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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: January 22, 1999
Commission File Number 1-13159
ENRON CORP.
(Exact name of registrant as specified in its charter)
Oregon 47-0255140
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Enron Building
1400 Smith Street
Houston, Texas
(Address of Principal 77002
executive offices) (Zip Code)
(713) 853-6161
(Registrant's telephone number, including code)
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ITEM 7. EXHIBITS.
4.01 Statement of Resolutions Establishing A Series of Preferred
Stock of Enron Corp. -- Mandatorily Convertible Single Reset
Preferred Stock, Series A.
4.02 Statement of Resolutions Establishing A Series of Preferred
Stock of Enron Corp. -- Mandatorily Convertible Single Reset
Preferred Stock, Series B.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ENRON CORP.
Date: January 22, 1999 By: /s/ RICHARD A. CAUSEY
-------------------------
Richard A. Causey
Senior Vice President,
Chief Accounting,
Information and
Administrative Officer
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INDEX TO EXHIBITS
4.01 Statement of Resolutions Establishing A Series of Preferred
Stock of Enron Corp. -- Mandatorily Convertible Single Reset
Preferred Stock, Series A.
4.02 Statement of Resolutions Establishing A Series of Preferred
Stock of Enron Corp. -- Mandatorily Convertible Single Reset
Preferred Stock, Series B.
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STATEMENT OF RESOLUTIONS ESTABLISHING
A SERIES OF PREFERRED STOCK OF
ENRON CORP.
MANDATORILY CONVERTIBLE SINGLE RESET PREFERRED STOCK, SERIES A
Pursuant to Oregon Revised Statutes Section 60.134 and Article IV of
the Articles of Incorporation, as amended, of Enron Corp. (the "Corporation"),
the Board of Directors of the Corporation has duly adopted the following
resolutions as of December 15, 1998, establishing a series of Preferred Stock of
the Corporation:
RESOLVED, that there is hereby established a series of Preferred Stock
of the Corporation designated the Mandatorily Convertible Single Reset Preferred
Stock, Series A (herein referred to as the "Mandatorily Convertible Preferred
Stock"). The designation and number of shares of such series and the powers,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations and restrictions thereof (in addition to those
set forth in the Corporation's Articles of Incorporation, as amended, that may
be applicable to such series) are as follows:
A. Definitions. Capitalized terms used but not defined herein shall
have the meaning ascribed thereto in the Corporation's Articles of
Incorporation, as amended. In addition, the following terms shall have the
following meanings when used herein:
"Average Trading Price" for any given period, including a single day,
means, for a security, an amount equal to (i) the sum of the Closing Price for
such security on each Trading Day in such period divided by (ii) the total
number of Trading Days in such period.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which commercial banking institutions in the State of New York, the State
of Oregon or London, England are authorized or obligated by law or executive
order to close.
"Closing Price" means, for a security, the closing price for such
security on the Trading Day in question (or if such day is not a Trading Day
then as of the Trading Day next preceding such day) as reported by Bloomberg
L.P., or if not so reported by Bloomberg L.P., as reported by another recognized
source selected by the Board of Directors of Enron.
"Common Stock" shall have the meaning specified in paragraph F(9)
hereof.
"Dividend Payment Date" shall have the meaning specified in paragraph
C(1) hereof.
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"Failed Remarketing" shall have the meaning ascribed to such term in
the Remarketing Agreement.
"Final Sale Date" shall have the meaning ascribed to such term in the
Remarketing Agreement.
"junior stock" shall mean (and references to shares ranking "junior to"
the Mandatorily Convertible Preferred Stock shall refer to), with respect to
paragraphs C and G, Common Stock, the Series A Junior Voting Convertible
Preferred Stock of the Corporation and any other class or series of stock of the
Corporation which by its terms is not entitled to receive any dividends unless
all dividends required to have been paid or declared and set apart for payment
on the Mandatorily Convertible Preferred Stock shall have been so paid or
declared and, with respect to paragraphs D and G, Common Stock, the Series A
Junior Voting Convertible Preferred Stock of the Corporation and any other class
or series of stock of the Corporation which by its terms is not entitled to
receive any assets upon the liquidation, dissolution or winding up of the
affairs of the Corporation until the Mandatorily Convertible Preferred Stock
shall have received the entire amount to which such stock is entitled upon
liquidation, dissolution or winding up.
"Mandatory Conversion" shall have the meaning specified in paragraph
F(1) hereof.
"Mandatory Conversion Date" shall have the meaning specified in
paragraph F(1) hereof.
"Mandatory Conversion Date Market Price" shall have the meaning
specified in paragraph F(1).
"Mandatory Conversion Rate" shall have the meaning specified in
paragraph F(1) hereof.
"Marlin Senior Notes" shall have the meaning ascribed to such term in
the Remarketing Agreement.
"Optional Conversion" shall have the meaning specified in paragraph
F(2).
"Optional Conversion Rate" shall have the meaning specified in
paragraph F(2).
"parity stock" shall mean (and references to shares ranking "on a
parity with" the Mandatorily Convertible Preferred Stock shall refer to), with
respect to paragraphs C and G, any class or series of stock of the Corporation
which by its terms is entitled to receive payment of dividends on a parity with
the Mandatorily Convertible Preferred Stock and, with respect to paragraphs D
and G, any class or series of stock of the Corporation which by its terms is
entitled to receive assets upon the liquidation, dissolution or winding up of
the affairs of the Corporation on a parity with the Mandatorily Convertible
Preferred Stock.
"Principal Market" means the principal exchange on which the security
in question is traded or the principal market on which such security is quoted,
as determined by the Board of Directors of the Corporation.
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"Pro Rata Repurchase" means any purchase of shares of Common Stock by
the Corporation or any affiliate thereof (as defined in Rule 12b-2 under the
Securities Exchange Act of 1934 (the "Exchange Act")) pursuant to any tender
offer or exchange offer subject to Section 13(e) of the Exchange Act, or
pursuant to any other offer available to substantially all holders of Common
Stock, whether for cash, shares of capital stock of the Corporation, other
securities of the Corporation, evidences of indebtedness of the Corporation or
any other person or any other property (including, without limitation, shares of
capital stock, other securities or evidences of indebtedness of a Subsidiary),
or any combination thereof, effected while any of the shares of Mandatorily
Convertible Preferred Stock are outstanding; provided, however, that "Pro Rata
Repurchase" shall not include any purchase of shares by the Corporation or any
affiliate thereof made in open market transactions substantially in accordance
with the requirements of Rule 10b-18 as in effect under the Exchange Act or on
such other terms and conditions as the Board of Directors shall have determined
are reasonably designed to prevent such purchases from having a material effect
on the trading market for the Common Stock. A Pro Rata Repurchase shall be
deemed to be effective on the date of acceptance of shares for purchase or
exchange under any tender or exchange offer which is a Pro Rata Repurchase or
the date of purchase with respect to any Pro Rata Repurchase that is not a
tender or exchange offer.
"Rate Reset Date" shall have the meaning ascribed to such term in the
Remarketing Agreement.
"Redemption Event" means the occurrence of any of the following: (i)
any consolidation or merger of the Corporation with or into another corporation
or entity or the statutory exchange of securities with another corporation or
entity, unless in connection with such consolidation, merger or exchange the
outstanding shares of Common Stock immediately preceding the consummation of
such consolidation, merger or exchange are converted into, exchanged for or
otherwise represent a majority of the outstanding shares of common stock of the
surviving or resulting corporation or entity immediately succeeding the
consummation of such consolidation, merger or exchange or (ii) the Corporation
sells or conveys to another entity (other than a Subsidiary) all or
substantially all of the assets of the Corporation.
"Remarketing Agents" shall have the meaning ascribed to such term in
the Remarketing Agreement.
"Remarketing Agreement" shall mean the Enron Preferred Stock
Remarketing and Registration Rights Agreement dated as of December 17, 1998
among the Corporation, the Preferred Voting Trust, Marlin Water Trust, Bankers
Trust Company, as Indenture Trustee, and BT Alex. Brown Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation, as Remarketing Agents. The
Corporation will furnish any shareholder of the Corporation with a copy of the
Remarketing Agreement without charge upon request in writing to the Secretary of
the Corporation.
"Reset Common Yield" shall mean the quotient of (i) the product of (x)
4 and (y) the amount of the ordinary quarterly cash dividend on one share of
Common Stock most recently declared prior to the Trigger Date (as appropriately
adjusted for the events referred to in paragraph F(3)(a)), unless subsequent to
such declaration and prior to the Trigger Date, the
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Corporation has publicly announced a change to, or elimination of, its ordinary
quarterly cash dividend and filed with the Securities and Exchange Commission a
document including such change or elimination, in which case the amount of such
proposed ordinary quarterly cash dividend or $0.00 if such dividend is to be
eliminated, divided by (ii) the Reset Price (provided, however, that if as of
the Trigger Date there is more than one class of Common Stock, then the Reset
Common Yield shall be calculated with respect to each then outstanding class of
Common Stock, and the Reset Common Yield (as used herein) shall be the amount
calculated with respect to the class of Common Stock resulting in the greatest
Reset Common Yield).
"Reset Dividend Rate" shall mean an amount per share per annum equal to
the product of (i) the sum of (x) the Reset Common Yield (expressed as a
percentage), plus (y) 7% and (ii) $5,000.00 (rounded to the nearest cent).
"Reset Price" shall mean the higher of (i) the Closing Price of a share
of Common Stock on the Trigger Date or (ii) the quotient (rounded up to the
nearest cent) of $1,024,000,000.00 divided by the number, as of the Trigger
Date, of the authorized but unissued shares of Common Stock that have not been
reserved as of the Trigger Date by the Board of Directors for other purposes,
subject to adjustment as provided in paragraph F.
"Rights" means rights or warrants distributed by the Corporation under
a shareholder rights plan or agreement to all holders of Common Stock entitling
the holders thereof to subscribe for or purchase shares of the Corporation's
capital stock (either initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events ("Rights Events"):
(i) are deemed to be transferred with such shares of Common Stock,
(ii) are not exercisable, and
(iii) are also issued in respect of future issuances of Common Stock.
"Rights Events" shall have the meaning ascribed to such term in the
definition of Rights.
"senior stock" shall mean (and references to shares ranking "senior to"
or "prior to" the Mandatorily Convertible Preferred Stock shall refer to), with
respect to paragraphs C and G, the 9.142% Perpetual Second Preferred Stock of
the Corporation, the Cumulative Second Preferred Convertible Stock of the
Corporation and any other class or series of stock of the Corporation ranking
senior to the Mandatorily Convertible Preferred Stock in respect of the right to
receive dividends and, with respect to paragraphs D and G, the 9.142% Perpetual
Second Preferred Stock of the Corporation, the Cumulative Second Preferred
Convertible Stock of the Corporation and any other class or series of stock of
the Corporation ranking senior to the Mandatorily Convertible Preferred Stock
with respect to the right to receive assets upon the liquidation, dissolution or
winding up of the affairs of the Corporation. All classes or series of stock of
the Corporation other than junior stock or parity stock shall be senior stock
with respect to the Mandatorily Convertible Preferred Stock, except to the
extent expressly provided otherwise in
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the Corporation's Articles of Incorporation, as amended, including any Statement
of Resolutions Establishing a Series of Preferred Stock.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other individuals performing similar functions, are at
the time directly or indirectly owned by the Corporation.
"Successful Repricing Date" shall have the meaning ascribed to such
term in the Remarketing Agreement.
"Threshold Appreciation Price" means the product of (i) the Reset Price
as of the time in question and (ii) 1.10.
"Trading Day" means a day on which the Principal Market with respect to
the security in question is regularly scheduled to be open for trading. For
purposes of this definition, a day on which any such exchange is scheduled to
close (as opposed to unexpectedly closing) prior to its regular closing time
shall not constitute a Trading Day.
"Trigger Date" shall mean the earlier of (A) the Successful Repricing
Date or (B) the date of a Failed Remarketing.
B. Designation. The distinctive designation of the series of Preferred
Stock created by this Statement of Resolutions shall be the "Mandatorily
Convertible Single Reset Preferred Stock, Series A." The number of shares that
shall constitute such series shall be 204,800 shares.
C. Dividends.
(1) The holders of the Mandatorily Convertible Preferred Stock shall
not be entitled to receive any dividends prior to, or with respect to any period
ending prior to, the Rate Reset Date. The holders of the Mandatorily Convertible
Preferred Stock, in preference to the rights of holders of any junior stock but
subject to the rights of holders of any senior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of any funds
legally available therefor, cumulative cash dividends from the Rate Reset Date
at the Reset Dividend Rate, and no more, payable on the dates as set forth in
this paragraph C. Dividends shall accrue on any given share of Mandatorily
Convertible Preferred Stock from the Rate Reset Date. Dividends shall be payable
quarterly in arrears on each January 1, April 1, July 1, and October 1
commencing on the first such date following the Rate Reset Date (each such date
being hereinafter referred to as a "Dividend Payment Date"), or, if any Dividend
Payment Date is not a Business Day, then the Dividend Payment Date shall be the
next succeeding Business Day. Each such dividend shall be payable to holders of
record as they appear on the books of the Corporation or any transfer agent for
the Mandatorily Convertible Preferred Stock on such record dates as shall be
fixed by the Board of Directors subject to applicable law (which record date
shall be no more than 60 days prior to the date fixed for the payment thereof).
Dividends on the Mandatorily Convertible Preferred Stock shall accrue on a daily
basis commencing on and including the Rate Reset Date, and accrued dividends for
each dividend period or portion thereof
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shall cumulate, to the extent not paid, as of the date on which they were to
have been paid. A dividend period shall commence on a Dividend Payment Date or
the Rate Reset Date, as the case may be, and continue to the day next preceding
the next succeeding Dividend Payment Date. Accumulated unpaid dividends shall
not accrue interest. Dividends (or cash amounts equal to accrued and unpaid
dividends) payable on the Mandatorily Convertible Preferred Stock for any period
less than or more than a full quarterly period shall be computed on the basis of
a 360-day year of twelve 30-day months and the actual number of days elapsed in
any period less than one month. Dividends on the Mandatorily Convertible
Preferred Stock shall accrue whether or not the Corporation has earnings,
whether or not there are funds legally available for the payment of such
dividends and whether or not such dividends are declared. Dividends in arrears
for any past dividend periods or portions thereof may be declared and paid at
any time without reference to any regular Dividend Payment Date to holders of
record on such date as shall be fixed by the Board of Directors subject to
applicable law. Dividends on the Mandatorily Convertible Preferred Stock shall
cease to accrue on the earlier of (i) the day immediately preceding the
Mandatory Conversion Date, or (ii) the day immediately prior to their earlier
conversion.
