
after their election. Except as otherwise provided herein, a Director shall
hold office until the annual meeting of stockholders for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
Section 8.6 Directors Elected by Holders of Preferred Stock. Notwithstanding
anything in the foregoing to the contrary, except as provided herein with
respect to the Class B-2 Directors elected by the holders of Series A-2
Preferred Stock pursuant to Section 8.5.3, the holders of any one or more
series of Preferred Stock may have the right to elect Directors if the creation
of such series of Preferred Stock was authorized by a majority of the Class A
Directors, a majority of the Class C Directors and all of the Class B
Directors. The election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of any
certificate of designations applicable thereto (authorized in accordance with
the preceding sentence), and the Directors so elected shall not be divided into
classes pursuant to Section 8.5.6.
During any period when the holders of any series of Preferred Stock have the
right to elect additional Directors as provided for or fixed pursuant to the
terms of such series of Preferred Stock, then upon commencement and for the
duration of the period during which such right continues: (i) the then
otherwise total authorized number of Directors of the Corporation shall
automatically be increased by such specified number of Directors, and the
holders of such Preferred Stock shall be entitled to elect the additional
Directors so provided for or fixed pursuant to said provisions and (ii) each
such additional Director shall serve until such Director's successor shall have
been duly elected and qualified, or until such Director's right to hold such
office terminates pursuant to said provisions, whichever occurs earlier,
subject to such Director's earlier death, disqualification, resignation or
removal. Except as otherwise provided by the Board of Directors in the
resolution or resolutions establishing such series, whenever the holders of any
series of Preferred Stock having such right to elect additional Directors are
divested of such right pursuant to the provisions of such stock, the terms of
office of all such additional Directors elected by the holders of such stock,
or elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional Directors, shall forthwith
terminate and the total and authorized number of Directors of the Corporation
shall be reduced accordingly.
Section 8.7 Removal of Directors; Qualification. Subject to the rights, if
any, of any class or series of Preferred Stock to elect Directors and to remove
any Director whom the holders of any such stock have the right to elect, any
Director (including persons elected by Directors to fill vacancies in the Board
of Directors)
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may be removed from office without cause only by the affirmative vote or
consent of the holders of at least a majority of the votes represented by the
shares then entitled to vote in the election of such Director.
Section 8.8 Vacancies.
(a) Except as otherwise provided in this Certificate with respect to the
right of the holders of any class or series of Preferred Stock to elect
Directors and to fill vacancies in the Board of Directors relating thereto, any
and all vacancies in the Board of Directors, however occurring, including by
reason of an increase in the size of the Board of Directors, or the death,
resignation, disqualification or removal of a Director, shall be filled:
(i) in the case of the Class A Directors, either (A) by the nomination
by a majority of the remaining Class A and Class C Directors and election
by the same stockholder vote as is required for the election of Class A and
Class C Directors or (B) by the vote of a majority of the remaining Class A
and Class C Directors then in office,
(ii) in the case of the Class B-1 Directors, either (A) by the
nomination by all of the remaining Class B-1 Directors and election by the
same stockholder vote as is required for the election of Class B-1
Directors or (B) by the vote of all of the remaining Class B-1 Directors
then in office,
(iii) in the case of the Class B-2 Directors, either (A) by the
nomination by all of the remaining Class B-2 Directors and election by the
same stockholder vote as is required for the election of the Class B-2
Directors or (B) by the vote of all of the remaining Class B-2 Directors
then in office,
(iv) in the case of the Class C Directors, either (A) by the nomination
by a majority of the remaining Class A and Class C Directors and election
by the same stockholder vote as is required for the election of Class C
Directors or (B) by the vote of the remaining Class A and Class C Directors
then in office, and
(v) in the case of the Class D Director (A) by the nomination by a
majority of the Class A Directors, and approved by all of the Class B
Directors then in office (such approval not to be unreasonably withheld),
and election by the same stockholder vote as is required by the election of
the Class D Director, or (B) by the vote of a majority of the Class A
Directors, and approved by all of the Class B Directors then in office
(such approval not to be unreasonably withheld).
(b) Except as otherwise provided in this Certificate, any Director elected
in accordance with Section 8.8(a) shall hold office for the remainder of the
full term of the class of Directors in which the new directorship was created
or the vacancy occurred and until such Director's successor shall have been
duly elected and qualified or until such Director's earlier resignation or
removal. Except as otherwise provided in this Certificate and subject to the
rights (if any) of the holders of any series of Preferred Stock, when the
number of Directors is increased or decreased, the Board of Directors shall
determine the class or classes to which the increased or decreased number of
Directors shall be apportioned; provided that no decrease in the number of
Directors may shorten the term of any incumbent Director (except as otherwise
provided in Sections 8.3, 8.4, 8.5.5 and 8.6).
(c) In the event of a vacancy in the Board of Directors, the remaining
Directors, except as otherwise provided by law, may exercise the powers of the
full Board of Directors until such vacancy is filled.
Section 8.9 By-Laws. Subject to applicable law and the right of the
stockholders of the Corporation to adopt, amend or repeal the By-Laws of the
Corporation the power to adopt, amend, or repeal the By-Laws of the Corporation
shall be exercised by the Board of Directors of the Corporation.
Section 8.10 Pertaining to the Chief Executive Officer. In addition to any
other vote required by law, the affirmative vote of a majority of the Directors
who are not Class A Directors 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).
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ARTICLE IX
Directors' Liability
To the fullest extent permitted by the DGCL, a Director of the Corporation
shall not be liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director. Any repeal or amendment of this
Article IX by the stockholders of the Corporation or by changes in applicable
law shall, to the extent permitted by applicable law, be prospective only, and
shall not adversely affect any limitation on the personal liability of any
director of the Corporation at the time of such repeal or amendment.
ARTICLE X
Indemnification of Directors, Officers, Etc.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative, any appeal in such an action, suit or proceeding and any inquiry
or investigation that could lead to such an action, suit or proceeding (whether
or not by or in the right of the Corporation), by reason of the fact that such
person is or was a Director, officer, employee or agent of the Corporation or
is or was serving at the request of the Corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another corporation, partnership, joint venture, sole proprietorship, trust,
nonprofit entity, employee benefit plan or other enterprise, against all
judgments, penalties (including excise and similar taxes), fines, settlements
and expenses (including attorneys' fees and court costs) actually and
reasonably incurred by such person in connection with such action, suit or
proceeding to the fullest extent permitted by any applicable law, and such
indemnity shall inure to the benefit of the heirs, executors and administrators
of any such person so indemnified pursuant to this Article X. The right to
indemnification under this Article X shall be a contract right and shall
include, with respect to directors and officers, the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance
of its disposition; provided, however, that, if the DGCL requires, the payment
of such expenses incurred by a director or officer 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 Article X or otherwise.
The Corporation may, by action of its Board of Directors, pay such expenses
incurred by employees and agents of the Corporation upon such terms as the
Board of Directors deems appropriate. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article X shall not be
deemed exclusive of any other right to which those seeking indemnification may
be entitled under any law, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office. Any
repeal or amendment of this Article X by the stockholders of the Corporation or
by changes in applicable law shall, to the extent permitted by applicable law,
be prospective only, and not adversely affect the indemnification of any person
who may be indemnified at the time of such repeal or amendment.
ARTICLE XI
Amendments
From time to time any of the provisions of this Certificate may be amended,
altered or repealed, and other provisions authorized by the laws of the State
of Delaware at the time in force may be added or inserted in the manner and at
the time prescribed by said laws and the provisions of this Certificate, and
all rights at any time conferred upon the stockholders of the Corporation by
this certificate of incorporation are granted subject to the provisions of this
Article XI.
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IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by David D. Halbert its Chairman of
the Board and Chief Executive Officer, this 7th day of December, 2000.
Advance Paradigm, Inc.
By: /s/ David D. Halbert
---------------------------------
Name: David D. Halbert
Title: Chairman of the Board and
Chief Executive Officer
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EXHIBIT A
SERIES A-1 11% PREFERRED STOCK
OF
ADVANCE PARADIGM, INC.
