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EXHIBIT C
STRAYER EDUCATION, INC.
ARTICLES SUPPLEMENTARY
Strayer Education, Inc., a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Under a power contained in Article SEVENTH of the charter
of the Corporation (the "Charter"), the Board of Directors of the corporation by
duly adopted resolutions classified and designated _____________ shares of
Preferred Stock (as defined in the Charter) as Series A Convertible Preferred
Stock (the "Series A Preferred Stock"), with the following preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications, and terms and conditions of
redemption, which, upon any restatement of the Charter, shall become part of
Article FIFTH of the Charter, with any necessary or appropriate renumbering or
relettering of the sections or subsections hereof.
Series A Convertible Preferred Stock
1. Number of Shares; Designation. A total of 5,769,231 shares
of Preferred Stock of the Corporation have been classified and designated as
Series A Convertible Preferred Stock (the "Series A Preferred Stock").
2. Rank. The Series A Preferred Stock shall, with respect to
payment of dividends, redemption payments and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation, (x) rank senior and
prior to the Common Stock, par value $.01 per share, of the Corporation ("Common
Stock") and to all Junior Dividend Stock (as defined in Section 3(a)) and all
Junior Liquidation Stock (as defined in Section 6(b)) and any other class or
series of stock of the Corporation that by its terms ranks junior to the Series
A Preferred Stock as to payment of dividends, redemption payments and rights
upon liquidation, dissolution or winding up of the affairs of the Corporation,
(y) rank on a parity with all Parity Dividend Stock (as defined in Section 3(a))
and all Parity Liquidation Stock (as defined in Section 6(b)), and (z) rank
junior to all Senior Dividend Stock (as defined in Section 3(c)), and all Senior
Liquidation Stock (as defined in Section 6(b)); provided that any class or
series of stock described in the foregoing clauses (y) and (z) shall be issued
only in compliance with Sections 9(b)(ii) and 10(b)(i).
3. Dividends. (a)(i) From the date of the original issuance of
the Series A Preferred Stock (the "Original Issuance Date") until the fifth
anniversary of such date, the Corporation shall pay to the holders of the issued
and outstanding shares of the Series A Preferred Stock, if, as and when
authorized by the Board of Directors of the Corporation out of funds legally
available therefor, with respect to each such share, cumulative dividends in an
amount equal to (x) 7.0% per annum of the sum of the Liquidation Amount (as
defined in Section 6(a)) and any accumulated and unpaid dividends thereon to the
date of payment (including Accrued Dividends (as defined below)) (the "Initial
Dividend Rate") plus (y) an amount equal to the product (if greater than zero)
of (A) the number of shares of Common Stock
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into which each share of Series A Preferred Stock is convertible on the
applicable Dividend Payment Date (as defined in Section 3(a)(iii)),
appropriately adjusted to reflect changes in the number of shares of Common
Stock into which such share is convertible during any applicable calendar
quarter in accordance with Section 7(f) as determined in good faith by the
members of the Board of Directors of the Corporation, excluding the directors
elected by the holders of the Series A Preferred Stock (such members, the
"Independent Directors") (whose good faith determination shall be conclusive and
binding and described in a resolution of such Independent Directors) and (B) the
excess, if any, of the aggregate distributions or dividends authorized for the
calendar quarter immediately preceding such Dividend Payment Date on one share
of Common Stock over the Regular Quarterly Dividend (as defined below) (the
"Excess Dividend Amount"). Of the Initial Dividend Rate, dividends in an amount
equal to 3.5% per annum of the sum of the Liquidation Amount and accumulated and
unpaid dividends thereon to the date of payment (excluding Accrued Dividends)
shall be paid in cash on a current basis at a rate of .875% per quarter and the
remainder (the "Accrued Dividends") shall not be paid in cash but shall
accumulate quarterly from the Original Issuance Date and shall compound
quarterly at the rate of .875% per quarter, whether or not authorized or
declared, until the earliest of the Redemption Date (as defined herein), the
Conversion Date (as defined herein), the occurrence of a Change of Control
(after notice is given by the holders of Series A Preferred Stock pursuant to
Section 6(c)) or an event (other than a Change of Control) described in Section
6(a) hereof. The Excess Dividend Amount shall be paid in the same manner as that
received by the holders of the Common Stock.
(ii) From the day after the fifth anniversary of the Original
Issuance Date, the Corporation shall pay to the holders of the issued and
outstanding shares of the Series A Preferred Stock, if, as and when authorized
by the Board of Directors of the Corporation, out of funds legally available
therefor, with respect to each such share, cumulative cash dividends in an
amount equal to (x) 3.0% per annum of the sum of the Liquidation Amount and any
accumulated and unpaid dividends thereon to the date of payment (the "Subsequent
Dividend Rate;" each of the Initial Dividend Rate and the Subsequent Dividend
Rate being sometimes referred to herein as the "Dividend Rate"), plus (y) an
amount equal to the product (if greater than zero) of (A) the number of shares
of Common Stock into which each share of Series A Preferred Stock is convertible
on the applicable Dividend Payment Date, appropriately adjusted to reflect
changes in the number of shares of Common Stock into which such share is
convertible during any applicable calendar quarter in accordance with Section
7(f) as determined in good faith by the Independent Directors (whose good faith
determination shall be conclusive and binding and described in a resolution of
such Independent Directors) and (B) the Excess Dividend Amount. The entire 3.0%
per annum of the sum of the Liquidation Amount and accumulated and unpaid
dividends thereon to the date of payment shall be paid in cash on a current
basis at a rate of .75% per quarter. The Excess Dividend Amount shall be paid in
the same manner as that received by the holders of Common Stock.
(iii) Dividends on shares of Series A Preferred Stock, whether or
not authorized or declared, shall accumulate on a quarterly basis from the
Original Issuance Date, shall compound quarterly at the applicable Dividend Rate
and (except in the case of Accrued Dividends) shall be payable quarterly in
arrears on the first day of January, April, July and October of each year,
commencing on _________ (each, a "Dividend Payment Date"), provided that the
Excess Dividend Amount shall be paid in the same manner as that received by the
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holders of the Common Stock, and provided, further, that if any Dividend Payment
Date is not a business day then the Dividend Payment Date shall be on the
immediately succeeding business day (as used herein, the term "business day"
shall mean any day except a Saturday, Sunday or day on which banking
institutions are legally authorized or obligated to close in the City of New
York) (and without any distribution or other payment in respect of any such
delay), except that, if such business day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding business day.
Dividends shall cease to accumulate in respect of shares of Series A Preferred
Stock on the Redemption Date (as defined below) or the Conversion Date (as
defined below) for such shares, as the case may be, unless, in the case of a
Redemption Date, the Corporation fails to pay any amount necessary for such
redemption (including any unpaid dividends required to be paid at such time) or,
in the case of a Conversion Date, the Corporation fails to deliver certificates
representing the Common Stock or other assets or securities issuable upon such
conversion within three business days of the Conversion Date or to make any
payment with respect to any unpaid dividends required to be paid at such time,
as the case may be, in which cases dividends shall continue to accumulate from
the Redemption Date or the Conversion Date, as the case may be, at the
applicable Dividend Rate, until such payment and/or delivery is made. If
requested in writing by any holder not less than five days prior to any Dividend
Payment Date, the Corporation shall pay the cash portion of any dividend
authorized with respect to such Dividend Payment Date by means of wire transfer
to an account specified by the holder in such notice.
(iv) All dividend payments paid (or accrued) with respect to
shares of Series A Preferred Stock shall be paid pro rata to (or accrued pro
rata for the benefit of) the holders entitled thereto, based on the number of
shares of Series A Preferred Stock owned by each such holder.
(v) If any dividend (other than Accrued Dividends) payable on
any Dividend Payment Date, together with all unpaid cash dividends in respect of
prior periods, is not authorized and paid in full on such Dividend Payment Date,
as provided in Section 3(a)(i), then until such time as all accumulated and
unpaid dividends have been authorized and paid in full, shares of Series A
Preferred Stock shall continue to accumulate dividends daily and any unpaid
dividends shall compound quarterly at the applicable Dividend Rate. All
references herein to "unpaid dividends" shall be deemed to include dividends
accumulating and accruing pursuant to this Section 3(a)(v).