(2) As long as any shares of Mandatorily Convertible Preferred Stock
are outstanding, no dividends or other distributions for any dividend period
(other than dividends or other distributions payable in shares of, or warrants,
rights or options exercisable for or convertible into, junior stock, and cash in
lieu of fractional shares of such junior stock in connection with any such
dividend or distribution) will be paid on any junior stock unless: (i) full
dividends, if any, on all outstanding shares of senior stock, parity stock and
Mandatorily Convertible Preferred Stock have been paid, or declared and set
aside for payment, for all dividend periods terminating on or prior to the
payment date of such junior stock dividend or distribution, to the extent such
dividends on senior stock, parity stock or Mandatorily Convertible Preferred
Stock are cumulative; (ii) the Corporation has paid or set aside all amounts, if
any, then or theretofore required to be paid or set aside for all purchase,
retirement, and sinking funds, if any, for any outstanding shares of senior
stock, parity stock and Mandatorily Convertible Preferred Stock; and (iii) the
Corporation is not in default on any of its obligations to redeem any
outstanding shares of senior stock, parity stock or Mandatorily Convertible
Preferred Stock.
In addition, as long as any Mandatorily Convertible Preferred Stock is
outstanding, no shares of any junior stock may be purchased, redeemed, or
otherwise acquired by the Corporation or any Subsidiary (except in connection
with a reclassification or exchange of any junior stock through the issuance of
other junior stock (and cash in lieu of fractional shares of such junior stock
in connection therewith) and except for the acquisition of shares of any junior
stock pursuant to contractual obligations binding against the Corporation or any
Subsidiary that were entered into prior to the date of the first issuance of
shares of Mandatorily Convertible Preferred Stock or pursuant to contractual
obligations that are entered into at a time subsequent thereto when such
acquisitions of shares could be made pursuant to this subparagraph C(2)) nor may
any funds be set aside or made available for any sinking fund for the purchase
or redemption of any junior stock unless: (i) full dividends, if any, on all
outstanding shares of senior stock, parity stock and Mandatorily Convertible
Preferred Stock have been paid, or declared and set aside for payment, for all
dividend periods terminating on or prior to the date of such purchase,
redemption or acquisition, to the extent dividends on such senior stock, parity
stock or Mandatorily Convertible Preferred Stock dividends are cumulative; (ii)
the Corporation has paid
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or set aside all amounts, if any, then or theretofore required to be paid or set
aside for all purchase, retirement, and sinking funds, if any, for any
outstanding shares of senior stock, parity stock and Mandatorily Convertible
Preferred Stock; and (iii) the Corporation is not in default on any of its
obligations to redeem any outstanding shares of senior stock, parity stock or
Mandatorily Convertible Preferred Stock. Subject to the provisions described
above, such dividends or other distributions (payable in cash, property, or
junior stock) as may be determined from time to time by the Board of Directors
may be declared and paid on the shares of any junior stock and from time to time
junior stock may be purchased, redeemed or otherwise acquired by the Corporation
or any Subsidiary. In the event of the declaration and payment of any such
dividends or other distributions, the holders of such junior stock will be
entitled, to the exclusion of holders of any outstanding senior stock or parity
stock, to share therein according to their respective interests.
(3) As long as any Mandatorily Convertible Preferred Stock is
outstanding, dividends or other distributions for any dividend period may not be
paid on any outstanding shares of parity stock (other than dividends or other
distributions payable in shares of, or warrants, rights or options exercisable
for or convertible into, parity stock or junior stock and cash in lieu of
fractional shares of such parity stock or junior stock in connection with any
such dividend), unless either: (a) (i) full dividends, if any, on all
outstanding shares of senior stock, parity stock and Mandatorily Convertible
Preferred Stock have been paid, or declared and set aside for payment, for all
dividend periods terminating on or prior to the payment date of such senior
stock, parity stock or Mandatorily Convertible Preferred Stock dividend or
distribution, to the extent dividends on such senior stock, parity stock or
Mandatorily Convertible Preferred Stock are cumulative; (ii) the Corporation has
paid or set aside all amounts, if any, then or theretofore required to be paid
or set aside for all purchase, retirement and sinking funds, if any, for any
outstanding shares of senior stock, parity stock and Mandatorily Convertible
Preferred Stock; and (iii) the Corporation is not in default on any of its
obligations to redeem any outstanding shares of senior stock, parity stock or
Mandatorily Convertible Preferred Stock; or (b) any such dividends are declared
and paid pro rata so that the amounts of any dividends declared and paid per
share on outstanding Mandatorily Convertible Preferred Stock and each share of
such parity stock will in all cases bear to each other the same ratio that
accrued and unpaid dividends (including any accumulation with respect to unpaid
dividends for prior dividend periods, if such dividends are cumulative) per
share of outstanding Mandatorily Convertible Preferred Stock and such
outstanding shares of parity stock bear to each other.
In addition, as long as any Mandatorily Convertible Preferred Stock is
outstanding, no shares of any parity stock may be purchased, redeemed or
otherwise acquired by the Corporation or any Subsidiary (except with any junior
stock and cash in lieu of fractional shares of such junior stock in connection
therewith and except for the acquisition of shares of any parity stock pursuant
to contractual obligations binding against the Corporation or any Subsidiary
that were entered into prior to the date of the first issuance of shares of
Mandatorily Convertible Preferred Stock or pursuant to contractual obligations
that are entered into at a time subsequent thereto when such acquisitions of
shares could be made pursuant to this subparagraph C(3)) unless: (i) full
dividends, if any, on all outstanding shares of senior stock, parity stock and
Mandatorily Convertible Preferred Stock have been paid, or declared and set
aside for payment, for all dividend periods terminating on or prior to the date
of such purchase, redemption or other
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acquisition, to the extent dividends on such senior stock, parity stock or
Mandatorily Convertible Preferred Stock are cumulative; (ii) the Corporation has
paid or set aside all amounts, if any, then or theretofore required to be paid
or set aside for all purchase, retirement, and sinking funds, if any, for any
outstanding shares of senior stock, parity stock and Mandatorily Convertible
Preferred Stock; and (iii) the Corporation is not in default of any of its
obligations to redeem any outstanding shares of senior stock, parity stock or
Mandatorily Convertible Preferred Stock, unless all parity stock and Mandatorily
Convertible Preferred Stock as to which such a default exists is purchased or
redeemed on a pro rata basis.
(4) Any dividend payment made on the Mandatorily Convertible Preferred
Stock shall first be credited against the earliest accrued but unpaid dividend
due with respect to the Mandatorily Convertible Preferred Stock.
(5) All dividends paid with respect to the Mandatorily Convertible
Preferred Stock shall be paid pro rata to the holders entitled thereto.
(6) Holders of the Mandatorily Convertible Preferred Stock shall be
entitled to receive dividends in preference to and in priority over any
dividends upon any shares of the Corporation ranking junior to the Mandatorily
Convertible Preferred Stock as to dividends, but subject to the rights of
holders of shares of the Corporation having a preference and a priority over the
payment of dividends on the Mandatorily Convertible Preferred Stock.
D. Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, then,
before any distribution or payments shall be made to the holders of any junior
stock, but subject to the rights of any senior stock or parity stock, the
holders of the Mandatorily Convertible Preferred Stock shall be entitled to be
paid in full in cash the amount of $5,000.00 per share, together with accrued
dividends to the date of such distribution or payment, whether or not earned or
declared. If such payment shall have been made in full to the holders of the
Mandatorily Convertible Preferred Stock and all preferential payments or
distributions to be made with respect to senior stock and parity stock have been
made in full, the remaining assets and funds of the Corporation shall be
distributed among the holders of the junior stock, according to their respective
rights and preferences and in each case according to their respective shares.
If, upon any liquidation, dissolution or winding up of the affairs of the
Corporation, the amounts so payable are not paid in full to the holders of all
shares of the Mandatorily Convertible Preferred Stock and parity stock, the
holders of the Mandatorily Convertible Preferred Stock, together with holders of
parity stock, shall share ratably in any distribution of assets in proportion to
the full amounts to which they would otherwise be respectively entitled. Neither
the consolidation or merger of the Corporation or the statutory exchange of
securities with another entity, nor the sale, lease, transfer, exchange or
conveyance of all or a part of its assets, shall be deemed a liquidation,
dissolution or winding up of the affairs of the Corporation within the meaning
of the foregoing provisions of this paragraph D.
E. Redemption. The Corporation shall have the right to redeem all, but
not part, of the outstanding Mandatorily Convertible Preferred Stock at any time
following a Redemption Event and prior to a Rate Reset Date at the redemption
price of $5,000.00 per share, together
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with accrued but unpaid dividends to the date of payment, whether or not earned
or declared (the "Redemption Price"). The Corporation shall not have the right
to redeem any or all of the Mandatorily Convertible Preferred Stock at any other
time. Notice of a redemption of the Mandatorily Convertible Preferred Stock
shall be mailed, addressed to the holder or holders of record of such shares at
their respective addresses as they shall appear on the books of the Corporation,
such mailing to be at least two Business Days and not more than 60 days prior to
the date fixed for redemption. Each such notice of redemption shall specify the
date fixed for redemption and the Redemption Price. On or after the date fixed
for redemption as stated in such notice, each holder of the shares called for
redemption shall surrender the certificate evidencing such shares to the
Corporation and shall thereupon be entitled to receive payment of the Redemption
Price. If, on the date fixed for redemption, funds necessary for the redemption
shall be available therefor and shall have been irrecoverably deposited or set
aside, then, notwithstanding that the certificates evidencing any shares so
called for redemption shall not have been surrendered, the dividends with
respect to the shares so called shall cease to accrue after the date fixed for
redemption, the shares shall no longer be deemed outstanding, and all rights
whatsoever with respect to the shares so called for redemption (except the right
of the holders to receive the Redemption Price without interest upon surrender
of their certificates therefor) shall terminate.
F. Conversion.
(1) Unless previously converted at the option of the holder in
accordance with the provisions hereof, on the third anniversary of the Rate
Reset Date, or if such date is not a Business Day, the next succeeding day that
is a Business Day ( the "Mandatory Conversion Date"), each outstanding share of
Mandatorily Convertible Preferred Stock shall, without additional notice to
holders thereof, convert automatically (the "Mandatory Conversion") into (i) a
number of fully paid and non-assessable shares of Common Stock at the Mandatory
Conversion Rate (as defined herein) in effect on the Mandatory Conversion Date;
and (ii) the right to receive an amount in cash equal to all accrued and unpaid
dividends on such share of Mandatorily Convertible Preferred Stock (other than
previously declared dividends payable to a holder of record as of a prior date)
to and including the day immediately prior to the Mandatory Conversion Date,
whether or not earned or declared, out of funds legally available therefor (and
if sufficient funds are not then legally available therefor, the Corporation
shall pay such amount, if any, pro rata (based on the amounts so owing) to the
holders of the Mandatorily Convertible Preferred Stock and any parity stock then
entitled to similar payment as is then legally available therefor and shall pay
any deficiency thereafter as soon as funds are legally available therefor). The
"Mandatory Conversion Rate" is equal to the following number of shares of Common
Stock per share of Mandatorily Convertible Preferred Stock: (a) if the Mandatory
Conversion Date Market Price is greater than or equal to the Threshold
Appreciation Price, the quotient of (i) $5,000.00 divided by (ii) the Threshold
Appreciation Price, (b) if the Mandatory Conversion Date Market Price is less
than the Threshold Appreciation Price but is greater than the Reset Price, the
quotient of $5,000.00 divided by the Mandatory Conversion Date Market Price and
(c) if the Mandatory Conversion Date Market Price is less than or equal to the
Reset Price, the quotient of $5,000.00 divided by the Reset Price, subject to
adjustment as provided in this paragraph F. "Mandatory Conversion Date Market
Price" shall mean the Average Trading Price per share of Common Stock for the 20
consecutive Trading Days immediately prior to, but not
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including, the Mandatory Conversion Date; provided, however, that if an event
occurs during such 20 consecutive Trading Days that would require an adjustment
to the Mandatory Conversion Rate pursuant to paragraphs F(3) or F(5), the Board
of Directors may make such adjustments to the Average Trading Price for shares
of Common Stock for such 20 Trading Day period as it reasonably deems
appropriate to effectuate the intent of the adjustments in paragraph F(3) and
F(5), in which case any such determination by the Board of Directors shall be
set forth in a resolution of the Board of Directors and shall be conclusive
absent manifest error.
Dividends on the Mandatorily Convertible Preferred Stock shall cease to
accrue, and Mandatorily Convertible Preferred Stock shall cease to be
outstanding, on the Mandatory Conversion Date. The Corporation shall make such
arrangements as it deems appropriate for the issuance of certificates
representing Common Stock and for the payment of cash in respect of such accrued
and unpaid dividends, if any, or cash in lieu of fractional shares, if any, in
exchange for and contingent upon surrender of certificates representing the
Mandatorily Convertible Preferred Stock, and the Corporation may defer the
payment of dividends on such Common Stock and the voting thereof until, and make
such payment and voting contingent upon, the surrender of such certificates
representing the Mandatorily Convertible Preferred Stock, provided that the
Corporation shall give the holders of the Mandatorily Convertible Preferred
Stock such notice of any such actions as the Corporation deems appropriate and
upon such surrender such holders shall be entitled to receive such dividends
declared and paid on such Common Stock subsequent to the Mandatory Conversion
Date. Amounts payable in cash in respect of the Mandatorily Convertible
Preferred Stock or in respect of such Common Stock shall not bear interest.
(2) Shares of Mandatorily Convertible Preferred Stock are convertible,
at the option of the holders thereof ("Optional Conversion") at any time after
the date hereof and before the Mandatory Conversion Date, into Common Stock at a
rate equal to 84.0778 shares of Common Stock per share of Mandatorily
Convertible Preferred Stock (the "Optional Conversion Rate"), subject to
adjustment as set forth in this paragraph F; provided, however, that the
Optional Conversion Rate shall adjust as of the Rate Reset Date (regardless of
the adjustments made to the Optional Conversion Rate after the issuance of the
shares of Mandatorily Convertible Preferred Stock and prior to the Rate Reset
Date) to the following number of shares of Common Stock per share of Mandatorily
Convertible Preferred Stock: the quotient of (i) $5,000.00 divided by (ii) the
Threshold Appreciation Price, subject to further adjustment as set forth in this
paragraph F. Optional Conversion of shares of Mandatorily Convertible Preferred
Stock may be effected by delivering certificates evidencing such shares of
Mandatorily Convertible Preferred Stock, together with written notice of
conversion and, if required by the Corporation, a proper assignment of such
certificates to the Corporation or in blank (and, if applicable as provided in
the following paragraph, cash payment of an amount equal to the dividends
attributable to the current dividend period payable on such shares), to the
office of the transfer agent for the shares of Mandatorily Convertible Preferred
Stock or to any other office or agency maintained by the Corporation for that
purpose and otherwise in accordance with Optional Conversion procedures
established by the Corporation. Each Optional Conversion shall be deemed to have
been effected immediately before the close of business on the date on which the
foregoing requirements shall have been satisfied. The Optional Conversion shall
be at the Optional Conversion Rate in effect at such time and on such date.
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Holders of shares of Mandatorily Convertible Preferred Stock at the
close of business on a record date for any payment of declared dividends shall
be entitled to receive the dividend payable on such shares on the corresponding
Dividend Payment Date notwithstanding the Optional Conversion of such shares
following such record date and on or prior to such Dividend Payment Date.