Set forth below are the powers, designations, preferences and relative,
participating, optional and other special rights, including voting rights, and
qualifications, limitations and restrictions of the Series A-1 11% Preferred
Stock of Advance Paradigm, Inc., a Delaware corporation (the "Corporation").
Such series of preferred stock, par value $0.01 per share, of the Corporation
(the "Preferred Stock"), was initially created by the Board of Directors of the
Corporation (the "Board of Directors") pursuant to the Amended and Restated
Certificate of Incorporation of the Corporation (as may be amended from time to
time, the "Certificate of Incorporation") and such series is now expressly
incorporated by reference into Section 5.2 of the Second Amended and Restated
Certificate of Incorporation of the Corporation.
Section 1. Designation and Number.
(a) Such series of Preferred Stock is designated as Series A-1 11% Preferred
Stock (the "Series A-1 Preferred Stock"), and the number of shares constituting
such series is 517,573 shares. A total of 65,854 shares of Series A-1 Preferred
Stock shall be initially issued, and 451,719 shares of Series A-1 Preferred
Stock shall be reserved for issuance in accordance with Section 4(a) and may
not be issued for any other purpose.
(b) Shares of Series A-1 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 Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock other than
as Series A-1 Preferred Stock.
Section 2. Definitions. The following terms, as used in this Certificate of
Designations, shall have the following meanings:
"Additional Series A-1 Shares" has the meaning set forth in Section
4(a)(i).
"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 conversion of any shares of Class B Common Stock into Regular Common
Stock; (iv) issued upon the exercise of options or warrants that have been
issued prior to, and are outstanding as of, the Issue Date; (v) 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; (vi) 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; (vii) issued upon
exercise of the Senior Subordinated Notes Warrants; and (viii) issued upon
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
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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.
"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" means (i) prior to the Restated Charter
Effectiveness, the Directors referred to as "Class A Directors" in the
Stockholders' Agreement, and (ii) following the Restated Charter
Effectiveness, the Directors referred to as "Class A Directors" in the
Restated Certificate of Incorporation.
"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 upon the Restated Charter Effectiveness
pursuant to the Restated Certificate of Incorporation.
"Class B-1 Directors" means the Directors (i) designated initially by
holders of Series B Preferred Stock pursuant to the Series B Certificate of
Designations and (ii) following the Restated Charter Effectiveness, elected
by holders of Class B-1 Common Stock pursuant to the Restated Certificate
of Incorporation.
"Class B-2 Common Stock" means the Class B-2 Common Stock to be created
as a separate class of Common Stock upon the Restated Charter Effectiveness
pursuant to the Restated Certificate of Incorporation.
"Class B-2 Directors" means the Directors (i) designated initially by
holders of Series A-2 Preferred Stock pursuant to the Series A-2
Certificate of Designations and (ii) following the Restated Charter
Effectiveness, elected by holders of Class B-2 Common Stock pursuant to the
Restated Certificate of Incorporation.
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"Class C Directors" means (i) prior to the Restated Charter
Effectiveness, the Directors referred to as "Class C Directors" in the
Stockholders' Agreement and (ii) following the Restated Charter
Effectiveness, the Directors referred to as "Class C Directors" in the
Restated Certificate of Incorporation.
"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 the Restated Charter
Effectiveness, 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" has the meaning set forth in Section 7(a).
"Conversion Date" means the first date on which any certificates for
shares of Series A-1 Preferred Stock are surrendered by the Electing Holder
to the Corporation for conversion into Class B-1 Common Stock.
"Conversion Price" has the meaning set forth in Section 7(b).
"Conversion Ratio" has the meaning set forth in Section 7(b).
"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.
"DGCL" means the General Corporation Law of the State of Delaware.
"Director" means a member of the Board of Directors.
"Dividend Payment Date" means March 31st, June 30th, September 30th and
December 31st of each year, unless such day is not a Business Day, in which
case Dividend Payment Date shall be the next succeeding Business Day.
"Dividend Period" means (i) the period beginning on the Dividend Start
Date and ending on the first Dividend Payment Date, and (ii) thereafter,
the quarterly periods from (and including) the first day of a Dividend
Period until the end of such period.
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"Dividend Rate" means, with respect to any share of Series A-1 Preferred
Stock, (i) from (and including) the Dividend Start Date to (and including)
September 30, 2001, a rate per annum equal to 11% of the Liquidation
Preference for such share as of the first day of the applicable Dividend
Period, (ii) from (and including) October 1, 2001 to (and including) March
31, 2002, a rate per annum equal to thirteen percent (13%) of the
Liquidation Preference for such share as of the first day of the applicable
Dividend Period, and (iii) from (and including) and after April 1, 2002, a
rate per annum equal to 16% of the Liquidation Preference for such share as
of the first day of the applicable Dividend Period.
"Dividend Start Date" means the 120th day following the Issue Date.
"Electing Holder" has the meaning given in Section 7(a).
"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,
(iv) the holders of shares of Series A-2 Preferred Stock and Series B
Preferred Stock on the Issue Date and the "Permitted Transferees" (as
defined in the Series A-2 Certificate of Designations or the Series B
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" (as defined in the Series B
Certificate of Designations) of such Persons (assuming that they are
holders of Series B Preferred Stock), 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.
"Holder" means a record holder of shares of Series A-1 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.
"Issue Date" means the original date of issuance of shares of Series A-1
Preferred Stock.
"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" means (i) prior to the Restated Charter Effectiveness,
the securities referred to in clause (i) of Section 3(a), and (ii)
following the Restated Charter Effectiveness, the securities referred to in
clause (i) of Section 3(b), in each case subject to Section 3(c).
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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 A-1 Preferred
Stock as of any date, (i) $1,000, plus (ii) in the case of any accumulated
and unpaid dividends or distributions on such share as of such date payable
in Additional Series A-1 Shares, (A) the number of such Additional Series
A-1 Shares times $1,000 plus (B) the amounts referred to in clauses (iii)
and (iv) of this definition for the accumulated and unpaid dividends
thereon, (iii) all accumulated and unpaid cash dividends and distributions
on such share as of such date, plus (iv) the Market Price of all other
accumulated and unpaid dividends and distributions on such share as of such
date (including an amount equal to a prorated dividend for the period from
the last Dividend Payment Date to the date fixed for redemption,
liquidation, dissolution or winding up, if any).
"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 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 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
Holders of a majority of the outstanding shares of Series A-1 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 A-1 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
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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 (a) prior to the Restated Charter Effectiveness,
any Capital Stock issued after the Issue Date, and (b) after the Restated
Charter Effectiveness, any Capital Stock issued after such effectiveness by
the Corporation for cash consideration, in each case 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) Regular
Common Stock issued upon conversion of Class B Common Stock; (iv) shares of
Series A Preferred Stock issued as a dividend on shares of Series A
Preferred Stock; (v) dividends or distributions payable in shares of
Capital Stock effected in accordance with Section 4(b) or 8(a); (vi)
Capital Stock issued upon the exercise of options or warrants that have
been issued prior to, and are outstanding as of, the Issue Date; (vii)
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; (viii) Capital Stock issued to holders of
Series A-2 Preferred Stock or Series B Preferred Stock pursuant to the
exercise by such holders of their preemptive rights contained in the Series
A-2 Certificate of Designations or the Series B Certificate of
Designations, as the case may be; (ix) Capital Stock issued upon exercise
of the Senior Subordinated Notes Warrants; (x) Common Stock issued upon the
exercise of Management Options; (xi) 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; and (xii) 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 expressly stipulated
that the following are not Options: (i) any rights, options or warrants to
subscribe for, purchase or otherwise acquire shares of Common Stock
referred to in clause (v) or (vi) 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.
"Parity Stock" means (i) prior to the Restated Charter Effectiveness,
the securities referred to in clause (ii) of Section 3(a) and (ii)
following the Restated Charter Effectiveness, the securities referred to in
clause (ii) of Section 3(b), in each case subject to Section 3(c).
"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).
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"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.
"Record Date" means, with respect to a dividend payable on March 31,
June 30, September 30 and December 31 of each year, 5:00 p.m. (Eastern
Standard Time) on the preceding March 15, June 15, September 15 and
December 15, respectively.