(vi) Dividends (other than Accrued Dividends) to be paid on any
Dividend Payment Date shall be paid to the holders of record of shares of the
Series A Preferred Stock as they appear on the stock register of the Corporation
at the close of business on such record date (each, a "Dividend Payment Record
Date"), which shall be not more than 40 days nor fewer than 10 days preceding
each Dividend Payment Date thereof, as shall be fixed by the Board of Directors
of the Corporation. Dividends (other than Accrued Dividends) not authorized and
paid in full on any Dividend Payment Date shall be authorized and paid at any
time as of which funds legally available therefor are available to the
Corporation, without reference to any regular Dividend Payment Date, to the
holders of record on such date (not exceeding 20 days nor fewer than 10 days
preceding the date on which dividends in arrears will be paid) as may be fixed
by the Board of Directors of the Corporation.
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(vii) Holders of shares of the Series A Preferred Stock shall be
entitled to receive dividends in preference to and in priority over dividends
upon the Common Stock and any other class or series of the Corporation's stock
that ranks junior as to dividends to the Series A Preferred Stock (such stock,
including the Common Stock, "Junior Dividend Stock") and shall be on a parity as
to dividends with any class or series of the Corporation's stock that does not
rank senior or junior as to dividends with the Series A Preferred Stock ("Parity
Dividend Stock"), it being understood that nothing herein shall prevent the
Corporation (as long as all accumulated dividends on the Series A Preferred
Stock, other than Accrued Dividends, shall have been paid in accordance
herewith) from paying (subject to approval of the Board of Directors of the
Corporation) a quarterly dividend of $0.065 per share of Common Stock, as such
amount may be nominally increased from time to time in accordance with Section
9(b)(iv) hereof (the "Regular Quarterly Dividend").
(b) So long as any shares of the Series A Preferred Stock are
outstanding, the Corporation shall not, unless all unpaid dividends (other than
Accrued Dividends) on the Series A Preferred Stock shall have been paid in full,
declare, pay or set apart for payment any dividend or other distribution on any
of the Common Stock or other Junior Dividend Stock or make any payment on
account of, or set apart for payment money for a sinking or other similar fund
for, the purchase, redemption or other retirement of any of the Common Stock or
other Junior Dividend Stock or any warrants, rights, calls or options
exercisable for or convertible into any of the Common Stock or other Junior
Dividend Stock, or make any distribution in respect thereof, either directly or
indirectly, and whether in cash, obligations or shares of the Corporation or
other property (other than, subject to Sections 7(f), 9(b) and 10(b) hereof, to
the extent applicable, distributions or dividends in Common Stock or other
Junior Dividend Stock to the holders of Common Stock or other Junior Dividend
Stock), and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any of the Common
Stock or other Junior Dividend Stock or any warrants, rights, calls or options
exercisable for or convertible into any of the Junior Dividend Stock.
(c) If at any time the Corporation issues (in accordance with
Section 9(b)(ii)) any class or series of stock ranking senior and prior to the
Series A Preferred Stock with respect to the payment of dividends ("Senior
Dividend Stock") and fails to pay or declare and set apart for payment
accumulated and unpaid dividends on such Senior Dividend Stock, in whole or in
part, then (except to the extent allowed by the terms of the Senior Dividend
Stock) no dividend paid in cash shall be paid or authorized and set apart for
payment on the Series A Preferred Stock unless and until all accumulated and
unpaid dividends with respect to the Senior Dividend Stock shall have been paid
or authorized and set apart for payment, without interest. Except as provided in
Section 3(d) below, no dividends shall be paid or authorized and set apart for
payment on any Parity Dividend Stock for any period unless the Corporation has
paid or authorized and set apart for payment, or contemporaneously pays or
declares and sets apart for payment, on the Series A Preferred Stock all unpaid
dividends (other than Accrued Dividends) for all dividend payment periods
terminating on or prior to the date of payment of such dividends. Except as
provided in Section 3(d) below, no dividends paid in cash shall be paid or
authorized and set apart for payment on the Series A Preferred Stock for any
period unless the Corporation has paid or authorized and set apart for payment,
or contemporaneously pays or declares and sets apart for such payment, on any
Parity Dividend Stock all accumulated and
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unpaid dividends for all dividend payment periods terminating on or prior to the
date of payment of such dividends.
(d) If at any time the Corporation has failed to pay any unpaid
dividends on any shares of Series A Preferred Stock on any Dividend Payment Date
or on any Parity Dividend Stock on a stated payment date, as the case may be,
subject to Section 4, the Corporation shall not:
(i) purchase any shares of the Series A Preferred Stock or
Parity Dividend Stock (except for a consideration payable in Common Stock
or other Junior Dividend Stock) or redeem fewer than all of the shares of
the Series A Preferred Stock and Parity Dividend Stock then outstanding
except for (x) the repurchase or redemption of shares of the Series A
Preferred Stock made pro rata among the holders of the shares of the
Series A Preferred Stock then outstanding and (y) the repurchase or
redemption made pro rata with respect to all shares of the Series A
Preferred Stock and Parity Dividend Stock then outstanding so that the
amounts repurchased or redeemed shall in all cases bear to each other the
same ratio that, at the time of the repurchase or redemption, the
aggregate of the then applicable Liquidation Amount (plus accumulated and
unpaid dividends thereon to the date of payment) of all of the Series A
Preferred Stock and the liquidation preference or amount of the other
Parity Dividend Stock then outstanding, respectively, bear to each other;
or
(ii) permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase any Common Stock,
Junior Dividend Stock, shares of the Series A Preferred Stock or Parity
Dividend Stock, except to the same extent that the Corporation could
purchase such shares pursuant to the foregoing clause (i).
Unless and until all unpaid dividends (other than Accrued
Dividends) in respect of prior dividend payment periods on shares of the Series
A Preferred Stock and any Parity Dividend Stock at the time outstanding have
been paid in full, all dividends (other than Accrued Dividends) paid by the
Corporation upon shares of the Series A Preferred Stock or Parity Dividend Stock
shall be authorized pro rata with respect to all shares of the Series A
Preferred Stock and Parity Dividend Stock then outstanding, so that the amounts
of any dividends authorized on shares of the Series A Preferred Stock and on the
Parity Dividend Stock shall in all cases bear to each other the same ratio that,
at the time of the declaration, all unpaid dividends in respect of prior
dividend payment periods on shares of the Series A Preferred Stock and the other
Parity Dividend Stock, respectively, bear to each other.
4. Redemption at the Option of the Corporation. (a) Except as
provided in this Section 4(a) and Section 4(b), shares of the Series A Preferred
Stock shall not be redeemable at the election of the Corporation. From and after
the date that is the third anniversary of the Original Issuance Date, the
Corporation, at its option, may redeem within 45 days after a 200% Date (as
defined below) shares of Series A Preferred Stock, in whole or in part, in the
sole discretion of the Independent Directors, to the extent it has funds legally
available therefor, at a redemption price in cash equal to 100% of the
Liquidation Amount of each share of Series A Preferred Stock to be redeemed,
plus an amount equal to the accumulated and unpaid dividends thereon (including
Accrued Dividends), whether or not authorized, to the redemption date (any
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such date, a "Three Year Redemption Date"). No redemption shall be permitted
pursuant to this Section 4(a) at any time during which the Common Stock is not
listed on either the New York Stock Exchange (the "NYSE") or the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"). A
"200% Date" shall be any date as of which the Closing Price of the Common Stock
equals or exceeds 200% of the Conversion Price then in effect on at least 20
consecutive Trading Days immediately preceding such date and as of such date;
provided that such 20 day period cannot begin prior to the third anniversary of
the Original Issuance Date. "Trading Day" means a day on which securities are
traded on the national securities exchange or quotation system or in the
over-the-counter market used to determine Closing Prices for the Common Stock.
"Closing Price" of the Common Stock on any day means the last reported per share
sale price, regular way, of the Common Stock on such day, or, in case no such
sale takes place on such day, the average of the reported closing per share bid
and asked prices, regular way, of the Common Stock on such day, in each case on
NASDAQ or, if the Common Stock is not quoted or admitted to trading on NASDAQ,
on the principal national securities exchange or quotation system on which the
Common Stock is listed or admitted to trading or quoted, or, if the Common Stock
is not listed or admitted to trading or quoted on any national securities
exchange or quotation system, the average of the closing per share bid and asked
prices of the Common Stock on such day in the over-the-counter market as
reported by a generally accepted national quotation service or, if not so
available in such manner, as furnished by any NYSE member firm selected from
time to time by the Board of Directors of the Corporation for that purpose or,
if not so available in such manner, as otherwise determined in good faith by the
Independent Directors (whose good faith determination shall be conclusive and
binding and described in a resolution of the Independent Directors).
