<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1997
REGISTRATION NO. 333-22629
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
FIRST SIERRA FINANCIAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<C> <C> <C>
DELAWARE 6159 76-0438432
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
TEXAS COMMERCE TOWER, SUITE 7050
600 TRAVIS STREET
HOUSTON, TEXAS 77002
(713) 221-8822
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
THOMAS J. DEPPING
PRESIDENT
TEXAS COMMERCE TOWER, SUITE 7050
600 TRAVIS STREET
HOUSTON, TX 77002
(713) 229-6800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
<TABLE>
<C> <C>
T. MARK KELLY SCOTT N. GIERKE
VINSON & ELKINS L.L.P. MCDERMOTT, WILL & EMERY
2300 FIRST CITY TOWER, 1001 FANNIN 227 W. MONROE
HOUSTON, TX 77002-6760 CHICAGO, IL 60606
(713) 758-4592 (312) 984-7521
(713) 615-5531(FAX)
</TABLE>
---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
================================================================================
<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<S> <C>
3.1 -- Restated Certificate of Incorporation of the Company
</TABLE>
II-1
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Houston, State of Texas, on the 5th day of May, 1997.
FIRST SIERRA FINANCIAL, INC.
By /s/ THOMAS J. DEPPING
-----------------------------------
Thomas J. Depping
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 3 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ THOMAS J. DEPPING President, Chief Executive May 5, 1997
- ----------------------------------------------------- Officer and Chairman of the
(Thomas J. Depping) Board of Directors (principal
executive officer)
/s/ SANDY B. HO Executive Vice President and May 5, 1997
- ----------------------------------------------------- Chief Financial Officer
(Sandy B. Ho) (principal financial officer)
/s/ CRAIG M. SPENCER Senior Vice President and Chief May 5, 1997
- ----------------------------------------------------- Accounting Officer (principal
(Craig M. Spencer) accounting officer)
* Director May 5, 1997
- -----------------------------------------------------
(David C. Shindeldecker)
* Director May 5, 1997
- -----------------------------------------------------
(David L. Solomon)
*By /s/ SANDY B. HO
- -----------------------------------------------------
Sandy B. Ho
as attorney-in-fact
</TABLE>
II-2
<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<C> <S>
3.1 -- Restated Certificate of Incorporation of the Company
</TABLE>
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST SIERRA FINANCIAL, INC.
First Sierra Financial, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
A. The name of the Corporation is First Sierra Financial, Inc. The
Certificate of Incorporation of the Corporation was originally filed with the
Secretary of State of the State of Delaware on June 3, 1994, and amended on May
8, 1995, May 21, 1996 and July 9, 1996.
B. This Restated Certificate of Incorporation has been duly adopted
in accordance with Sections 242 and 245 of the General Corporation Law of the
State of Delaware (the "DGCL") and, pursuant to such provisions, this Restated
Certificate of Incorporation restates and integrates and further amends the
provisions of the Certificate of Incorporation of the Corporation.
C. The text of the Certificate of Incorporation of the Corporation
is hereby restated and further amended to read in its entirety as set forth on
Exhibit A hereto and in Exhibits B and C hereto containing the Certificates of
Designation, Preferences, Rights and Limitations of the Corporation's Series A
Preferred Stock and Series B Convertible Preferred Stock, respectively.
<PAGE> 2
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed by the undersigned authorized officers of the Corporation this 27th day
of February, 1997.
FIRST SIERRA FINANCIAL, INC.
By: /s/ THOMAS J. DEPPING
--------------------------------
Name: Thomas J. Depping
--------------------------------
Title: President
--------------------------------
ATTEST:
/s/ SANDY B. HO
- ---------------------------
<PAGE> 3
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
FIRST SIERRA FINANCIAL, INC.
ARTICLE I.
The name of the Corporation is First Sierra Financial, Inc.
ARTICLE II.
The registered office of the Corporation in the State of Delaware is
located at Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.
ARTICLE III.
The purpose for which the Corporation is organized is to engage in any
and all lawful acts and activity for which corporations may be organized under
the General Corporation Law of Delaware. The Corporation will have perpetual
existence.
ARTICLE IV.
The total number of shares of stock that the Corporation shall have
authority to issue is, 26,000,000 shares of capital stock, consisting of (i)
25,000,000 shares of common stock, par value $.01 per share ("Common Stock")
and (ii) 1,000,000 shares of preferred stock, par value $.01 per share
("Preferred Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Common Stock and the Preferred Stock are
as follows:
1. Provisions Relating to the Common Stock.
(a) Dividends. Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any class or series thereof,
each share of Common Stock shall entitle the holder of record thereof to
receive dividends (payable in cash, stock, or otherwise) out of funds legally
available therefor, when, as and if declared by the board of directors of the
Corporation with respect to any of such class of stock.
<PAGE> 4
(b) Liquidation Rights. The holders of Common Stock shall be
entitled to participate in the net assets of the Corporation remaining after
any dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, and after payment or provision for the
payment of the debts and liabilities of the Corporation and payment of the
liquidation preference of any shares of capital stock of the Corporation having
such a preference, ratably in proportion to the number of shares of Common
Stock held by them. A dissolution, liquidation or winding-up of the
Corporation, as such terms are used in this paragraph (b), shall not be deemed
to be occasioned by or to include any consolidation or merger of the
Corporation with or into any other corporation or corporations or other entity
or a sale, lease, exchange, or conveyance of all or a part of the assets of the
Corporation.
2. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time in one or
more classes or series, the shares of each class or series to have any
designations and powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof as are stated and expressed in this
Article IV and in the resolution or resolutions providing for the issue of such
class or series adopted by the board of directors of the Corporation as
hereafter prescribed.
(b) Authority is hereby expressly granted to and vested in the board
of directors of the Corporation to authorize the issuance of the Preferred
Stock from time to time in one or more classes or series, and with respect to
each class or series of the Preferred Stock, to state by the resolution or
resolutions from time to time adopted providing for the issuance thereof the
following:
(i) whether or not the class or series is to have voting
rights, special, or limited, or is to be without voting rights, and whether or
not such class or series is to be entitled to vote as a separate class either
alone or together with the holders of one or more other classes or series of
stock;
(ii) the number of shares to constitute the class or series and
the designations thereof;
(iii) the preferences and relative, participating, optional, or
other special rights, if any, and the qualifications, limitations, or
restrictions thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series shall be
redeemable at the option of the Corporation or the holders thereof or upon the
happening of any specified event, and, if redeemable, the redemption price or
prices (which may be payable in the form of cash, notes, securities, or other
property), and the time or times at which, and the terms and conditions upon
which, such shares shall be redeemable and the manner of redemption;
<PAGE> 5
(v) whether or not the shares of a class or series shall be
subject to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and, if such retirement
or sinking fund or funds are to be established, the periodic amount thereof,
and the terms and provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in cash,
stock of the Corporation, or other property, the conditions upon which and the
times when such dividends are payable, the preference to or the relation to the
payment of dividends payable on any other class or classes or series of stock,
whether or not such dividends shall be cumulative or noncumulative, and if
cumulative, the date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which the
holders of any class or series thereof shall be entitled to receive upon the
voluntary or involuntary dissolution of, or upon any distribution of the assets
of, the Corporation;
(viii) whether or not the shares of any class or series, at the
option of the Corporation or the holder thereof or upon the happening of any
specified event, shall be convertible into or exchangeable for the shares of
any other class or classes or of any other series of the same or any other
class or classes of stock, securities, or other property of the Corporation and
the conversion price or prices or ratio or ratios or the rate or rates at which
such conversion or exchange may be made, with such adjustments, if any, as
shall be stated and expressed or provided for in such resolution or
resolutions; and
(ix) any other special rights and protective provisions with
respect to any class or series as may be deemed advisable by the board of
directors of the Corporation.
(c) The shares of each class or series of the Preferred Stock may
vary from the shares of any other class or series thereof in any or all of the
foregoing respects and in any other manner. The board of directors of the
Corporation may increase the number of shares of the Preferred Stock designated
for any existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The board of directors of the Corporation may decrease
the number of shares of the Preferred Stock designated for any existing class
or series by a resolution subtracting from such class or series authorized and
unissued shares of the Preferred Stock designated for such existing class or
series, and the shares so subtracted shall become authorized, unissued, and
undesignated shares of the Preferred Stock.
3. General.
(a) Subject to the foregoing provisions of this Restated Certificate
of Incorporation, the Corporation may issue shares of its Preferred Stock and
Common Stock from time to time for such consideration (not less than the par
value thereof) as may be fixed by the board of directors of the Corporation,
which is expressly authorized to fix the same in its absolute discretion
subject to the foregoing conditions. Shares so issued for which the
consideration shall have been paid or delivered to the Corporation shall be
deemed fully paid stock and shall not be liable to any further
<PAGE> 6
call or assessment thereon, and the holders of such shares shall not be liable
for any further payments in respect of such shares.
(b) The Corporation shall have authority to create and issue rights
and options entitling their holders to purchase shares of the Corporation's
capital stock of any class or series or other securities of the Corporation,
and such rights and options shall be evidenced by instrument(s) approved by the
board of directors of the Corporation. The board of directors of the
Corporation shall be empowered to set the exercise price, duration, times for
exercise, and other terms of such rights or options; provided, however, that
the consideration to be received for any shares of capital stock subject
thereto shall not be less than the par value thereof.
ARTICLE V.
The number, classification, and terms of the board of directors of the
Corporation and the procedures to elect directors, to remove directors, and to
fill vacancies in the board of directors shall be as follows:
(a) The number of directors that shall constitute the whole board of
directors shall from time to time be fixed exclusively by the board of
directors by a resolution adopted by a majority of the whole board of directors
serving at the time of that vote. In no event shall the number of directors
that constitute the whole board of directors be fewer than three. No decrease
in the number of directors shall have the effect of shortening the term of any
incumbent director. Directors of the Corporation need not be elected by
written ballot unless the bylaws of the Corporation otherwise provide.
(b) The board of directors of the Corporation shall be divided into
three classes designated Class I, Class II, and Class III, respectively, all as
nearly equal in number as possible, with each director then in office receiving
the classification that at least a majority of the board of directors
designates. The initial term of office of directors of Class I shall expire at
the annual meeting of stockholders of the Corporation in 1998, of Class II
shall expire at the annual meeting of stockholders of the Corporation in 1999,
and of Class III shall expire at the annual meeting of stockholders of the
Corporation in 2000, and in all cases as to each director until his successor
is elected and qualified or until his earlier death, resignation or removal.
At each annual meeting of stockholders beginning with the annual meeting of
stockholders in 1998, each director elected to succeed a director whose term is
then expiring shall hold his office until the third annual meeting of
stockholders after his election and until his successor is elected and
qualified or until his earlier death, resignation or removal. If the number of
directors that constitutes the whole board of directors is changed as permitted
by this Article V, the majority of the whole board of directors that adopts the
change shall also fix and determine the number of directors comprising each
class; provided, however, that any increase or decrease in the number of
directors shall be apportioned among the classes as equally as possible.
(c) Vacancies in the board of directors resulting from death,
resignation, retirement, disqualification, removal from office, or other cause
and newly-created directorships resulting from any increase in the authorized
number of directors may be filled by no less than a majority vote of the
remaining directors then in office, though less than a quorum, who are
designated to
<PAGE> 7
represent the same class or classes of stockholders that the vacant position,
when filled, is to represent or by the sole remaining director (but not by the
stockholders except as required by law), and each director so chosen shall
receive the classification of the vacant directorship to which he has been
appointed or, if it is a newly-created directorship, shall receive the
classification that at least a majority of the board of directors designates
and shall hold office until the first meeting of stockholders held after his
election for the purpose of electing directors of that classification and until
his successor is elected and qualified or until his earlier death, resignation,
or removal from office.
(d) A director of any class of directors of the Corporation may be
removed before the expiration date of that director's term of office, only for
cause, by an affirmative vote of the holders of not less than eighty percent
(80%) of the votes of the outstanding shares of the class or classes or series
of stock then entitled to be voted at an election of directors of that class or
series, voting together as a single class, cast at the annual meeting of
stockholders or at any special meeting of stockholders called by a majority of
the whole board of directors for this purpose.
(e) Notwithstanding any other provisions of this Restated Certificate
of Incorporation or any provision of law that might otherwise permit a lesser
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the capital stock of the Corporation required by
law or by this Restated Certificate of Incorporation, the affirmative vote of
the holders of not less than eighty percent (80%) of the votes of the
outstanding shares of the Corporation then entitled to be voted in an election
of directors, voting together as a single class, shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article V.
ARTICLE VI.