"Redemption Date" has the meaning given in Section 6(b).
"Redemption Notice" has the meaning set forth in Section 6(b).
"Related Parties" has the meaning given to such term in the Senior
Subordinated Notes Indenture.
"Regular Common Stock" means (i) initially, the class of Common Stock
existing on the Issue Date, and (ii) upon the Restated Charter
Effectiveness, the Class A Common Stock created as a separate class of
Common Stock pursuant to the Restated Certificate of Incorporation.
"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 the Restated Charter Effectiveness,
pursuant to the Stockholders' Agreement, and (y) after the Restated Charter
Effectiveness, 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.
"Restated Charter Effectiveness" means the date of the filing of the
Restated Certificate of Incorporation with the Secretary of State of the
State of Delaware in accordance with the DGCL following Stockholder
Approval.
"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" means the securities referred to in clause (iii) of
Section 3(b), subject to Section 3(c).
"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
deferrals, renewals, extensions, replacements, refinancings or refundings
thereof, or amendments or supplements thereto or replacements thereof.
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"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-2 Preferred Stock and
Series A-1 Preferred Stock.
"Series A Certificates of Designations" means the Series A-2 Certificate
of Designations and this Certificate of Designations.
"Series A-2 Certificate of Designations" means (i) initially, 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 (ii) following the Restated Charter
Effectiveness, Exhibit A to the Restated Certificate of Incorporation, in
each case, as amended, supplemented or restated from time to time.
"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 A-1 Preferred Stock" has the meaning set forth in Section 1.
"Series B Certificate of Designations" means (i) initially the
Certificate of Designations for the Series B Preferred Stock filed pursuant
to the DGCL with the Secretary of State of the State of Delaware on or
about the Issue Date, and (ii) following the Restated Charter
Effectiveness, Exhibit C to the Restated Certificate of Incorporation, in
each case, as amended, supplemented or restated from time to time.
"Series B Preferred Stock" means the Preferred Stock designated by the
Board of Directors as Series B Convertible 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 B Certificate of Designations.
"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-2 Preferred Stock and
Series B Preferred Stock in accordance with the terms of this Certificate
of Designations, the Series A-2 Certificate of Designations and the Series
B Certificate 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).
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"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 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) Prior to the Restated Charter Effectiveness. Prior to and until the
Restated Charter Effectiveness, the Series A-1 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 created after the
Issue Date and prior to the Restated Charter Effectiveness; and
(ii) on a parity with the Series A-2 Preferred Stock and the Series B
Preferred Stock.
(b) Following the Restated Charter Effectiveness. Upon and following the
Restated Charter Effectiveness, the Series A-1 Preferred Stock shall, with
respect to dividends and distributions and upon a Liquidation Event, rank:
(i) senior to all classes or series of Common Stock;
(ii) on a parity with the Series A-2 Preferred Stock;
(iii) junior to each series or class of Preferred Stock created after
the Restated Charter Effectiveness.
(c) 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) Prior to the Restated Charter Effectiveness. Prior to and until the
Restated Charter Effectiveness:
(i) Beginning on the Dividend Start Date, the Holders of outstanding
shares of Series A-1 Preferred Stock shall be entitled to receive (if and
to the extent of surplus legally available therefor), dividends at the
Dividend Rate payable solely in additional shares of Series A-1 Preferred
Stock ("Additional Series A-1 Shares") in accordance with the terms of this
Section 4. Following the Dividend Start Date, such dividends shall be
payable quarterly in arrears on each Dividend Payment Date for the Dividend
Period ending on such Dividend Payment Date. Dividends on the Series A-1
Preferred Stock shall accrue (whether or not declared) and be cumulative
from (and including) the first day of each Dividend Period in which
dividends may be payable, and accrued dividends for each Dividend Period
shall accumulate to the extent not paid on the Dividend Payment Date for
such Dividend Period; provided that dividends on Additional Series A-1
Shares shall accrue from (and including) the date such Additional Series A-
1 Shares are issued pursuant to this Section 4(a), whether or not in any
Dividend Period there shall be surplus of the Corporation legally available
for the payment of such dividends. Each such dividend shall be payable to
the Holders of shares of Series A-1 Preferred Stock on the corresponding
Record Date.
(ii) The amount of dividends payable for each full Dividend Period for
the Series A-1 Preferred Stock shall be computed by dividing the applicable
Dividend Rate by four. The amount of dividends payable for any period
shorter or longer than a full Dividend Period, shall be computed on the
basis of twelve 30-day months and a 360-day year. Holders of shares of
Series A-1 Preferred Stock shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of cumulative dividends as
herein provided. No interest, or sum of money in lieu of interest, shall be
payable in respect of any
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dividend payment on the Series A-1 Preferred Stock that may be in arrears;
except that if dividends are not paid in full on any Dividend Payment Date,
dividends will cumulate as if the unpaid dividends were payable in cash and
the Liquidation Preference had been increased by the amount of unpaid
dividends until paid.
(iii) Dividends on the shares of Series A-1 Preferred Stock pursuant to
this Section 4(a) shall continue to accrue and accumulate until full
cumulative dividends (including an amount equal to a prorated dividend for
the period from the last Dividend Payment Date to (but not including) the
date of the Restated Charter Effectiveness) have been declared and paid on
the Series A-1 Preferred Stock for all Dividend Periods terminating prior
to the date of the Restated Charter Effectiveness; provided that such
dividends shall cease to accrue or accumulate on (but not including) the
date of the Restated Charter Effectiveness.
(iv) The number of Additional Series A-1 Shares to be issued as
dividends pursuant to this Section 4(a) will equal the cash amount of the
dividend that would have been payable on a share of Series A-1 Preferred
Stock if dividends were payable in cash, divided by $1,000, rounded to the
nearest full share, up or down, after taking into account all shares of
Series A-1 Preferred Stock owned by the Holder thereof, provided that if
the resulting fractional share held by such Holder equals one-half of a
share of Series A-1 Preferred Stock, such fractional share shall be rounded
up to the nearest full share.
(v) Accrued dividends for any past Dividend Periods may be declared and
paid on any subsequent Dividend Payment Date or any other date established
by the Board.
(b) Following the Restated Charter Effectiveness. Upon and following the
Restated Charter Effectiveness, 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 A-1 Preferred Stock been converted into Class
B Common Stock pursuant to Section 7 immediately prior to the record date for
such dividend or distribution.
(c) Dividends or Distributions on Parity Stock. So long as any shares of the
Series A-1 Preferred Stock are outstanding, (i) no dividend or distribution may
be declared or paid or set apart for payment on any Parity Stock by the
Corporation, directly or indirectly, unless (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 A-1 Preferred Stock, and any redemption payments
required by Section 6, have been or are contemporaneously paid or are being
paid on a pro rata basis with any such Parity Stock, and (ii) except as
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 (A) all accumulated and unpaid
dividends and distributions due to be paid on the Series A-1 Preferred Stock,
and any redemption payments required by Section 6, have been or are
contemporaneously paid, and (B) 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.
(d) Dividends or Distributions on Junior Stock. So long as any shares of
Series A-1 Preferred Stock are outstanding, no dividends or other distribution
may be declared or paid or set apart for payment on any Junior Stock, nor may
any Junior Stock be redeemed, purchased or otherwise acquired for any
consideration (or any
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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) dividends or distributions on shares
of Common Stock effected solely in accordance with Section 4(b) or 8(g), 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 A-1
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 A-1
Preferred Stock had been converted into shares of Common Stock pursuant to
Section 7 (assuming that (A) the Restated Charter Effectiveness has occurred
and (B) all outstanding shares of Series A-2 Preferred Stock and Series B
Preferred Stock had been converted into shares of Common Stock pursuant to the
Series A-2 Certificate of Designations and the Series B Certificate of
Designations, respectively, immediately prior to such Liquidation Event).
(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 A-1 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 A-1
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 shares of Series A-1 Preferred
Stock shall terminate.
Section 6. Redemption.