(b) From and after the date that is the fifth anniversary of
the Original Issuance Date, the Corporation, at its option, may redeem shares of
Series A Preferred Stock, in whole or in part, in the sole discretion of the
Independent Directors, to the extent it has funds legally available therefor, at
a redemption price in cash equal to 100% of the Liquidation Amount of each share
of Series A Preferred Stock to be redeemed, plus an amount equal to the
accumulated and unpaid dividends thereon (including Accrued Dividends), whether
or not authorized, to the redemption date (any such date, a "Five Year
Redemption Date;" each of the Three Year Redemption Date and the Five Year
Redemption Date sometimes being referred to herein as the "Redemption Date").
(c) Not less than 15 days nor more than 45 days (such date as
fixed by the Board of Directors of the Corporation is referred to herein as the
"Redemption Record Date") prior to the date fixed for any redemption of shares
of the Series A Preferred Stock pursuant to this Section 4, a notice specifying
the time and place of the redemption and the number of shares to be redeemed
shall be given by overnight courier or by certified mail return receipt
requested, to the holders of record on the Redemption Record Date of the shares
of the Series A Preferred Stock to be redeemed at their respective addresses as
the same shall appear on the books of the Corporation, calling upon each holder
of record to surrender to the Corporation on the Redemption Date at the place
designated in the notice such holder's certificate or certificates representing
the number of shares specified in the notice of redemption, provided that the
Corporation shall at all times maintain an office or agency in the City of New
York for such purposes. Neither failure to mail such notice, nor any defect
therein or in the mailing thereof, to any particular holder shall affect the
sufficiency of the notice or the validity of the proceedings
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for redemption with respect to the other holders. Any notice mailed in the
manner herein provided shall be conclusively presumed to have been duly given
whether or not the holder receives the notice. On or after the Redemption Date,
each holder of shares of Series A Preferred Stock to be redeemed shall present
and surrender such holder's certificate or certificates for such shares to the
Corporation at the place designated in the redemption notice and thereupon the
redemption price of the shares, and any accumulated and unpaid dividends thereon
to the Redemption Date, shall be paid to or on the order of the person whose
name appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled. In case fewer than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(d) If a notice of redemption has been given pursuant to this
Section 4 and, on or before the Redemption Date, the funds necessary for such
redemption (including all dividends on the shares of Series A Preferred Stock to
be redeemed, including Accrued Dividends, that will accumulate to the Redemption
Date) shall have been set aside by the Corporation, separate and apart from its
other funds, in trust for the pro rata benefit of the holders of the shares of
Series A Preferred Stock so called for redemption, then, notwithstanding that
any certificates for such shares of Series A Preferred Stock have not been
surrendered for cancellation, on the Redemption Date dividends shall cease to
accumulate on the shares of the Series A Preferred Stock to be redeemed and the
holders of such shares shall cease to be stockholders with respect to those
shares, shall have no interest in or claims against the Corporation by virtue
thereof and shall have no voting or other rights with respect thereto, except
the conversion rights provided in subsection (e) of this Section 4 and Section 7
below and the right to receive the monies payable upon such redemption, without
interest thereon, upon surrender (and endorsement, if required by the
Corporation) of their certificates, and the shares of Series A Preferred Stock
represented thereby shall no longer be outstanding. Subject to applicable
escheat laws, any monies so set aside by the Corporation and unclaimed at the
end of four years from the Redemption Date shall revert to the general funds of
the Corporation, after which reversion the holders of such shares so called for
redemption shall look only to the general funds of the Corporation for the
payment of the redemption price, without interest. Any interest accrued on funds
so deposited shall belong to the Corporation and be paid thereto from time to
time.
(e) If a notice of redemption has been given pursuant to this
Section 4 and any holder of shares of Series A Preferred Stock shall, prior to
the close of business on the business day immediately preceding the Redemption
Date, give written notice to the Corporation pursuant to Section 7 below of the
conversion of any or all of the shares to be redeemed held by the holder, then
such redemption shall not become effective as to such shares to be converted and
such conversion shall become effective as provided in Section 7 below, whereupon
any funds deposited by the Corporation for the redemption of such shares shall
(subject to any right of the holder of such shares to receive the dividends
payable thereon as provided in Section 7 below) immediately upon such conversion
be returned to the Corporation or, if then held in trust by the Corporation,
shall automatically and without further corporate action or notice be discharged
from the trust.
(f) In every case of redemption of fewer than all of the
outstanding shares of the Series A Preferred Stock pursuant to this Section 4,
the shares to be redeemed shall be selected pro rata among all holders of Series
A Preferred Stock on the basis of the number of
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shares of Series A Preferred Stock owned by each such holder, provided that only
whole shares shall be selected for redemption.
5. Redemption at the Option of the Holder.
(a) No holder of shares of Series A Preferred Stock shall have
any right to require the Corporation to redeem any shares of Series A Preferred
Stock prior to the earlier of (i) 10 years from the Original Issuance Date, (ii)
a Change of Control, or (iii) the sale by the Corporation of all or
substantially all of its assets (the "Optional Redemption Effective Date").
Thereafter, at any time following the Optional Redemption Effective Date, each
holder of shares of Series A Preferred Stock shall have the right, at the sole
option and election of such holder, to require the Corporation to redeem all or
less than all of the shares of Series A Preferred Stock owned by such holder at
a redemption price (the "Redemption Price") in cash equal to 100% of the
Liquidation Amount of each share of Series A Preferred Stock to be redeemed,
plus an amount equal to the accumulated and unpaid dividends thereon (including
Accrued Dividends), whether or not authorized, to the redemption date.
(b) The holder of any shares of Series A Preferred Stock may
exercise such holder's right to require the Corporation to redeem such shares by
surrendering for such purpose to the Corporation, at its principal office or at
such other office or agency maintained by the Corporation for that purpose
(provided that the Corporation shall at all times maintain an office or agency
in the City of New York for such purposes), certificates representing the shares
of Series A Preferred Stock to be redeemed, accompanied by a written notice
stating that such holder elects to require the Corporation to redeem all or less
than all of such shares in accordance with the provisions of this Section 5(b),
which notice may specify an account for delivery of the Redemption Price.
(c) Within fifteen (15) days after the surrender of such
certificates, the Corporation shall pay to the holder of the shares being
redeemed the Redemption Price therefor. Such payment shall be made by wire
transfer of immediately available funds to an account designated by such holder.
(d) Subject to Section 5(e), such redemption shall be deemed to
have been made at the close of business on the date of the receipt of such
notice and of such surrender of the certificates representing the shares of the
Series A Preferred Stock to be redeemed, the shares so redeemed shall no longer
be deemed outstanding, the rights to receive dividends thereon shall cease from
and after the date of redemption designated in the notice of redemption, and the
rights of the holder thereof, except for the right to receive the Redemption
Price therefor in accordance herewith, shall cease on such date of receipt and
surrender.