All of the power of the Corporation, insofar as it may be lawfully
vested by this Restated Certificate of Incorporation in the board of directors,
is hereby conferred upon the board of directors of the Corporation. In
furtherance of and not in limitation of that power or the powers conferred by
law, (1) a majority of directors then in office (or such higher percentage as
may be specified in the bylaws with respect to any provision thereof) shall
have the power to adopt, amend, and repeal the bylaws of the Corporation; (2)
the stockholders of the Corporation shall have no power to appoint or remove
directors as members of committees of the board of directors, nor to abrogate
the power of the board of directors to establish any such committees or the
power of any such committee to exercise the powers and authority of the board
of directors; (3) the stockholders of the Corporation shall have no power to
elect or remove officers of the Corporation nor to abrogate the power of the
board of directors to elect and remove officers of the Corporation; and (4)
notwithstanding any other provision of this Restated Certificate of
Incorporation or any provision of law that might otherwise permit a lesser or
no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the capital stock of the Corporation required by
law or by this Restated Certificate of Incorporation, the bylaws of the
Corporation shall not be adopted, altered, amended or repealed by the
stockholders of the Corporation except in accordance with the provisions of the
bylaws and by the vote of the holders of not less than two-thirds of the
outstanding shares of stock then entitled to vote upon the election of
directors, voting together as a single class, or such higher vote as is set
forth in the bylaws. In the event of a direct conflict between the bylaws of
the Corporation and this Restated Certificate
<PAGE> 8
of Incorporation, the provisions of this Restated Certificate of Incorporation
shall be controlling. Notwithstanding any other provisions of this Restated
Certificate of Incorporation or any provision of law that might otherwise
permit a lesser or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of the capital stock of the
Corporation required by law or by this Restated Certificate of Incorporation,
the affirmative vote of the holders of not less than eighty percent (80%) of
the votes of the shares of the Corporation then entitled to be voted in an
election of directors, voting together as a single class, shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article VI.
ARTICLE VII.
Any action required or permitted to be taken by the stockholders of the
Corporation may be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
ARTICLE VIII.
Special meetings of the stockholders of the Corporation, and any
proposals to be considered at such meetings, may be called and proposed
exclusively by the board of directors, pursuant to a resolution approved by a
majority of the members of the board of directors at the time in office, and no
stockholder of the Corporation shall require the board of directors to call a
special meeting of common stockholders or to propose business at a special
meeting of stockholders. Except as otherwise required by law or regulation, no
business proposed by a stockholder to be considered at an annual meeting of the
stockholders (including the nomination of any person to be elected as a
director of the Corporation) shall be considered by the stockholders at that
meeting unless, no later than sixty (60) days before the annual meeting of
stockholders or (if later) ten days after the first public notice of that
meeting is sent to stockholders, the Corporation receives from the stockholder
proposing that business a written notice that sets forth (1) the nature of the
proposed business with reasonable particularity, including the exact text of
any proposal to be presented for adoption, and the reasons for conducting that
business at the annual meeting; (2) with respect to each such stockholder, that
stockholder's name and address (as they appear on the records of the
Corporation), business address and telephone number, residence address and
telephone number, and the number of shares of each class of stock of the
Corporation beneficially owned by that stockholder; (3) any interest of the
stockholder in the proposed business; (4) the name or names of each person
nominated by the stockholder to be elected or re-elected as a director, if any;
and (5) with respect to each nominee, that nominee's name, business address and
telephone number, and residence address and telephone number, the number of
shares, if any, of each class of stock of the Corporation owned directly and
beneficially by that nominee, and all information relating to that nominee that
is required to be disclosed in solicitations of proxies for elections of
directors, or is otherwise required, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (or any
provision of law subsequently replacing Regulation 14A), together with a duly
acknowledged letter signed by the nominee stating his or her acceptance of the
nomination by that stockholder, stating his or her intention to serve as a
director if elected, and consenting to
<PAGE> 9
being named as a nominee for director in any proxy statement relating to such
election. The person presiding at the annual meeting shall determine whether
business (including the nomination of any person as a director) has been
properly brought before the meeting and, if the facts so warrant, shall not
permit any business (or voting with respect to any particular nominee) to be
transacted that has not been properly brought before the meeting.
Notwithstanding any other provisions of this Restated Certificate of
Incorporation or any provision of law that might otherwise permit a lesser or
no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the capital stock of the Corporation required by
law or by this Restated Certificate of Incorporation, the affirmative vote of
the holders of not less than eighty percent (80%) of the shares of the
Corporation then entitled to be voted in an election of directors, voting
together as a single class, shall be required to amend or repeal, or to adopt
any provision inconsistent with, this Article VIII.
ARTICLE IX.
Notwithstanding any other provisions of this Restated Certificate of
Incorporation or any provision of law that might otherwise permit a lesser or
no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the capital stock of the Corporation required by
law or by this Restated Certificate of Incorporation, the affirmative vote of
the holders of not less than two-thirds (66 2/3%) of the shares of the
Corporation then entitled to be voted in an election of directors, voting
together as a single class, shall be required to approve any of the following
proposed transactions:
(a) a merger or consolidation in which the Corporation shall not be
the surviving entity or shall survive only as a subsidiary of an entity;
(b) a sale, lease or exchange or an agreement to sell, lease or
exchange all or substantially all of the assets of the Corporation to any other
person or entity; or
(c) the dissolution or liquidation of the Corporation.
Notwithstanding any other provisions of this Restated Certificate of
Incorporation or any provision of law that might otherwise permit a lesser or
no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the capital stock of the Corporation required by
law or by this Restated Certificate of Incorporation, the affirmative vote of
the holders of not less than eighty percent (80%) of the shares of the
Corporation then entitled to be voted in an election of directors, voting
together as a single class, shall be required to amend or repeal, or to adopt
any provision inconsistent with, this Article IX.
ARTICLE X.
No contract or transaction between the Corporation and one or more of
its directors, officers, or stockholders or between the Corporation and any
person (as used herein "person" means any corporation, partnership,
association, firm, trust, joint venture, political subdivision, or
instrumentality) or other organization in which one or more of its directors,
officers, or stockholders are directors, officers, or stockholders, or have a
financial interest, shall be void or
<PAGE> 10
voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the board or any committee thereof
which authorizes the contract or transaction, or solely because his, her, or
their votes are counted for such purpose, if: (i) the material facts as to his
or her relationship or interest and as to the contract or transaction are
disclosed or are known to the board of directors or the committee, and the
board of directors or the committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(ii) the material facts as to his or her relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by majority vote of the stockholders; or (iii) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved, or ratified by the board of directors, a committee thereof, or the
stockholders. Interested directors may be counted in determining the presence
of a quorum at a meeting of the board of directors or of a committee which
authorizes the contract or transaction.
ARTICLE XI.
The Corporation shall indemnify and hold harmless any person who was,
is, or is threatened to be made a party to a proceeding (as hereinafter
defined) by reason of the fact that he or she (i) is or was a director or
officer of the Corporation or (ii) while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, to the fullest extent permitted under the Delaware General
Corporation Law, as the same exists or may hereafter be amended. Such right
shall be a contract right and as such shall run to the benefit of any director
or officer who is elected and accepts the position of director or officer of
the Corporation or elects to continue to serve as a director or officer of the
Corporation while this Article XI is in effect. Any repeal or amendment of
this Article XI shall be prospective only and shall not limit the rights of any
such director or officer or the obligations of the Corporation with respect to
any claim arising from or related to the services of such director or officer
in any of the foregoing capacities prior to any such repeal or amendment to
this Article XI. Such right shall include the right to be paid by the
Corporation expenses incurred in defending any such proceeding in advance of
its final disposition to the maximum extent permitted under the Delaware
General Corporation Law, as the same exists or may hereafter be amended. If a
claim for indemnification or advancement of expenses hereunder is not paid in
full by the Corporation within sixty (60) days after a written claim has been
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim, and if
successful in whole or in part, the claimant shall also be entitled to be paid
the expenses of prosecuting such claim. It shall be a defense to any such
action that such indemnification or advancement of costs of defense are not
permitted under the Delaware General Corporation Law, but the burden of proving
such defense shall be on the Corporation. Neither the failure of the
Corporation (including its board of directors, independent legal counsel, or
stockholders) to have made its determination prior to the commencement of such
action that indemnification of, or advancement of costs of defense to, the
claimant is permissible in the circumstances nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or
stockholders) that such indemnification or advancement is not
<PAGE> 11
permissible shall be a defense to the action or create a presumption that such
indemnification or advancement is not permissible. In the event of the death
of any person having a right of indemnification under the foregoing provisions,
such right shall inure to the benefit of his or her heirs, executors,
administrators, and personal representatives. The rights conferred above shall
not be exclusive of any other right which any person may have or hereafter
acquire under any statute, bylaw, resolution of stockholders or directors,
agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
ARTICLE XII.
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. Any repeal or amendment of this Article XII by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation arising from an act or omission occurring prior to the time of such
repeal or amendment. In addition to the circumstances in which a director of
the Corporation is not personally liable as set forth in the foregoing
provisions of this Article XII, a director shall not be liable to the
Corporation or its stockholders to such further extent as permitted by any law
hereafter enacted, including, without limitation, any subsequent amendment to
the Delaware General Corporation Law.
<PAGE> 12
EXHIBIT B
CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A PREFERRED STOCK
OF
FIRST SIERRA FINANCIAL, INC.
PURSUANT to Section 151(g) of the General Corporation Law of Delaware,
FIRST SIERRA FINANCIAL, INC., a corporation organized and existing under the
General Corporation Law of Delaware (herein referred to as the "Corporation"),
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors of
the Corporation by its Certificate of Incorporation, and pursuant to the
provisions of Section 151(g) of the General Corporation Law of Delaware, such
Board of Directors by written unanimous consent dated June 27, 1996, and as
amended by such Board of Directors by written unanimous consent dated October
11, 1996, duly adopted a resolution providing for the issuance of a series of
Fifty Eight Thousand Seven Hundred Sixteen (58,716) shares of the Corporation's
Preferred Stock, $.01 par value per share, to be designated "Series A Preferred
Stock", and fixing the voting powers, preferences and relative, participating,
optional or other rights, and the qualifications, limitations or restrictions
thereof, which resolution is as follows:
RESOLVED, that pursuant to the authority expressly granted
and vested in the Board of Directors of the Corporation in accordance
with the provisions of its Certificate of Incorporation, there shall be
established and authorized for issuance a series of the Corporation's
Preferred Stock, $.01 par value per share, designated "Series A
Preferred Stock" (herein referred to as "Series A Preferred Stock"),
consisting of Fifty Eight Thousand Seven Hundred Sixteen (58,716)
shares, each of the par value of $.01 per share, and having the voting
powers, preferences and relative, participating, optional and other
rights, and the qualifications, limitations or restrictions set forth
below:
1. Definitions. For purposes hereof, the following terms shall have the
following definitions or shall be subject to the following rules of
construction:
<PAGE> 13
(a) "Affiliate" of any person shall mean (a) any member of
the immediate family of such person, including parents, siblings,
spouse and lineal descendants (including those by adoption); the
parents, siblings, spouse, or lineal descendants (including those by
adoption) of such immediate family member; and in any such case any
trust whose primary beneficiary is such person or one or more members
of such immediate family and/or such person's lineal descendants; (b)
the legal representative or guardian of such person or of any such
immediate family members in the event such person or any such immediate
family members becomes mentally incompetent; and (c) any person,
corporation or other entity controlling, controlled by or under common
control with such person. As used in this definition, the term
"control", including the correlative terms "controlling", "controlled
by" and "under common control with" shall mean possession, directly or
indirectly, of the power to direct or cause the direction of management
or policies (whether through ownership of securities or any partnership
or other ownership interest, by contract or otherwise) of a person,
corporation or other entity.
(b) "Board of Directors" means the Board of Directors of
the Corporation.
(c) "Common Stock" means shares of the Corporation's
Common Stock, $.01 par value per share.
(d) "Conversion Rate" means the rate at which the Series A
Preferred Stock is convertible on a per share basis into Common Stock,
as shall be determined from time to time by the Board of Directors at
the time of issuance of any shares of Series A Preferred Stock. The
Conversion Rate applicable to any shares of Series A Preferred Stock
shall be recorded in the minutes of the Board of Directors at which
such shares are authorized to be issued, and shall be conclusively
evidenced (absent manifest error) by a notation to such effect on the
face of each certificate representing such shares.
(e) "Dividend Rate" shall mean an annual rate (expressed
in dollars or portions thereof) as shall be determined from time to
time by the Board of Directors at the time of issuance of any shares of
Series A Preferred Stock. The Dividend Rate applicable to any shares
of Series A Preferred Stock shall be recorded in the minutes of the
Board of Directors at which such shares are authorized to be issued,
and shall be conclusively evidenced (absent manifest error) by a
notation to such effect on the face of each certificate representing
such shares.
(f) "Preferred Stock" means shares of any series of the
Corporation's Preferred Stock, $.01 par value per share.
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<PAGE> 14
(g) "Securities Act" means the Securities Act of 1933, as
amended.
(h) "Redemption Price" means the rate at which the Series
A Preferred Stock shall be redeemed as shall be determined from time to
time by the Board of Directors at the time of issuance of any shares of
Series A Preferred Stock. The Redemption Price applicable to any
series of Series A Preferred Stock shall be recorded in the minutes of
the Board of Directors at which such shares are authorized to be
issued, and shall be conclusively evidenced (absent manifest error) by
a notation to such effect on the face of each certificate representing
such shares.