However, shares of Mandatorily Convertible Preferred Stock surrendered for
Optional Conversion after the close of business on a record date for any payment
of declared dividends and before the opening of business on the next succeeding
Dividend Payment Date must be accompanied by payment in cash of an amount equal
to the dividends attributable to the current dividend period payable on such
shares on such next succeeding Dividend Payment Date. Except as provided above,
upon any Optional Conversion, the Corporation shall make no payment of or
allowance for unpaid dividends, whether or not in arrears, on such converted
shares of Mandatorily Convertible Preferred Stock as to which Optional
Conversion has been effected or for previously declared dividends or
distributions on the shares of Common Stock issued upon such Optional
Conversion.
(3) The Optional Conversion Rate shall be adjusted from time to time,
and the Mandatory Conversion Rate shall be adjusted from time to time after the
Rate Reset Date, as follows:
(a) In case the Corporation shall (i) pay a dividend on its
Common Stock in other Common Stock, (ii) subdivide or split its
outstanding Common Stock into a greater number of shares, (iii) combine
its outstanding Common Stock into a smaller number of Common Stock, or
(iv) issue by reclassification of its Common Stock any other Common
Stock (including in connection with a merger in which the Corporation
is a surviving corporation), then, in any such event, (1) the Mandatory
Conversion Rate in effect immediately prior to such event shall be
adjusted such that the Reset Price shall be adjusted by multiplying it
by a fraction (which fraction and all other fractions referred to
herein may be improper fractions), the numerator of which is one and
the denominator of which is the number of shares of Common Stock that a
holder of one share of Common Stock prior to any event described above
would hold after such event (assuming the issuance of fractional
shares) (the "Recapitalization Adjustment Ratio"), and (2) the Optional
Conversion Rate in effect immediately prior to such event shall be
adjusted by multiplying it by a fraction, the numerator of which is one
and the denominator of which is the Recapitalization Adjustment Ratio.
Such adjustment shall become effective immediately after the effective
date of any such event (or the earlier record date in the case of any
such dividend) whenever any of the events listed above shall occur.
(b) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them (for a period, except in
the case of Rights, expiring within 45 days after the record date for
determination of the shareholders entitled to receive such rights or
warrants) to subscribe for or purchase Common Stock at a price per
share of Common Stock less than the current market price per share of
Common Stock (as defined in paragraph F(4) below) on such record date,
then in each such case the Mandatory Conversion Rate on the date of
such issuance shall be adjusted such that the Reset Price shall be
adjusted by multiplying it by a fraction the numerator of which shall
be the sum
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of (x) the number of shares of Common Stock outstanding immediately
prior to such issuance, plus (y) the number of additional shares of
Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered for subscription or purchase would
purchase at the Average Trading Price for a share of Common Stock for
the record date for such issuance, and the denominator of which shall
be the sum of (x) the number of shares of Common Stock outstanding
immediately prior to such issuance, plus (y) the number of additional
shares of Common Stock offered for subscription or purchase pursuant to
such rights or warrants (the "Anti-Dilution Adjustment Ratio"); and (B)
the Optional Conversion Rate in effect on the record date described
below shall be adjusted by multiplying it by a fraction, the numerator
of which is one and the denominator of which is the Anti-Dilution
Adjustment Ratio. For the purposes of this subparagraph (b): the
issuance of rights or warrants to subscribe for or purchase securities
exercisable for, convertible into, or exchangeable for, shares of
Common Stock shall be deemed to be the issuance of rights or warrants
to purchase the shares of Common Stock into which such securities are
exercisable, convertible or exchangeable at an aggregate offering price
equal to the aggregate offering price of such securities plus the
minimum aggregate amount (if any) payable upon the exercise, conversion
or exchange of such securities. Such adjustment shall become effective
at the opening of business on the Business Day next following the
record date for such rights or warrants. To the extent that any shares
of Common Stock, or securities exercisable for, convertible into, or
exchangeable for, shares of Common Stock so offered for subscription or
purchase are not so subscribed or purchased by the expiration of such
rights or warrants, the Mandatory Conversion Rate, the Threshold
Appreciation Price, the Reset Price and the Optional Conversion Rate
shall each be readjusted to the rates or amounts, respectively, which
would then be in effect, had the adjustment made upon the issuance of
such rights or warrants been made upon the basis of the issuance of
rights or warrants in respect of only the number of shares of Common
Stock and securities exercisable for, convertible into, or exchangeable
for, shares of Common Stock actually issued upon exercise of such
rights or warrants.
(c) If the Corporation shall pay a dividend or make a
distribution to all holders of its Common Stock consisting of evidences
of its indebtedness or other assets (including capital shares of the
Corporation other than Common Stock but excluding any Ordinary Cash
Dividends (as defined below)), or shall issue to all holders of its
Common Stock rights or warrants to subscribe for or purchase any of its
securities (other than those referred to in subparagraph (b) above),
then in each such case the Mandatory Conversion Rate in effect
immediately prior to such event shall be adjusted such that the Reset
Price shall be adjusted by multiplying it by a fraction, the numerator
of which shall be the Average Trading Price for a share of Common Stock
on such record date, minus the fair market value as of such record date
of the portion of evidences of indebtedness or other assets so
distributed, or of such subscription rights or warrants, applicable to
one share of Common Stock (provided that such numerator shall never be
less than $1.00) and the denominator of which shall be the Average
Trading Price for a share of Common Stock on such record date (the
"Distribution Adjustment Ratio"); and (B) the Optional Conversion Rate
in effect immediately prior to such event shall be adjusted by
multiplying it by a fraction, the numerator of which is one and the
denominator of which
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is the Distribution Adjustment Ratio. Such adjustment shall become
effective on the opening of business on the Business Day next following
the record date for such dividend or distribution or the determination
of shareholders entitled to receive such dividend or distribution or
rights or warrants, as the case may be. "Ordinary Cash Dividends" shall
mean (i) any regular cash dividend on the Common Stock that does not
exceed the per share amount of the immediately preceding regular cash
dividend on the Common Stock (as adjusted to appropriately reflect any
of the events referred to in paragraph F(3)(a)) and (ii) any other cash
dividend or distribution which, when combined on a per share basis with
the per share amount of all other cash dividends and distributions paid
on the Common Stock during the 365-day period ending on the date of
declaration of such dividend or distribution (as adjusted to
appropriately reflect any of the events referred to in paragraph
F(3)(a) and excluding cash dividends or distributions that resulted in
an adjustment to the Mandatory Conversion Rate or the Optional
Conversion Rate), does not exceed 10% of the current market price per
Common Stock (determined pursuant to paragraph F(4)) on the Trading Day
immediately preceding the date of declaration of such dividend or
distribution.
(4) For the purpose of any computation under paragraph F(3) above, the
"current market price per share of Common Stock" on any date in question shall
mean the Average Trading Price for shares of Common Stock for the 15 consecutive
Trading Days ending on the earlier of the day in question and, if applicable,
the day before the "ex" date with respect to the issuance or distribution
requiring such computation; provided, however, that if another event occurs that
would require an adjustment pursuant to paragraph F(3), the Board of Directors
of the Corporation may make such adjustments to the Average Trading Price for
shares of Common Stock during such 15 Trading Day period as it reasonably deems
appropriate to effectuate the intent of the adjustments in paragraph F(3), in
which case any such determination by the Board of Directors of the Corporation
shall be set forth in a Board resolution and shall be conclusive absent manifest
error. For purposes of this paragraph, the term "'ex' date", when used with
respect to any issuance or distribution, means the first date on which the
shares of Common Stock trade regular way on the relevant exchange or in the
relevant market from which the Average Trading Price was obtained without the
right to receive such issuance or distribution. For the purpose of any
computation under paragraph F(3) above, the "fair market value" of any assets,
evidences of indebtedness, subscription rights or warrants on any date in
question: (i) in the event any such item is a publicly traded security
("Publicly Traded Security"), shall be determined for such date pursuant to the
provisions of this paragraph F(4) for determination of the "current market price
per share of Common Stock", except that (x) each reference therein to "Common
Stock" shall be deemed to mean such Publicly Traded Security, and (y) if such
Publicly Traded Security does not trade on a "when issued" basis for the 15
consecutive Trading Days preceding the "ex" date, such determination shall be
made for the period of 15 consecutive Trading Days commencing on the "ex" date;
and (ii) in the event any such item is not a Publicly Traded Security, shall be
reasonably determined in good faith for such date by the Board of Directors of
the Corporation, as evidenced by a resolution of the Board, whose determination
shall be conclusive absent manifest error.
(5) In any case of any reclassification of Common Stock (other than a
reclassification of the Common Stock referred to in paragraph F(3)(a)); any
consolidation or merger of the
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<PAGE> 14
Corporation with or into another corporation or other entity (other than a
merger resulting in a reclassification of the Common Stock referred to in
paragraph F(3)(a)); any sale or conveyance to another entity (other than a
Subsidiary) of all or substantially all of the assets of the Corporation; or the
statutory exchange of securities with another corporation or entity (other than
in connection with a merger or acquisition) (any such event referred to herein
as a "Transaction"), then the Optional Conversion Rate and Mandatory Conversion
Rate shall be adjusted so that after consummation of such a Transaction the
holders of shares of Mandatorily Convertible Preferred Stock will receive, in
lieu of the number of shares of Common Stock which such holder would have
received upon conversion but for such Transaction, the kind and amount of
securities, cash or other property receivable upon consummation of such
Transaction by a holder of such number of shares of Common Stock, subject to
further adjustment as provided in this paragraph F, including without
limitation, an adjustment to the Optional Conversion Rate on the Rate Reset Date
if such Transaction occurs prior to the Rate Reset Date. On and after the
consummation of any such Transaction, the Mandatory Conversion Date Market
Price, which shall be used for purposes of the determination as to which of
clauses (a), (b) or (c) of the definition of Mandatory Conversion Rate applies,
shall mean the sum of (i) the product of the Average Trading Price of any
Publicly Traded Security received upon consummation of such Transaction for the
20 consecutive Trading Days immediately prior to, but not including, the
Mandatory Conversion Date multiplied by the fraction of such security received
in such Transaction per share of Common Stock (assuming the issuance of
fractional shares) plus (ii) the fair market value of the cash and other
property received upon consummation of such Transaction per share of Common
Stock as of the day preceding the Mandatory Conversion Date as determined in
accordance with subparagraph F(4). In determining the kind and amount of
securities, cash or other property receivable upon consummation of such
Transaction by a holder of shares of Common Stock, it shall be assumed that such
holder is not a person or entity with which the Corporation consolidated or into
which the Corporation was merged or which merged into the Corporation or with
which such statutory exchange occurred, as the case may be, or an affiliate of
any such Person and that such holder of Common Stock failed to exercise rights
of election, if any, as to the kind or amount of securities, cash, or other
property receivable upon consummation of such transaction (provided that, if the
kind or amount of securities, cash, or other property receivable upon
consummation of such Transaction is not the same for each non-electing share,
then the kind and amount of securities, cash or other property receivable upon
consummation of such transaction for each non-electing share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
non-electing shares). In the event of such a reclassification, consolidation,
merger, sale, conveyance or exchange, effective provision shall be made in the
certificate of incorporation or similar document of the resulting or surviving
corporation or entity so that the conversion rate applicable to any securities
or property into which the shares of the Mandatorily Convertible Preferred Stock
shall then be convertible 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 subparagraphs (a) to (c) of paragraph
F(3) inclusive, above, and the other provisions of this paragraph F with respect
to the Common Stock shall apply on terms as nearly equivalent as practicable to
any such other securities and property deliverable upon conversion of shares of
Mandatorily Convertible Preferred Stock.
(6) Whenever any adjustments are required in the shares of Common Stock
into which each share of Mandatorily Convertible Preferred Stock is convertible,
the Corporation
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<PAGE> 15
shall forthwith (a) compute the adjusted Mandatory Conversion Rate and Optional
Conversion Rate in accordance herewith and prepare a certificate signed by an
officer of the Corporation setting forth the adjusted Mandatory Conversion Rate
and the Optional Conversion Rate, describing in reasonable detail the method of
calculation used and the facts requiring such adjustment and upon which such
adjustment is based, which certificate shall be conclusive, final and binding
evidence of the correctness of the adjustment and file with the transfer agent
of the Mandatorily Convertible Preferred Stock such certificate and (b) cause a
copy of such certificate to be mailed to each holder of record of the
Mandatorily Convertible Preferred Stock as of or promptly after the effective
date of such adjustment and, with respect to adjustments applicable after the
Rate Reset Date, make a prompt public announcement of such adjustment.
(7) The Corporation shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued shares of Common
Stock for the purpose of issuance upon conversion of the Mandatorily Convertible
Preferred Stock a number of shares of Common Stock equal to the product of (i)
the number of shares of Common Stock then deliverable at such time upon an
Optional Conversion of all shares of the Mandatorily Convertible Preferred Stock
multiplied by (ii) 1.10.
(8) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes that may be payable in respect of the issuance or
delivery of shares of Common Stock on conversion of shares of the Mandatorily
Convertible Preferred Stock pursuant to paragraph F. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involving the issue and delivery of shares of Common Stock in the name
other than in that which the shares of Mandatorily Convertible Preferred Stock
so converted were registered and no such issue and delivery shall be made unless
and until the person requesting such issue 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.
(9) For the purpose of this paragraph F, the term "Common Stock" shall
include any shares of the Corporation of any class or series which has no
preference or priority in the payment of dividends or in the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation and which is not subject to redemption by the Corporation.
However, Common Stock issuable upon conversion of the Mandatorily Convertible
Preferred Stock shall include only shares of the class designated as Common
Stock as of the original date of issuance of the Mandatorily Convertible
Preferred Stock, or shares of the Corporation of any classes or series resulting
from any reclassification or reclassifications thereof (including
reclassifications referred to in clause (iv) of subparagraph F(3)(a)) and which
have no preference or priority in the payment of dividends or in the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and which are not subject to
redemption by the Corporation, provided that, if at any time, there shall be
more than one such resulting class or series, the shares of such class and
series then so issuable shall be in the same proportion, if possible, or if not
possible, in substantially the same proportion which the total number of shares
of such class and series resulting from all such reclassifications bears to the
total number of shares of all classes and series resulting from all such
reclassifications.
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<PAGE> 16
(10) No fractional shares or scrip representing fractional shares shall
be issued upon the conversion of the Mandatorily Convertible Preferred Stock. If
any such conversion would otherwise require the issuance of a fractional share,
an amount equal to such fraction multiplied by the current market price per
share of Common Stock (determined as provided in paragraph F(4)) of the Common
Stock on the date of conversion shall be paid to the holder in cash by the
Corporation. If on such date there is no current market price per share of
Common Stock, the fair market value of a share of Common Stock (determined as
provided in paragraph F(4)) on such date, shall be used. If more than one share
of Mandatorily Convertible Preferred Stock shall be surrendered for conversion
at one time by or for the same 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 Mandatorily Convertible Preferred Stock so surrendered.