(e) In the event that the Redemption Price is not paid when due
in accordance with Section 5(c) hereof, then, in addition to any other rights
that may otherwise be available to holders of Series A Preferred Stock pursuant
to the terms of the Series A Preferred Stock or the Charter, and notwithstanding
Section 5(d) or any provision of the Charter to the contrary, (1) all shares of
the Series A Preferred Stock redeemed pursuant to Section 5(d) shall be reissued
or returned (as applicable) to all holders who exercised their option to redeem
such shares, and the right to receive dividends (including Accrued Dividends)
thereon and all other rights of the
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holder thereof shall be deemed to have continued as if such redemption had not
occurred and (2) provided that the aggregate Redemption Price then due shall
equal at least $30 million, the total number of directors of the Corporation
shall increase by such number of directors as will be required to enable the
holders of Series A Preferred Stock to elect a majority of the directors on the
Board of Directors of the Corporation (the "Default Number"), and the holders of
Series A Preferred Stock, voting together as a single class, shall by
affirmative vote of holders of a plurality of the total number of shares of
Series A Preferred Stock voting thereon, be entitled to elect, at a meeting of
such stockholders or by written consent in lieu thereof, to the Board of
Directors of the Corporation the Default Number of directors (the "Redemption
Default Directors") (which directors shall be in addition to, and not in lieu
of, any directors such holders may otherwise be entitled to elect pursuant to
the terms of the Series A Preferred Stock and which directors shall each be
required to satisfy any applicable qualifications existing under applicable law
and shall be entitled to all rights of voting and participation as are directors
of the Corporation generally), and shall be entitled exclusively, by affirmative
vote of holders of a majority of the total number of shares of Series A
Preferred Stock then outstanding or by written consent in lieu thereof, at any
time to remove any director so elected. Any other provision of the terms of the
Series A Preferred Stock or the Charter or Bylaws of the Corporation
notwithstanding, no Redemption Default Director may be removed except in the
manner provided for in this paragraph. Vacancies among the Redemption Default
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled at any time, but only by the
affirmative vote of holders of a plurality of the total number of shares of
Series A Preferred Stock voting thereon, voting together as a single class, or
by written consent in lieu thereof, and any director so chosen shall hold office
for a term expiring on the date the term of office of the director such
newly-elected director shall have replaced would have expired. At any time
during which the holders of Series A Preferred Stock are entitled to elect
Redemption Default Directors, in the event the Corporation pays in cash the
aggregate Redemption Price owed by it pursuant to Section 5(a), then the term of
any Redemption Default Director then in office shall terminate as of the time
such payment is made, and the total number of directors of the Corporation shall
decrease by the number of Redemption Default Directors then in office whose term
shall have terminated and the holders of Series A Preferred Stock shall cease to
have any rights hereunder to elect Redemption Default Directors, in each case,
unless and until one or more of the conditions specified above shall recur. In
addition, for so long as the holders of Series A Preferred Stock have rights to
elect Redemption Default Directors, the holders shall have the rights set forth
in Section Twelfth of the Charter.
6. Liquidation; Change of Control. (a) In the event of any
voluntary or involuntary liquidation (complete or partial), dissolution or
winding-up of the affairs of the Corporation, the holders of the Series A
Preferred Stock shall be entitled to receive an amount in cash equal to the
greater of (the "Greater Amount") (i) $26.00 per share (the "Liquidation
Amount") (subject to adjustment for any stock dividend, subdivision, combination
or reclassification or similar event affecting the Series A Preferred Stock)
plus an amount equal to the accumulated and unpaid dividends thereon (including
Accrued Dividends), whether or not authorized, from the Original Issuance Date
to the payment date and (ii) the product of (A) the price of the Common Stock
(calculated as the average of the daily Closing Prices for the Common Stock for
the five consecutive Trading Days selected by the Board of Directors of the
Corporation commencing not more than 20 Trading Days before, and ending not
later than the date of such liquidation, dissolution, or winding-up) and (B) the
number of shares of Common
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Stock such holders would be entitled to receive upon conversion of such Series A
Preferred Stock in accordance with the provisions of Section 7.
(b) In the event of any voluntary or involuntary liquidation
(complete or partial), dissolution or winding-up of the Corporation, the holders
of shares of Series A Preferred Stock (i) shall not be entitled to receive the
Greater Amount of the shares held by them until payment in full or provision has
been made for the payment of all claims of creditors of the Corporation and the
liquidation preference of any class or series of stock ranking senior to the
Series A Preferred Stock with respect to redemption rights and rights upon
liquidation, dissolution or winding-up of the affairs of the Corporation
("Senior Liquidation Stock" and, together with the Senior Dividend Stock, the
"Senior Stock"), plus accumulated and unpaid dividends thereon, if any, whether
or not authorized, to the payment date, shall have been paid in full and (ii)
shall be entitled to receive the Greater Amount of such shares held by them, in
preference to and in priority over any distributions upon the Common Stock and
any other series or class of the Corporation's stock that ranks junior to the
Series A Preferred Stock as to redemption rights and rights upon liquidation,
dissolution or winding-up of the affairs of the Corporation ("Junior Liquidation
Stock" and, together with the Junior Dividend Stock, the "Junior Stock"). Upon
payment in full of the Greater Amount to which the holders of shares of the
Series A Preferred Stock are entitled, the holders of shares of the Series A
Preferred Stock shall not be entitled to any further participation in any
distribution of assets by the Corporation. Subject to clause (i) above, if the
assets of the Corporation are not sufficient to pay in full the Greater Amount
payable to the holders of shares of the Series A Preferred Stock and the
liquidation preference payable to the holders of any series or class of the
Corporation's stock, outstanding on the date hereof or hereafter issued, that
ranks on a parity with the Series A Preferred Stock as to redemption rights and
rights upon liquidation, dissolution or winding-up of the affairs of the
Corporation ("Parity Liquidation Stock" and, together with the Parity Dividend
Stock, the "Parity Stock"), the holders of all such shares shall share ratably
in proportion to the full respective preferential amounts payable on such shares
in any distribution.
(c) For the purposes of this Section 6, neither the sale of all
or substantially all of the assets of the Corporation nor the consolidation or
merger of the Corporation with or into any other entity, shall be deemed to be a
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, unless (i) such sale, consolidation or merger shall be in
connection with a plan of liquidation, dissolution or winding up of the
Corporation (in which event the holders of the Series A Preferred Stock shall be
entitled to receive the Greater Amount per share held by them) or (ii) a Change
of Control (as defined below) shall occur (in which case, the holders of the
Series A Preferred Stock shall, if they so request in writing, subject to the
third and fourth sentence of this Section 6(c), be entitled to receive the
Liquidation Amount per share plus accumulated and unpaid dividends, including
Accrued Dividends, thereon to the payment date). In the event of a Change of
Control, the Corporation shall, not less than 30 days nor more than 60 days
prior thereto, by overnight courier or certified mail return receipt requested,
give notice thereof to the holders of the Series A Preferred Stock at their
addresses as they appear on the books of the Corporation (which notice shall
specify that the holders who desire to convert must satisfy the requirements for
conversion contained in Section 7 hereof and shall set forth the Conversion
Price) and shall comply with the provisions of Section 7. Each holder of shares
of Series A Preferred Stock shall within 10 days of receipt of such notice give
written notice to the Company that such holder wishes to receive the Liquidation
Amount per share plus accumulated
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and unpaid dividends thereon to the payment date. Any holder who fails to give
such notice shall be deemed to have elected to retain its shares of Series A
Preferred Stock. The Corporation shall not consummate a Change of Control
without adequately assuring the holders of the Series A Preferred Stock the
right to receive the amounts such holders are entitled to pursuant to this
Section 6(c) as of such date in accordance with applicable law.
(d) A "Change of Control", with respect to any person, means
the occurrence of any of the following:
(i) The acquisition by any person or group of persons of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Securities and Exchange Act of 1934, as amended) (other than (x) the
Corporation or a Subsidiary (as defined in that certain Preferred Stock
Purchase Agreement by and among the Corporation and the Purchasers listed
therein, dated November 28, 2000 (the "Purchase Agreement")) of the
Corporation in connection with the Offer (as defined in the Purchase
Agreement) or (y) the holders of the Series A Preferred Stock or their
respective Affiliates (as defined in the Purchase Agreement)) of 50% or
more of either (1) the then outstanding shares of Common Stock of the
person (the "Outstanding Company Common Stock") or (2) the combined
voting power of the then outstanding voting securities of the person
entitled to vote generally in the election of directors of such person
(the "Outstanding Company Voting Securities"); provided, however, that
any acquisition by any person pursuant to a transaction that complies
with clauses (1), (2) and (3) of paragraph (iii) of this definition shall
not be a Change of Control; or
(ii) Individuals who, as of the date hereof, constitute the
Board of Directors of the Corporation or other similar governing body of
such person or, with respect to any person organized or formed after the
date hereof, the individuals who constitute members of such body at its
first meeting (the "Incumbent Board") (it being understood that any
members of the Board of Directors of the Corporation elected by the
holders of the Series A Preferred Stock are members of the Incumbent
Board) cease for any reason to constitute at least a majority of the
Board of Directors of the Corporation or other similar governing body of
such person; provided, however, that any individual becoming a director,
or having similar management supervisory functions (for purposes of this
definition, a "director") subsequent to the date hereof or date of such
meeting whose election, or nomination for election by such person's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a
person other than the Incumbent Board of such person; or
(iii) Consummation of a reorganization, merger or consolidation,
sale or other disposition of all or substantially all of the assets or
shares of such person, or consummation of any acquisition by such person
or any of its Subsidiaries, or any transaction similar to any of the
foregoing (a "Business Combination"), in each case, unless, following
such Business Combination, (1) all or substantially all of the persons
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<PAGE> 12
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities of the applicable
person immediately prior to such Business Combination beneficially own,
directly or indirectly, a majority or more of, respectively, the then
Outstanding Company Common Stock and the then Outstanding Company Voting
Securities, as the case may be, of the person resulting from such
Business Combination (including a person which as a result of such
transaction owns the applicable person or all or substantially all of the
applicable person's assets either directly or through one or more
Subsidiaries) (such resulting person, a "Resulting Corporation") in
substantially the same proportions as their ownership, immediately prior
to such Business Combination, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities of the applicable person, as the
case may be, (2) no person or group of persons or their affiliates
(excluding any Resulting Corporation and any holder of shares of Series A
Preferred Stock or Affiliate thereof) beneficially owns, directly or
indirectly, 50% or more of, respectively, the then Outstanding Company
Common Stock of the Resulting Corporation or the then Outstanding Company
Voting Securities of the Resulting Corporation, and (3) at least a
majority of the members of the board of directors or other similar
governing body of the Resulting Corporation were members of the Incumbent
Board or were approved by a majority of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the board
or other similar governing body, providing for such Business Combination;
or
(iv) Approval by the shareholders of such person of a complete
liquidation or dissolution of such person.