(i) "Underlying Stock" means all shares of Common Stock
into which the Series A Preferred Stock is convertible, and all other
shares of capital stock received on account of such shares of Series A
Preferred Stock or Common Stock in respect of any stock split, stock
dividend, recapitalization, reorganization or other similar corporate
events.
(j) All accounting terms used herein and not expressly
defined herein shall have the meanings given to them in accordance with
generally accepted accounting principles consistently applied and in
effect as of the date of the relevant calculation.
2. Dividends.
(a) Series A Preferred Stock. The holders of Series A
Preferred Stock, in preference to the holders of Common Stock, shall be
entitled to receive, but only out of any funds legally available for
the declaration of dividends, non-cumulative, preferential dividends in
cash at an annual rate equal to the Dividend Rate, payable at such
times as shall be determined by the Board of Directors at the time of
issuance of the Series A Preferred Stock. So long as any shares of
Series A Preferred Stock remain outstanding, no dividends or
distributions (other than dividends or distributions on Common Stock
payable in Common Stock) shall be paid upon, or declared or set apart
for, the Common Stock.
(b) Other Stock. Subject to paragraph (a) above, (i)
dividends may be declared and paid on the Common Stock and any other
class or series of the Corporation's capital stock, and (ii) Common
Stock or such other capital stock may be purchased, retired or
otherwise acquired, when and as determined by the Board of Directors,
out of any funds legally available for such purposes.
3. Redemption.
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<PAGE> 15
(a) Mandatory Redemption. On December 31, 2001, the
Corporation shall redeem all of the shares of Series A Preferred Stock
then outstanding (subject, however, to the right of the holders of the
Series A Preferred Stock to convert their shares pursuant to Section 5
by providing the written conversion notice referred to in Section 5(c)
below on or before November 30, 2001), at the Redemption Price.
(b) General. From and after the effective date of
redemption and the setting aside of the funds necessary for redemption,
notwithstanding that any certificate for shares of Series A Preferred
Stock so called for redemption shall not have been surrendered for
cancellation, the shares to be redeemed shall no longer be deemed
outstanding, and the holders of certificates representing such shares
shall have with respect to such shares no rights in or with respect to
the Corporation except the right to receive, upon the surrender of such
certificates, the Redemption Price therefor. Shares of Series A
Preferred Stock redeemed by the Corporation pursuant to this Section 3,
or shares of Series A Preferred Stock otherwise purchased by the
Corporation, shall not be reissued and shall be cancelled and retired
in the manner provided by the laws of the State of Delaware, and no
other shares of Series A Preferred Stock shall be issued in lieu
thereof.
4. Preference on Liquidation, Dissolution or Winding Up.
(a) Definition. A consolidation or merger of the
Corporation, a sale or transfer of substantially all of its assets as
an entirety, or any purchase or redemption of capital stock of the
Corporation of any class, shall not be regarded as "liquidation,
dissolution or winding up of the affairs of the Corporation" within the
meaning of this Section 4.
(b) Series A Preferred Stock. During any proceedings for
the voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation, the holders of the Series A Preferred
Stock shall be entitled to receive, before any distribution of the
assets of the Corporation shall be made in respect of the outstanding
Common Stock, an amount in cash for each share of Series A Preferred
Stock equal to the Redemption Price or funds necessary for such payment
shall have been set aside in trust for the account of the holders of
the outstanding Series A Preferred Stock so as to be and continue
available therefor. If upon such liquidation, dissolution or winding
up, the assets distributable to the holders of the Series A Preferred
Stock as aforesaid shall be insufficient to permit the payment to them
the Redemption Price, the assets of the Corporation shall be
distributed to the holders of the Series A Preferred Stock until they
shall have received the full amount to which they would otherwise be
entitled. If the assets of the Corporation are sufficient to permit
the payment of such amounts to the holders of the Series A Preferred
Stock, the remainder of the assets of the Corporation, if any, after
the distributions as aforesaid shall be distributed and
4
<PAGE> 16
divided ratably among the holders of the Common Stock then outstanding
according to their respective shares. In calculating any amount
distributable to the holders of the Series A Preferred Stock as
aforesaid, there shall be credited against such amount any sums
distributed or payable to such holders other than pursuant to the terms
hereof, whether under any letter of credit, security or other similar
right or interest.
5. Conversion. The Series A Preferred Stock shall be convertible into
Common Stock in accordance with the following provisions of this
Section 5.
(a) Optional Conversion. Subject to and upon compliance
with the provisions of this Section 5, each holder of shares of Series
A Preferred Stock shall have the right at such holder's option, at any
time or from time to time, from and after the date of original issuance
to convert all (but not less than all) of his shares of Series A
Preferred Stock into fully paid and nonassessable shares of Common
Stock, at the Conversion Rate in effect on the Conversion Date, upon
the terms hereinafter set forth.
(b) Conversion Rate. Each share of Series A Preferred
Stock shall be convertible at the Conversion Rate.
(c) Mechanics of Conversion. The holder of any shares of
Series A Preferred Stock may exercise the optional conversion right
specified in paragraph (a) above by surrendering to the Corporation or
any transfer agent of the Corporation the certificate or certificates
for the shares to be converted, accompanied by written notice stating
that the holder elects to convert all of the shares represented
thereby. Optional conversion under paragraph (a) shall be deemed to
have been effected on the date when notice of an election to convert
and certificates for the shares to be converted has been delivered; any
such date is referred to herein as the "Conversion Date". As promptly
as practicable thereafter the Corporation shall issue and deliver to or
upon the written order of such holders a certificate or certificates
for the number of full shares of Common Stock to which such holders are
entitled rounded down to the next whole share as provided in paragraph
(d) below. The person in whose name the certificate or certificates of
Common Stock are to be issued shall be deemed to have become a holder
of record of such Common Stock on the Conversion Date.
(d) Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued upon conversion of shares of Series A
Preferred Stock. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of any shares of
Series A Preferred Stock, the number of full shares of Common Stock
issuable upon conversion thereof shall be reduced to the next lowest
number of whole shares, and the Corporation will pay a cash adjustment
in
5
<PAGE> 17
respect of any surrendered shares of Series A Preferred Stock not
converted into Common Stock in an amount equal to the Redemption Price
divided by the number of shares of Series A Preferred Stock so held by
such holder.
(e) Conversion Amount Adjustments. The Conversion Rate
shall be subject to adjustment from time to time as follows:
(i) Stock Dividends. If the number of shares of
Common Stock outstanding at any time after the issuance of any
Series A Preferred Stock is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then immediately after the
record date fixed for the determination of holders of Common
Stock entitled to receive such stock dividend or the effective
date of such subdivision or split-up, as the case may be, the
Conversion Rate shall be appropriately increased so that the
holders of any shares of Series A Preferred Stock shall be
entitled to receive the number of shares of Common Stock of
the Corporation which they would have owned immediately
following such action had such shares of Series A Preferred
Stock been converted immediately prior thereto.
(ii) Reorganizations. In case of any capital
reorganization of the Corporation, or of any reclassification
of the Common Stock, or in case of the consolidation of the
Corporation with or the merger of the Corporation with or into
any other corporation, partnership or other business entity in
which the Corporation is not the survivor, or of the sale,
lease or other transfer of all or substantially all of the
assets of the Corporation to any other corporation,
partnership or other business entity, each share of Series A
Preferred Stock shall, effective simultaneously with such
capital reorganization, reclassification, consolidation,
merger, sale or lease, be convertible into the number of
shares of stock or other securities or property to which the
Common Stock issuable (at the time of such capital
reorganization, reclassification, consolidation, merger, sale
or lease) upon conversion of such share of Series A Preferred
Stock would have been entitled immediately following such
capital reorganization, reclassification, consolidation,
merger, sale or lease in place of (or in addition to, in the
case of any such event after which Common Stock remains
outstanding) the shares of Common Stock into which such share
of Series A Preferred Stock would otherwise have been
convertible; and in any such case, if necessary, the
provisions set forth herein with respect to the rights and
interests thereafter of the holders of the shares of Series A
Preferred Stock shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any share of
stock or other securities or property thereafter deliverable
on the conversion of the shares of Series A Preferred Stock.
6
<PAGE> 18
(f) Notice to Holders. In the event the Corporation
proposes to take any action of the type described in paragraph (e)
above, the Corporation shall give notice to each holder of the Series A
Preferred Stock and to the Corporation's transfer agent by mail, first
class postage prepaid, at his or its address appearing on the
Corporation's records. Such notice shall specify the record date, if
any, with respect to any such action and the approximate date on which
such action is to take place. Such notice shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate
the effect of such action (to the extent such effect may be known at
the date of such notice) on the Conversion Rate and the number, kind or
class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of the Series A Preferred Stock. In the
case of any action which would require the fixing of a record date,
such notice shall be given at least 10 days prior to the date so fixed,
and in case of all other action, such notice shall be given at least 15
days prior to the taking of such proposed action. The Corporation
shall also provide to each such holder notice of the consummation of
such action.
(g) Costs. The Corporation shall pay all documentary,
stamp, transfer or other transactional taxes attributable to the
issuance or delivery of shares of Common Stock of the Corporation or
other securities or property upon conversion of the shares of Series A
Preferred Stock; provided, however, that the Corporation shall not be
required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for
such shares or securities in the name other than that of the holder of
the shares of Series A Preferred Stock in respect of which such shares
are being issued.
(h) Reservation of Shares. The Corporation shall reserve
at all times so long as any shares of Series A Preferred Stock remain
outstanding, free from preemptive rights, out of its treasury stock or
its authorized but unissued shares of Common Stock, or both, solely for
the purpose of effecting the conversion of shares of Series A Preferred
Stock, sufficient shares of Common Stock to provide for the conversion
of all outstanding shares of Series A Preferred Stock and set aside and
keep available any other property deliverable upon conversion of all
outstanding shares of Series A Preferred Stock.
(i) Valid Issuance. All shares of Common Stock or other
securities which may be issued upon conversion of the shares of Series
A Preferred Stock will upon issuance by the Corporation be duly and
validly issued, fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issuance thereof and the
Corporation shall take no action which will cause a contrary result.
6. Voting Rights. At any annual or special meeting of shareholders or
otherwise in respect of any matter submitted for the vote of
shareholders generally, each share
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<PAGE> 19
of Series A Preferred Stock shall entitle the holder to such number of
votes per share as shall equal the number of shares of Common Stock
(rounded to the nearest whole share) into which such shares of Series A
Preferred Stock is then convertible. The provisions of this Section 6
shall apply to any shares of Series A Preferred Stock so long as such
shares are outstanding, and shall terminate with respect to such shares
when such shares are no longer outstanding, whether by repurchase,
conversion into Common Stock, or otherwise.
7. Certain Transferability Rights and Restrictions.
(a) Application. The following provisions of this Section
7 apply to all shares of Series A Preferred Stock as well as all shares
of Underlying Stock relating thereto (collectively, "Stock"). Such
provisions shall continue to bind all shares of Stock, and each
original holder of such shares and each transferee thereof agrees by
acceptance of any certificate representing such shares to be so bound
by such provisions, notwithstanding the conversion of the Series A
Preferred Stock into Common Stock or that no shares of Series A
Preferred Stock may be outstanding at any given time, from the date of
issuance until the earlier to occur of (i) the dissolution or
termination of existence of the Corporation, or (ii) the written
consent of the Board of Directors and the holders of 66-2/3% of the
outstanding Stock. Every certificate representing shares of Stock
shall be inscribed with a legend referring to the restrictions set
forth in this Section 7.
(b) General. Without the prior approval of the Board of
Directors in each instance, no shares of Stock subject may be sold,
assigned, pledged, encumbered, transferred or otherwise hypothecated in
any manner (by gift, pursuant to any marital dissolution, in any
bankruptcy or insolvency proceeding, or otherwise), except as provided
in this Section 7.
(c) Right of First Refusal. If any holder of Stock
desires to sell, assign, transfer or otherwise dispose of any shares of
Stock, then such holder (for purposes of this paragraph (c), the
"Selling Shareholder"), prior to making any such sale, shall first
offer such shares of Stock (for purposes of this paragraph (c), the
"Option Shares") for sale to the Corporation, in accordance with the
following provisions of this paragraph (c).
(i) Option Price; Terms; Offering Notices. The
price per Option Share at which the Selling Shareholder shall
be required to offer the Option Shares (for purposes of this
paragraph (c), the "Option Price") and the terms of such
offer, shall be the price at which and the terms upon which
any proposed third party purchaser shall have offered to
purchase the Option Shares from the Selling Shareholder and
which the Selling Shareholder is prepared to accept. Each
offer required to be made by the
8
<PAGE> 20
Selling Shareholder pursuant to this paragraph (c) shall be
made by a written notice (for purposes of this paragraph (C),
the "Offering Notice") which shall state that the offer is
being made pursuant to this paragraph (c) and which shall set
forth the number of Option Shares, the name or names of the
proposed purchaser or purchasers of the Option Shares, the
price per share offered by such proposed purchaser or
purchasers for the Option Shares, the method of payment of the
purchase price and the scheduled date of consummation of such
proposed sale. A copy of the written offer from any proposed
third-party purchaser shall be attached to each Offering
Notice.