(11) All shares of the Mandatorily Convertible Preferred Stock
purchased or otherwise acquired by the Corporation (including shares surrendered
for conversion) shall be canceled and thereupon restored to the status of
authorized but unissued shares of Preferred Stock undesignated as to series.
(12) No adjustment in the Mandatory Conversion Rate and the Optional
Conversion Rate shall be required unless such adjustment (plus any adjustments
not previously made by reason of this paragraph F(12)) would require an increase
or decrease of at least 1% in the number of shares of Common Stock into which
each share of the Mandatorily Convertible Preferred Stock is then convertible;
provided, however, that any adjustments which by reason of this paragraph F(12)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment and provided further that any adjustment shall be
required and made in accordance with the provisions of paragraph F(3) not later
than such time as may be required in order to preserve the tax free nature of a
distribution to the holders of shares of Common Stock. If any action or
transaction would require adjustment to the Mandatory Conversion Rate or the
Optional Conversion Rate pursuant to this paragraph F, only one adjustment shall
be made and such adjustment shall be the amount of the adjustment that has the
highest absolute value. All calculations under this paragraph F shall be made to
the nearest one-thousandth of a share of Common Stock.
(13) The Board of Directors may make such upward adjustments in the
Mandatory Conversion Rate and the Optional Conversion Rate, in addition to those
required by this paragraph F, as shall be determined by the Board of Directors,
as evidenced by a resolution of the Board of Directors, to be advisable in order
that any stock dividends, subdivisions of shares, distribution of rights to
purchase stock or securities, or distribution of securities convertible into or
exchangeable for stock (or any transaction that could be treated as any of the
foregoing transactions pursuant to Section 305 of the Internal Revenue Code of
1986, as amended) made by the Corporation to its stockholders after the Rate
Reset Date shall not be taxable. The determination of the Board of Directors as
to whether an adjustment should be made pursuant to the provisions of this
paragraph (13), and if so, as to what adjustment should be made and when, shall
be conclusive, final and binding on the Corporation and all stockholders of the
Corporation.
(14) In any case in which paragraph F shall require that an adjustment
as a result of any event become effective at the opening of business on the
Business Day next following a record
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<PAGE> 17
date and the date fixed for conversion occurs after such record date, but before
the occurrence of such event, the Corporation may, in its sole discretion, elect
to defer the following until after the occurrence of such event: (A) issuing to
the holder of any converted Mandatorily Convertible Preferred Stock the
additional shares of Common Stock issuable upon such conversion over the shares
of Common Stock issuable before giving effect to such adjustments and (B) paying
to such holder any amount in cash in lieu of a fractional share of Common Stock
pursuant to paragraph F(10).
(15) Notwithstanding the foregoing provisions of this paragraph F, no
adjustment of the Optional Conversion Rate or the Mandatory Conversion Rate
shall be required to be made upon the issuance of any shares of Common Stock
pursuant to any present or future plan providing for the reinvestment of
dividends or interest payable on securities of the Corporation and the
investment of additional optional amounts in shares of Common Stock under any
such plan.
(16) Notwithstanding any other provision of this paragraph F, the
issuance or distribution of Rights shall not be deemed to constitute an issuance
or a distribution or dividend of rights, warrants, or other securities to which
any of the adjustment provisions described above applies until the occurrence of
the earliest Rights Event.
(17) For purposes of this Paragraph F, shares of Common Stock owned by,
or held for the account of, the Corporation, a Subsidiary or another entity of
which a majority of the common stock or common equity interests are owned,
directly or indirectly, by the Corporation shall be deemed to be not
outstanding.
G. Voting Rights. The holders of Mandatorily Convertible Preferred
Stock shall have no right to vote except as otherwise specifically provided
herein, in the Corporation's Articles of Incorporation, as amended, or as
required by statute.
(1) So long as any shares of Mandatorily Convertible Preferred Stock
are outstanding, in addition to any other vote or consent of shareholders
required in the Corporation's Articles of Incorporation, as amended, or by law,
the consent of the holders of at least a majority of the Mandatorily Convertible
Preferred Stock, given in person or by proxy, either in writing without a
meeting (if permitted by law) or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating:
(a) any amendment, alteration or repeal of any of the
provisions of the Corporation's Articles of Incorporation, as amended,
which affects adversely the powers, rights or preferences of the
holders of the Mandatorily Convertible Preferred Stock or reduces the
minimum time required for any notice to which holders of Mandatorily
Convertible Preferred Stock then outstanding may be entitled; provided,
that the amendment of the provisions of the Corporation's Articles of
Incorporation, as amended, so as to authorize or create, or to increase
the authorized amount of, any junior stock or parity stock shall not be
deemed to affect adversely the powers, rights or preferences of the
holders of the Mandatorily Convertible Preferred Stock and shall not be
subject to
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<PAGE> 18
approval by the holders of the Mandatorily Convertible Preferred Stock
and such holders shall not be entitled to vote thereon to the fullest
extent permitted by law;
(b) the authorization, creation or issuance of, or the
increase in the authorized amount of, any stock of any class or series,
or any security convertible into stock of any class or series, ranking
senior to the Mandatorily Convertible Preferred Stock; or
(c) the merger or consolidation of the Corporation with or
into any other corporation or other entity or a statutory share
exchange with another corporation or entity, unless in connection with
such merger, consolidation or statutory share exchange each holder of
shares of Mandatorily Convertible Preferred Stock immediately preceding
such merger, consolidation or share exchange shall either (I) with
respect to a merger, consolidation or statutory share exchange
consummated prior to, on or after the Rate Reset Date, receive or
continue to hold in the surviving or resulting corporation or other
corporation or entity the same number of shares, with substantially the
same rights and preferences (except as contemplated by subparagraph
F(5) and except for those rights and preferences that could be affected
without the vote of the holders of the Mandatorily Convertible
Preferred Stock, such as the authorization and issuance of junior
stock), as correspond to the shares of Mandatorily Convertible
Preferred Stock held immediately prior to such merger or consolidation
or (II) with respect to a merger, consolidation or statutory share
exchange consummated after the Rate Reset Date, receive the kind and
amount of securities, cash and other property that would have been
receivable upon consummation of such merger, consolidation or share
exchange by such holder (subject to the assumptions set forth in
paragraph F(5)) if the Mandatory Conversion had occurred immediately
prior to the consummation of such merger, consolidation or share
exchange and the Mandatory Conversion Rate was determined as of such
time (and if clause (I) or (II) are applicable, then such merger,
consolidation or statutory share exchange shall not be subject to
approval by the holders of the Mandatorily Convertible Preferred Stock
and such holders shall not be entitled to vote thereon).
(2) (a) If the Marlin Senior Notes are not paid in full when due,
whether on their maturity date, by acceleration or by mandatory redemption in
accordance with the terms of the Marlin Senior Notes, the number of directors of
the Corporation constituting the entire Board of Directors shall be increased by
two persons and the holders of shares of the Mandatorily Convertible Preferred
Stock, voting separately as a class, shall have the right to elect such
additional two directors to fill such positions at any regular meeting of
shareholders or special meeting held in place thereof, or at a special meeting
called as provided in paragraph 2(c) below. Upon the earliest of (i) the payment
in full of the Marlin Senior Notes, (ii) the Final Sale Date and (iii) the first
date holders of the Mandatorily Convertible Preferred Stock are entitled to
elect directors pursuant to paragraph 2(b) below, the right of the holders of
shares of the Mandatorily Convertible Preferred Stock to elect such additional
two directors shall cease, and the terms of office of all persons previously
elected as directors by the holders of shares of the Mandatorily Convertible
Preferred Stock shall forthwith terminate and the number of the Board of
Directors shall be reduced accordingly.
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(b) In the event that full cumulative dividends on the Mandatorily
Convertible Preferred Stock are not paid and in arrears for six consecutive
quarterly dividend periods following the Rate Reset Date, the number of
directors of the Corporation constituting the entire Board of Directors shall be
increased by two persons and the holders of shares of the Mandatorily
Convertible Preferred Stock, voting separately as a class (together with the
holders of shares of all other series of capital stock of the Corporation
ranking on a parity with the Mandatorily Convertible Preferred Stock as to the
payment of dividends and having the then present right to elect one or more
directors as a result of a dividend arrearage but not then entitled to other
separate voting rights to elect one or more directors in the event of such an
arrearage (herein referred to as "Class Voting Stock")), shall have the right to
elect such additional two directors to fill such positions at any regular
meeting of shareholders or special meeting held in place thereof, or at a
special meeting called as provided in paragraph 2(c) below. Whenever all
arrearages of dividends on the Mandatorily Convertible Preferred Stock then
outstanding shall have been paid or declared and irrevocably set apart for
payment, then the right of the holders of shares of the Mandatorily Convertible
Preferred Stock (and, subject to the terms of such other Class Voting Stock,
such other Class Voting Stock) to elect such additional two directors shall
cease (but subject always to the same provisions for the vesting of such voting
rights in the case of any similar future arrearages in dividends), and the terms
of office of all persons previously elected as directors by the holders of
shares of the Mandatorily Convertible Preferred Stock and such other Class
Voting Stock shall forthwith terminate and the number of the Board of Directors
shall be reduced accordingly.
(c) At any time after the voting power referred to in paragraph 2(a) or
2(b) above shall have been so vested in the holders of shares of the Mandatorily
Convertible Preferred Stock, the Secretary of the Corporation may, and upon the
written request of any holder or the holders of at least 10% of the number of
shares of Mandatorily Convertible Preferred Stock then outstanding (addressed to
the Secretary at the principal executive office of the Corporation) shall, call
a special meeting of the holders of shares of the Mandatorily Convertible
Preferred Stock and, in the case of paragraph 2(b), all other Class Voting Stock
for the election of the directors to be elected by them pursuant to paragraph
2(a) or 2(b); provided that the Secretary shall not be required to call such
special meeting if the request for such meeting is received less than 45
calendar days before the date fixed for the next ensuing annual meeting of
shareholders. Such call shall be made by notice similar to that provided in the
bylaws of the Corporation for a special meeting of the shareholders or as
required by law. Subject to the foregoing provisions, if any such special
meeting required to be called as above provided shall not be called by the
Secretary within 20 calendar days after receipt of an appropriate request, then
any holder of shares of Mandatorily Convertible Preferred Stock may call such
meeting, upon the notice above provided, and for that purpose shall have access
to the stock books and records of the Corporation. Except as otherwise provided
by law, at any such meeting, the holders of a majority of the number of shares
of Mandatorily Convertible Preferred Stock and, in the case of paragraph 2(b),
such other Class Voting Stock then outstanding shall constitute a quorum for the
purpose of electing directors as contemplated in paragraph 2(a) or 2(b) above.
If at any such meeting or adjournment thereof, a quorum of such holders of
Mandatorily Convertible Preferred Stock and, if applicable, such other Class
Voting Stock shall not be present, no election of directors by the Mandatorily
Convertible Preferred Stock and, if applicable, such other Class Voting Stock
shall take place, and any such meeting may be adjourned from time to time for
periods not exceeding 30 calendar
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<PAGE> 20
days until a quorum of the Mandatorily Convertible Preferred Stock and, if
applicable, the Class Voting Stock is present at such adjourned meeting. Unless
otherwise provided by law or the Corporation's Articles of Incorporation, as
amended, directors to be elected by the holders of shares of Mandatorily
Convertible Preferred Stock and, if applicable, such other Class Voting Stock
shall be elected by a plurality of the votes cast by such holders at a meeting
at which a quorum is present. Notwithstanding the foregoing, the absence of a
quorum of the Mandatorily Convertible Preferred Stock and, if applicable, such
other Class Voting Stock shall not prevent the voting of, including the election
of, directors by the holders of Common Stock and other classes of capital stock
at such meeting.
(d) Any director who shall have been elected by holders of shares of
Mandatorily Convertible Preferred Stock voting separately as a class, together,
if applicable, with the holders of one or more other series of Class Voting
Stock, or any director so elected as provided below, may be removed at any time
during a class voting period, either for or without cause, by, and only by, the
affirmative vote of the holders of a majority of the number of shares of
Mandatorily Convertible Preferred Stock then outstanding, voting separately as a
class, together, if applicable, with the holders of all other series of Class
Voting Stock then outstanding, given at a special meeting of such shareholders
called for such purpose, and any vacancy thereby created may be filled during
such class voting period only by the holders of shares of Mandatorily
Convertible Preferred Stock and, if applicable, the other series, if any, of
Class Voting Stock. In case any vacancy (other than as provided in the preceding
sentence) shall occur among the directors elected by the holders of shares of
the Mandatorily Convertible Preferred Stock (and, if applicable, such other
Class Voting Stock), a successor shall be elected by the Board of Directors to
serve until the next annual meeting of the shareholders or special meeting held
in place thereof upon the nomination of the then remaining director elected by
the holders of the Mandatorily Convertible Preferred Stock (and, if applicable,
such other Class Voting Stock) or the successor of such remaining director.
(3) Holders of Mandatorily Convertible Preferred Stock shall not be
entitled to receive notice of any meeting of shareholders at which they are not
entitled to vote or consent except as otherwise provided by applicable law.
H. Other Rights. Shares of Mandatorily Convertible Preferred Stock
shall not have any relative, participating, optional or other special rights or
powers other than as set forth herein, in the Corporation's Articles of
Incorporation, as amended, or as required by law.
I. Notices. In case, at any time while any shares of Mandatorily
Convertible Preferred Stock are outstanding, (i) the Corporation shall declare a
dividend (or any other distribution) on its Common Stock, excluding any cash
dividends, (ii) the Corporation shall authorize the issuance to all holders of
its Common Stock of rights or warrants to subscribe for or purchase shares of
Common Stock or of securities exercisable for, convertible into, or exchangeable
for, shares of Common Stock, (iii) the Corporation shall authorize any
reclassification of its Common Stock (other than a subdivision or combination
thereof) or any consolidation or merger or statutory share exchange to which the
Corporation is a party and for which approval of any stockholders of the
Corporation is required (except for a merger of the Corporation into one of its
Subsidiaries solely for the purpose of changing the corporate name or
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<PAGE> 21
corporate domicile of the Corporation to another state of the United States and
in connection with which there is no substantive change in the rights or
privileges of any securities of the Corporation other than changes resulting
from differences in the corporate statutes of the then existing and the new
state of domicile), or the sale or transfer to another corporation of the
property of the Corporation as an entirety or substantially as an entirety, (iv)
the Corporation shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, or (v) there shall occur any Pro
Rata Repurchase, then the Corporation shall cause to be filed at each office or
agency maintained for the purpose of conversion of the Mandatorily Convertible
Preferred Stock, and shall cause to be mailed to the holders of Mandatorily
Convertible Preferred Stock at their last addresses as they shall appear on the
stock register, at least 10 days before the date hereinafter specified (or the
earlier of the dates hereinafter specified, in the event that more than one date
is specified), a notice stating (A) the date on which a record is to be taken
for the purpose of such dividend, distribution, rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights or warrants are to
be determined, or (B) the date on which any such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up or
Pro Rata Repurchase is expected to become effective, and the date as of which it
is expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities or other property (including cash), if any,
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up or Pro Rata Repurchase; provided,
however, that if any such action requiring such notice is to occur prior to the
Rate Reset Date, then such notice need only be given on or before the date of
such action. The failure to give or receive the notice required hereby or any
defect therein shall not affect the legality or validity of such dividend,
distribution, right or warrant or other action.