(a) Unless the Restated Charter Effectiveness shall have occurred prior to
the occurrence of the event described in clause (i) or (ii) of this Section
6(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 A-1 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 A-1
Preferred Stock demanding a redemption of the outstanding shares of Series A-1
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
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of a redemption occurring pursuant to clause (i) of this Section 6(a), the date
of the eleventh 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 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 A-1 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 A-1 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 A-1 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, dividends on the shares of Series A-1 Preferred
Stock shall cease to accumulate on the Redemption Date, and all rights of the
Holders with respect to their Series A-1 Preferred Stock, other than the right
to receive the Mandatory Redemption Price, shall terminate on the Redemption
Date.
(e) For the purpose of determining whether funds are legally available for
redemption of Series A-1 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 A-1 Preferred Stock, (i) the Corporation shall use funds
to the extent legally available for such purpose, (ii) the Corporation shall
effect the Mandatory Redemption Obligation pro rata according to the number of
shares of Series A-1 Preferred Stock held by each holder and (iii) the Dividend
Rate on any unpaid portion of the Mandatory Redemption Price shall be increased
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by 2%. 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
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, any 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), its shares of Series A-1
Preferred Stock into Common Stock in lieu of any redemption of its Series A-1
Preferred Stock. Upon such Conversion, the Holders shall no longer be entitled
to any payment in connection with the redemption for the Series A-1 Preferred
Stock.
(h) The Corporation need not establish any sinking fund for the Mandatory
Redemption Obligation.
Section 7. Conversion.
(a) Conversion Right. At any time following the Restated Charter
Effectiveness, subject to and in compliance with the provisions of this Section
7, any Holder may, at such Holder's election, convert all, but not less than
all, of such Holder's shares of Series A-1 Preferred Stock into shares of Class
B-1 Common Stock (the "Electing Holder"), and upon any such conversion, all
other outstanding shares of Series A-1 Preferred Stock shall automatically
convert into shares of Class B-1 Common Stock (the "Conversion").
Notwithstanding any call for redemption pursuant to Section 6, the right to
convert shares pursuant to this Section 7 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) Conversion Ratio. The number of shares of Class B-1 Common Stock
deliverable upon Conversion of one share of Series A-1 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.
(c) Conversion Mechanics.
(i) The Electing Holder shall surrender the certificate representing its
shares of Series A-1 Preferred Stock at the principal office of the
Corporation, with a written notice of election to convert completed and
signed.
(ii) On the Conversion Date, all outstanding shares of Series A-1
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 shares of Class B-1 Common Stock
issuable upon the Conversion upon surrender of certificates representing
the corresponding shares of Series A-1 Preferred Stock. Unless the shares
issuable on Conversion by the Holder are to be issued in the same name as
the name in which such shares of Series A-1 Preferred Stock are registered,
each share surrendered 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 Class B-1 Common Stock in any name
other than the name or names set forth on the certificates for the shares
of Series A-1 Preferred Stock unless the requirements of the Stockholders'
Agreement relating to the transfer of shares of Series A-1 Preferred Stock
have been complied with or waived by the Corporation.
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(iii) Notwithstanding clause (i) or (ii) of this Section 7(c), if the
Holder of any share or shares of Series A-1 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 Class B-1 Common Stock issuable
upon the Conversion in the name of such holder.
(iv) As promptly as practicable after the delivery by the Holder of the
certificates for shares of Series A-1 Preferred Stock (or in the case of a
lost certificate, the certification, the agreement and, if requested, the
posting of the bond described in clause (iii) of this Section 7(c)), 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 A-1 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 Class B-1 Common Stock
issuable upon the Conversion of such shares in accordance with the
provisions of this Section 7, and (B) any cash adjustment required pursuant
to Section 7(f).
(v) The Conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date. The Person in whose
name or names any certificate or certificates for shares of Class B-1
Common Stock shall be issuable upon such Conversion shall be deemed to have
become the holder of record of the shares of Class B-1 Common Stock
represented thereby at such time on the Conversion Date and the Conversion
shall be into a number of whole shares of Class B-1 Common Stock equal to
the product of the number of shares of Series A-1 Preferred Stock
surrendered multiplied by the Conversion Ratio in effect on the applicable
Conversion Date. All shares of Class B-1 Common Stock delivered upon
conversion of the Series A-1 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 the Conversion, the shares of Series A-
1 Preferred Stock 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 Class B-1 Common
Stock and other amounts payable pursuant to this Section 7.
(d) Reservation of Shares; Compliance with Laws. The Corporation covenants
that it will at all times following the Restated Charter Effectiveness reserve
and keep available, free from preemptive rights, such number of its authorized
but unissued shares of Class B-1 Common Stock as shall be required for the
purpose of effecting the Conversion of the Series A-1 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 the Conversion, the Corporation shall comply with all
applicable federal and state laws and regulations which require action to be
taken by the Corporation.
(e) 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 Class B-1 Common Stock upon the Conversion, other than
any tax payable in respect of any transfer involved in the issue or delivery of
shares of Class B-1 Common Stock in a name other than that of the Holder of the
Series A-1 Preferred Stock to be converted. The Corporation shall have the
right not to issue or deliver any shares of Class B-1 Common Stock in a name
other than that of the Holder of the Series A-1 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.
(f) No Fractional Shares. No fractions of shares of Class B-1 Common Stock
shall be required to be issued to a Holder in connection with the 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.
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(g) 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 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 following the Restated Charter Effectiveness in order
to protect the conversion rights of the holders of the Series A-1 Preferred
Stock against impairment. Without limiting the generality of the foregoing,
following the Restated Charter Effectiveness, 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 Class B-1
Common Stock on the 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 Class B-1 Common Stock
issuable after the action upon the Conversion of all of the Series A-1
Preferred Stock will exceed the total number of shares of Class B-1 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 (assuming that the Restated
Charter Effectiveness has occurred) the Series A-1 Preferred Stock been
converted into Class B-1 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 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 the 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 the
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 (assuming that the Restated Charter Effectiveness has occurred)
had converted its Series A-1 Preferred Stock pursuant to Section 7 immediately
prior to such consummation (or, if applicable, any record date with respect to
such transaction), subject to
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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 A-1 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 A-1 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 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 A-1 Preferred Stock shall be
convertible into, in lieu of the number of shares of Class B-1 Common Stock
which the Holders would otherwise have been entitled to receive (assuming that
the Restated Charter Effectiveness has occurred), a number of shares of such
other class or classes of stock equivalent to the number of shares of Class B-1
Common Stock that would have been subject to receipt by the Holders upon any
Conversion (assuming that the Restated Charter Effectiveness has occurred)
immediately before that change. No class or series of Common Stock shall be so
changed into shares of any other class or series of 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
and prior to the Restated Charter Effectiveness, 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 and
prior to the Restated Charter Effectiveness, issues, sells or grants 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
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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):
(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) Certain Payments in Lieu of Dividends. In case the Corporation, at any
time on or after the Issue Date and prior to the Restated Charter
Effectiveness, shall, by dividend or otherwise, distribute to all holders of
its Regular Common Stock evidences of its indebtedness or assets (including
securities other than dividends and distributions paid pursuant to Section
8(a)), then the Conversion Price shall be adjusted by multiplying the
Conversion Price then in effect by a fraction (i) the numerator of which shall
be (A) the Current Market Price of a share of Regular Common Stock on the
record date fixed for such distribution minus (B) the Market Value of the
portion of the assets or evidences of indebtedness so distributed applicable to
one share of Regular Common Stock and (ii) the denominator of which shall be
the Current Market Price of a share of Regular Common Stock on the record date
fixed for such distribution.
(h) 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
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such adjustment or readjustment in 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 A-1 Preferred Stock, the Corporation will have the
certificates referred to in this Section 8(h) 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 Class B-1
Common Stock that such Holder would receive upon the Conversion of its shares
of Series A-1 Preferred Stock into Class B-1 Common Stock pursuant to Section 7
immediately prior to the issuance of the New Securities (assuming that the
Restated Charter Effectiveness had occurred) to (ii) the total number of issued
and outstanding shares of Common Stock immediately prior to the issuance of the
New Securities (assuming (A) that the Restated Charter Effectiveness has
occurred and (B) 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).