(ii) Offer to the Corporation. The Selling
Shareholder shall offer the Option Shares to the Corporation
by delivering an Offering Notice to the Corporation. Within
30 days following the Corporation's receipt of such Offering
Notice, the Corporation shall deliver to the Selling
Shareholder a written reply notice accepting the offer of the
Selling Shareholder with respect to all (but not less than
all) of the Option Shares or rejecting such offer. If by such
written reply notice the Corporation accepts the offer made by
the Selling Shareholder, the reply notice shall constitute an
agreement binding on the Selling Shareholder and the
Corporation to sell and purchase the Option Shares at a price
per share equal to the Option Price. If within such 30-day
period, the Corporation shall have failed to deliver a reply
notice accepting the offer of the Selling Shareholder as to
all of the Option Shares, the Corporation shall be deemed to
have rejected such offer.
(iii) Lapse of Option. If the foregoing offer to
sell Option Shares has been made by the Selling Shareholder
and has not been accepted by the Corporation, then the Selling
Shareholder may sell not less than all of the Option Shares at
any time within, but not subsequent to, 60 days after the
lapse of the option granted pursuant to this paragraph (c);
provided, however, that no sale of the Option Shares shall be
made at any price lower than the Option Price or on terms
materially different from those specified in the Offering
Notice or to any person or persons other than the persons
specified in the Offering Notice or to any person or persons
other than the persons specified in the Offering Notice. If
after the lapse of such 60-day period the Option Shares shall
not have been sold, all of the provisions of this paragraph
(c) shall apply to any future sale or other disposition of
shares of Stock owned by the Selling Shareholder.
(iv) Consummation of Purchases. Each transaction
of purchase and sale of Option Shares pursuant to this
paragraph (c) shall be completed by delivery of the stock
certificates representing the Option Shares endorsed
9
<PAGE> 21
in blank, or accompanied by duly executed stock powers, and by
actual registration of the transfer of the Option Shares on
the books of the Corporation upon payment of the purchase
price to the Selling Shareholder (the Corporation agreeing to
effect such registration upon the tender of such certificates,
endorsed or accompanied by such executed stock powers). Any
such transaction shall be closed at such time and place as
shall be agreed upon by the parties thereto, or, if no such
agreement is reached, at the principal office of the
Corporation on the 30th day following the date of delivery of
the last reply notice given in connection with such
transaction or, if such day shall not be a business day, on
the first business day thereafter during normal business
hours.
(v) Certain Permitted Dispositions. Subject to
the restrictions set forth in paragraph (b) above, transfers
by holders of Stock to Affiliates, upon the death of any such
holder to such holder's estate or other legal representative,
or the pledge of Stock by such holder (but not any disposition
in foreclosure or other remedy) shall not be subject to the
right of first refusal under this paragraph (c), provided,
however, that the provisions of this Section 7 shall continue
to bind the shares of Stock held by any such transferee. The
foregoing provisions of this paragraph (c) shall also not
apply to any disposition pursuant to an effective registration
statement under the Securities Act or under Rule 144.
8. Registration Rights. Subject to paragraph (h) below and the other
provisions of this Section 8, the holders of the Series A Preferred
Stock shall be entitled to have their respective shares of Common Stock
issuable upon conversion of their Series A Preferred Stock included in
any registration of Common stock under the Securities Act proposed by
the Corporation.
(a) Piggyback Rights. If at any time or from time to time
the Corporation proposes to file with the Securities and Exchange
Commission (the "Commission") a registration statement (whether on Form
S-1, S-2 or S-3, SB-1, SB-2, or any equivalent form then in effect) for
the registration under the Securities Act of any shares of Common Stock
for sale to the public by the Corporation or on behalf of a shareholder
of the corporation for cash (excluding any shares of Common Stock
issuable by the Corporation upon the exercise of employee or director
stock options or in connection with the merger or consolidation of the
Corporation or one of its subsidiaries with one or more other
corporations if the Corporation is the surviving corporation), the
Corporation shall give each holder of the Series A Preferred Stock at
least 30 days' prior written notice of the filing of the proposed
registration statement. The notice shall include a list of the states
and foreign jurisdictions, if any, in which the Corporation intends to
qualify such shares, and shall also include the Corporation's estimate
of the range of the
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<PAGE> 22
offering price per share of Common Stock. On the written request of
any holder of the Series A Preferred Stock received by the Corporation
within 15 days after the date of the Corporation's notice, the
Corporation shall, subject to the conditions and in accordance with the
procedures set forth in paragraphs (b) and (c) below, and at its own
expense as provided in paragraph (e) below, include in the coverage of
such registration statement and qualify for sale under the blue sky or
securities laws of the various states, the number of shares (but not
less than 5,000 shares, subject to adjustment to give effect to any
stock dividends, splits or combinations, recapitalizations or other
similar corporate events) of Common Stock (herein called the "Specified
Shares") held and so requested to be registered by each such holder;
provided that if the managing underwriter for the Corporation indicates
its belief in writing that the effect of including in the coverage of
such registration statement all or part of the Specified Shares and the
shares of Common Stock requested to be so included by other
stockholders having contractual registration rights ("Other Requesting
Stockholders") will materially and adversely affect the sale of the
shares of Common Stock proposed to be sold by the Corporation (which
statement of the managing underwriter shall also state the maximum
number of shares (herein called the "Maximum Shares"), if any, which
can be sold by such all such holders without materially and adversely
affecting the sale of the shares proposed to be sold by the
Corporation), then the number of Specified Shares which the holders of
the Series A Preferred Stock and the Other Requesting Stockholders
shall collectively have the right to include in such registration
statement shall be reduced to the number of Maximum Shares set forth in
such statement of the managing underwriter, such reduction to be
effected on a pro rata basis in accordance with the number of all such
shares requested to be so registered by the holders of the Series A
Preferred Stock and the Other Requesting Stockholders.
Except as provided in paragraph (c) below, in no event shall
the Corporation be required to amend any registration statement filed
pursuant to this Section 8 after it has become effective or to amend or
supplement any prospectus to permit the continued disposition of shares
of Common Stock registered under any registration statement.
The Corporation shall have the right to select any
underwriters, including the managing underwriter, of any public
offering of shares of Common Stock subject to the provisions of this
paragraph (a). Nothing in this paragraph (a) shall create any
liability on the part of the Corporation to the holders of the Series A
Preferred Stock if the Corporation for any reason should decide not to
file such a registration statement.
The Corporation may withdraw any registration statement and
abandon any proposed offering initiated by the Corporation without the
consent of any holder of the Series A Preferred Stock, notwithstanding
the request of any such holder to
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<PAGE> 23
participate therein in accordance with this paragraph (a), if the
Corporation determines that such action is in the best interests of the
Corporation.
(b) Certain Registration Conditions. Any holder of Series
A Preferred Stock requesting registration of Common Stock into which
such holder's Series A Preferred Stock is convertible pursuant to
paragraph (a) of this Section 8 is hereafter referred to as a "Selling
Stockholder." Anything in this Agreement to the contrary
notwithstanding, the Corporation shall not be required to effect a
registration of any Common Stock of any Selling Stockholder pursuant to
paragraph (a) of this Section 8, or file any post-effective amendment
thereto:
(i) unless such Selling Stockholder agrees (x) to
sell and distribute a portion or all of his Common Stock in
accordance with the customary plan or plans of distribution
adopted by and through underwriters, if any, acting for the
Corporation, and (y) to bear a pro rata share of underwriter's
discounts and commissions;
(ii) unless the Corporation and the underwriters
for the Corporation shall have received from such Selling
Stockholder all such information as the Corporation and such
underwriters may reasonably request from him concerning such
Selling Stockholder to enable the Corporation to include in
the registration statement all material facts required to be
disclosed therein. Notwithstanding the foregoing, a Selling
Stockholder shall not be required to furnish to the
Corporation any personal financial information of such Selling
Stockholder unrelated to his holdings of Common Stock, Series
A Preferred Stock or other securities of the Corporation held
by him, provided that each Selling Stockholder shall
nonetheless be required to furnish all information reasonably
requested by any such underwriter;
(iii) unless such Selling Stockholder is then
entitled to convert his shares of Series A Preferred Stock
into Common Stock and such Selling Stockholder in fact
delivers to the Corporation, contemporaneously with the notice
given by such Selling Stockholder under paragraph (a) hereof
of his intention to convert the Series A Preferred Stock into
Common Stock subject to and upon the effectiveness of the
registration statement; and
(iv) unless such Selling Stockholder, at the
request of the Corporation or its managing underwriter, agrees
or acknowledges that such Selling Stockholder (x) has a
present intention to sell such shares; (y) agrees to execute
all consents, powers of attorney, registration statements and
other documents required in order to cause such registration
statement to become effective; and (z) agrees, if the offering
is at the market, to give the
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<PAGE> 24
Corporation written notice of the first bona fide offering of
such shares and to use the prospectus forming a part of such
registration statement for only a period of 90 days (or such
longer period provided for in paragraph (c) below) unless such
registration statement is on a form that complies with Rule
415.
(c) Covenants and Procedures. If the Corporation becomes
obligated under the provisions of paragraph (a) of this Section 8 to
effect registration of shares of Common Stock on behalf of any Selling
Stockholder, the following shall apply:
(i) The Corporation, at its own expense as
provided in paragraph (e), shall prepare and file with the
Commission a registration statement covering such shares of
Common Stock and use its best efforts to cause such
registration statement to become effective; and the
Corporation will file such post-effective amendments to such
registration statement (and use its best efforts to cause them
to be effective) and such supplements as are necessary so that
current prospectuses are at all times available for a period
of at least 90 days after the effective date of such
registration statement or for such longer period, not to
exceed 180 days, as may be required by the Corporation or the
managing underwriter under the plan or plans of distribution
set forth in such registration statement. Each Selling
Stockholder shall promptly provide the Corporation with such
information with respect to such Selling Stockholder's shares
of Common Stock to be so registered and, if applicable, the
proposed terms of the offering thereof as is required for such
registration. Further, if the shares of Common Stock to be
covered by the registration statement are not to be sold to or
through underwriters acting for the Corporation, the
Corporation shall (x) deliver to each Selling Stockholder as
promptly as practicable as many copies of preliminary
prospectuses as such Selling Stockholder may reasonably
request, and such Selling Stockholder shall keep a written
record of the distribution of such preliminary prospectuses
and shall refrain from delivery of such preliminary
prospectuses in any manner or under any circumstances which
would violate the Securities Act or the securities laws of any
other jurisdiction, including the various states of the United
States, (y) deliver to each Selling Stockholder, as soon as
practicable after the effective date of the registration
statement, and from time to time thereafter during such 90-
day period, or such longer period as is herein provided, as
many copies of the prospectuses required to be delivered in
connection with the sale of shares of Common Stock registered
under the registration statement as such Selling Stockholder
may reasonably request, and (z) in case of the happening,
after the effective date of such registration statement and
during such 90- day period (or such longer period specified
above), of
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<PAGE> 25
any event or occurrence which would be set forth in an
amendment of or supplement to such prospectus to make any
statements therein not misleading or to correct any misleading
omissions, give each Selling Stockholder written notice
thereof and prepare and furnish to such Selling Stockholder,
in such quantities as he may reasonably request, copies of
such amended prospectus or of such supplement to be attached
to the prospectus in order that the prospectus, as so amended
or supplemented, will not contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made,
not misleading.
(ii) On or prior to the date on which the
registration statement is declared effective, the Corporation
shall use its best efforts to register or qualify, and
cooperate with each Selling Stockholder, the underwriter or
underwriters, if any, and their counsel, in connection with
the registration or qualification of the Common Stock covered
by the registration statement for offer and sale under the
securities or blue sky laws of each state and other
jurisdiction of the United States as such Selling Stockholder
or underwriter reasonably requests, to use its best efforts to
keep each such registration or qualification effective,
including through new filings, or amendments or renewals,
during the period such registration statement is required to
be kept effective and to do any and all other acts or things
necessary or advisable to enable the disposition in all such
jurisdictions of the Common Stock covered by the applicable
registration statement, provided that the Corporation will not
be required to qualify generally to do business in any
jurisdiction where it is not then so qualified.
(iii) The Corporation shall use its best efforts to
cause all of each Selling Stockholder's Common Stock included
in such registration statement to be listed, by the date of
the first sale of such Common Stock pursuant to such
registration statement, on each securities exchange on which
the Common Stock of the Corporation is then listed or proposed
to be listed, if any.
(iv) The Corporation shall make generally
available to each Selling Stockholder and any underwriter
participating in the offering conducted pursuant to the
registration statement an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act no later
than 45 days after the end of the 12-month period beginning
with the first day of the Corporation's first fiscal quarter
commencing after the effective date of the registration
statement, which earnings statement shall cover said 12-month
period, which requirement will be deemed to be satisfied if
the
14
<PAGE> 26
Corporation timely files complete and accurate information on
Forms 10-Q, 10-K, and 8-K under the Securities Exchange Act of
1934, as amended, and otherwise complies with Rule 158 under
the Securities Act as soon as feasible.