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<PAGE> 1
STATEMENT OF RESOLUTIONS ESTABLISHING
A SERIES OF PREFERRED STOCK OF
ENRON CORP.
--------------------------------
MANDATORILY CONVERTIBLE SINGLE RESET PREFERRED STOCK, SERIES B
--------------------------------
Pursuant to Oregon Revised Statutes Section 60.134 and Article IV of
the Articles of Incorporation, as amended, of Enron Corp. (the "Corporation"),
the Board of Directors of the Corporation has duly adopted the following
resolutions as of December 29, 1998, establishing a series of Preferred Stock of
the Corporation:
RESOLVED, that there is hereby established a series of Preferred Stock
of the Corporation designated the Mandatorily Convertible Single Reset Preferred
Stock, Series B (herein referred to as the "Mandatorily Convertible Preferred
Stock"). The designation and number of shares of such series and the powers,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations and restrictions thereof (in addition to those
set forth in the Corporation's Articles of Incorporation, as amended, that may
be applicable to such series) are as follows:
A. Definitions. Capitalized terms used but not defined herein shall
have the meaning ascribed thereto in the Corporation's Articles of
Incorporation, as amended. In addition, the following terms shall have the
following meanings when used herein:
"Average Trading Price" for any given period, including a single day,
means, for a security, an amount equal to (i) the sum of the Closing Price for
such security on each Trading Day in such period divided by (ii) the total
number of Trading Days in such period.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which commercial banking institutions in the State of New York, the State
of Oregon or London, England are authorized or obligated by law or executive
order to close.
"Closing Price" means, for a security, the closing price for such
security on the Trading Day in question (or if such day is not a Trading Day
then as of the Trading Day next preceding such day) as reported by Bloomberg
L.P., or if not so reported by Bloomberg L.P., as reported by another recognized
source selected by the Board of Directors of Enron.
"Common Stock" shall have the meaning specified in paragraph F(9)
hereof.
"Dividend Payment Date" shall have the meaning specified in paragraph
C(1) hereof.
<PAGE> 2
"Failed Remarketing" shall have the meaning ascribed to such term in
the Remarketing Agreement.
"Final Sale Date" shall have the meaning ascribed to such term in the
Remarketing Agreement.
"junior stock" shall mean (and references to shares ranking "junior to"
the Mandatorily Convertible Preferred Stock shall refer to), with respect to
paragraphs C and G, Common Stock, the Series A Junior Voting Convertible
Preferred Stock of the Corporation and any other class or series of stock of the
Corporation which by its terms is not entitled to receive any dividends unless
all dividends required to have been paid or declared and set apart for payment
on the Mandatorily Convertible Preferred Stock shall have been so paid or
declared and, with respect to paragraphs D and G, Common Stock, the Series A
Junior Voting Convertible Preferred Stock of the Corporation and any other class
or series of stock of the Corporation which by its terms is not entitled to
receive any assets upon the liquidation, dissolution or winding up of the
affairs of the Corporation until the Mandatorily Convertible Preferred Stock
shall have received the entire amount to which such stock is entitled upon
liquidation, dissolution or winding up.
"Loan" shall have the meaning specified in the Senior Loan Agreement.
"Mandatory Conversion" shall have the meaning specified in paragraph
F(1) hereof.
"Mandatory Conversion Date" shall have the meaning specified in
paragraph F(1) hereof.
"Mandatory Conversion Date Market Price" shall have the meaning
specified in paragraph F(1).
"Mandatory Conversion Rate" shall have the meaning specified in
paragraph F(1) hereof.
"Optional Conversion" shall have the meaning specified in paragraph
F(2).
"Optional Conversion Rate" shall have the meaning specified in
paragraph F(2).
"parity stock" shall mean (and references to shares ranking "on a
parity with" the Mandatorily Convertible Preferred Stock shall refer to), with
respect to paragraphs C and G, the Mandatorily Convertible Single Reset
Preferred Stock, Series A of the Corporation and any other class or series of
stock of the Corporation which by its terms is entitled to receive payment of
dividends on a parity with the Mandatorily Convertible Preferred Stock and, with
respect to paragraphs D and G, the Mandatorily Convertible Single Reset
Preferred Stock, Series A of the Corporation and any other class or series of
stock of the Corporation which by its terms is entitled to receive assets upon
the liquidation, dissolution or winding up of the affairs of the Corporation on
a parity with the Mandatorily Convertible Preferred Stock.
"Principal Market" means the principal exchange on which the security
in question is traded or the principal market on which such security is quoted,
as determined by the Board of Directors of the Corporation.
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<PAGE> 3
"Pro Rata Repurchase" means any purchase of shares of Common Stock by
the Corporation or any affiliate thereof (as defined in Rule 12b-2 under the
Securities Exchange Act of 1934 (the "Exchange Act")) pursuant to any tender
offer or exchange offer subject to Section 13(e) of the Exchange Act, or
pursuant to any other offer available to substantially all holders of Common
Stock, whether for cash, shares of capital stock of the Corporation, other
securities of the Corporation, evidences of indebtedness of the Corporation or
any other person or any other property (including, without limitation, shares of
capital stock, other securities or evidences of indebtedness of a Subsidiary),
or any combination thereof, effected while any of the shares of Mandatorily
Convertible Preferred Stock are outstanding; provided, however, that "Pro Rata
Repurchase" shall not include any purchase of shares by the Corporation or any
affiliate thereof made in open market transactions substantially in accordance
with the requirements of Rule 10b-18 as in effect under the Exchange Act or on
such other terms and conditions as the Board of Directors shall have determined
are reasonably designed to prevent such purchases from having a material effect
on the trading market for the Common Stock. A Pro Rata Repurchase shall be
deemed to be effective on the date of acceptance of shares for purchase or
exchange under any tender or exchange offer which is a Pro Rata Repurchase or
the date of purchase with respect to any Pro Rata Repurchase that is not a
tender or exchange offer.
"Rate Reset Date" shall have the meaning ascribed to such term in the
Remarketing Agreement.
"Redemption Event" means the occurrence of any of the following: (i)
any consolidation or merger of the Corporation with or into another corporation
or entity or the statutory exchange of securities with another corporation or
entity, unless in connection with such consolidation, merger or exchange the
outstanding shares of Common Stock immediately preceding the consummation of
such consolidation, merger or exchange are converted into, exchanged for or
otherwise represent a majority of the outstanding shares of common stock of the
surviving or resulting corporation or entity immediately succeeding the
consummation of such consolidation, merger or exchange or (ii) the Corporation
sells or conveys to another entity (other than a Subsidiary) all or
substantially all of the assets of the Corporation.
"Remarketing Agents" shall have the meaning ascribed to such term in
the Remarketing Agreement.
"Remarketing Agreement" shall mean the Enron Preferred Stock
Remarketing and Registration Rights Agreement dated as of December 30, 1998
among the Corporation, the Aguia Voting Trust, Firefly Trust, The Chase
Manhattan Bank, as Administrative Agent, and BT Alex. Brown Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation, as Remarketing Agents. The
Corporation will furnish any shareholder of the Corporation with a copy of the
Remarketing Agreement without charge upon request in writing to the Secretary of
the Corporation.
"Reset Common Yield" shall mean the quotient of (i) the product of (x)
4 and (y) the amount of the ordinary quarterly cash dividend on one share of
Common Stock most recently declared prior to the Trigger Date (as appropriately
adjusted for the events referred to in
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<PAGE> 4
paragraph F(3)(a)), unless subsequent to such declaration and prior to the
Trigger Date, the Corporation has publicly announced a change to, or elimination
of, its ordinary quarterly cash dividend and filed with the Securities and
Exchange Commission a document including such change or elimination, in which
case the amount of such proposed ordinary quarterly cash dividend or $0.00 if
such dividend is to be eliminated, divided by (ii) the Reset Price (provided,
however, that if as of the Trigger Date there is more than one class of Common
Stock, then the Reset Common Yield shall be calculated with respect to each then
outstanding class of Common Stock, and the Reset Common Yield (as used herein)
shall be the amount calculated with respect to the class of Common Stock
resulting in the greatest Reset Common Yield).
"Reset Dividend Rate" shall mean an amount per share per annum equal to
the product of (i) the sum of (x) the Reset Common Yield (expressed as a
percentage), plus (y) 7% and (ii) $5,000.00 (rounded to the nearest cent).
"Reset Price" shall mean the higher of (i) the Closing Price of a share
of Common Stock on the Trigger Date or (ii) the quotient (rounded up to the
nearest cent) of $415,000,000.00 divided by the number, as of the Trigger Date,
of the authorized but unissued shares of Common Stock that have not been
reserved as of the Trigger Date by the Board of Directors for other purposes,
subject to adjustment as provided in paragraph F.
"Rights" means rights or warrants distributed by the Corporation under
a shareholder rights plan or agreement to all holders of Common Stock entitling
the holders thereof to subscribe for or purchase shares of the Corporation's
capital stock (either initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events ("Rights Events"):
(i) are deemed to be transferred with such shares of Common Stock,
(ii) are not exercisable, and
(iii) are also issued in respect of future issuances of Common Stock.
"Rights Events" shall have the meaning ascribed to such term in the
definition of Rights.
"Senior Loan Agreement" shall have the meaning ascribed to such term in
the Remarketing Agreement.
"senior stock" shall mean (and references to shares ranking "senior to"
or "prior to" the Mandatorily Convertible Preferred Stock shall refer to), with
respect to paragraphs C and G, the 9.142% Perpetual Second Preferred Stock of
the Corporation, the Cumulative Second Preferred Convertible Stock of the
Corporation and any other class or series of stock of the Corporation ranking
senior to the Mandatorily Convertible Preferred Stock in respect of the right to
receive dividends and, with respect to paragraphs D and G, the 9.142% Perpetual
Second Preferred Stock of the Corporation, the Cumulative Second Preferred
Convertible Stock of the Corporation and any other class or series of stock of
the Corporation ranking senior to the Mandatorily Convertible Preferred Stock
with respect to the right to receive assets upon the liquidation,
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<PAGE> 5
dissolution or winding up of the affairs of the Corporation. All classes or
series of stock of the Corporation other than junior stock or parity stock shall
be senior stock with respect to the Mandatorily Convertible Preferred Stock,
except to the extent expressly provided otherwise in the Corporation's Articles
of Incorporation, as amended, including any Statement of Resolutions
Establishing a Series of Preferred Stock.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other individuals performing similar functions, are at
the time directly or indirectly owned by the Corporation.
"Successful Repricing Date" shall have the meaning ascribed to such
term in the Remarketing Agreement.
"Threshold Appreciation Price" means the product of (i) the Reset Price
as of the time in question and (ii) 1.10.
"Trading Day" means a day on which the Principal Market with respect to
the security in question is regularly scheduled to be open for trading. For
purposes of this definition, a day on which any such exchange is scheduled to
close (as opposed to unexpectedly closing) prior to its regular closing time
shall not constitute a Trading Day.
"Trigger Date" shall mean the earlier of (A) the Successful Repricing
Date or (B) the date of a Failed Remarketing.
B. Designation. The distinctive designation of the series of Preferred
Stock created by this Statement of Resolutions shall be the "Mandatorily
Convertible Single Reset Preferred Stock, Series B." The number of shares that
shall constitute such series shall be 83,000 shares.
C. Dividends.
(1) The holders of the Mandatorily Convertible Preferred Stock shall
not be entitled to receive any dividends prior to, or with respect to any period
ending prior to, the Rate Reset Date. The holders of the Mandatorily Convertible
Preferred Stock, in preference to the rights of holders of any junior stock but
subject to the rights of holders of any senior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of any funds
legally available therefor, cumulative cash dividends from the Rate Reset Date
at the Reset Dividend Rate, and no more, payable on the dates as set forth in
this paragraph C. Dividends shall accrue on any given share of Mandatorily
Convertible Preferred Stock from the Rate Reset Date. Dividends shall be payable
quarterly in arrears on each January 1, April 1, July 1, and October 1
commencing on the first such date following the Rate Reset Date (each such date
being hereinafter referred to as a "Dividend Payment Date"), or, if any Dividend
Payment Date is not a Business Day, then the Dividend Payment Date shall be the
next succeeding Business Day. Each such dividend shall be payable to holders of
record as they appear on the books of the Corporation or any transfer agent for
the Mandatorily Convertible Preferred Stock on such record dates as shall be
fixed by the Board of Directors subject to applicable law (which record date
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<PAGE> 6
shall be no more than 60 days prior to the date fixed for the payment thereof).
Dividends on the Mandatorily Convertible Preferred Stock shall accrue on a daily
basis commencing on and including the Rate Reset Date, and accrued dividends for
each dividend period or portion thereof shall cumulate, to the extent not paid,
as of the date on which they were to have been paid. A dividend period shall
commence on a Dividend Payment Date or the Rate Reset Date, as the case may be,
and continue to the day next preceding the next succeeding Dividend Payment
Date. Accumulated unpaid dividends shall not accrue interest. Dividends (or cash
amounts equal to accrued and unpaid dividends) payable on the Mandatorily
Convertible Preferred Stock for any period less than or more than a full
quarterly period shall be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed in any period less than one
month. Dividends on the Mandatorily Convertible Preferred Stock shall accrue
whether or not the Corporation has earnings, whether or not there are funds
legally available for the payment of such dividends and whether or not such
dividends are declared. Dividends in arrears for any past dividend periods or
portions thereof may be declared and paid at any time without reference to any
regular Dividend Payment Date to holders of record on such date as shall be
fixed by the Board of Directors subject to applicable law. Dividends on the
Mandatorily Convertible Preferred Stock shall cease to accrue on the earlier of
(i) the day immediately preceding the Mandatory Conversion Date, or (ii) the day
immediately prior to their earlier conversion.
(2) As long as any shares of Mandatorily Convertible Preferred Stock
are outstanding, no dividends or other distributions for any dividend period
(other than dividends or other distributions payable in shares of, or warrants,
rights or options exercisable for or convertible into, junior stock, and cash in
lieu of fractional shares of such junior stock in connection with any such
dividend or distribution) will be paid on any junior stock unless: (i) full
dividends, if any, on all outstanding shares of senior stock, parity stock and
Mandatorily Convertible Preferred Stock have been paid, or declared and set
aside for payment, for all dividend periods terminating on or prior to the
payment date of such junior stock dividend or distribution, to the extent such
dividends on senior stock, parity stock or Mandatorily Convertible Preferred
Stock are cumulative; (ii) the Corporation has paid or set aside all amounts, if
any, then or theretofore required to be paid or set aside for all purchase,
retirement, and sinking funds, if any, for any outstanding shares of senior
stock, parity stock and Mandatorily Convertible Preferred Stock; and (iii) the
Corporation is not in default on any of its obligations to redeem any
outstanding shares of senior stock, parity stock or Mandatorily Convertible
Preferred Stock.