7. Conversion. (a) Holders of shares of Series A Preferred
Stock may, at any time after the Original Issuance Date, convert shares of
Series A Preferred Stock, unless previously redeemed, into a number of shares of
Common Stock calculated by dividing, for each share of Series A Preferred Stock
to be converted, (1) the Liquidation Amount thereof, plus an amount equal to the
accumulated and unpaid dividends thereon (including Accrued Dividends), whether
or not authorized, to the Conversion Date (as defined below) by (2) $26.00,
subject to adjustment as described in Section 7(f) (the "Conversion Price"). If
more than one share of Series A Preferred Stock shall be surrendered for
conversion at one time by the same record holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of Series A Preferred Stock so surrendered. In
the case of shares of Series A Preferred Stock called for redemption, conversion
rights shall (subject to Section 5(e)) expire at the close of business on the
business day immediately preceding the Redemption Date. The holders of shares of
Series A Preferred Stock that convert such shares into shares of Common Stock
shall be entitled to receive (i) any unpaid dividends (including Accrued
Dividends) accumulating through the Conversion Date, if a Conversion Notice (as
defined below) is delivered by such holders on or after a Dividend Payment Date
and before the next succeeding Dividend Payment Record Date or (ii) the dividend
payable on (plus Accrued Dividends to) the subsequent Dividend Payment Date, if
a Conversion Notice is delivered by such holders on or after a Dividend Payment
Record Date and prior to the subsequent Dividend Payment Date, which amount (in
each case (i) and (ii)) shall be included in the Liquidation Amount to be
converted.
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<PAGE> 13
(b) Any holder of shares of Series A Preferred Stock electing
to convert the shares or any portion thereof in accordance with Section 7(a)
above shall give written notice (a "Conversion Notice") to the Corporation
(which notice may be given by facsimile transmission) that such holder elects to
convert the same and shall state therein the number of shares of Series A
Preferred Stock to be converted and the name or names in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued.
Promptly thereafter, the holder shall surrender the certificate or certificates
of shares of Series A Preferred Stock to be converted, duly endorsed, at the
office of the Corporation or any transfer agent for such shares, or at such
other place designated by the Corporation, provided that the Corporation shall
at all times maintain an office or agency in the City of New York for such
purposes. The Corporation shall, within three business days of receipt of such
Conversion Notice, issue and deliver to or upon the order of such holder,
against delivery of the certificates representing the shares of Series A
Preferred Stock that have been converted, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled (in the
number(s) and denomination(s) designated by such holder), and the Corporation
shall deliver to such holder a certificate or certificates for the number of
shares of Series A Preferred Stock that such holder has not elected to convert.
The conversion right with respect to any shares of Series A Preferred Stock
shall be deemed to have been exercised at the date upon which the Conversion
Notice is received by the Corporation (the "Conversion Date") and the person or
persons entitled to receive the Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such Common Stock
upon that date; provided, however, that nothing in this sentence shall relieve
the Corporation of its obligation to deliver to the person or persons entitled
to receive the Common Stock issuable upon conversion certificates therefor (and
the payment required by Section 7(d), if applicable), or its obligation, if any,
to pay any dividends accumulating after the Conversion Date pursuant to Section
3(a)(iii) above.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series A Preferred Stock. Instead of any fractional
share of Common Stock otherwise issuable upon conversion of any shares of Series
A Preferred Stock, the Corporation shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction of the Closing Price
(determined as set forth in Section 4(a) hereof) of the Common Stock on the
Conversion Date.
(d) If a holder converts shares of Series A Preferred Stock,
the Corporation shall pay any documentary, stamp or similar issue or transfer
tax due on the issue of Common Stock upon the conversion or due upon the
issuance of a new certificate or certificates for any shares of Series A
Preferred Stock not converted. The holder, however, shall pay any such tax that
is due because any such shares of the Common Stock or of the Series A Preferred
Stock are issued in a name other than the name of the holder.
(e) The Corporation shall at all times keep reserved out of its
authorized but unissued Common Stock a sufficient number of shares of Common
Stock to permit the conversion of all of the then-outstanding shares of Series A
Preferred Stock. For the purposes of this Section 7(e), the full number of
shares of Common Stock then issuable upon the conversion of all then-outstanding
shares of Series A Preferred Stock shall be computed as if at the time of
computation all outstanding shares of Series A Preferred Stock were held by a
single holder. The Corporation shall from time to time, in accordance with the
laws of the State of Maryland
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<PAGE> 14
and its Charter, increase the authorized amount of its Common Stock if at any
time the authorized amount of its Common Stock remaining unissued shall not be
sufficient to permit the conversion of all shares of Series A Preferred Stock at
the time outstanding. All shares of Common Stock issued upon conversion of the
shares of Series A Preferred Stock shall be validly issued, fully paid,
nonassessable and free and clear of (i) any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other), restriction
or other security interest of any kind or nature whatsoever (collectively,
"Liens"), other than any such Liens imposed by the holder to whom such shares
are issued or such person's creditors and (ii) any preemptive or other similar
rights.
(f) The Conversion Price shall be subject to adjustment as
follows:
(i) In case the Corporation shall (A) pay a dividend on any
class of its stock in shares of any class of Common Stock, (B) subdivide
the outstanding shares of any class of Common Stock into a greater number
of shares or (C) combine the outstanding shares of any class of Common
Stock into a smaller number of shares, the Conversion Price in effect
immediately prior thereto shall be adjusted by multiplying the Conversion
Price at which the shares of Series A Preferred Stock were theretofore
convertible by a fraction of which the denominator shall be the number of
shares of Common Stock outstanding immediately following such action and
of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior thereto. Such adjustment shall be made
whenever any event listed above shall occur and shall become effective
retroactively immediately after the record date in the case of a dividend
and immediately after the effective date in the case of a subdivision or
combination.