(v) The Corporation shall cooperate with each
Selling Stockholder and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends)
representing Common Stock to be sold under the registration
statement, and enable such securities to be in such
denominations and registered in such names as the managing
underwriter or underwriters, if any, or such Selling
Stockholder may request, subject to the underwriters'
obligation to return any certificates representing securities
not sold.
(vi) The Corporation shall use its best efforts to
cause each Selling Stockholder's Common Stock covered by the
registration statement to be registered with or approved by
such other governmental agencies or authorities within the
United States as may be necessary to enable such Selling
Stockholder or the underwriter or underwriters, if any, to
consummate the disposition of such Common Stock.
(vii) The Corporation shall make available for
inspection by each Selling Stockholder, any underwriter
participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent
retained by such Selling Stockholder or any such underwriter
(collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the
Corporation, as shall be reasonably necessary to enable them
to exercise their due diligence, responsibility, and cause the
Corporation's officers, directors and employees to supply all
nonconfidential information reasonably requested by any such
Inspector in connection with such registration statement. As
a condition to providing such access, the Corporation may
require that any and all Inspectors execute and deliver
confidentiality agreement, in form and substance acceptable to
the Corporation, and that confidentiality procedures be
observed, all with respect to such information.
(viii) The Corporation shall use its best efforts to
obtain a "cold comfort" letter from the Corporation's
independent public accountants, and an opinion of counsel for
the Corporation, each in customary form and covering such
matters of the type customarily covered by cold comfort
letters and opinions of counsel in connection with public
offerings of securities, as each Selling Stockholder
reasonably requests.
15
<PAGE> 27
(d) Indemnification.
(i) Indemnification by the Corporation. In the
event of any registration under the Securities Act pursuant to
this Section 8 of shares of Common Stock held by any Selling
Stockholder, the Corporation will hold harmless each Selling
Stockholder and each underwriter of such securities and each
other person, if any, who controls each Selling Stockholder or
such underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities (including
legal fees and costs of court), joint or several, to which
such Selling Stockholder or such underwriter or controlling
person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue
statement of any material fact contained, on the effective
date thereof, in any registration statement under which such
securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein,
or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading; and will reimburse
each Selling Stockholder and each such underwriter and each
such controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage or liability;
provided, however, that the Corporation shall not be liable to
any Selling Stockholder or his underwriters or controlling
persons in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement,
preliminary prospectus or final prospectus or such amendment
or supplement in reliance upon and in conformity with
information furnished to the Corporation through a written
instrument duly executed by such Selling Stockholder or such
underwriter specifically for use in the preparation thereof.
(ii) Indemnification by Selling Stockholders. It
shall be a condition precedent to the obligation of the
Corporation to include in any registration statement any
shares of Common Stock then held by a Selling Stockholder that
the Corporation shall have received an undertaking reasonably
satisfactory to it and its counsel from such selling
Stockholder to severally indemnify and hold harmless (in the
same manner and to the same extent as set forth in
subparagraph (i) above) the Corporation, each director of the
Corporation, each officer of the Corporation who shall sign
such registration statement, each underwriter of such
securities and any
16
<PAGE> 28
person who controls the Corporation or such underwriter within
the meaning of the Securities Act, with respect to any
statement or omission from such registration statement, any
preliminary prospectus or final prospectus contained therein,
or any amendment or supplement thereto, if such statement or
omission was made in reliance upon and in conformity with
information furnished to the Corporation through a written
instrument duly executed by such Selling Stockholder
specifically for use in the preparation of such registration
statement, preliminary prospectus or final prospectus or such
amendment or supplement thereto.
(iii) Indemnification Procedures. Promptly after
receipt by an indemnified party of notice of the commencement
of any action involving a claim referred to in the preceding
subparagraphs (i) and (ii), such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying
party, give written notice to the indemnifying party of the
commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party
will be entitled to participate in and to assume the defense
thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume
the defense thereof, and provided that the indemnifying party
in fact assumes such defense, the indemnifying party will not
be liable to such indemnified party for any legal or other
expenses incurred after the date of such notice by the latter
in connection with the defense thereof. Whether or not such
defense is assumed by the indemnifying party, the indemnifying
party will not be subject to any liability for any settlement
made without its consent. No indemnifying party will consent
to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or
litigation. The indemnified party shall be entitled to
participate with his own counsel (at his own expense) if
reasonably necessary to avoid a conflict of interest.
(iv) Contribution. If the indemnification
provided for in this paragraph (d) from the indemnifying party
is unavailable to an indemnified party hereunder in respect of
any losses, claims, damages, liabilities or expenses referred
to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses in
such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other
relevant equitable
17
<PAGE> 29
considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or a
material omission, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties,
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with
any investigation or proceeding. For purposes of the
foregoing, it would not be just and equitable if contribution
pursuant to this paragraph (d) were determined by pro rata
allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the
provisions of this subparagraph (iv), no Selling Stockholder
shall be required to contribute any amount in excess of the
amount by which the total price at which the Common Stock of
such Selling Stockholder was offered to the public exceeds the
amount of any damages which such Selling Stockholder has
otherwise been required to pay by reason of such untrue
statement or omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent
misrepresentation.
(e) Expenses. All expenses incurred by the Corporation in
connection with any registration statement covering shares of Common
Stock offered by the Selling Stockholders, including, without
limitation, all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers,
Inc.), printing expenses, fees and disbursements of counsel for the
Corporation and of its independent certified public accountants, the
reasonable fees and disbursements of one counsel for collectively all
Selling Stockholders and Other Requesting Stockholders whose stock is
included in such registration, and the expense of qualifying such
shares under state blue sky laws, shall be borne by the Corporation;
provided, however, that all underwriter's discounts and commissions
relating to the shares of Common Stock to be sold by the Selling
Stockholders shall be borne by the Selling Stockholders.
(f) Dispositions During Registration. Upon written
request by the Corporation, the Selling Stockholders will agree, upon
the registration of any of each such Selling Stockholder's shares of
Common Stock or the Common Stock issued by the Corporation, not to sell
or otherwise dispose of any shares of Stock (other than Common Stock
covered by such registration, which may be sold in
18
<PAGE> 30
accordance with the plan or plans of distribution described in the
registration statement) owned by each such Selling Stockholder for a
period of 90 days following the effective date of such registration
statement or for such longer period (not to exceed 180 days) as may be
required under the plan or plans of distribution set forth in such
registration statement. Each holder of the Series A Preferred Stock
shall comply with the foregoing requirements even if his Common Stock
issuable upon the conversion thereof is not being included in such
registration, if (i) at such time such holder (together with his
Affiliates) owns five percent (5%) or more of the Common Stock not
being registered by such registration and (ii) other holders of five
percent or more of the Common Stock not being registered by such
registration are similarly bound.
(g) Term of Registration Rights. The registration rights
granted pursuant to this Section 8 shall be effective for a period
commencing upon the date of original issuance thereof and ending on (i)
as to any holder of Series A Preferred Stock, upon either (A) such
holder's written consent, (B) the date such holder holds, together with
such holder's Affiliates, less than 5,000 shares (subject to adjustment
as described in paragraph (g) above) of Common Stock determined on a
fully diluted basis, or (c) the date such holder is able to dispose of
his shares of Common Stock that such holder may acquire upon conversion
of the Series A Preferred Stock under Rule 144 promulgated under the
Securities Act; and (ii) upon redemption on December 31, 2001.
9. Exclusion of Other Rights. Unless otherwise required by law, the
shares of Series A Preferred Stock shall not have any voting powers,
preferences or relative, participating, optional or other special
rights other than those specifically set forth herein.
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<PAGE> 31
EXHIBIT C
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
FIRST SIERRA FINANCIAL, INC.
PURSUANT to Section 151(g) of the General Corporation Law of the State
of Delaware, FIRST SIERRA FINANCIAL, INC., a corporation organized and existing
under the General Corporation Law of the State of Delaware (herein referred to
as the "Corporation"), DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors of
the Corporation by its Certificate of Incorporation, and pursuant to the
provisions of Section 151(g) of the General Corporation Law of the State of
Delaware, such Board of Directors by written unanimous consent dated as of
October 31, 1996, duly adopted a resolution providing for the creation and
issuance of a series of 43,691 shares of the Corporation's Preferred Stock,
$.01 par value per share, to be designated the "Series B Convertible Preferred
Stock", and fixing the voting powers, preferences and relative, participating,
optional or other rights, and the qualifications, limitations or restrictions
thereof, which resolution is as follows:
RESOLVED, that pursuant to the authority expressly granted and
vested in the Board of Directors of the Corporation in accordance with
the provisions of its Certificate of Incorporation, a series of
Preferred Stock of the Corporation be, and it hereby is, created out
of the authorized but unissued shares of the Preferred Stock of the
Corporation, such series to be designated "Series B Convertible
Preferred Stock" (the "Series B Preferred Stock"), to consist of
43,691 shares, par value $0.01 per share, and having the voting
powers, preferences and relative, participating, optional and other
rights, and the qualifications, limitations and restrictions (in
addition to those set forth in the Certificate of Incorporation) set
forth below:
1. Definitions. For purposes hereof, each of the following terms shall
have the meaning ascribed to it below:
(a) "Affiliate" of any person shall mean (a) any member
of the immediate family of such person, including parents, siblings,
spouse and lineal descendants (including those by adoption); the
parents, siblings, spouse or lineal descendants (including those by
adoption) of such immediate family member; and in any such case any
trust whose primary beneficiary is such person or one or more members
of such immediate family and/or such
<PAGE> 32
person's lineal descendants; (b) the legal representative or guardian
of such person or of any such immediate family members in the event
such person or any such immediate family members becomes mentally
incompetent; and (c) any person, corporation or other entity
controlling, controlled by or under common control with such person.
As used in this definition, the term "control", including the
correlative terms "controlling", "controlled by" and "under common
control with", shall mean possession, directly or indirectly, of the
power to direct or cause the direction of management or policies
(whether through ownership of securities or any partnership or other
ownership interest, by contract or otherwise) of a person, corporation
or other entity.
(b) "Board of Directors" means the Board of Directors of
the Corporation.
(c) "Common Stock" means shares of the Corporation's
Common Stock, $.01 par value per share.
(d) "Conversion Rate" has the meaning ascribed to it in
Section 5(c) below.
(e) "Dividend Rate" has the meaning ascribed to it in
Section 2(b).
(f) "Escrow Agreement" means that certain Escrow
Agreement to be entered into among the Corporation, Valerie A. Hayes
and an escrow agent mutually acceptable to the Corporation and Valerie
A. Hayes.
(g) "Preferred Stock" means shares of any series of the
Corporation's Preferred Stock, $.01 par value per share.
(h) "Securities Act" means the Securities Act of 1933, as
amended.
(i) "Redemption Acceleration Event" means the occurrence
of any one of the following:
(i) The filing by the Corporation of a petition
for liquidation, reorganization, arrangement or adjudication as a
bankrupt or similar relief under bankruptcy, insolvency or similar
laws of the United States or any state or territory thereof;
(ii) The filing against the Corporation of a
petition for liquidation, reorganization, arrangement or adjudication
as a bankrupt or similar relief under bankruptcy, insolvency or
similar laws of the United States or any state thereof and the failure
of the Corporation to secure dismissal of any such petition filed
against it within 90 days of such filing;
(iii) The institution by the Corporation of any
type of insolvency proceeding (under the Bankruptcy Code or otherwise)
for the dissolution or liquidation of, settlement of claims against,
or winding up of the affairs of the Corporation;
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<PAGE> 33
(iv) The failure of the Corporation to provide a
renewal or extension of the Letter of Credit described in Section
2(c)(vi) of the Agreement and Plan of Reorganization dated as of
October 15, 1996 between Valerie A. Hayes, Corporate Capital Leasing
Group, Inc., First Sierra Financial, Inc. and First Sierra
Pennsylvania, Inc. (the "Reorganization Agreement"), in accordance
with the terms of such Section 2(c)(vi) of the Reorganization
Agreement; or
(v) Failure of the Corporation to pay any
dividends on the Series B Preferred Stock when required pursuant to
the terms of Section 2(c)(ii) of the Reorganization Agreement and such
failure continues beyond the cure period referenced in such Section
2(c)(ii) of the Reorganization Agreement.
(i) "Redemption Price" has the meaning ascribed to it in
Section 3(a) below.
(j) "Required Conversion Shares" means, as of each day on
which the Trading Level Event occurs, those outstanding shares of the
Series B Preferred Stock (a) that are not held in the Escrow and (b)
as to which there is a currently effective registration statement
under the Securities Act of 1933 and applicable state law and a
prospectus covering the immediate resale of the shares of Common Stock
(and, if applicable, the Underlying Stock relating to such shares)
into which such shares of Series B Preferred Stock are convertible.