(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 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.
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(b) So long as the number of outstanding shares of Series A-1 Preferred
Stock is equal to or greater than 10% of the number of shares of Series A-1
Preferred Stock issued on the Issue Date (subject to adjustments for stock
dividends or distributions and subdivisions, combinations or consolidation of
stock), the affirmative vote of the Holders of at least a majority of the then
outstanding shares of Series A-1 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 A-1 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, the Series A-2 Certificate of Designations or
the Series B Certificate of Designations;
(iii) 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-2 Preferred
Stock and the Series B Preferred Stock, the issuance of shares of Series B
Preferred Stock pursuant to the Series B Certificate of Designations, and
the issuance of shares of Series A-2 Preferred Stock (including issuances
of shares of Series A-2 Preferred Stock as a dividend on the Series A-2
Preferred Stock in accordance with the Series A-2 Certificate of
Designations) in accordance with the Series A-2 Certificate of
Designations;
(iv) 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 approval of the Holders
pursuant to this Section 10(c);
(v) repurchase or redeem any Capital Stock of the Corporation, other
than (A) the Series A-2 Preferred Stock issued on the Issue Date or issued
as a dividend on the Series A-2 Preferred Stock in accordance with the
Series A-2 Certificate of Designations and (B) the Series B Preferred Stock
issued pursuant to the Series B Certificate of Designations, 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 approval of the Holders
pursuant to this Section 10(c);
(vi) 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;
(vii) voluntarily file for bankruptcy, liquidation, dissolution or
winding up of the Corporation;
(viii) increase the number of Directors to more than eleven, unless the
holders of Series B Preferred Stock or Class B-1 Common Stock are entitled
to elect an additional Class B-1 Director pursuant to the Series B
Certificate of Designations or the Restated Certificate of Incorporation,
or the holders of Series A-2 Preferred Stock or Class B-2 Common Stock are
entitled to elect an additional Class B-2 Director pursuant to the Series
A-2 Certificate of Designations or the Restated Certificate of
Incorporation, in which case the number of Directors may be increased by
the number of such additional Directors;
(ix) 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);
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(x) 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
(xi) enter into any agreement with any Affiliate of the Corporation
(other than Subsidiaries of the Corporation) involving amounts in excess of
$5 million.
(c) From and after the Restated Charter Effectiveness, so long as the number
of outstanding shares of Series A-1 Preferred Stock is equal to or greater than
25% of the number of shares of Series A-1 Preferred Stock issued on the Issue
Date (in each case, as adjusted for stock dividends or distributions and
subdivisions, combinations or consolidation of stock), the Corporation may not,
without the approval of Holders of at least a majority of the then outstanding
shares of Series A-1 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.
(d) 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 by 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).
(e) The approval of Holders of at least 75% of the then outstanding shares
of Series A-1 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(b) or 10(c) or this Section 10(e).
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.
(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
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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 A-1 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. Until the 120th day following the Issue
Date and following the Restated Charter Effectiveness, any transfer of shares
of Series A-1 Preferred Stock by a Holder to a Person other than a Permitted
Transferee shall be null and void and of no force and effect . The Corporation
may, at its discretion, as a condition to the transfer or registration of
transfer of Series A-1 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 an individual who was a Holder on the
Issue Date and the Persons referred to in clause (v).
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EXHIBIT B
SERIES A-2 11% PREFERRED STOCK
OF
ADVANCE PARADIGM, INC.
Set forth below are the powers, designations, preferences and relative,
participating, optional and other special rights, including voting rights, and
qualifications, limitations and restrictions of the Series A-2 11% Preferred
Stock of Advance Paradigm, Inc., a Delaware corporation (the "Corporation").
Such series of preferred stock, par value $0.01 per share, of the Corporation
(the "Preferred Stock"), was initially created by the Board of Directors of the
Corporation (the "Board of Directors") pursuant to the Amended and Restated
Certificate of Incorporation of the Corporation (as may be amended from time to
time, the "Certificate of Incorporation") and such series is now expressly
incorporated by reference into Section 5.2 of the Second Amended and Restated
Certificate of Incorporation of the Corporation.
Section 1. Designation and Number.
(a) Such series of Preferred Stock is designated as Series A-2 11% Preferred
Stock (the "Series A-2 Preferred Stock"), and the number of shares constituting
such series is 982,427 shares. A total of 125,000 shares of Series A-2
Preferred Stock shall be initially issued, and 857,427 shares of Series A-2
Preferred Stock shall be reserved for issuance in accordance with Section 4(a)
and may not be issued for any other purpose.
(b) Shares of Series A-2 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 Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock other than
as Series A-2 Preferred Stock.
Section 2. Definitions. The following terms, as used in this Certificate of
Designations, shall have the following meanings:
"Additional Series A-2 Shares" has the meaning set forth in Section
4(a)(i).
"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 conversion of any shares of Class B Common Stock into Regular Common
Stock; (iv) issued upon the exercise of options or warrants that have been
issued prior to, and are outstanding as of, the Issue Date; (v) 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; (vi) 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; (vii) issued upon
exercise of the Senior Subordinated Notes Warrants; and (viii) issued upon
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
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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.
"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" means (i) prior to the Restated Charter
Effectiveness, the Directors referred to as "Class A Directors" in the
Stockholders' Agreement, and (ii) following the Restated Charter
Effectiveness, the Directors referred to as "Class A Directors" in the
Restated Certificate of Incorporation.
"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 upon the Restated Charter Effectiveness
pursuant to the Restated Certificate of Incorporation.
"Class B-1 Directors" means the Directors (i) designated initially by
holders of Series B Preferred Stock pursuant to the Series B Certificate of
Designations and (ii) following the Restated Charter Effectiveness, elected
by holders of Class B-1 Common Stock pursuant to the Restated Certificate
of Incorporation.
"Class B-2 Common Stock" means the Class B-2 Common Stock to be created
as a separate class of Common Stock upon the Restated Charter Effectiveness
pursuant to the Restated Certificate of Incorporation.
"Class B-2 Directors" has the meaning set forth in Section 10(c).
"Class C Directors" means (i) prior to the Restated Charter
Effectiveness, the Directors referred to as "Class C Directors" in the
Stockholders' Agreement and (ii) following the Restated Charter
Effectiveness, the Directors referred to as "Class C Directors" in the
Restated Certificate of Incorporation.
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"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 the Restated Charter
Effectiveness, the Class B Common Stock).
"Conversion" has the meaning set forth in Section 7(a).
"Conversion Date" means the first date on which any certificates for
shares of Series A-2 Preferred Stock are surrendered by the Electing Holder
to the Corporation for conversion into Class B-2 Common Stock.
"Conversion Price" has the meaning set forth in Section 7(b).
"Conversion Ratio" has the meaning set forth in Section 7(b).
"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.
"DGCL" means the General Corporation Law of the State of Delaware.
"Director" means a member of the Board of Directors.
"Dividend Payment Date" means March 31st, June 30th, September 30th and
December 31st of each year, unless such day is not a Business Day, in which
case Dividend Payment Date shall be the next succeeding Business Day.
"Dividend Period" means (i) the period beginning on the Dividend Start
Date and ending on the first Dividend Payment Date, and (ii) thereafter,
the quarterly periods from (and including) the first day of a Dividend
Period until the end of such period.
"Dividend Rate" means, with respect to any share of Series A-2 Preferred
Stock, (i) from (and including) the Dividend Start Date to (and including)
September 30, 2001, a rate per annum equal to 11% of the Liquidation
Preference for such share as of the first day of the applicable Dividend
Period, (ii) from (and including) October 1, 2001 to (and including) March
31, 2002, a rate per annum equal to thirteen percent (13%) of the
Liquidation Preference for such share as of the first day of the applicable
Dividend Period, and (iii) from (and including) and after April 1, 2002, a
rate per annum equal to 16% of the Liquidation Preference for such share as
of the first day of the applicable Dividend Period.
"Dividend Start Date" means the 120th day following the Issue Date.
"Electing Holder" has the meaning given in Section 7(a).