(ii) In case the Corporation shall issue rights or warrants to
any person (including holders of its Common Stock) entitling such person
or persons to subscribe for or purchase shares of Common Stock at a price
per share less than the Applicable Price (as defined below) on the date
of issuance, or in case the Corporation shall issue to any person
(including holders of its Common Stock) other securities convertible into
or exchangeable for Common Stock for a consideration per share of Common
Stock deliverable upon conversion or exchange thereof less than the
Applicable Price on the date of issuance, then the Conversion Price in
effect immediately prior thereto shall be adjusted as provided below so
that the Conversion Price therefor shall be equal to the price determined
by multiplying (A) the Conversion Price at which shares of Series A
Preferred Stock were theretofore convertible by (B) a fraction of which
(x) the denominator shall be the sum of (1) the number of shares of
Common Stock outstanding on the date of issuance of the convertible or
exchangeable securities, rights or warrants and (2) the number of
additional shares of Common Stock offered for subscription or purchase,
or issuable upon such conversion or exchange, and (y) the numerator shall
be the sum of (1) the number of shares of Common Stock outstanding on the
date of issuance of such convertible or exchangeable securities, rights
or warrants and (2) the number of additional shares of Common Stock which
the aggregate offering price of the shares of Common Stock so offered
would purchase at the Applicable Price. Such adjustment shall be made
whenever such convertible or exchangeable securities, rights or warrants
are issued, and shall become effective immediately after the date of
issuance of such securities. In the event the price per share of Common
Stock deliverable upon
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<PAGE> 15
exercise of any outstanding right or warrant to purchase or subscribe for
Common Stock, or upon conversion or exchange of any securities
convertible into or exchangeable for shares of Common Stock, is adjusted
or amended to an amount less than the Applicable Price as of the date of
such adjustment or amendment, then the Conversion Price in effect
immediately prior thereto shall be adjusted as provided in the
immediately preceding sentence as if such right, warrant or convertible
or exchangeable security were newly issued by the Corporation on the date
of such adjustment or amendment. The foregoing notwithstanding, upon the
expiration of any right or warrant to purchase Common Stock, the issuance
of which resulted in an adjustment in the Conversion Price pursuant to
this Section 7(f)(ii), if any such right or warrant shall expire and
shall not have been exercised, the Conversion Price shall be recomputed
immediately upon such expiration and effective immediately upon such
expiration shall be increased to the price it would have been (but
reflecting any other adjustments to the Conversion Price made pursuant to
the provisions of this Section 7(f) after the issuance of such rights or
warrants) had the adjustment of the Conversion Price made upon the
issuance of such rights or warrants been made on the basis of offering
for subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights or warrants. No
further adjustment shall be made upon exercise of any right, warrant,
convertible security or exchangeable security if any adjustment shall
have been made upon issuance of such security. As used herein, (A)
"Applicable Price" shall mean the Conversion Price or, if at any time the
condition in clause (i) or (ii) of Section 10(a) is not satisfied and
there are not on the Board of Directors of the Corporation Redemption
Default Directors elected by the holders of the Series A Preferred Stock
in accordance with Section 5(e), the Current Market Price, and (B)
"Current Market Price" for a given date, with respect to any share of
Common Stock, shall mean the average of the Closing Prices of such share
(if available, as reported in The Wall Street Journal or other reputable
financial news source) for the 20 consecutive Trading Days immediately
preceding such date; provided, however, that with respect to options
issued pursuant to duly adopted stock option or other plans of the
Corporation under which options to purchase stock of the Corporation may
be issued to employees or directors of the Corporation or of affiliates
under the Corporation's control ("Corporation Option Plans"), each
reference to "Current Market Price" in this subsection (ii) shall be
deemed to be a reference to the current market price or fair market value
of the Common Stock or similar concept, if any, as such term or concept
is used in the applicable Corporation Option Plan for determining the
fair market value of such stock at the time of grant.
(iii) [INTENTIONALLY OMITTED]
(iv) In case the Corporation shall purchase, redeem or otherwise
acquire any shares of Common Stock at a price per share greater than the
Applicable Price on the date of such event, or in case the Corporation
shall purchase, redeem or otherwise acquire other securities convertible
into or exchangeable for Common Stock for a consideration per share of
Common Stock into which such security is convertible or exchangeable
greater than the Applicable Price on the date of such event, then the
Conversion Price in effect immediately prior thereto shall be adjusted as
provided below so that the Conversion Price therefor shall be equal to
the price determined by multiplying (A) the Conversion Price at which
shares of Series A Preferred Stock were theretofore
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<PAGE> 16
convertible by (B) a fraction of which (x) the denominator shall be the
Applicable Price immediately prior to such event, and (y) the numerator
shall be the result of dividing: (1) (x) the product of (aa) the number
of shares of Common Stock outstanding on a fully-diluted basis and (bb)
the Applicable Price, in each case immediately prior to such event, minus
(y) the aggregate consideration paid by the Company in such event (plus,
in the case of securities convertible into or exchangeable for Common
Stock, the aggregate additional consideration to be paid to the Company
upon exercise, conversion or exchange), by (2) the number of shares of
Common Stock outstanding on a fully-diluted basis immediately after such
event. Such adjustment shall be made whenever such Common Stock is issued
or sold, and shall become effective immediately after the issuance or
sale of such securities; provided, however, that no adjustment shall be
made pursuant to this subsection (iv) if holders of a majority of the
Series A Preferred Stock, voting separately as a class, consent in
advance to the event that would otherwise give rise to such adjustment
occurring without such Conversion Price adjustment.
(v) In case the Corporation shall issue or sell any shares of
Common Stock at a price per share below the Applicable Price on the date
the Corporation commits or agrees to such sale or issuance, then the
Conversion Price in effect immediately prior thereto shall be adjusted as
provided below so that the Conversion Price therefor shall be equal to
the price determined by multiplying (A) the Conversion Price at which
shares of Series A Preferred Stock were theretofore convertible by (B) a
fraction of which (x) the denominator shall be the sum of (1) the number
of shares of Common Stock outstanding on the date of issuance or sale of
such shares of Common Stock and (2) the number of additional shares of
Common Stock offered for sale or subject to issuance, and (y) the
numerator shall be the sum of (1) the number of shares of Common Stock
outstanding on the date of issuance or sale of such shares of Common
Stock and (2) the number of additional shares of Common Stock which the
aggregate offering price of the number of shares of Common Stock so
offered or issued would purchase at the Applicable Price. Such adjustment
shall be made whenever such Common Stock is issued or sold, and shall
become effective immediately after the issuance or sale of such
securities; provided, however, that the provisions of this subparagraph
shall not apply to (1) shares of Common Stock issued upon conversion of
shares of Series A Preferred Stock, (2) shares of Common Stock issued
upon conversion of options issued or granted pursuant to Corporation
Option Plans, or (3) shares of Common Stock issued in a bona fide public
offering to or through a nationally recognized investment banking firm in
which affiliates (as defined in the rules of the Securities and Exchange
Commission promulgated under the Securities Exchange Act of 1934, as
amended) of the Corporation (other than the Purchasers (as defined in the
Purchase Agreement) and persons controlling the Purchasers) purchase less
than 10% of the shares sold in such offering.
(vi) No adjustment in the Conversion Price shall be required
unless the adjustment would require an increase or decrease of at least
1% in the Conversion Price then in effect; provided, however, that any
adjustments that by reason of this Section 7(f)(vi) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 7(f) shall be made to the
nearest cent.
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(vii) In the event that at any time the holder of any share of
Series A Preferred Stock thereafter surrendered for conversion shall
become entitled to receive any shares of the Corporation other than
shares of the Common Stock, thereafter the number of such other shares so
receivable upon conversion of any share of Series A Preferred Stock shall
be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Section 7(f), and the other provisions of this
Section 7 with respect to the Common Stock shall apply on like terms to
any such other shares.
(viii) Whenever the Conversion Price is adjusted, as herein
provided, the Corporation shall promptly file with the transfer agent for
the Series A Preferred Stock, if any, a certificate of an officer of the
Corporation setting forth the Conversion Price after the adjustment and
setting forth a brief statement of the facts requiring such adjustment
and a computation thereof (each, a "Conversion Certificate") and promptly
thereafter the Corporation shall cause a notice of the adjusted
Conversion Price to be mailed to each registered holder of shares of
Series A Preferred Stock; provided that if there is no transfer agent for
the Series A Preferred Stock, then the Corporation shall promptly send a
copy of the Conversion Certificate to each holder of record by overnight
courier or by certified mail, return receipt requested.