(k) "Released Preferred B Shares" means those shares of
the Series B Preferred Stock that at any time prior to any date of
determination were deposited and held in escrow pursuant to the Escrow
Agreement and that as of such date of determination have been released
from such escrow pursuant to the terms of the Escrow Agreement.
(l) "Trading Level Event" means, as of any particular day
of determination, that the Common Stock of the Corporation is listed
on the New York Stock Exchange, the American Stock Exchange or The
Nasdaq National Market or The Nasdaq Small Cap Market and such Common
Stock has traded at or above 120% of the Target Per Share Price for
the 20 consecutive trading days preceding such day.
(m) "Underlying Stock" means all shares of Common Stock
into which the Series B Preferred Stock is convertible, and all other
shares of capital stock received on account of such shares of Series B
Preferred Stock or Common Stock in respect of any stock split, stock
dividend, recapitalization, reorganization or other similar corporate
event.
All accounting terms used herein and not expressly defined herein shall have
the meanings given to them in accordance with generally accepted accounting
principles consistently applied and in effect as of the date of the relevant
calculation.
2. Dividends.
(a) Series B Preferred Stock. Holders of Series B Preferred Stock
shall be entitled to receive, but only out of any funds legally available for
the declaration of dividends, cumulative
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<PAGE> 34
dividends, on each share of the Series B Preferred Stock at an annual rate
equal to the Dividend Rate payable at such times as shall be determined by the
Board of Directors. Dividends shall accrue at the Dividend Rate whether or not
there are profits, surplus or other funds of the Corporation legally available
for the payment of dividends.
(b) Dividend Rate. The term "Dividend Rate" means, subject to
adjustment pursuant to the following provisions of this paragraph (b), $1.14
per share of Series B Preferred Stock during any period prior to the aggregate
Released Preferred B Shares exceeding 21,846; $1.53 per share of Series B
Preferred Stock during any period prior to the aggregate Released Preferred B
Shares exceeding 29,127; $1.91 per share of Series B Preferred Stock during any
period prior to the aggregate Released Preferred B Shares exceeding 36,409; and
$2.29 per share of Series B Preferred Stock during any period following the
aggregate Released Preferred B Shares exceeding 36,409.
(c) Restriction on Dividends. During such time as (i) dividends
on the Series B Preferred Stock shall be in arrears or (ii) the Corporation
shall be obligated to and shall have failed to redeem any shares of Series B
Preferred Stock pursuant to Section 3(a), the Corporation may not declare or
pay any dividend on shares of Common Stock or any other stock ranking junior to
the Series B Preferred Stock (other than a distribution payable exclusively in
shares of such stock). Should dividends not be paid in full on the Series B
Preferred Stock and any other preferred stock ranking on a parity as to
dividends with the Series B Preferred Stock, all dividends declared on the
Series B Preferred Stock and any other preferred stock ranking on a parity as
to dividends with the Series B Preferred Stock will be declared pro rata, so
that the amount of dividends declared per share on the Series B Preferred Stock
and such other preferred stock will bear to each other the same ratio that
accumulated dividends per share on the shares of the Series B Preferred Stock
and such other preferred stock bear to each other. For purposes of this
Section 2(c), the Series B Preferred Stock shall rank on a parity as to
dividends with the Corporation's Series A Convertible Preferred Stock and any
subsequently issued series of the Corporation's Preferred Stock so designated
as being on parity with the Series B Preferred Stock. In connection with each
dividend that the Corporation intends to declare on the Corporation's Common
Stock while any shares of the Series B Preferred Stock are outstanding, the
Corporation shall give notice thereof to the record holder(s) of the Series B
Preferred Stock (at the address(s) of such holder(s) as reflected in the
records of the Corporation) no less than ten days prior to the effective date
of such dividend.
(d) Other Stock. Subject to paragraph (c) above, (i) dividends
may be declared and paid on the Common Stock and any other class or series of
the Corporation's capital stock, and (ii) Common Stock or such other capital
stock may be purchased, retired or otherwise acquired, when and as determined
by the Board of Directors, out of any funds legally available for such
purposes.
3. Redemption.
(a) Mandatory Redemption. (i) On December 31, 2001, the
Corporation shall redeem all of the shares of Series B Preferred Stock then
outstanding (subject, however, to the right of the holders of the Series B
Preferred Stock to convert all, but not less than all, of their shares pursuant
to Section 5 by providing the written conversion notice referred to in Section
5(c) on or before November 30, 2001), at a per share price equal to the
Redemption Price. Subject to adjustment
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<PAGE> 35
pursuant to Section 3(c), the "Redemption Price" shall be $28.61 per share of
Series B Preferred Stock during any period prior to the aggregate Released
Preferred B Shares exceeding 21,846 plus any accrued but unpaid dividends on
such share; $38.15 per share of Series B Preferred Stock during any period
prior to the aggregate Released Preferred B Shares exceeding 29,127 plus any
accrued but unpaid dividends on such share; $48.00 per share of Series B
Preferred Stock during any period prior to the aggregate Released Preferred B
Shares exceeding 36,409 plus any accrued but unpaid dividends on such share;
and $57.22 per share of Series B Preferred Stock during any period following
the aggregate Released Preferred B Shares exceeding 36,409 plus any accrued but
unpaid dividends on such shares.
(ii) If a Redemption Acceleration Event occurs prior to
December 31, 2001, each holder of the then outstanding shares of Series B
Preferred Stock may elect to require the Corporation to redeem all (but not
less than all) of the shares of Series B Preferred Stock held by such holder at
the per share Redemption Price then in effect. The Corporation or a
representative of the Corporation shall give written notice of the occurrence
of a Redemption Acceleration Event to each such holder (the "Redemption
Acceleration Notice"). Each holder receiving such notice may elect to require
the Corporation to redeem all (but not less than all) of such holder's shares
of Series B Preferred Stock by giving written notice of such election to the
Corporation no later than 30 days following such holder's receipt of the
Redemption Acceleration Notice. If within such 30 day period any holder fails
to give the Corporation written notice of such holder's decision to require the
Corporation to redeem such holder's shares of the Series B Preferred Stock,
then such holder shall have no further rights pursuant to this Section
3(a)(ii).
(b) General. If any draw is made on the Letter of Credit, the
amount(s) so drawn shall be applied against the amounts required to be paid by
the Corporation pursuant to Section 3(a) above or (as applicable) Section 4(b)
below. From and after the effective date of redemption and the setting aside
of the funds necessary for redemption, notwithstanding that any certificate for
shares of Series B Preferred Stock (and, if applicable, any certificate for
shares of Common Stock into which shares of Series B Preferred Stock shall
have been converted) so called for redemption shall not have been surrendered
for cancellation, the shares to be redeemed shall no longer be deemed
outstanding, and the holders of certificates representing such shares shall
have with respect to such shares no rights in or with respect to the
Corporation except the right to receive, upon the surrender of such
certificates, the Redemption Price therefor. Shares of Series B Preferred
Stock redeemed by the Corporation pursuant to this Section 3, or shares of
Series B Preferred Stock otherwise purchased by the Corporation, shall not be
reissued and shall be cancelled and retired in the manner provided by the laws
of the State of Delaware, and no other shares of Series B Preferred Stock shall
be issued in lieu thereof.
4. Preference on Liquidation, Dissolution or Winding Up.
(a) Definition. A consolidation or merger of the Corporation, a
sale or transfer of substantially all of its assets as an entirety, or any
purchase or redemption of capital stock of the Corporation of any class, shall
not be regarded as "liquidation, dissolution or winding up of the affairs of
the Corporation" within the meaning of this Section 4.
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(b) Series B Preferred Stock. During any proceedings for the
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation other than in connection with a Redemption Acceleration
Event (a "Liquidation"), the holders of the Series B Preferred Stock shall be
entitled to receive (and shall not be entitled to any other payment) an amount
in cash for each share of Series B Preferred Stock equal to the Redemption
Price (the "Liquidation Preference") or funds necessary for such payment shall
have been set aside in trust for the account of the holders of the outstanding
Series B Preferred Stock so as to be and continue available therefor, before
any distribution shall be made to the holders of any stock ranking junior to
the Series B Preferred Stock upon the Liquidation of the Corporation. If the
net assets of the Corporation are insufficient to pay the Liquidation
Preference on all outstanding shares of the Series B Preferred Stock and all
outstanding shares of any other preferred stock ranking on a parity as to
Liquidation with the Series B Preferred Stock in the amounts to which the
holders of such shares are entitled, then the entire net assets of the
Corporation will be distributed ratably among the holders of the Series B
Preferred Stock and any other preferred stock ranking on a parity as to
Liquidation with the Series B Preferred Stock, based upon the aggregate amount
of the Liquidation Preference due on such shares. In calculating any amount
distributable to the holders of the Series B Preferred Stock as aforesaid,
there shall be credited against such amount any sums distributed or payable to
such holders other than pursuant to the terms hereof, whether under any letter
of credit, security or other similar right or interest.
5. Conversion. The Series B Preferred Stock shall be convertible into
Common Stock in accordance with the following provisions of this Section 5.
(a) Optional Conversion. Subject to and upon compliance with the
provisions of this Section 5, each holder of shares of Series B Preferred Stock
shall have the right at such holder's option, at any time or from time to time,
from and after the date of original issuance to convert all or less than all
(but not less than 5,000 shares per conversion) of such holder's shares of
Series B Preferred Stock into fully paid and nonassessable shares of Common
Stock, at the Conversion Rate in effect on the Conversion Date, upon the terms
hereinafter set forth. To the extent any such shares so converted are held in
escrow pursuant to the Escrow Agreement at the time of conversion, then the
converted shares of the Series B Preferred Stock so held in escrow shall be
released upon the deposit into such escrow of the shares of Common Stock into
which such shares were converted.
(b) Automatic Conversion. (i) Subject to adjustment pursuant to
the following provisions, the "Target Per Share Price" shall be $56.22. If the
number of shares of Common Stock outstanding at any time after the issuance of
the Series B Preferred Stock is increased by stock dividend payable in shares
of Common Stock or by subdivision or split-up of shares of Common Stock (each,
an "Increasing Adjustment Event"), then immediately after the record date fixed
for determination of holders of Common Stock entitled to receive the stock
dividend or the effective date of the subdivision or split-up, as the case may
be, the dollar amount then in effect pursuant to the preceding sentence shall
be reduced to equal the product resulting from the multiplication of such
dollar amount by a fraction, the numerator of such fraction being the total
number of shares of Common Stock outstanding immediately prior to such
Increasing Adjustment Event on a fully diluted basis and the denominator of
such fraction being the total number of shares of Common Stock outstanding
immediately following such Increasing Adjustment Event on a fully diluted
basis.
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If the number of shares of Common Stock outstanding at any time after the
issuance of the Series B Preferred Stock is decreased by virtue of a reverse
stock split (a "Decreasing Adjustment Event"), then immediately after date of
the reverse stock split, the dollar amount then in effect pursuant to the
second preceding sentence shall be increased to equal the product resulting
from the multiplication of such dollar amount by a fraction, the numerator of
such fraction being the total of shares of Common Stock outstanding immediately
following such Decreasing Adjustment Event on a fully diluted basis and the
denominator of such fraction being the total number of shares of Common Stock
outstanding immediately prior to such Decreasing Adjustment Event on a fully
diluted basis.
(ii) If as of any day on which the Trading Level Event has
occurred there are outstanding any Required Conversion Shares, then each share
of the Series B Preferred Stock comprising such Required Conversion Shares
shall automatically be converted, without any further act of the Corporation or
its shareholders, into fully paid and non-assessable shares of Common Stock of
the Corporation at the Conversion Rate in effect as of such day upon the terms
hereinafter set forth and unlegended certificate(s) for such shares (and, if
applicable, the Underlying Stock relating to such shares) shall be delivered to
the holders thereof within two business days thereafter.
(c) Conversion Rate. On or about the date of this Amended and
Restated Certificate the outstanding shares of Common Stock will be subdivided
or split-up on a 5.47 to one basis in anticipation of the initial public
offering of the Common Stock (the "IPO Subdivision"). Upon the occurrence of
and following the IPO Subdivision, each share of Series B Preferred Stock shall
be convertible into 5.47 shares of the Common Stock (subject to subsequent
adjustment pursuant to Section 5(g), the "Conversion Rate").
(d) Mechanics of Conversion. The holder of any shares of Series B
Preferred Stock may exercise the optional conversion right specified in
paragraph (a) above by surrendering to the Corporation or any transfer agent of
the Corporation the certificate or certificates for the shares to be converted,
accompanied by written notice stating that the holder elects to convert all of
the shares represented thereby. Optional conversion under paragraph (a) shall
be deemed to have been effected on the date when notice of an election to
convert and certificates for the shares to be converted has been delivered.