In addition, as long as any Mandatorily Convertible Preferred Stock is
outstanding, no shares of any junior stock may be purchased, redeemed, or
otherwise acquired by the Corporation or any Subsidiary (except in connection
with a reclassification or exchange of any junior stock through the issuance of
other junior stock (and cash in lieu of fractional shares of such junior stock
in connection therewith) and except for the acquisition of shares of any junior
stock pursuant to contractual obligations binding against the Corporation or any
Subsidiary that were entered into prior to the date of the first issuance of
shares of Mandatorily Convertible Preferred Stock or pursuant to contractual
obligations that are entered into at a time subsequent thereto when such
acquisitions of shares could be made pursuant to this subparagraph C(2)) nor may
any funds be set aside or made available for any sinking fund for the purchase
or redemption of any junior stock unless: (i) full dividends, if any, on all
outstanding shares of senior stock, parity stock and Mandatorily Convertible
Preferred Stock have been paid, or declared and set aside for
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<PAGE> 7
payment, for all dividend periods terminating on or prior to the date of such
purchase, redemption or acquisition, to the extent dividends on such senior
stock, parity stock or Mandatorily Convertible Preferred Stock dividends are
cumulative; (ii) the Corporation has paid or set aside all amounts, if any, then
or theretofore required to be paid or set aside for all purchase, retirement,
and sinking funds, if any, for any outstanding shares of senior stock, parity
stock and Mandatorily Convertible Preferred Stock; and (iii) the Corporation is
not in default on any of its obligations to redeem any outstanding shares of
senior stock, parity stock or Mandatorily Convertible Preferred Stock. Subject
to the provisions described above, such dividends or other distributions
(payable in cash, property, or junior stock) as may be determined from time to
time by the Board of Directors may be declared and paid on the shares of any
junior stock and from time to time junior stock may be purchased, redeemed or
otherwise acquired by the Corporation or any Subsidiary. In the event of the
declaration and payment of any such dividends or other distributions, the
holders of such junior stock will be entitled, to the exclusion of holders of
any outstanding senior stock or parity stock, to share therein according to
their respective interests.
(3) As long as any Mandatorily Convertible Preferred Stock is
outstanding, dividends or other distributions for any dividend period may not be
paid on any outstanding shares of parity stock (other than dividends or other
distributions payable in shares of, or warrants, rights or options exercisable
for or convertible into, parity stock or junior stock and cash in lieu of
fractional shares of such parity stock or junior stock in connection with any
such dividend), unless either: (a) (i) full dividends, if any, on all
outstanding shares of senior stock, parity stock and Mandatorily Convertible
Preferred Stock have been paid, or declared and set aside for payment, for all
dividend periods terminating on or prior to the payment date of such senior
stock, parity stock or Mandatorily Convertible Preferred Stock dividend or
distribution, to the extent dividends on such senior stock, parity stock or
Mandatorily Convertible Preferred Stock are cumulative; (ii) the Corporation has
paid or set aside all amounts, if any, then or theretofore required to be paid
or set aside for all purchase, retirement and sinking funds, if any, for any
outstanding shares of senior stock, parity stock and Mandatorily Convertible
Preferred Stock; and (iii) the Corporation is not in default on any of its
obligations to redeem any outstanding shares of senior stock, parity stock or
Mandatorily Convertible Preferred Stock; or (b) any such dividends are declared
and paid pro rata so that the amounts of any dividends declared and paid per
share on outstanding Mandatorily Convertible Preferred Stock and each share of
such parity stock will in all cases bear to each other the same ratio that
accrued and unpaid dividends (including any accumulation with respect to unpaid
dividends for prior dividend periods, if such dividends are cumulative) per
share of outstanding Mandatorily Convertible Preferred Stock and such
outstanding shares of parity stock bear to each other.
In addition, as long as any Mandatorily Convertible Preferred Stock is
outstanding, no shares of any parity stock may be purchased, redeemed or
otherwise acquired by the Corporation or any Subsidiary (except with any junior
stock and cash in lieu of fractional shares of such junior stock in connection
therewith and except for the acquisition of shares of any parity stock pursuant
to contractual obligations binding against the Corporation or any Subsidiary
that were entered into prior to the date of the first issuance of shares of
Mandatorily Convertible Preferred Stock or pursuant to contractual obligations
that are entered into at a time subsequent thereto when such acquisitions of
shares could be made pursuant to this subparagraph C(3)) unless: (i)
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<PAGE> 8
full dividends, if any, on all outstanding shares of senior stock, parity stock
and Mandatorily Convertible Preferred Stock have been paid, or declared and set
aside for payment, for all dividend periods terminating on or prior to the date
of such purchase, redemption or other acquisition, to the extent dividends on
such senior stock, parity stock or Mandatorily Convertible Preferred Stock are
cumulative; (ii) the Corporation has paid or set aside all amounts, if any, then
or theretofore required to be paid or set aside for all purchase, retirement,
and sinking funds, if any, for any outstanding shares of senior stock, parity
stock and Mandatorily Convertible Preferred Stock; and (iii) the Corporation is
not in default of any of its obligations to redeem any outstanding shares of
senior stock, parity stock or Mandatorily Convertible Preferred Stock, unless
all parity stock and Mandatorily Convertible Preferred Stock as to which such a
default exists is purchased or redeemed on a pro rata basis.
(4) Any dividend payment made on the Mandatorily Convertible Preferred
Stock shall first be credited against the earliest accrued but unpaid dividend
due with respect to the Mandatorily Convertible Preferred Stock.
(5) All dividends paid with respect to the Mandatorily Convertible
Preferred Stock shall be paid pro rata to the holders entitled thereto.
(6) Holders of the Mandatorily Convertible Preferred Stock shall be
entitled to receive dividends in preference to and in priority over any
dividends upon any shares of the Corporation ranking junior to the Mandatorily
Convertible Preferred Stock as to dividends, but subject to the rights of
holders of shares of the Corporation having a preference and a priority over the
payment of dividends on the Mandatorily Convertible Preferred Stock.
D. Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, then,
before any distribution or payments shall be made to the holders of any junior
stock, but subject to the rights of any senior stock or parity stock, the
holders of the Mandatorily Convertible Preferred Stock shall be entitled to be
paid in full in cash the amount of $5,000.00 per share, together with accrued
dividends to the date of such distribution or payment, whether or not earned or
declared. If such payment shall have been made in full to the holders of the
Mandatorily Convertible Preferred Stock and all preferential payments or
distributions to be made with respect to senior stock and parity stock have been
made in full, the remaining assets and funds of the Corporation shall be
distributed among the holders of the junior stock, according to their respective
rights and preferences and in each case according to their respective shares.
If, upon any liquidation, dissolution or winding up of the affairs of the
Corporation, the amounts so payable are not paid in full to the holders of all
shares of the Mandatorily Convertible Preferred Stock and parity stock, the
holders of the Mandatorily Convertible Preferred Stock, together with holders of
parity stock, shall share ratably in any distribution of assets in proportion to
the full amounts to which they would otherwise be respectively entitled. Neither
the consolidation or merger of the Corporation or the statutory exchange of
securities with another entity, nor the sale, lease, transfer, exchange or
conveyance of all or a part of its assets, shall be deemed a liquidation,
dissolution or winding up of the affairs of the Corporation within the meaning
of the foregoing provisions of this paragraph D.
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<PAGE> 9
E. Redemption. The Corporation shall have the right to redeem all, but
not part, of the outstanding Mandatorily Convertible Preferred Stock at any time
following a Redemption Event and prior to a Rate Reset Date at the redemption
price of $5,000.00 per share, together with accrued but unpaid dividends to the
date of payment, whether or not earned or declared (the "Redemption Price"). The
Corporation shall not have the right to redeem any or all of the Mandatorily
Convertible Preferred Stock at any other time. Notice of a redemption of the
Mandatorily Convertible Preferred Stock shall be mailed, addressed to the holder
or holders of record of such shares at their respective addresses as they shall
appear on the books of the Corporation, such mailing to be at least two Business
Days and not more than 60 days prior to the date fixed for redemption. Each such
notice of redemption shall specify the date fixed for redemption and the
Redemption Price. On or after the date fixed for redemption as stated in such
notice, each holder of the shares called for redemption shall surrender the
certificate evidencing such shares to the Corporation and shall thereupon be
entitled to receive payment of the Redemption Price. If, on the date fixed for
redemption, funds necessary for the redemption shall be available therefor and
shall have been irrecoverably deposited or set aside, then, notwithstanding that
the certificates evidencing any shares so called for redemption shall not have
been surrendered, the dividends with respect to the shares so called shall cease
to accrue after the date fixed for redemption, the shares shall no longer be
deemed outstanding, and all rights whatsoever with respect to the shares so
called for redemption (except the right of the holders to receive the Redemption
Price without interest upon surrender of their certificates therefor) shall
terminate.
F. Conversion.
(1) Unless previously converted at the option of the holder in
accordance with the provisions hereof, on the third anniversary of the Rate
Reset Date, or if such date is not a Business Day, the next succeeding day that
is a Business Day ( the "Mandatory Conversion Date"), each outstanding share of
Mandatorily Convertible Preferred Stock shall, without additional notice to
holders thereof, convert automatically (the "Mandatory Conversion") into (i) a
number of fully paid and non-assessable shares of Common Stock at the Mandatory
Conversion Rate (as defined herein) in effect on the Mandatory Conversion Date;
and (ii) the right to receive an amount in cash equal to all accrued and unpaid
dividends on such share of Mandatorily Convertible Preferred Stock (other than
previously declared dividends payable to a holder of record as of a prior date)
to and including the day immediately prior to the Mandatory Conversion Date,
whether or not earned or declared, out of funds legally available therefor (and
if sufficient funds are not then legally available therefor, the Corporation
shall pay such amount, if any, pro rata (based on the amounts so owing) to the
holders of the Mandatorily Convertible Preferred Stock and any parity stock then
entitled to similar payment as is then legally available therefor and shall pay
any deficiency thereafter as soon as funds are legally available therefor). The
"Mandatory Conversion Rate" is equal to the following number of shares of Common
Stock per share of Mandatorily Convertible Preferred Stock: (a) if the Mandatory
Conversion Date Market Price is greater than or equal to the Threshold
Appreciation Price, the quotient of (i) $5,000.00 divided by (ii) the Threshold
Appreciation Price, (b) if the Mandatory Conversion Date Market Price is less
than the Threshold Appreciation Price but is greater than the Reset Price, the
quotient of $5,000.00 divided by the Mandatory Conversion Date Market Price and
(c) if the Mandatory Conversion Date Market Price is less than or equal to the
Reset Price, the
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<PAGE> 10
quotient of $5,000.00 divided by the Reset Price, subject to adjustment as
provided in this paragraph F. "Mandatory Conversion Date Market Price" shall
mean the Average Trading Price per share of Common Stock for the 20 consecutive
Trading Days immediately prior to, but not including, the Mandatory Conversion
Date; provided, however, that if an event occurs during such 20 consecutive
Trading Days that would require an adjustment to the Mandatory Conversion Rate
pursuant to paragraphs F(3) or F(5), the Board of Directors may make such
adjustments to the Average Trading Price for shares of Common Stock for such 20
Trading Day period as it reasonably deems appropriate to effectuate the intent
of the adjustments in paragraph F(3) and F(5), in which case any such
determination by the Board of Directors shall be set forth in a resolution of
the Board of Directors and shall be conclusive absent manifest error.
Dividends on the Mandatorily Convertible Preferred Stock shall cease to
accrue, and Mandatorily Convertible Preferred Stock shall cease to be
outstanding, on the Mandatory Conversion Date. The Corporation shall make such
arrangements as it deems appropriate for the issuance of certificates
representing Common Stock and for the payment of cash in respect of such accrued
and unpaid dividends, if any, or cash in lieu of fractional shares, if any, in
exchange for and contingent upon surrender of certificates representing the
Mandatorily Convertible Preferred Stock, and the Corporation may defer the
payment of dividends on such Common Stock and the voting thereof until, and make
such payment and voting contingent upon, the surrender of such certificates
representing the Mandatorily Convertible Preferred Stock, provided that the
Corporation shall give the holders of the Mandatorily Convertible Preferred
Stock such notice of any such actions as the Corporation deems appropriate and
upon such surrender such holders shall be entitled to receive such dividends
declared and paid on such Common Stock subsequent to the Mandatory Conversion
Date. Amounts payable in cash in respect of the Mandatorily Convertible
Preferred Stock or in respect of such Common Stock shall not bear interest.
(2) Shares of Mandatorily Convertible Preferred Stock are convertible,
at the option of the holders thereof ("Optional Conversion") at any time after
the date hereof and before the Mandatory Conversion Date, into Common Stock at a
rate equal to 79.570 shares of Common Stock per share of Mandatorily Convertible
Preferred Stock (the "Optional Conversion Rate"), subject to adjustment as set
forth in this paragraph F; provided, however, that the Optional Conversion Rate
shall adjust as of the Rate Reset Date (regardless of the adjustments made to
the Optional Conversion Rate after the issuance of the shares of Mandatorily
Convertible Preferred Stock and prior to the Rate Reset Date) to the following
number of shares of Common Stock per share of Mandatorily Convertible Preferred
Stock: the quotient of (i) $5,000.00 divided by (ii) the Threshold Appreciation
Price, subject to further adjustment as set forth in this paragraph F. Optional
Conversion of shares of Mandatorily Convertible Preferred Stock may be effected
by delivering certificates evidencing such shares of Mandatorily Convertible
Preferred Stock, together with written notice of conversion and, if required by
the Corporation, a proper assignment of such certificates to the Corporation or
in blank (and, if applicable as provided in the following paragraph, cash
payment of an amount equal to the dividends attributable to the current dividend
period payable on such shares), to the office of the transfer agent for the
shares of Mandatorily Convertible Preferred Stock or to any other office or
agency maintained by the Corporation for that purpose and otherwise in
accordance with Optional Conversion procedures established by the Corporation.
Each Optional Conversion shall be deemed to have been effected
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<PAGE> 11
immediately before the close of business on the date on which the foregoing
requirements shall have been satisfied. The Optional Conversion shall be at the
Optional Conversion Rate in effect at such time and on such date.
Holders of shares of Mandatorily Convertible Preferred Stock at the
close of business on a record date for any payment of declared dividends shall
be entitled to receive the dividend payable on such shares on the corresponding
Dividend Payment Date notwithstanding the Optional Conversion of such shares
following such record date and on or prior to such Dividend Payment Date.
However, shares of Mandatorily Convertible Preferred Stock surrendered for
Optional Conversion after the close of business on a record date for any payment
of declared dividends and before the opening of business on the next succeeding
Dividend Payment Date must be accompanied by payment in cash of an amount equal
to the dividends attributable to the current dividend period payable on such
shares on such next succeeding Dividend Payment Date. Except as provided above,
upon any Optional Conversion, the Corporation shall make no payment of or
allowance for unpaid dividends, whether or not in arrears, on such converted
shares of Mandatorily Convertible Preferred Stock as to which Optional
Conversion has been effected or for previously declared dividends or
distributions on the shares of Common Stock issued upon such Optional
Conversion.