(ix) In case of any reclassification of the Common Stock, any
consolidation of the Corporation with, or merger of the Corporation into,
any other entity, any merger of another entity into the Corporation
(other than a merger that does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common
Stock of the Corporation), any sale or transfer of all or substantially
all of the assets of the Corporation or any compulsory share exchange
pursuant to which share exchange the Common Stock is converted into other
securities, cash or other property (each such transaction, a "Fundamental
Change"), then lawful provision shall be made as part of the terms of
such transaction whereby the holder of each share of Series A Preferred
Stock outstanding immediately prior thereto shall have the right
thereafter, during the period such share of Series A Preferred Stock
shall be convertible, to convert such share into the kind and amount of
securities, cash and other property receivable upon the reclassification,
consolidation, merger, sale, transfer or share exchange by a holder of
the number of shares of Common Stock of the Corporation into which a
share of Series A Preferred Stock would have been convertible immediately
prior to the reclassification, consolidation, merger, sale, transfer or
share exchange. The Corporation, the person formed by the consolidation
or resulting from the merger or which acquires such assets or which
acquires the Corporation's shares, as the case may be, shall make
provisions in its certificate or articles of incorporation or other
constituent document to establish such rights and such rights shall be
clearly provided for in the definitive transaction documents relating to
such transaction, and the Corporation agrees that it will not be a party
to or permit such Fundamental Change to occur unless such provisions are
so made as a part of the terms thereof. The certificate or articles of
incorporation or other constituent document shall provide for
adjustments, which, for events subsequent to the effective date of the
certificate or articles of incorporation or other constituent document,
shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section
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7. The provisions of this Section 7(f)(ix) shall similarly apply to
successive reclassifications, consolidations, mergers, sales, transfers
or share exchanges.
(x) In the event any Merger Event (as defined below) is
proposed or the Corporation enters into any agreement providing for a
Merger Event, and the fair market value of the cash, securities and other
property to be received by holders of shares of Common Stock for each
share of Common Stock held, or into which shares of Common Stock are to
be converted in such event (the "Merger Event Consideration"), is less
than the Conversion Price then in effect, then each holder of shares of
Series A Preferred Stock may elect to cause all of such holder's shares
of Series A Preferred Stock to be converted into shares of Common Stock
effective immediately prior to the Merger Event on the basis of an
adjusted Conversion Price equal to 99% of the fair market value of the
Merger Event Consideration. The Corporation shall not engage in any
Merger Event or permit any Merger Event to occur unless not less than 30
days prior to the proposed date of such Merger Event the Corporation
shall have sent, by overnight courier or certified mail return receipt
requested, a notice to each holder of Series A Preferred Stock at such
holder's address as it appears on the stock books of the Corporation,
which notice shall: (i) describe the contemplated Merger Event and
indicate the date on which the Merger Event is expected to be
consummated; (ii) state the Merger Event Consideration; (iii) inform such
holders of their right to effect a conversion pursuant to and in
accordance with this subsection in connection with the proposed Merger
Event; and (iv) state that holders electing not to convert pursuant to
this subsection shall have the rights set forth in subsection (ix) above.
The term "Merger Event" shall mean (1) any consolidation of the
Corporation with, or merger of the Corporation into, any other entity,
(2) any merger of another entity into the Corporation (other than a
merger that does not result in any reclassification, conversion, exchange
or cancellation of outstanding shares of any class of Common Stock of the
Corporation), (3) any sale or transfer of all or substantially all of the
assets of the Corporation or (4) any compulsory share exchange pursuant
to which share exchange the Common Stock is to be converted into other
securities, cash or other property, except, in each of cases (1) - (4),
for any such event in which the consideration to be received by holders
of Common Stock consists solely of shares of common stock of the
acquiring or surviving corporation of such event, which common stock is
listed or admitted to trading or quoted on the NYSE, the American Stock
Exchange or NASDAQ. For purposes of this subsection (x), the fair market
value of any securities for which a current market price (calculated in
the same manner, mutatis mutandis, as set forth in the definition of
Current Market Price in Section 7(f)(ii) with respect to the Common
Stock) is ascertainable shall be the current market price for such
security as of the relevant date, and the fair market value of all other
securities and all other assets or property shall be determined in good
faith by the Board of Directors of the Corporation.
(xi) If any event occurs as to which the foregoing provisions of
this Section 7(f) are not strictly applicable or, if strictly applicable,
would not, in the good faith judgment of the Board of Directors of the
Corporation, fairly protect the conversion rights of the Series A
Preferred Stock in accordance with the essential intent and principles of
such provisions, then the Board of Directors of the Corporation shall
make such adjustments in the application of such provisions, in
accordance with such essential intent and principles, as shall be
reasonably necessary, in the good faith opinion of the
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Board of Directors of the Corporation, to protect such conversion rights
as aforesaid, but in no event shall any such adjustment have the effect
of increasing the Conversion Price, or otherwise adversely affect the
holders.
(g) The Independent Directors may make such reductions in the
Conversion Price, in addition to those required by the foregoing paragraphs, as
it considers to be advisable to avoid or diminish any income tax to holders of
Common Stock or rights to purchase Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes. The Independent Directors from time to time may
reduce the Conversion Price by any amount for any period of time if the period
is at least 20 days and if the reduction is irrevocable during the period.
Whenever the Conversion Price is reduced pursuant to either of the two preceding
sentences, the Corporation shall mail to holders of record of the Series A
Preferred Stock a notice of the reduction at least 15 days before the date the
reduced Conversion Price takes effect, stating the reduced Conversion Price and
the period it will be in effect. A voluntary reduction of the Conversion Price
does not change or adjust the Conversion Price otherwise in effect for purposes
of paragraph 7(f) above.
8. Status of Shares. All shares of the Series A Preferred
Stock that are at any time redeemed pursuant to Sections 4 or 5 or converted
pursuant to Section 7 and all shares of the Series A Preferred Stock that are
otherwise reacquired by the Corporation shall have the status of authorized but
unissued shares of Preferred Stock, without designation as to series, subject to
reissuance by the Board of Directors of the Corporation as shares of any one or
more other classes or series.
9. Voting Rights. (a) For so long as any shares of the Series
A Preferred Stock are outstanding, each share of Series A Preferred Stock shall
entitle the holder thereof to notice of, to attend and to vote at, in person or
by proxy, any special or annual meeting of stockholders, on all matters entitled
to be voted on by holders of Common Stock and any other series or class of
Voting Stock (as defined in Section 9(d)) voting together as a single class
(except as set forth in Sections 9(b) and 10) with all other shares entitled to
vote thereon. With respect to any such vote, each share of Series A Preferred
Stock shall entitle the holder thereof to cast that number of votes per share as
is equal to the number of votes that such holder would be entitled to cast had
such holder converted its shares of Series A Preferred Stock into shares of
Common Stock, as of the record or other applicable date for determining the
stockholders of the Corporation eligible to vote on any such matters.
(b) For so long as any shares of Series A Preferred Stock are
outstanding, in addition to any vote or consent of stockholders required by law
or by the Charter, the affirmative vote, given in person or by proxy at any
meeting called for such purpose, or written consent, of the holders of at least
a majority of the Series A Preferred Stock at any time issued and outstanding,
acting as a single class, shall be necessary for effecting, entering into,
engaging in or approving:
(i) any reclassification of the Series A Preferred Stock or any
amendment, alteration or repeal (including as a result of a merger or
consolidation involving the Corporation or otherwise by operation of law)
of any provision of the Corporation's
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Charter or Bylaws, which adversely affects the dividend or liquidation
preferences, voting powers or other rights of the holders of the Series A
Preferred Stock;
(ii) the authorization or creation of, or the increase in the
authorized amount of, or the issuance of any shares of any class or
series of (or the reclassification of any securities into) securities of
the Corporation ranking senior to or on a par with the Series A Preferred
Stock with respect to distributions or rights on liquidation, or any
security convertible into or exercisable for or otherwise representing
the right to acquire any such securities or any derivative or similar
securities representing any of the foregoing;
(iii) any issuance of shares of Common Stock at a price equal to
or less than $26 per share of Common Stock, appropriately adjusted to
reflect any changes in the capitalization of the Corporation after the
date hereof as determined in good faith by the Board of Directors of the
Corporation, or of securities convertible into or exchangeable for, or
otherwise representing the right to acquire, Common Stock for a
consideration per share of Common Stock deliverable upon conversion,
exchange or exercise thereof equal to or less than $26 per share of
Common Stock (appropriately adjusted as described above) based on the
initial consideration paid for such convertible, exchangeable or
exercisable security; and
(iv) the declaration, payment or making of any dividend or other
distribution (in cash, property or obligations) in respect of any shares
of stock of the Corporation other than dividends on the Series A
Preferred Stock and the Regular Quarterly Dividends in cash
(appropriately adjusted to reflect changes in the Common Stock after the
date hereof as determined in good faith by the Board of Directors of the
Corporation); provided that the Board of Directors of the Corporation may
without a vote of the holders of the Series A Preferred Stock
nominally increase the Regular Quarterly Dividend above $0.065; and
provided, further, that such nominal increase is done in a manner
consistent with past practice.