Upon an automatic conversion pursuant to Section 5(b), then on the Conversion
Date, the outstanding shares of the Series B Preferred Stock shall be converted
automatically without any action by the holders of such shares and whether or
not the certificates representing such shares are surrendered to the
Corporation or its transfer agent; provided, the Corporation shall not be
obligated to issue to any holder certificates representing the shares of Common
Stock issuable upon such conversion unless certificates representing the shares
of Series B Preferred Stock, endorsed directly or through stock powers to the
Corporation or in blank and accompanied when appropriate with evidence of the
signatory's authority, are delivered to the Corporation or any transfer agent
of the Corporation. Each date on which the Corporation has received a notice
regarding optional conversion and the date upon which an automatic conversion
occurs under paragraph (b) above is referred to herein as a "Conversion Date".
As promptly as practicable after a Conversion Date the Corporation shall issue
and deliver to or upon the written order of the applicable holders a
certificate or certificates for the number of full shares of Common Stock to
which such holders are entitled rounded down to the next whole share as
provided in paragraph (e) below. The person in whose
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name the certificate or certificates of Common Stock are to be issued shall be
deemed to have become a holder of record of such Common Stock on the Conversion
Date.
(e) Fractional Shares. No fractional shares of Common Stock or
scrip shall be issued upon conversion of shares of Series B Preferred Stock.
Instead of any fractional shares of Common Stock which would otherwise be
issuable upon conversion of any shares of Series B Preferred Stock, the number
of full shares of Common Stock issuable upon conversion thereof shall be
reduced to the next lowest number of whole shares, and the Corporation will pay
a cash adjustment in respect of any surrendered shares of Series B Preferred
Stock not converted into Common Stock in an amount equal to the Redemption
Price of such shares.
(f) Partial Conversion. Upon conversion of only a portion of the
number of shares covered by a certificate representing shares of Series B
Preferred Stock surrendered for conversion (in the case of conversion pursuant
to Section 5(a)), the Corporation shall issue and deliver to or upon the
written order of the holder of the certificate so surrendered for conversion,
at the expense of the Corporation, a new certificate representing the number of
shares of the Series B Preferred Stock representing the unconverted portion of
the certificate so surrendered.
(g) Conversion Rate Adjustments. The Conversion Rate shall be
subject to adjustment from time to time as follows:
(i) Stock Dividends. If the number of shares of Common
Stock outstanding at any time after the IPO Subdivision is increased
by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then immediately
after the record date fixed for the determination of holders of Common
Stock entitled to receive such stock dividend or the effective date of
such subdivision or split-up, as the case may be, the Conversion Rate
shall be proportionately adjusted so that the holder of any shares of
Series B Preferred Stock surrendered for conversion after such date
shall be entitled to receive the number of shares of Common Stock of
the Corporation which such holder would have owned and been entitled
to receive immediately following such action had such shares of Series
B Preferred Stock been converted immediately prior thereto. If the
number of shares of Common Stock outstanding at any time after the IPO
Subdivision is decreased by a reverse stock split, then immediately
after the effective date of such reverse stock split the Conversion
Rate shall be proportionately adjusted so that the holder of any
shares of Series B Preferred Stock surrendered for conversion after
such date shall be entitled to receive the number of shares of Common
Stock of the Corporation which such holder would have owned and been
entitled to receive immediately following such action had such shares
of Series B Preferred Stock been converted immediately prior thereto.
(ii) Reorganizations. In case of any capital
reorganization of the Corporation, or of any reclassification of the
Common Stock, or in case of the consolidation of the Corporation with
or the merger of the Corporation with or into any other corporation,
partnership or other business entity in which the Corporation is not
the survivor, or of the sale, lease or other transfer of all or
substantially all of the assets of the Corporation to any other
corporation, partnership or other business entity, each share of
Series B Preferred Stock
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shall, effective simultaneously with such capital reorganization,
reclassification, consolidation, merger, sale or lease, be convertible
into the number of shares of stock or other securities or property to
which the Common Stock issuable (at the time of such capital
reorganization, reclassification, consolidation, merger, sale or
lease) upon conversion of such share of Series B Preferred Stock would
have been entitled immediately following such capital reorganization,
reclassification, consolidation, merger, sale or lease in place of (or
in addition to, in the case of any such event after which Common Stock
remains outstanding) the shares of Common Stock into which such share,
of Series B Preferred Stock would otherwise have been convertible; and
in any such case, if necessary, the provisions set forth herein with
respect to the rights and interests thereafter of the holders of the
shares of Series B Preferred Stock shall be appropriately adjusted so
as to be applicable, as nearly as may reasonably be, to any share of
stock or other securities or property thereafter deliverable on the
conversion of the shares of Series B Preferred Stock.
(h) Notice to Holders. If the Corporation proposes to take any
action of the type described in paragraph (g) above, the Corporation shall give
notice to each holder of the Series B Preferred Stock and to the Corporation's
transfer agent by mail, first class postage prepaid, at such holder's address
appearing on the Corporation's records. Such notice shall specify the record
date, if any, with respect to any such action and the approximate date on which
such action is to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Conversion Rate and the number, kind or class of shares or other securities
or property which shall be deliverable or purchasable upon the occurrence of
such action or deliverable upon conversion of the Series B Preferred Stock. In
the case of any action which would require the fixing of a record date, such
notice shall be given at least ten days prior to the date so fixed, and in case
of all other action, such notice shall be given at least 15 days prior to the
taking of such proposed action. The Corporation shall also provide to each
such holder notice of the consummation of such action.
(i) Costs. The Corporation shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance or delivery
of shares of Common Stock of the Corporation or other securities or property
upon conversion of the shares of Series B Preferred Stock; provided, that the
Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares or securities in the name other than that of the holder of the
shares of Series B Preferred Stock in respect of which such shares are being
issued.
(j) Reservation of Shares. The Corporation shall reserve at all
times so long as any shares of Series B Preferred Stock remain outstanding,
free from preemptive rights, out of its treasury stock or its authorized but
unissued shares of Common Stock, or both, solely for the purpose of effecting
the conversion of shares of Series B Preferred Stock, sufficient shares of
Common Stock to provide for the conversion of all outstanding shares of Series
B Preferred Stock and set aside and keep available any other property
deliverable upon conversion of all outstanding shares of Series B Preferred
Stock.
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(k) Valid Issuance. All shares of Common Stock or other
securities which may be issued upon conversion of the shares of Series B
Preferred Stock will upon issuance by the Corporation be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof and the Corporation shall take no action
which will cause a contrary result.
6. Voting Rights. At any annual or special meeting of shareholders or
otherwise in respect of any matter submitted for the vote of shareholders
generally, each share of Series B Preferred Stock shall entitle the holder to
such number of votes per share as shall equal the number of shares of Common
Stock (rounded to the nearest whole share) into which such shares of Series B
Preferred Stock is then convertible. The provisions of this Section 6 shall
apply to any shares of Series B Preferred Stock so long as such shares are
outstanding, and shall terminate with respect to such shares when such shares
are no longer outstanding, whether by repurchase, conversion into Common Stock,
or otherwise.
7. Certain Transferabilitv Rights and Restrictions.
(a) Application. The following provisions of this Section 7 apply
to all shares of Series B Preferred Stock (collectively, "Stock"). Such
provisions shall continue to bind all shares of Stock, and each original holder
of such shares and each transferee thereof agrees by acceptance of any
certificate representing such shares to be so bound by such provisions, from
the date of issuance until the earlier to occur of (i) the dissolution or
termination of existence of the Corporation, (ii) the written consent of the
Board of Directors and the holders of 66-2/3% of the outstanding Stock, and
(iii) as to any particular share of Series B Preferred Stock, the conversion of
such share into Common Stock. Every certificate representing shares of Stock
shall be inscribed with a legend referring to the restrictions set forth in
this Section 7.
(b) General. Without the prior approval of the Board of Directors
in each instance, no shares of Stock subject may be sold, assigned, pledged,
encumbered, transferred or otherwise hypothecated in any manner (by gift,
pursuant to any marital dissolution, in any bankruptcy or insolvency
proceeding, or otherwise), except as provided in this Section 7.
(c) Right of First Refusal. If any holder of Stock desires to
sell, assign, transfer or otherwise dispose of any shares of Stock (other than
pursuant to Sections 3 or 4), then such holder (for purposes of this paragraph
(c), the "Selling Shareholder"), prior to making any such sale, shall first
offer such shares of Stock (for purposes of this paragraph (c), the "Option
Shares") for sale to the Corporation, in accordance with the following
provisions of this paragraph (c).
(i) Option Price: Terms: Offering Notices. The price per
Option Share at which the Selling Shareholder shall be required to
offer the Option Shares (for purposes of this paragraph (c), the
"Option Price") and the terms of such offer, shall be the price at
which and the terms upon which any proposed third party purchaser
shall have offered to purchase the Option Shares from the Selling
Shareholder and which the Selling Shareholder is prepared to accept.
Each offer required to be made by the Selling Shareholder pursuant to
this paragraph (c) shall be made by a written notice (for purposes of
this paragraph (c), the
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"Offering Notice") which shall state that the offer is being made
pursuant to this paragraph (c) and which shall set forth the number of
Option Shares, the name or names of the proposed purchaser or
purchasers of the Option Shares, the price per share offered by such
proposed purchaser or purchasers for the Option Shares, the method of
payment of the purchase price and the scheduled date of consummation
of such proposed sale. A copy of the written offer from any proposed
third-party purchaser shall be attached to each Offering Notice.
(ii) Offer to the Corporation. The Selling Shareholder
shall offer the Option Shares to the Corporation by delivering an
Offering Notice to the Corporation. Within 30 days following the
Corporation's receipt of such Offering Notice, the Corporation shall
deliver to the Selling Shareholder a written reply notice accepting
the offer of the Selling Shareholder with respect to all (but not less
than all) of the Option Shares or rejecting such offer. If by such
written reply notice the Corporation accepts the offer made by the
Selling Shareholder, the reply notice shall constitute an agreement
binding on the Selling Shareholder and the Corporation to sell and
purchase, respectively, the Option Shares at a price per share equal
to the Option Price. If within such 30-day period, the Corporation
shall have failed to deliver a reply notice accepting the offer of the
Selling Shareholder as to all of the Option Shares, the Corporation
shall be deemed to have rejected such offer.
(iii) Lapse of Option. If the foregoing offer to sell
Option Shares has been made by the Selling Shareholder and has not
been accepted by the Corporation, then the Selling Shareholder may
sell not less than all of the Option Shares at any time within, but
not subsequent to, 60 days after the lapse of the option granted
pursuant to this paragraph (c); provided, no sale of the Option Shares
shall be made at any price lower than the Option Price or on terms
materially different from those specified in the Offering Notice or to
any person or persons other than the persons specified in the Offering
Notice or to any person or persons other than the persons specified in
the Offering Notice. If after the lapse of such 60-day period the
Option Shares shall not have been sold, all of the provisions of this
paragraph (c) shall apply to any future sale or other disposition of
shares of Stock owned by the Selling Shareholder.
(iv) Consummation of Purchases. Each transaction of
purchase and sale of Option Shares pursuant to this paragraph (c)
shall be completed by delivery of the stock certificates representing
the Option Shares endorsed in blank, or accompanied by duly executed
stock powers, and by actual registration of the transfer of the Option
Shares on the books of the Corporation upon payment of the purchase
price to the Selling Shareholder (the Corporation agreeing to effect
such registration upon the tender of such certificates, endorsed or
accompanied by such executed stock powers). Any such transaction
shall be closed at such time and place as shall be agreed upon by the
parties thereto, or, if no such agreement is reached, at the principal
office of the Corporation on the 30th day following the date of
delivery of the last reply notice given in connection with such
transaction or, if such day shall not be a business day, on the first
business day thereafter during normal business hours.
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(v) Certain Permitted Dispositions. Subject to the
restrictions set forth in paragraph (b) above, transfers by holders of
Stock to Affiliates, upon the death of any such holder to such
holder's estate or other legal representative, or the pledge of Stock
by such holder (but not any disposition in foreclosure or other
remedy) shall not be subject to the right of first refusal under this
paragraph (c), provided, the provisions of this Section 7 shall
continue to bind the shares of Stock held by any such transferee.
8. Registration Rights. Subject to paragraph (g) below and the other
provisions of this Section 8, the holders of the Series B Preferred Stock shall
be entitled to have the shares of Common Stock issuable upon conversion of
their Series B Preferred Stock included in any registration of Common stock
under the Securities Act filed by the Corporation with the Securities and
Exchange Commission (the "Commission").