(3) The Optional Conversion Rate shall be adjusted from time to time,
and the Mandatory Conversion Rate shall be adjusted from time to time after the
Rate Reset Date, as follows:
(a) In case the Corporation shall (i) pay a dividend on its
Common Stock in other Common Stock, (ii) subdivide or split its
outstanding Common Stock into a greater number of shares, (iii) combine
its outstanding Common Stock into a smaller number of Common Stock, or
(iv) issue by reclassification of its Common Stock any other Common
Stock (including in connection with a merger in which the Corporation
is a surviving corporation), then, in any such event, (1) the Mandatory
Conversion Rate in effect immediately prior to such event shall be
adjusted such that the Reset Price shall be adjusted by multiplying it
by a fraction (which fraction and all other fractions referred to
herein may be improper fractions), the numerator of which is one and
the denominator of which is the number of shares of Common Stock that a
holder of one share of Common Stock prior to any event described above
would hold after such event (assuming the issuance of fractional
shares) (the "Recapitalization Adjustment Ratio"), and (2) the Optional
Conversion Rate in effect immediately prior to such event shall be
adjusted by multiplying it by a fraction, the numerator of which is one
and the denominator of which is the Recapitalization Adjustment Ratio.
Such adjustment shall become effective immediately after the effective
date of any such event (or the earlier record date in the case of any
such dividend) whenever any of the events listed above shall occur.
(b) In case the Corporation shall issue rights or warrants to
all holders of its Common Stock entitling them (for a period, except in
the case of Rights, expiring within 45 days after the record date for
determination of the shareholders entitled to receive such rights or
warrants) to subscribe for or purchase Common Stock at a price per
share of Common Stock less than the current market price per share of
Common Stock (as defined
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<PAGE> 12
in paragraph F(4) below) on such record date, then in each such case
the Mandatory Conversion Rate on the date of such issuance shall be
adjusted such that the Reset Price shall be adjusted by multiplying it
by a fraction the numerator of which shall be the sum of (x) the number
of shares of Common Stock outstanding immediately prior to such
issuance, plus (y) the number of additional shares of Common Stock
which the aggregate offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at
the Average Trading Price for a share of Common Stock for the record
date for such issuance, and the denominator of which shall be the sum
of (x) the number of shares of Common Stock outstanding immediately
prior to such issuance, plus (y) the number of additional shares of
Common Stock offered for subscription or purchase pursuant to such
rights or warrants (the "Anti-Dilution Adjustment Ratio"); and (B) the
Optional Conversion Rate in effect on the record date described below
shall be adjusted by multiplying it by a fraction, the numerator of
which is one and the denominator of which is the Anti-Dilution
Adjustment Ratio. For the purposes of this subparagraph (b): the
issuance of rights or warrants to subscribe for or purchase securities
exercisable for, convertible into, or exchangeable for, shares of
Common Stock shall be deemed to be the issuance of rights or warrants
to purchase the shares of Common Stock into which such securities are
exercisable, convertible or exchangeable at an aggregate offering price
equal to the aggregate offering price of such securities plus the
minimum aggregate amount (if any) payable upon the exercise, conversion
or exchange of such securities. Such adjustment shall become effective
at the opening of business on the Business Day next following the
record date for such rights or warrants. To the extent that any shares
of Common Stock, or securities exercisable for, convertible into, or
exchangeable for, shares of Common Stock so offered for subscription or
purchase are not so subscribed or purchased by the expiration of such
rights or warrants, the Mandatory Conversion Rate, the Threshold
Appreciation Price, the Reset Price and the Optional Conversion Rate
shall each be readjusted to the rates or amounts, respectively, which
would then be in effect, had the adjustment made upon the issuance of
such rights or warrants been made upon the basis of the issuance of
rights or warrants in respect of only the number of shares of Common
Stock and securities exercisable for, convertible into, or exchangeable
for, shares of Common Stock actually issued upon exercise of such
rights or warrants.
(c) If the Corporation shall pay a dividend or make a
distribution to all holders of its Common Stock consisting of evidences
of its indebtedness or other assets (including capital shares of the
Corporation other than Common Stock but excluding any Ordinary Cash
Dividends (as defined below)), or shall issue to all holders of its
Common Stock rights or warrants to subscribe for or purchase any of its
securities (other than those referred to in subparagraph (b) above),
then in each such case the Mandatory Conversion Rate in effect
immediately prior to such event shall be adjusted such that the Reset
Price shall be adjusted by multiplying it by a fraction, the numerator
of which shall be the Average Trading Price for a share of Common Stock
on such record date, minus the fair market value as of such record date
of the portion of evidences of indebtedness or other assets so
distributed, or of such subscription rights or warrants, applicable to
one share of Common Stock (provided that such numerator shall never be
less than $1.00) and the denominator of which shall be the Average
Trading Price for a share of Common Stock
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<PAGE> 13
on such record date (the "Distribution Adjustment Ratio"); and (B) the
Optional Conversion Rate in effect immediately prior to such event
shall be adjusted by multiplying it by a fraction, the numerator of
which is one and the denominator of which is the Distribution
Adjustment Ratio. Such adjustment shall become effective on the opening
of business on the Business Day next following the record date for such
dividend or distribution or the determination of shareholders entitled
to receive such dividend or distribution or rights or warrants, as the
case may be. "Ordinary Cash Dividends" shall mean (i) any regular cash
dividend on the Common Stock that does not exceed the per share amount
of the immediately preceding regular cash dividend on the Common Stock
(as adjusted to appropriately reflect any of the events referred to in
paragraph F(3)(a)) and (ii) any other cash dividend or distribution
which, when combined on a per share basis with the per share amount of
all other cash dividends and distributions paid on the Common Stock
during the 365-day period ending on the date of declaration of such
dividend or distribution (as adjusted to appropriately reflect any of
the events referred to in paragraph F(3)(a) and excluding cash
dividends or distributions that resulted in an adjustment to the
Mandatory Conversion Rate or the Optional Conversion Rate), does not
exceed 10% of the current market price per Common Stock (determined
pursuant to paragraph F(4)) on the Trading Day immediately preceding
the date of declaration of such dividend or distribution.
(4) For the purpose of any computation under paragraph F(3) above, the
"current market price per share of Common Stock" on any date in question shall
mean the Average Trading Price for shares of Common Stock for the 15 consecutive
Trading Days ending on the earlier of the day in question and, if applicable,
the day before the "ex" date with respect to the issuance or distribution
requiring such computation; provided, however, that if another event occurs that
would require an adjustment pursuant to paragraph F(3), the Board of Directors
of the Corporation may make such adjustments to the Average Trading Price for
shares of Common Stock during such 15 Trading Day period as it reasonably deems
appropriate to effectuate the intent of the adjustments in paragraph F(3), in
which case any such determination by the Board of Directors of the Corporation
shall be set forth in a Board resolution and shall be conclusive absent manifest
error. For purposes of this paragraph, the term "'ex' date", when used with
respect to any issuance or distribution, means the first date on which the
shares of Common Stock trade regular way on the relevant exchange or in the
relevant market from which the Average Trading Price was obtained without the
right to receive such issuance or distribution. For the purpose of any
computation under paragraph F(3) above, the "fair market value" of any assets,
evidences of indebtedness, subscription rights or warrants on any date in
question: (i) in the event any such item is a publicly traded security
("Publicly Traded Security"), shall be determined for such date pursuant to the
provisions of this paragraph F(4) for determination of the "current market price
per share of Common Stock", except that (x) each reference therein to "Common
Stock" shall be deemed to mean such Publicly Traded Security, and (y) if such
Publicly Traded Security does not trade on a "when issued" basis for the 15
consecutive Trading Days preceding the "ex" date, such determination shall be
made for the period of 15 consecutive Trading Days commencing on the "ex" date;
and (ii) in the event any such item is not a Publicly Traded Security, shall be
reasonably determined in good faith for such date by the Board of Directors of
the Corporation, as evidenced by a resolution of the Board, whose determination
shall be conclusive absent manifest error.
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<PAGE> 14
(5) In any case of any reclassification of Common Stock (other than a
reclassification of the Common Stock referred to in paragraph F(3)(a)); any
consolidation or merger of the Corporation with or into another corporation or
other entity (other than a merger resulting in a reclassification of the Common
Stock referred to in paragraph F(3)(a)); any sale or conveyance to another
entity (other than a Subsidiary) of all or substantially all of the assets of
the Corporation; or the statutory exchange of securities with another
corporation or entity (other than in connection with a merger or acquisition)
(any such event referred to herein as a "Transaction"), then the Optional
Conversion Rate and Mandatory Conversion Rate shall be adjusted so that after
consummation of such a Transaction the holders of shares of Mandatorily
Convertible Preferred Stock will receive, in lieu of the number of shares of
Common Stock which such holder would have received upon conversion but for such
Transaction, the kind and amount of securities, cash or other property
receivable upon consummation of such Transaction by a holder of such number of
shares of Common Stock, subject to further adjustment as provided in this
paragraph F, including without limitation, an adjustment to the Optional
Conversion Rate on the Rate Reset Date if such Transaction occurs prior to the
Rate Reset Date. On and after the consummation of any such Transaction, the
Mandatory Conversion Date Market Price, which shall be used for purposes of the
determination as to which of clauses (a), (b) or (c) of the definition of
Mandatory Conversion Rate applies, shall mean the sum of (i) the product of the
Average Trading Price of any Publicly Traded Security received upon consummation
of such Transaction for the 20 consecutive Trading Days immediately prior to,
but not including, the Mandatory Conversion Date multiplied by the fraction of
such security received in such Transaction per share of Common Stock (assuming
the issuance of fractional shares) plus (ii) the fair market value of the cash
and other property received upon consummation of such Transaction per share of
Common Stock as of the day preceding the Mandatory Conversion Date as determined
in accordance with subparagraph F(4). In determining the kind and amount of
securities, cash or other property receivable upon consummation of such
Transaction by a holder of shares of Common Stock, it shall be assumed that such
holder is not a person or entity with which the Corporation consolidated or into
which the Corporation was merged or which merged into the Corporation or with
which such statutory exchange occurred, as the case may be, or an affiliate of
any such Person and that such holder of Common Stock failed to exercise rights
of election, if any, as to the kind or amount of securities, cash, or other
property receivable upon consummation of such transaction (provided that, if the
kind or amount of securities, cash, or other property receivable upon
consummation of such Transaction is not the same for each non-electing share,
then the kind and amount of securities, cash or other property receivable upon
consummation of such transaction for each non-electing share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
non-electing shares). In the event of such a reclassification, consolidation,
merger, sale, conveyance or exchange, effective provision shall be made in the
certificate of incorporation or similar document of the resulting or surviving
corporation or entity so that the conversion rate applicable to any securities
or property into which the shares of the Mandatorily Convertible Preferred Stock
shall then be convertible 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 subparagraphs (a) to (c) of paragraph
F(3) inclusive, above, and the other provisions of this paragraph F with respect
to the Common Stock shall apply on terms as nearly equivalent as practicable to
any such other securities and property deliverable upon conversion of shares of
Mandatorily Convertible Preferred Stock.
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<PAGE> 15
(6) Whenever any adjustments are required in the shares of Common Stock
into which each share of Mandatorily Convertible Preferred Stock is convertible,
the Corporation shall forthwith (a) compute the adjusted Mandatory Conversion
Rate and Optional Conversion Rate in accordance herewith and prepare a
certificate signed by an officer of the Corporation setting forth the adjusted
Mandatory Conversion Rate and the Optional Conversion Rate, describing in
reasonable detail the method of calculation used and the facts requiring such
adjustment and upon which such adjustment is based, which certificate shall be
conclusive, final and binding evidence of the correctness of the adjustment and
file with the transfer agent of the Mandatorily Convertible Preferred Stock such
certificate and (b) cause a copy of such certificate to be mailed to each holder
of record of the Mandatorily Convertible Preferred Stock as of or promptly after
the effective date of such adjustment and, with respect to adjustments
applicable after the Rate Reset Date, make a prompt public announcement of such
adjustment.
(7) The Corporation shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued shares of Common
Stock for the purpose of issuance upon conversion of the Mandatorily Convertible
Preferred Stock a number of shares of Common Stock equal to the product of (i)
the number of shares of Common Stock then deliverable at such time upon an
Optional Conversion of all shares of the Mandatorily Convertible Preferred Stock
multiplied by (ii) 1.10.
(8) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes that may be payable in respect of the issuance or
delivery of shares of Common Stock on conversion of shares of the Mandatorily
Convertible Preferred Stock pursuant to paragraph F. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involving the issue and delivery of shares of Common Stock in the name
other than in that which the shares of Mandatorily Convertible Preferred Stock
so converted were registered and no such issue and delivery shall be made unless
and until the person requesting such issue 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.
(9) For the purpose of this paragraph F, the term "Common Stock" shall
include any shares of the Corporation of any class or series which has no
preference or priority in the payment of dividends or in the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation and which is not subject to redemption by the Corporation.
However, Common Stock issuable upon conversion of the Mandatorily Convertible
Preferred Stock shall include only shares of the class designated as Common
Stock as of the original date of issuance of the Mandatorily Convertible
Preferred Stock, or shares of the Corporation of any classes or series resulting
from any reclassification or reclassifications thereof (including
reclassifications referred to in clause (iv) of subparagraph F(3)(a)) and which
have no preference or priority in the payment of dividends or in the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and which are not subject to
redemption by the Corporation, provided that, if at any time, there shall be
more than one such resulting class or series, the shares of such class and
series then so issuable shall be in the same proportion, if possible, or if not
possible, in substantially the same proportion which the total number of shares
of such class and series resulting from all such
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<PAGE> 16
reclassifications bears to the total number of shares of all classes and series
resulting from all such reclassifications.
(10) No fractional shares or scrip representing fractional shares shall
be issued upon the conversion of the Mandatorily Convertible Preferred Stock. If
any such conversion would otherwise require the issuance of a fractional share,
an amount equal to such fraction multiplied by the current market price per
share of Common Stock (determined as provided in paragraph F(4)) of the Common
Stock on the date of conversion shall be paid to the holder in cash by the
Corporation. If on such date there is no current market price per share of
Common Stock, the fair market value of a share of Common Stock (determined as
provided in paragraph F(4)) on such date, shall be used. If more than one share
of Mandatorily Convertible Preferred Stock shall be surrendered for conversion
at one time by or for the same 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 Mandatorily Convertible Preferred Stock so surrendered.
(11) All shares of the Mandatorily Convertible Preferred Stock
purchased or otherwise acquired by the Corporation (including shares surrendered
for conversion) shall be canceled and thereupon restored to the status of
authorized but unissued shares of Preferred Stock undesignated as to series.