"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, (iv)
the
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holders of shares of Series A-1 Preferred Stock and Series B Preferred
Stock on the Issue Date and the "Permitted Transferees" (as defined in the
Series A-1 Certificate of Designations or the Series B Certificate of
Designations, as the case may be) and the Affiliates of the Persons
referred to in this clause (iv), and (v) any Person permitted or required
to receive shares of Series B Preferred Stock pursuant to the Exchange
Agreement, the "Permitted Transferees" (as defined in the Series B
Certificate of Designations) of such Persons (assuming that they are
holders of Series B Preferred Stock), 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.
"Holder" means a record holder of shares of Series A-2 Preferred Stock.
"Indebtedness" has the meaning given to such term in the Senior
Subordinated Notes Indenture.
"Issue Date" means the original date of issuance of shares of Series A-2
Preferred Stock.
"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" means (i) prior to the Restated Charter Effectiveness,
the securities referred to in clause (i) of Section 3(a), and (ii)
following the Restated Charter Effectiveness, the securities referred to in
clause (i) of Section 3(b), in each case subject to Section 3(c).
"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 A-2 Preferred
Stock as of any date, (i) $1,000, plus (ii) in the case of any accumulated
and unpaid dividends or distributions on such share as of such date payable
in Additional Series A-2 Shares, (A) the number of such Additional Series
A-2 Shares times $1,000 plus (B) the amounts referred to in clauses (iii)
and (iv) of this definition for the accumulated and unpaid dividends
thereon, (iii) all accumulated and unpaid cash dividends and distributions
on such share as of such date, plus (iv) the Market Price of all other
accumulated and unpaid dividends and distributions on such share as of such
date (including an amount equal to a prorated dividend for the period from
the last Dividend Payment Date to the date fixed for redemption,
liquidation, dissolution or winding up, if any).
"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 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
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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 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 Holders of a majority of the outstanding shares of Series A-2 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 A-2 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 (a) prior to the Restated Charter Effectiveness,
any Capital Stock issued after the Issue Date, and (b) after the Restated
Charter Effectiveness, any Capital Stock issued after such effectiveness by
the Corporation for cash consideration, in each case 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) Regular
Common Stock issued upon conversion of Class B Common Stock; (iv) shares of
Series A Preferred Stock issued as a dividend on shares of Series A
Preferred Stock; (v) dividends or distributions payable in shares of
Capital Stock effected in accordance with Section 4(b) or 8(a); (vi)
Capital Stock issued upon the exercise of options or warrants that have
been issued prior to, and are outstanding as of, the Issue Date; (vii)
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; (viii) Capital Stock issued to holders of
Series A-1 Preferred Stock or Series B Preferred Stock pursuant to the
exercise by such holders of their preemptive rights contained in the Series
A-1 Certificate of Designations or the Series B Certificate of
Designations, as the case may be; (ix) Capital Stock issued upon exercise
of the Senior Subordinated Notes Warrants; (x) Common Stock issued upon the
exercise of Management Options; (xi) 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; and (xii) shares of Series B Preferred Stock
issued in accordance with the JLL Exchange Agreement.
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"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 expressly stipulated
that the following are not Options: (i) any rights, options or warrants to
subscribe for, purchase or otherwise acquire shares of Common Stock
referred to in clause (v) or (vi) 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.
"Parity Stock" means (i) prior to the Restated Charter Effectiveness,
the securities referred to in clause (ii) of Section 3(a) and (ii)
following the Restated Charter Effectiveness, the securities referred to in
clause (ii) of Section 3(b), in each case subject to Section 3(c).
"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.
"Record Date" means, with respect to a dividend payable on March 31,
June 30, September 30 and December 31 of each year, 5:00 p.m. (Eastern
Standard Time) on the preceding March 15, June 15, September 15 and
December 15, respectively.
"Redemption Date" has the meaning given in Section 6(b).
"Redemption Notice" has the meaning set forth in Section 6(b).
"Related Parties" has the meaning given to such term in the Senior
Subordinated Notes Indenture.
"Regular Common Stock" means (i) initially, the class of Common Stock
existing on the Issue Date, and (ii) upon the Restated Charter
Effectiveness, the Class A Common Stock created as a separate class of
Common Stock pursuant to the Restated Certificate of Incorporation.
"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 the Restated Charter Effectiveness,
pursuant to the Stockholders' Agreement, and (y) after the Restated Charter
Effectiveness, 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.
"Restated Charter Effectiveness" means the date of the filing of the
Restated Certificate of Incorporation with the Secretary of State of the
State of Delaware in accordance with the DGCL following Stockholder
Approval.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
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"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" means the securities referred to in clause (iii) of
Section 3(b), subject to Section 3(c).
"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
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 this Certificate of Designations.
"Series A-1 Certificate of Designations" means (i) initially, 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 (ii) following the Restated Charter
Effectiveness, Exhibit A to the Restated Certificate of Incorporation, in
each case, 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" has the meaning set forth in Section 1.
"Series B Certificate of Designations" means (i) initially the
Certificate of Designations for the Series B Preferred Stock filed pursuant
to the DGCL with the Secretary of State of the State of Delaware on or
about the Issue Date, and (ii) following the Restated Charter
Effectiveness, Exhibit C to the Restated Certificate of Incorporation, in
each case, as amended, supplemented or restated from time to time.
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"Series B Preferred Stock" means the Preferred Stock designated by the
Board of Directors as Series B Convertible 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 B Certificate of Designations.
"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-1 Preferred Stock and
Series B Preferred Stock in accordance with the terms of this Certificate
of Designations, the Series A-1 Certificate of Designations and the Series
B Certificate 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" has the meaning given to such term in the Series B
Certificate of Designations.
"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) Prior to the Restated Charter Effectiveness. Prior to and until the
Restated Charter Effectiveness, the Series A-2 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 created after the
Issue Date and prior to the Restated Charter Effectiveness; and
(ii) on a parity with the Series A-1 Preferred Stock and the Series B
Preferred Stock.
(b) Following the Restated Charter Effectiveness. Upon and following the
Restated Charter Effectiveness, the Series A-2 Preferred Stock shall, with
respect to dividends and distributions and upon a Liquidation Event, rank:
(i) senior to all classes or series of Common Stock;
(ii) on a parity with the Series A-1 Preferred Stock;
(iii) junior to each series or class of Preferred Stock created after
the Restated Charter Effectiveness.
(c) 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.
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Section 4. Dividends.
(a) Prior to the Restated Charter Effectiveness. Prior to and until the
Restated Charter Effectiveness:
(i) Beginning on the Dividend Start Date, the Holders of outstanding
shares of Series A-2 Preferred Stock shall be entitled to receive (if and
to the extent of surplus legally available therefor), dividends at the
Dividend Rate payable solely in additional shares of Series A-2 Preferred
Stock ("Additional Series A-2 Shares") in accordance with the terms of this
Section 4. Following the Dividend Start Date, such dividends shall be
payable quarterly in arrears on each Dividend Payment Date for the Dividend
Period ending on such Dividend Payment Date. Dividends on the Series A-2
Preferred Stock shall accrue (whether or not declared) and be cumulative
from (and including) the first day of each Dividend Period in which
dividends may be payable, and accrued dividends for each Dividend Period
shall accumulate to the extent not paid on the Dividend Payment Date for
such Dividend Period; provided that dividends on Additional Series A-2
Shares shall accrue from (and including) the date such Additional Series A-
2 Shares are issued pursuant to this Section 4(a), whether or not in any
Dividend Period there shall be surplus of the Corporation legally available
for the payment of such dividends. Each such dividend shall be payable to
the Holders of shares of Series A-2 Preferred Stock on the corresponding
Record Date.
(ii) The amount of dividends payable for each full Dividend Period for
the Series A-2 Preferred Stock shall be computed by dividing the applicable
Dividend Rate by four. The amount of dividends payable for any period
shorter or longer than a full Dividend Period, shall be computed on the
basis of twelve 30-day months and a 360-day year. Holders of shares of
Series A-2 Preferred Stock shall not be entitled to any dividends, whether
payable in cash, property or stock, in excess of cumulative dividends as
herein provided. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment on the Series A-2 Preferred
Stock that may be in arrears; except that if dividends are not paid in full
on any Dividend Payment Date, dividends will cumulate as if the unpaid
dividends were payable in cash and the Liquidation Preference had been
increased by the amount of unpaid dividends until paid.