(c) In connection with any right to vote pursuant to Section
9(b), each holder of shares of Series A Preferred Stock shall have one vote for
each share held.
(d) The term "Voting Stock" means any class or classes of
stock, or securities convertible into or exchangeable for any class of stock, of
the Corporation pursuant to which the holders thereof have the general power
under ordinary circumstances to vote with respect to the election of at least a
majority of the Board of Directors of the Corporation, irrespective of whether
or not, at the time, stock of any other class or classes shall have, or might
have, voting power by reason of the happening of any contingency.
10. Board Representation. (a) For as long as (i) shares of
Series A Preferred Stock entitling the holders thereof to cast an aggregate of
at least 90% of the votes that can be cast by the holders of Series A Preferred
Stock pursuant to Section 9(a) hereof as of the Original Issuance Date are
outstanding, the holders thereof shall be entitled to elect, at a meeting of
such stockholders or by written consent in lieu thereof, at least one half of
the members of the Board of Directors of the Corporation, (ii) shares of Series
A Preferred Stock entitling the holders thereof to cast an aggregate of at least
50% of the votes that can be cast by the holders of Series
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A Preferred Stock pursuant to Section 9(a) as of the Original Issuance Date
hereof are outstanding, the holders thereof shall be entitled to elect, at a
meeting of such stockholders or by written consent in lieu thereof, at least 40%
of the members of the Board of Directors of the Corporation, (iii) shares of
Series A Preferred Stock entitling the holders thereof to cast an aggregate of
at least 25% of the votes that can be cast by the holders of Series A Preferred
Stock pursuant to Section 9(a) as of the Original Issuance Date hereof are
outstanding, the holders thereof shall be entitled to elect, at a meeting of
such stockholders or by written consent in lieu thereof, at least one quarter of
the members of the Board of Directors of the Corporation, or (iv) shares of
Series A Preferred Stock entitling the holders thereof to cast an aggregate of
at least 10% of the votes that can be cast by the holders of Series A Preferred
Stock pursuant to Section 9(a) as of the Original Issuance Date hereof are
outstanding, the holders thereof shall be entitled to elect, at a meeting of
such stockholders or by written consent in lieu thereof, at least one member of
the Board of Directors of the Corporation; provided, however, that each voting
requirement in clauses (i) through (iv) shall be appropriately adjusted to
reflect any changes in the Common Stock after the date hereof. A plurality of
all votes cast by holders of the Series A Preferred Stock at a meeting at which
a quorum is present shall be sufficient to elect a director pursuant to this
Section 10. As long as at least 10% of the votes that can be cast by the holders
of Series A Preferred Stock pursuant to Section 9(a) as of the Original Issuance
Date hereof are outstanding, each committee of the Board of the Corporation, the
board of directors of any Subsidiary of the Corporation and each committee of
any such Subsidiary's board of directors shall include a proportionate number of
directors nominated by the holders of Series A Preferred Stock.
(b) As long as the condition in either clause (i) or clause
(ii) of Section 10(a) is satisfied, the Corporation shall not, and shall not
permit any of its Subsidiaries to, without the consent of the majority of the
directors elected by the holders of Series A Preferred Stock in accordance with
either of such clauses, effect or validate any of the following:
(i) any authorization or issuance, reclassification,
repurchase, redemption or other acquisition of any of its equity
securities or any rights, warrants, options or other securities
exercisable for, convertible into or otherwise carrying the right to
acquire any equity securities, or any derivative or similar securities
with respect to any of the foregoing;
(ii) any issuance or incurrence of (or agreement to issue or
incur, including by way of an acquisition of any entity, or any merger,
business combination or similar transaction or as a result of any
amendment to any indenture, credit agreement or other similar instrument)
Debt (as defined below) if, after giving effect thereto, the
Corporation's Debt would be greater than $25 million, on a consolidated
basis;
(iii) the liquidation, dissolution, winding up or reorganization
of the Corporation;
(iv) any transaction or series of related transactions involving
a Change of Control (without reference to the exceptions in clauses (1),
(2) and (3) of paragraph (iii) of the definition of such term) or the
sale of all or substantially all of the equity or assets of the
Corporation, or any acquisition, disposition or other business
combination
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transaction (or series of transactions) involving consideration in an
amount greater than $20 million in the aggregate (including without
limitation (x) the purchase price paid or to be paid in connection with
such transaction (whether pursuant to lump sum payments, future payments,
earn-out payments or combinations thereof, with any future payments
discounted to present value) and (y) any and all liabilities which are
assumed or to be assumed in connection with such transaction);
(v) any amendment to the Corporation's Charter or Bylaws;
(vi) the removal or replacement of, or the establishment of the
level or form of compensation payable to, the Corporation's Chief
Executive Officer, Chief Operating Officer or Chief Financial Officer.
(c) Any directors elected by the holders of Series A Preferred
Stock pursuant to Section 10(a) (the "Designated Directors") shall be entitled
to all rights of voting and participation as are directors of the Corporation
generally. The holders of the Series A Preferred Stock shall be entitled
exclusively, by affirmative vote of holders of a majority of the total number of
shares of Series A Preferred Stock then outstanding or by written consent in
lieu thereof, at any time to remove any Designated Director (provided that the
Independent Directors shall, to the extent permitted by applicable law, have the
right to remove, but not replace, any Designated Director who has been convicted
of a felony involving moral turpitude or has been found by a court or other
governmental authority having competent jurisdiction to have engaged in material
willful misconduct). Any other provision of the terms of the Series A Preferred
Stock or the Charter or Bylaws of the Corporation notwithstanding, no Designated
Director may be removed except in the manner provided for in this Section 10(c).
Vacancies among the Designated Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
at any time, but only by the affirmative vote of holders of a plurality of the
total number of shares of Series A Preferred Stock cast, voting at a meeting
together as a single class, or by a majority of the total number of shares of
Series A Preferred Stock then outstanding acting by written consent in lieu
thereof, and any director so chosen shall hold office for a term expiring on the
date the term of office of the director such newly-elected director shall have
replaced would have expired.
(d) For purposes of this Section 10, "Debt" shall mean, with
respect to any person, whether recourse is to all or a portion of the assets of
such person and whether or not contingent, and without duplication, (i) every
obligation of such person for money borrowed; (ii) every obligation of such
person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such person; (iv) every obligation of such person issued or
assumed as the deferred purchase price of property or services but excluding
trade accounts payable; (v) every capital lease obligation of such person; (vi)
all indebtedness of such person, whether incurred on or prior to the Original
Issuance Date or thereafter incurred, for claims in respect of derivative
products, including interest rate, foreign exchange rate and commodity forward
contracts, options and swaps and similar arrangements; (vii) every other
liability or obligation of such person but excluding trade accounts payable; and
(viii) every obligation of the type referred to in clauses (i) through (vii) of
another person and all
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dividends of another person the payment of which, in either case, such person
has guaranteed or is responsible or liable for, directly or indirectly, as
obligor or otherwise.
11. Preemptive Rights. Holders of the Series A Preferred Stock
shall have the preemptive rights as set forth in Article Seventh of the Charter.
12. Notice of Certain Events. The holders of shares of the
Series A Preferred Stock will be entitled to receive written notice of any
liquidation, Change of Control or redemption and shall be given an opportunity
to convert their Series A Preferred Stock immediately prior to any such
liquidation, Change of Control or redemption in the manner specified above, if
so specified, or if not so specified, in such a manner as is reasonably likely
to give the holders such an opportunity.
SECOND: The shares of Series A Preferred Stock have been
classified and designated by the Board of Directors of the Corporation under the
authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the
Board of Directors of the Corporation in the manner and by the vote required by
law.
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FOURTH: The undersigned President of the Corporation acknowledges
these Articles Supplementary to be the corporate act of the Corporation and, as
to all matters or facts required to be verified under oath, the undersigned
President acknowledges that, to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be signed in its name and on its behalf by its President and
attested to by its Secretary on this __th day of _________, 2001.
<TABLE>
<S> <C>
ATTEST: STRAYER EDUCATION, INC.
------------------------ By: ------------------------ (SEAL)
------------------------ ------------------------
Secretary
</TABLE>
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