(12) No adjustment in the Mandatory Conversion Rate and the Optional
Conversion Rate shall be required unless such adjustment (plus any adjustments
not previously made by reason of this paragraph F(12)) would require an increase
or decrease of at least 1% in the number of shares of Common Stock into which
each share of the Mandatorily Convertible Preferred Stock is then convertible;
provided, however, that any adjustments which by reason of this paragraph F(12)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment and provided further that any adjustment shall be
required and made in accordance with the provisions of paragraph F(3) not later
than such time as may be required in order to preserve the tax free nature of a
distribution to the holders of shares of Common Stock. If any action or
transaction would require adjustment to the Mandatory Conversion Rate or the
Optional Conversion Rate pursuant to this paragraph F, only one adjustment shall
be made and such adjustment shall be the amount of the adjustment that has the
highest absolute value. All calculations under this paragraph F shall be made to
the nearest one-thousandth of a share of Common Stock.
(13) The Board of Directors may make such upward adjustments in the
Mandatory Conversion Rate and the Optional Conversion Rate, in addition to those
required by this paragraph F, as shall be determined by the Board of Directors,
as evidenced by a resolution of the Board of Directors, to be advisable in order
that any stock dividends, subdivisions of shares, distribution of rights to
purchase stock or securities, or distribution of securities convertible into or
exchangeable for stock (or any transaction that could be treated as any of the
foregoing transactions pursuant to Section 305 of the Internal Revenue Code of
1986, as amended) made by the Corporation to its stockholders after the Rate
Reset Date shall not be taxable. The determination of the Board of Directors as
to whether an adjustment should be made pursuant to the provisions of this
paragraph (13), and if so, as to what adjustment should be made and when, shall
be conclusive, final and binding on the Corporation and all stockholders of the
Corporation.
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<PAGE> 17
(14) In any case in which paragraph F shall require that an adjustment
as a result of any event become effective at the opening of business on the
Business Day next following a record date and the date fixed for conversion
occurs after such record date, but before the occurrence of such event, the
Corporation may, in its sole discretion, elect to defer the following until
after the occurrence of such event: (A) issuing to the holder of any converted
Mandatorily Convertible Preferred Stock the additional shares of Common Stock
issuable upon such conversion over the shares of Common Stock issuable before
giving effect to such adjustments and (B) paying to such holder any amount in
cash in lieu of a fractional share of Common Stock pursuant to paragraph F(10).
(15) Notwithstanding the foregoing provisions of this paragraph F, no
adjustment of the Optional Conversion Rate or the Mandatory Conversion Rate
shall be required to be made upon the issuance of any shares of Common Stock
pursuant to any present or future plan providing for the reinvestment of
dividends or interest payable on securities of the Corporation and the
investment of additional optional amounts in shares of Common Stock under any
such plan.
(16) Notwithstanding any other provision of this paragraph F, the
issuance or distribution of Rights shall not be deemed to constitute an issuance
or a distribution or dividend of rights, warrants, or other securities to which
any of the adjustment provisions described above applies until the occurrence of
the earliest Rights Event.
(17) For purposes of this Paragraph F, shares of Common Stock owned by,
or held for the account of, the Corporation, a Subsidiary or another entity of
which a majority of the common stock or common equity interests are owned,
directly or indirectly, by the Corporation shall be deemed to be not
outstanding.
G. Voting Rights. The holders of Mandatorily Convertible Preferred
Stock shall have no right to vote except as otherwise specifically provided
herein, in the Corporation's Articles of Incorporation, as amended, or as
required by statute.
(1) So long as any shares of Mandatorily Convertible Preferred Stock
are outstanding, in addition to any other vote or consent of shareholders
required in the Corporation's Articles of Incorporation, as amended, or by law,
the consent of the holders of at least a majority of the Mandatorily Convertible
Preferred Stock, given in person or by proxy, either in writing without a
meeting (if permitted by law) or by vote at any meeting called for the purpose,
shall be necessary for effecting or validating:
(a) any amendment, alteration or repeal of any of the
provisions of the Corporation's Articles of Incorporation, as amended,
which affects adversely the powers, rights or preferences of the
holders of the Mandatorily Convertible Preferred Stock or reduces the
minimum time required for any notice to which holders of Mandatorily
Convertible Preferred Stock then outstanding may be entitled; provided,
that the amendment of the provisions of the Corporation's Articles of
Incorporation, as amended, so as to authorize or create, or to increase
the authorized amount of, any junior stock or
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<PAGE> 18
parity stock shall not be deemed to affect adversely the powers, rights
or preferences of the holders of the Mandatorily Convertible Preferred
Stock and shall not be subject to approval by the holders of the
Mandatorily Convertible Preferred Stock and such holders shall not be
entitled to vote thereon to the fullest extent permitted by law;
(b) the authorization, creation or issuance of, or the
increase in the authorized amount of, any stock of any class or series,
or any security convertible into stock of any class or series, ranking
senior to the Mandatorily Convertible Preferred Stock; or
(c) the merger or consolidation of the Corporation with or
into any other corporation or other entity or a statutory share
exchange with another corporation or entity, unless in connection with
such merger, consolidation or statutory share exchange each holder of
shares of Mandatorily Convertible Preferred Stock immediately preceding
such merger, consolidation or share exchange shall either (I) with
respect to a merger, consolidation or statutory share exchange
consummated prior to, on or after the Rate Reset Date, receive or
continue to hold in the surviving or resulting corporation or other
corporation or entity the same number of shares, with substantially the
same rights and preferences (except as contemplated by subparagraph
F(5) and except for those rights and preferences that could be affected
without the vote of the holders of the Mandatorily Convertible
Preferred Stock, such as the authorization and issuance of junior
stock), as correspond to the shares of Mandatorily Convertible
Preferred Stock held immediately prior to such merger or consolidation
or (II) with respect to a merger, consolidation or statutory share
exchange consummated after the Rate Reset Date, receive the kind and
amount of securities, cash and other property that would have been
receivable upon consummation of such merger, consolidation or share
exchange by such holder (subject to the assumptions set forth in
paragraph F(5)) if the Mandatory Conversion had occurred immediately
prior to the consummation of such merger, consolidation or share
exchange and the Mandatory Conversion Rate was determined as of such
time (and if clause (I) or (II) are applicable, then such merger,
consolidation or statutory share exchange shall not be subject to
approval by the holders of the Mandatorily Convertible Preferred Stock
and such holders shall not be entitled to vote thereon).
(2) (a) If any Loan (as defined) under the Senior Loan Agreement is not
paid in full when due, whether on its maturity date, by acceleration or by
prepayment in accordance with the terms of the Senior Loan Agreement, the number
of directors of the Corporation constituting the entire Board of Directors shall
be increased by two persons and the holders of shares of the Mandatorily
Convertible Preferred Stock, voting separately as a class, shall have the right
to elect such additional two directors to fill such positions at any regular
meeting of shareholders or special meeting held in place thereof, or at a
special meeting called as provided in paragraph 2(c) below. Upon the earliest of
(i) the payment in full of the principal, interest and other amounts due under
the Senior Loan Agreement, (ii) the Final Sale Date and (iii) the first date
holders of the Mandatorily Convertible Preferred Stock are entitled to elect
directors pursuant to paragraph 2(b) below, the right of the holders of shares
of the Mandatorily Convertible Preferred Stock to elect such additional two
directors shall cease, and the terms of office of all persons previously elected
as directors by the holders of shares of the Mandatorily Convertible Preferred
Stock shall forthwith terminate and the number of the Board of Directors shall
be reduced accordingly.
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(b) In the event that full cumulative dividends on the Mandatorily
Convertible Preferred Stock are not paid and in arrears for six consecutive
quarterly dividend periods following the Rate Reset Date, the number of
directors of the Corporation constituting the entire Board of Directors shall be
increased by two persons and the holders of shares of the Mandatorily
Convertible Preferred Stock, voting separately as a class (together with the
holders of shares of all other series of capital stock of the Corporation
ranking on a parity with the Mandatorily Convertible Preferred Stock as to the
payment of dividends and having the then present right to elect one or more
directors as a result of a dividend arrearage but not then entitled to other
separate voting rights to elect one or more directors in the event of such an
arrearage (herein referred to as "Class Voting Stock")), shall have the right to
elect such additional two directors to fill such positions at any regular
meeting of shareholders or special meeting held in place thereof, or at a
special meeting called as provided in paragraph 2(c) below. Whenever all
arrearages of dividends on the Mandatorily Convertible Preferred Stock then
outstanding shall have been paid or declared and irrevocably set apart for
payment, then the right of the holders of shares of the Mandatorily Convertible
Preferred Stock (and, subject to the terms of such other Class Voting Stock,
such other Class Voting Stock) to elect such additional two directors shall
cease (but subject always to the same provisions for the vesting of such voting
rights in the case of any similar future arrearages in dividends), and the terms
of office of all persons previously elected as directors by the holders of
shares of the Mandatorily Convertible Preferred Stock and such other Class
Voting Stock shall forthwith terminate and the number of the Board of Directors
shall be reduced accordingly.
(c) At any time after the voting power referred to in paragraph 2(a) or
2(b) above shall have been so vested in the holders of shares of the Mandatorily
Convertible Preferred Stock, the Secretary of the Corporation may, and upon the
written request of any holder or the holders of at least 10% of the number of
shares of Mandatorily Convertible Preferred Stock then outstanding (addressed to
the Secretary at the principal executive office of the Corporation) shall, call
a special meeting of the holders of shares of the Mandatorily Convertible
Preferred Stock and, in the case of paragraph 2(b), all other Class Voting Stock
for the election of the directors to be elected by them pursuant to paragraph
2(a) or 2(b); provided that the Secretary shall not be required to call such
special meeting if the request for such meeting is received less than 45
calendar days before the date fixed for the next ensuing annual meeting of
shareholders. Such call shall be made by notice similar to that provided in the
bylaws of the Corporation for a special meeting of the shareholders or as
required by law. Subject to the foregoing provisions, if any such special
meeting required to be called as above provided shall not be called by the
Secretary within 20 calendar days after receipt of an appropriate request, then
any holder of shares of Mandatorily Convertible Preferred Stock may call such
meeting, upon the notice above provided, and for that purpose shall have access
to the stock books and records of the Corporation. Except as otherwise provided
by law, at any such meeting, the holders of a majority of the number of shares
of Mandatorily Convertible Preferred Stock and, in the case of paragraph 2(b),
such other Class Voting Stock then outstanding shall constitute a quorum for the
purpose of electing directors as contemplated in paragraph 2(a) or 2(b) above.
If at any such meeting or adjournment thereof, a quorum of such holders of
Mandatorily Convertible Preferred Stock and, if applicable, such other Class
Voting Stock shall not be present, no election of directors by the Mandatorily
Convertible Preferred Stock and, if applicable, such other Class Voting Stock
shall take place,
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and any such meeting may be adjourned from time to time for periods not
exceeding 30 calendar days until a quorum of the Mandatorily Convertible
Preferred Stock and, if applicable, the Class Voting Stock is present at such
adjourned meeting. Unless otherwise provided by law or the Corporation's
Articles of Incorporation, as amended, directors to be elected by the holders of
shares of Mandatorily Convertible Preferred Stock and, if applicable, such other
Class Voting Stock shall be elected by a plurality of the votes cast by such
holders at a meeting at which a quorum is present. Notwithstanding the
foregoing, the absence of a quorum of the Mandatorily Convertible Preferred
Stock and, if applicable, such other Class Voting Stock shall not prevent the
voting of, including the election of, directors by the holders of Common Stock
and other classes of capital stock at such meeting.
(d) Any director who shall have been elected by holders of shares of
Mandatorily Convertible Preferred Stock voting separately as a class, together,
if applicable, with the holders of one or more other series of Class Voting
Stock, or any director so elected as provided below, may be removed at any time
during a class voting period, either for or without cause, by, and only by, the
affirmative vote of the holders of a majority of the number of shares of
Mandatorily Convertible Preferred Stock then outstanding, voting separately as a
class, together, if applicable, with the holders of all other series of Class
Voting Stock then outstanding, given at a special meeting of such shareholders
called for such purpose, and any vacancy thereby created may be filled during
such class voting period only by the holders of shares of Mandatorily
Convertible Preferred Stock and, if applicable, the other series, if any, of
Class Voting Stock. In case any vacancy (other than as provided in the preceding
sentence) shall occur among the directors elected by the holders of shares of
the Mandatorily Convertible Preferred Stock (and, if applicable, such other
Class Voting Stock), a successor shall be elected by the Board of Directors to
serve until the next annual meeting of the shareholders or special meeting held
in place thereof upon the nomination of the then remaining director elected by
the holders of the Mandatorily Convertible Preferred Stock (and, if applicable,
such other Class Voting Stock) or the successor of such remaining director.
(3) Holders of Mandatorily Convertible Preferred Stock shall not be
entitled to receive notice of any meeting of shareholders at which they are not
entitled to vote or consent except as otherwise provided by applicable law.
H. Other Rights. Shares of Mandatorily Convertible Preferred Stock
shall not have any relative, participating, optional or other special rights or
powers other than as set forth herein, in the Corporation's Articles of
Incorporation, as amended, or as required by law.
I. Notices. In case, at any time while any shares of Mandatorily
Convertible Preferred Stock are outstanding, (i) the Corporation shall declare a
dividend (or any other distribution) on its Common Stock, excluding any cash
dividends, (ii) the Corporation shall authorize the issuance to all holders of
its Common Stock of rights or warrants to subscribe for or purchase shares of
Common Stock or of securities exercisable for, convertible into, or exchangeable
for, shares of Common Stock, (iii) the Corporation shall authorize any
reclassification of its Common Stock (other than a subdivision or combination
thereof) or any consolidation or merger or statutory share exchange to which the
Corporation is a party and for which approval of any stockholders of the
Corporation is required (except for a merger of the
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Corporation into one of its Subsidiaries solely for the purpose of changing the
corporate name or corporate domicile of the Corporation to another state of the
United States and in connection with which there is no substantive change in the
rights or privileges of any securities of the Corporation other than changes
resulting from differences in the corporate statutes of the then existing and
the new state of domicile), or the sale or transfer to another corporation of
the property of the Corporation as an entirety or substantially as an entirety,
(iv) the Corporation shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, or (v) there shall occur any Pro
Rata Repurchase, then the Corporation shall cause to be filed at each office or
agency maintained for the purpose of conversion of the Mandatorily Convertible
Preferred Stock, and shall cause to be mailed to the holders of Mandatorily
Convertible Preferred Stock at their last addresses as they shall appear on the
stock register, at least 10 days before the date hereinafter specified (or the
earlier of the dates hereinafter specified, in the event that more than one date
is specified), a notice stating (A) the date on which a record is to be taken
for the purpose of such dividend, distribution, rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights or warrants are to
be determined, or (B) the date on which any such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up or
Pro Rata Repurchase is expected to become effective, and the date as of which it
is expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities or other property (including cash), if any,
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up or Pro Rata Repurchase; provided,
however, that if any such action requiring such notice is to occur prior to the
Rate Reset Date, then such notice need only be given on or before the date of
such action. The failure to give or receive the notice required hereby or any
defect therein shall not affect the legality or validity of such dividend,
distribution, right or warrant or other action.
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