(iii) Dividends on the shares of Series A-2 Preferred Stock pursuant to
this Section 4(a) shall continue to accrue and accumulate until full
cumulative dividends (including an amount equal to a prorated dividend for
the period from the last Dividend Payment Date to (but not including) the
date of the Restated Charter Effectiveness) have been declared and paid on
the Series A-2 Preferred Stock for all Dividend Periods terminating prior
to the date of the Restated Charter Effectiveness; provided that such
dividends shall cease to accrue or accumulate on (but not including) the
date of the Restated Charter Effectiveness.
(iv) The number of Additional Series A-2 Shares to be issued as
dividends pursuant to this Section 4(a) will equal the cash amount of the
dividend that would have been payable on a share of Series A-2 Preferred
Stock if dividends were payable in cash, divided by $1,000, rounded to the
nearest full share, up or down, after taking into account all shares of
Series A-2 Preferred Stock owned by the Holder thereof, provided that if
the resulting fractional share held by such Holder equals one-half of a
share of Series A-2 Preferred Stock, such fractional share shall be rounded
up to the nearest full share.
(v) Accrued dividends for any past Dividend Periods may be declared and
paid on any subsequent Dividend Payment Date or any other date established
by the Board.
(b) Following the Restated Charter Effectiveness. Upon and following the
Restated Charter Effectiveness, 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 A-2 Preferred Stock been converted into
Class B Common Stock pursuant to Section 7 immediately prior to the record
date for such dividend or distribution.
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(c) Dividends or Distributions on Parity Stock. So long as any shares of the
Series A-2 Preferred Stock are outstanding, (i) no dividend or distribution may
be declared or paid or set apart for payment on any Parity Stock by the
Corporation, directly or indirectly, unless (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 A-2 Preferred Stock, and any redemption payments
required by Section 6, have been or are contemporaneously paid or are being
paid on a pro rata basis with any such Parity Stock, and (ii) except as
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 (A) all accumulated and unpaid
dividends and distributions due to be paid on the Series A-2 Preferred Stock,
and any redemption payments required by Section 6, have been or are
contemporaneously paid, and (B) 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.
(d) Dividends or Distributions on Junior Stock. So long as any shares of
Series A-2 Preferred Stock are outstanding, no dividends or other distribution
may be declared or paid or set apart for payment on any Junior Stock, 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)
dividends or distributions on shares of Common Stock effected solely in
accordance with Section 4(b) or 8(g), 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 A-2
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 A-2
Preferred Stock had been converted into shares of Common Stock pursuant to
Section 7 (assuming that (A) the Restated Charter Effectiveness has occurred
and (B) all outstanding shares of Series A-1 Preferred Stock and Series B
Preferred Stock had been converted into shares of Common Stock pursuant to the
Series A-1 Certificate of Designations and the Series B Certificate of
Designations, respectively, immediately prior to such Liquidation Event).
(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 A-2 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 A-2
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
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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 shares of Series A-2 Preferred
Stock shall terminate.
Section 6. Redemption.
(a) Unless the Restated Charter Effectiveness shall have occurred prior to
the occurrence of the event described in clause (i) or (ii) of this Section
6(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 A-2 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 A-2
Preferred Stock demanding a redemption of the outstanding shares of Series A-2
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 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 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 A-2 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 A-2 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 A-2 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, dividends on the shares of Series A-2 Preferred
Stock shall cease to accumulate on the Redemption Date, and
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all rights of the Holders with respect to their Series A-2 Preferred Stock,
other than the right to receive the Mandatory Redemption Price, shall terminate
on the Redemption Date.
(e) For the purpose of determining whether funds are legally available for
redemption of Series A-2 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 A-2 Preferred Stock, (i) the Corporation shall use funds
to the extent legally available for such purpose, (ii) the Corporation shall
effect the Mandatory Redemption Obligation pro rata according to the number of
shares of Series A-2 Preferred Stock held by each holder and (iii) the Dividend
Rate on any unpaid portion of the Mandatory Redemption Price shall be increased
by 2%. 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
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, any 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), its shares of Series A-2
Preferred Stock into Common Stock in lieu of any redemption of its Series A-2
Preferred Stock. Upon such Conversion, the Holders shall no longer be entitled
to any payment in connection with the redemption for the Series A-2 Preferred
Stock.
(h) The Corporation need not establish any sinking fund for the Mandatory
Redemption Obligation.
Section 7. Conversion.
(a) Conversion Right. At any time following the Restated Charter
Effectiveness, subject to and in compliance with the provisions of this Section
7, any Holder may, at such Holder's election, convert all, but not less than
all, of such Holder's shares of Series A-2 Preferred Stock into shares of Class
B-2 Common Stock (the "Electing Holder"), and upon any such conversion, all
other outstanding shares of Series A-2 Preferred Stock shall automatically
convert into shares of Class B-2 Common Stock (the "Conversion").
Notwithstanding any call for redemption pursuant to Section 6, the right to
convert shares pursuant to this Section 7 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) Conversion Ratio. The number of shares of Class B-2 Common Stock
deliverable upon Conversion of one share of Series A-2 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
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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.
(c) Conversion Mechanics.
(i) The Electing Holder shall surrender the certificate representing its
shares of Series A-2 Preferred Stock at the principal office of the
Corporation, with a written notice of election to convert completed and
signed.
(ii) On the Conversion Date, all outstanding shares of Series A-2
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 shares of Class B-2 Common Stock
issuable upon the Conversion upon surrender of certificates representing
the corresponding shares of Series A-2 Preferred Stock. Unless the shares
issuable on Conversion by the Holder are to be issued in the same name as
the name in which such shares of Series A-2 Preferred Stock are registered,
each share surrendered 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 Class B-2 Common Stock in any name
other than the name or names set forth on the certificates for the shares
of Series A-2 Preferred Stock unless the requirements of the Stockholders'
Agreement relating to the transfer of shares of Series A-2 Preferred Stock
have been complied with or waived by the Corporation.
(iii) Notwithstanding clause (i) or (ii) of this Section 7(c), if the
Holder of any share or shares of Series A-2 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 Class B-2 Common Stock issuable
upon the Conversion in the name of such holder.
(iv) As promptly as practicable after the delivery by the Holder of the
certificates for shares of Series A-2 Preferred Stock (or in the case of a
lost certificate, the certification, the agreement and, if requested, the
posting of the bond described in clause (iii) of this Section 7(c)), 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 A-2 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 Class B-2 Common Stock
issuable upon the Conversion of such shares in accordance with the
provisions of this Section 7, and (B) any cash adjustment required pursuant
to Section 7(f).
(v) The Conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date. The Person in whose
name or names any certificate or certificates for shares of Class B-2
Common Stock shall be issuable upon such Conversion shall be deemed to have
become the holder of record of the shares of Class B-2 Common Stock
represented thereby at such time on the Conversion Date and the Conversion
shall be into a number of whole shares of Class B-2 Common Stock equal to
the product of the number of shares of Series A-2 Preferred Stock
surrendered multiplied by the Conversion Ratio in effect on the applicable
Conversion Date. All shares of Class B-2 Common Stock delivered upon
conversion of the Series A-2 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 the Conversion, the shares of Series A-
2 Preferred Stock 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 Class B-2 Common
Stock and other amounts payable pursuant to this Section 7.
(d) Reservation of Shares; Compliance with Laws. The Corporation covenants
that it will at all times following the Restated Charter Effectiveness reserve
and keep available, free from preemptive rights, such number of its authorized
but unissued shares of Class B-2 Common Stock as shall be required for the
purpose
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of effecting the Conversion of the Series A-2 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 the Conversion, the Corporation shall comply with all applicable
federal and state laws and regulations which require action to be taken by the
Corporation.
(e) 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 Class B-2 Common Stock upon the Conversion, other than
any tax payable in respect of any transfer involved in the issue or delivery of
shares of Class B-2 Common Stock in a name other than that of the Holder of the
Series A-2 Preferred Stock to be converted. The Corporation shall have the
right not to issue or deliver any shares of Class B-2 Common Stock in a name
other than that of the Holder of the Series A-2 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.
(f) No Fractional Shares. No fractions of shares of Class B-2 Common Stock
shall be required to be issued to a Holder in connection with the 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.
(g) 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 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 following the Restated Charter Effectiveness in order
to protect the conversion rights of the holders of the Series A-2 Preferred
Stock against impairment. Without limiting the generality of the foregoing,
following the Restated Charter Effectiveness, 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 Class B-2
Common Stock on the 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 Class B-2 Common Stock
issuable after the action upon the Conversion of all of the Series A-2
Preferred Stock will exceed the total number of shares of Class B-2 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 (assuming that the Restated
Charter Effectiveness has occurred) the Series A-2 Preferred Stock been
converted into Class B-2 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
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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 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 the 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 the
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 (assuming that the Restated Charter Effectiveness has occurred)
had converted its Series A-2 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
A-2 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 A-2 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 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 A-2 Preferred Stock shall be
convertible into, in lieu of the number of shares of Class B-2 Common Stock
which the Holders would otherwise have been entitled to receive (assuming that
the Restated Charter Effectiveness has occurred), a number of shares of such
other class or classes of stock equivalent to the number of shares of Class B-2
Common Stock that would have been subject to receipt by the Holders upon any
Conversion (assuming that the Restated Charter Effectiveness has occurred)
immediately before that change. No class or series of Common Stock shall be so
changed into shares of any other class or series of 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
and prior to the Restated Charter Effectiveness, issues or sells
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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 and
prior to the Restated Charter Effectiveness, issues, sells or grants 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):
(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
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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) Certain Payments in Lieu of Dividends. In case the Corporation, at any
time on or after the Issue Date and prior to the Restated Charter
Effectiveness, shall, by dividend or otherwise, distribute to all holders of
its Regular Common Stock evidences of its indebtedness or assets (including
securities other than dividends and distributions paid pursuant to Section
8(a)), then the Conversion Price shall be adjusted by multiplying the
Conversion Price then in effect by a fraction (i) the numerator of which shall
be (A) the Current Market Price of a share of Regular Common Stock on the
record date fixed for such distribution minus (B) the Market Value of the
portion of the assets or evidences of indebtedness so distributed applicable to
one share of Regular Common Stock and (ii) the denominator of which shall be
the Current Market Price of a share of Regular Common Stock on the record date
fixed for such distribution.
(h) 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 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 A-2 Preferred Stock, the Corporation will have the certificates referred
to in this Section 8(h) 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 Class B-2
Common Stock that such Holder would receive upon the Conversion of its shares
of Series A-2 Preferred Stock into Class B-2 Common Stock pursuant to Section 7
immediately prior to the issuance of the New Securities (assuming that the
Restated Charter Effectiveness had occurred) to (ii) the total number of issued
and outstanding shares of Common Stock immediately prior to the issuance of the
New Securities (assuming (A) that the Restated Charter Effectiveness has
occurred and (B) 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).
(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
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delivery of such a written notice (which notice shall specify the amount of New
Securities to be purchased by the Shareholder 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) The approval of Holders of at least a majority of the then outstanding
shares of Series A-2 Preferred Stock voting or consenting, as the case may be,
separately as a class, shall be required to amend or repeal any provision of,
or add any provision to, this Certificate of Designations.
(c) 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-2 Directors") as follows:
(i) On the Issue Date, two individuals designated by the holders of
shares of Series A-2 Preferred Stock shall be elected as Class B-2
Directors. The Holders shall be entitled to elect, voting or consenting as
a separate class, two Class B-2 Directors until the second anniversary of
the Issue Date which number may only be reduced pursuant to clause (ii),
(iii) or (iv) of this Section 10(c) only after such second anniversary.
(ii) So long as the number of outstanding shares of Series A-2 Preferred
Stock is equal to or greater than 50% of the number of shares of Series A-2
Preferred Stock issued on the Issue Date (in each case, as adjusted for
stock dividends or distributions and subdivisions, combinations or
consolidations of stock), the Holders shall be entitled to elect, voting or
consenting as a separate class, two Class B-2 Directors.
(iii) So long as the number of outstanding shares of Series A-2
Preferred Stock is less than 50% but equal to or greater than 10% of the
number of shares of Series A-2 Preferred Stock issued on the Issue Date (in
each case, as adjusted for stock dividends or distributions and
subdivisions, combinations or consolidations of stock), the Holders shall
be entitled to elect, voting or consenting as a separate class, one Class
B-2 Director.
(iv) The Holders shall not be entitled to elect any Director pursuant to
this Section 10(c) after the second anniversary of the Issue Date when the
number of outstanding shares of Series A-2 Preferred Stock is less than 10%
of the number of shares of Series A-2 Preferred Stock issued on the Issue
Date (in each case, as adjusted for stock dividends or distributions and
subdivisions, combinations or consolidations of stock).
(v) In addition to the number of Class B-2 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 or consenting as a
separate class, to elect one additional Class B-2 Director.
(vi) Upon any increase or decrease in the total number of Class B-2
Directors pursuant to this Section 10(c), there shall be a corresponding
and equal increase or decrease in the total number of Directors.
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(vii) So long as the Holders of shares of Series A-2 Preferred Stock are
entitled to elect Class B-2 Directors under this Section 10(d), at any
annual meeting of stockholders, or special meeting held in place thereof,
the holders of shares of Series A-2 Preferred Stock, voting or consenting
(as the case may be separately) as a single class, shall be entitled to
elect any Class B-2 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-2
Director shall be filled by the vote or consent of the Holders. A Class B-2
Director may be removed without cause only by the vote or consent of the
Holders of a majority of the outstanding shares of Series A-2 Preferred
Stock.
(d) Upon and following the Restated Charter Effectiveness, the Class B-2
Directors shall be classified as set forth in Restated Certificate of
Incorporation.
(e) 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 by 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.
(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
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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 A-2 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. Until the 120th day following the Issue
Date and following the Restated Charter Effectiveness, any transfer of shares
of Series A-2 Preferred Stock by a Holder to a Person other than a Permitted
Transferee shall be null and void and of no force and effect. The Corporation
may, at its discretion, as a condition to the transfer or registration of
transfer of Series A-2 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 Subsidiary of such
Holder, (ii) Rite Aid Corporation, a Delaware corporation, and any direct or
indirect Subsidiary of Rite Aid Corporation, and (iii) any Person who is an
institutional lender acquiring such shares of Series A-2 Preferred Stock or a
security interest therein or pledge thereof from any Person referred to in
clause (ii) as security for Indebtedness of such Person referred to in clause
(ii) (including any such acquisition upon foreclosure).
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EXHIBIT C
SERIES B CONVERTIBLE PREFERRED STOCK
OF
ADVANCE PARADIGM, INC.
Set forth below are the powers, designations, preferences and relative,
participating, optional and other special rights, including voting rights, and
qualifications, limitations and restrictions of the Series B Preferred Stock of
Advance Paradigm, Inc., a Delaware corporation (the "Corporation"). Such series
of preferred stock, par value $0.01 per share, of the Corporation (the
"Preferred Stock"), was initially created by the Board of Directors of the
Corporation (the "Board of Directors") pursuant to the Amended and Restated
Certificate of Incorporation of the Corporation (as may be amended from time to
time, the "Certificate of Incorporation") and such series is now expressly
incorporated by reference into Section 5.2 of the Second Amended and Restated
Certificate of Incorporation of the Corporation.
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 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).
"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
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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).
"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).
"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).
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"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
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; (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
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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).
"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
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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
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.
"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.
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"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 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
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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 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
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.
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(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 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.
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(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.
(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.
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").
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(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.
(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 delivered upon conversion of the Series B Preferred
Stock will upon delivery be duly and validly issued and fully
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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 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
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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 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
stock unless a proportional and equivalent change is made with respect to all
other
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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):
(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.
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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 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 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.
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(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.
(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;
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(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);
(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.
(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
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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.
(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.
(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
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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 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).
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