(a) Piggyback Rights; Demand Rights. (1) If at any time or from
time to time the Corporation proposes to file with the Commission a
registration statement (whether on Form S-1, S-2 or S-3, SB-1, SB-2, or any
equivalent form then in effect) for the registration under the Securities Act
of any shares of Common Stock for sale to the public by the Corporation or on
behalf of a shareholder of the Corporation for cash (excluding any shares of
Common Stock issuable by the Corporation upon the exercise of employee or
director stock options or in connection with the merger or consolidation of the
Corporation or one of its subsidiaries with one or more other corporations if
the Corporation is the surviving corporation), the Corporation shall give each
holder of the Series B Preferred Stock at least 15 days' prior written notice
of the filing of the proposed registration statement. The notice shall include
a list of the states and foreign jurisdictions, if any, in which the
Corporation intends to qualify such shares, and shall also include the
Corporation's estimate of the range of the offering price per share of Common
Stock. On the written request of any holder of the Series B Preferred Stock
received by the Corporation within 15 days after the date of the Corporation's
notice, the Corporation shall, subject to the conditions and in accordance with
the procedures set forth in paragraphs (b) and (c) below, and at its own
expense as provided in paragraph (e) below, include in the coverage of such
registration statement and qualify for sale under the blue sky or securities
laws of the various states, the number of shares (but not less than 5,000
shares, subject to adjustment to give effect to any stock dividends, splits or
combinations, recapitalizations or other similar corporate events) of Common
Stock (herein called the "Specified Shares") held and so requested to be
registered by each such holder; provided, if the managing underwriter for the
Corporation indicates its belief in writing that the effect of including in the
coverage of such registration statement all or part of the Specified Shares and
the shares of Common Stock requested to be so included by other stockholders
having contractual registration rights ("Other Requesting Stockholders") will
materially and adversely affect the sale of the shares of Common Stock proposed
to be sold by the Corporation (which statement of the managing underwriter
shall also state the maximum number of shares, herein called the "Maximum
Shares"), if any, which can be sold by such all such holders without materially
and adversely affecting the sale of the shares proposed to be sold by the
Corporation), then the number of Specified Shares which the holders of the
Series B Preferred Stock and the Other Requesting Stockholders shall
collectively have the right to include in such registration statement shall be
reduced to the number of Maximum Shares set forth in such statement of the
managing underwriter, such reduction to be effected on a pro rata basis in
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accordance with the number of all such shares requested to be so registered by
the holders of the Series B Preferred Stock and the Other Requesting
Stockholders.
Except as provided in paragraph (c) below, in no event shall the
Corporation be required to amend any registration statement filed pursuant to
this Section 8 after it has become effective or to amend or supplement any
prospectus to permit the continued disposition of shares of Common Stock
registered under any registration statement.
The Corporation shall have the right to select any underwriters,
including the managing underwriter, of any public offering of shares of Common
Stock subject to the provisions of this paragraph (a). Nothing in this
paragraph (a) shall create any liability on the part of the Corporation to the
holders of the Series B Preferred Stock if the Corporation for any reason
should decide not to file or to withdraw such a registration statement.
The Corporation may withdraw any registration statement and abandon
any proposed offering initiated by the Corporation without the consent of any
holder of the Series B Preferred Stock, notwithstanding the request of any such
holder to participate therein in accordance with this paragraph (a), if the
Corporation determines that such action is in the best interests of the
Corporation.
(2) (aa) At any time during the period commencing as
of 12 months following the expiration of the Corporation's initial public
offering of its Common Stock and ending 48 months thereafter (the "Demand
Period"), any holder or holders of shares of the Series B Preferred Stock who
shall have the right to acquire upon conversion of shares of the Series B
Preferred Stock 25% or more of the aggregate amount of shares of Common Stock
issuable upon conversion of the Series B Preferred Stock, may notify the
Corporation of such holder's demand for registration pursuant to this Section
8(a)(2), in which case the provisions of this Section 8(a)(2) shall apply.
Such demand shall include the number of shares of Series B Preferred Stock
owned by such holder or holders and the number of shares of Common Stock
issuable upon conversion of the Series B Preferred Stock. If any holder of
shares of Series B Preferred Stock makes a demand pursuant to this Section
8(a)(2), then all of the then outstanding shares of Series B Preferred Stock
shall be deemed covered by such demand even if part of such shares are owned by
another holder. If the demand referred to in the preceding provisions is not
made within the Demand Period, then the provisions of this Section 8(a)(2)
shall have no further force or effect (and the holders of the Series B
Preferred Stock shall have no further rights under this Section 8(a)(2)) as of
the expiration of the Demand Period.
(bb) As soon as reasonably practicable following
any demand pursuant to clause (2)(aa) preceding being made timely in accordance
with such clause, the Corporation shall (i) provide written notice of the
demand having been made and offering to include the shares of Common Stock
issuable upon conversion of shares of Series B Preferred Stock owned by each
holder not included in the demand prepare and file with the Commission a
registration statement, whether on "shelf" or other form, which form the
Corporation shall have the right to choose (as the same may be amended, the
"Registration Statement") pursuant to which all of the shares of Common Stock
issuable upon conversion of the Series B Preferred Stock then outstanding (such
shares being hereinafter, in this clause (2)(bb), referred to as the "Subject
Shares") are registered for immediate
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sale, in one or more transactions (which may involve block transactions), in
special offerings, exchange distributions and/or secondary distributions, in
the over-the-counter market, in negotiated transactions, or a combination of
such methods of sale, at market prices prevailing at the time of sale, at
prices related to such market prices or at negotiated prices; provided, such
transactions shall not include an underwritten public offering unless the
Corporation so elects in its sole discretion.
(cc) The Corporation shall use commercially
reasonably best efforts to cause the Registration Statement to become effective
within 60 days following its receipt of the demand notice. Further, the
Corporation shall use commercially reasonable efforts to cause the Registration
Statement to remain effective continuously for a three month period.
(dd) The Corporation will pay all expenses
incurred by it in complying with its registration obligations pursuant to this
clause (2), including, without limitation, all registration and filing fees,
blue sky fees and expenses, printing expenses, fees and disbursements of its
counsel and independent public accountants for the Corporation, and fees of
transfer agents and registrars, but excluding any selling commissions or
discounts allocable to the sale of the Subject Shares, fees and disbursements
of counsel and other representatives for any holder of the Subject Shares and
any stock transfer taxes payable by reason of the sale of the Subject Shares,
all of which shall be for the account of each holder of the Subject Shares.
(b) Certain Registration Conditions. Any holder of Series B
Preferred Stock for whom shares of Common Stock into which such holder's Series
B Preferred Stock is convertible are included in any registration statement
filed with the Commission pursuant to paragraph (a) of this Section 8 is
hereafter referred to as a "Selling Stockholder." Anything in this Agreement to
the contrary notwithstanding, the Corporation shall not be required to effect a
registration of any Common Stock of any Selling Stockholder pursuant to this
Section 8, or file any post-effective amendment thereto:
(i) unless such Selling Stockholder agrees (if such
shares are included pursuant to paragraph (a) of this Section 8) (x)
to sell and distribute a portion or all of such stockholder's Common
Stock in accordance with the plan or plans of distribution adopted by
and through underwriters, if any, acting for the Corporation, and (y)
to bear a pro rata share of underwriter's discounts and commissions;
(ii) unless the Corporation and the underwriters for the
Corporation, if any, shall have received from such Selling Stockholder
all such information as the Corporation and such underwriters may
reasonably request concerning such stockholder to enable the
Corporation to include in the registration statement all material
facts required to be disclosed therein. Notwithstanding the
foregoing, a Selling Stockholder shall not be required to furnish to
the Corporation any personal financial information of such stockholder
unrelated to such stockholder's holdings of Common Stock, Series B
Preferred Stock or other securities of the Corporation, provided that
each Selling Stockholder shall nonetheless be required to furnish all
information reasonably requested by any such underwriter;
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<PAGE> 45
(iii) unless such Selling Stockholder is then entitled to
convert such stockholder's shares of Series B Preferred Stock into
Common Stock and such Selling Stockholder in fact delivers to the
Corporation, contemporaneously with the notice given by such Selling
Stockholder under paragraph 8(a) hereof of their desire to have shares
of Common Stock included in such registration statement, notice of
such Stockholder's intention to convert the Series B Preferred Stock
into Common Stock subject to and upon the effectiveness of the
registration statement; and
(iv) unless such Selling Stockholder, at the request of
the Corporation or its managing underwriter, if any, agrees or
acknowledges that such Selling Stockholder (x) has a present intention
to sell such shares; and (y) agrees to execute all consents, powers of
attorney, registration statements and other documents required in
order to cause such registration statement to become effective.
(c) Covenants and Procedures. If the Corporation becomes
obligated under the provisions of paragraph (a) of this Section 8 to effect
registration of shares of Common Stock on behalf of any Selling Stockholder,
the following shall apply:
(i) The Corporation, at its own expense as provided in
paragraph (e), shall prepare and file with the Commission a
registration statement covering such shares of Common Stock and use
its best efforts to cause such registration statement to become
effective; and the Corporation will file such post-effective
amendments to such registration statement (and use its best efforts to
cause them to be effective) and such supplements as are necessary so
that current prospectuses are at all times available for a period of
at least 90 days after the effective date of such registration
statement. Each Selling Stockholder shall promptly provide the
Corporation with such information with respect to such Selling
Stockholder's shares of Common Stock to be so registered and, if
applicable, the proposed terms of the offering thereof as is required
for such registration. Further, if the shares of Common Stock to be
covered by the registration statement are not to be sold to or through
underwriters acting for the Corporation, the Corporation shall (x)
deliver to each Selling Stockholder as promptly as practicable as many
copies of preliminary prospectuses as such Selling Stockholder may
reasonably request, and such Selling Stockholder shall keep a written
record of the distribution of such preliminary prospectuses and shall
refrain from delivery of such preliminary prospectuses in any manner
or under any circumstances which would violate the Securities Act or
the securities laws of any other jurisdiction, including the various
states of the United States, (y) deliver to each Selling Stockholder,
as soon as practicable after the effective date of the registration
statement, and from time to time thereafter during such 90 day period,
as many copies of the prospectuses required to be delivered in
connection with the sale of shares of Common Stock registered under
the regish stockholder may reasonably request, copies of such amended
prospectus or of such supplement to be attached to the prospectus in
order that the prospectus, as so amended or supplemented, will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
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(ii) On or prior to the date on which the
registration statement is declared effective, the Corporation shall use
its best efforts to register or qualify, and cooperate with each
Selling Stockholder, and their counsel, in connection with the
registration or qualification of the Common Stock covered by the
registration statement for offer and sale under the securities or blue
sky laws of each state and other jurisdiction of the United States as
such Selling Stockholder or underwriter reasonably requests, to use
commercially reasonable best efforts to keep each such registration or
qualification effective, including through new filings, or amendments
or renewals, during the period such registration statement is required
to be kept effective and to do any and all other acts or things
necessary or advisable to enable the disposition in all such
jurisdictions of the Common Stock covered by the applicable
registration statement, provided that the Corporation will not be
required to qualify generally to do business in any jurisdiction where
it is not then so qualified.
(iii) The Corporation shall use commercially reasonable
best efforts to cause all of each Selling Stockholder's Common Stock
included in such registration statement to be listed, by the date of
the first sale of such Common Stock pursuant to such registration
statement, on each securities exchange on which the Common Stock of
the Corporation is then listed or proposed to be listed, if any.
(iv) The Corporation shall make generally available to
each Selling Stockholder an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act no later than 45
days after the end of the 12-month period beginning with the first day
of the Corporation's first fiscal quarter commencing after the
effective date of the registration statement, which earnings statement
shall cover said 12-month period, which requirement will be deemed to
be satisfied if the Corporation timely files complete and accurate
information on Forms 10-Q, 10-K and 8-K under the Securities Exchange
Act of 1934, as amended, and otherwise complies with Rule 158 under
the Securities Act as soon as feasible.
(v) The Corporation shall cooperate with each Selling
Stockholder to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Common
Stock to be sold under the registration statement, and enable such
securities to be in such denominations and registered in such names as
the managing underwriter or underwriters, if any, or such Selling
Stockholder may request, subject to the underwriters' obligation to
return any certificates representing securities not sold.
(vi) The Corporation shall make available for inspection
by each Selling Stockholder and any attorney, accountant or other
agent retained by such Selling Stockholder (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Corporation, as shall be reasonably
necessary to enable them to exercise their due diligence,
responsibility, and cause the Corporation's officers, directors and
employees to supply all nonconfidential information reasonably
requested by any such Inspector in connection with such registration
statement. As a condition to providing such access, the Corporation
may require that any and all Inspectors execute and deliver
confidentiality agreement, in form and substance acceptable to the
Corporation, and that confidentiality procedures be observed, all with
respect to such information.
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(vii) The Corporation shall use commercially reasonable
best efforts to obtain a "cold comfort" letter from the Corporation's
independent public accountants, and an opinion of counsel for the
Corporation, each in customary form and covering such matters of the
type customarily covered by cold comfort letters and opinions of
counsel in connection with public offerings of securities.
(d) Indemnification.
(i) Indemnification by the Corporation. In the event of
any registration under the Securities Act pursuant to this Section 8
of shares of Common Stock held by any Selling Stockholder, the
Corporation will hold harmless each Selling Stockholder and each
person, if any, who controls each Selling Stockholder within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities (including legal fees and costs of court), joint or
several, to which such Selling Stockholder or controlling person may
become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained, on the effective date
thereof, in any registration statement under which such securities
were registered under the Securities Act, any final prospectus
contained therein, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; and will reimburse each
Selling Stockholder and each such controlling person for any legal or
any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage or liability;
provided, the Corporation shall not be liable to any such Selling
Stockholder or controlling persons in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement or final
prospectus or such amendment or supplement in reliance upon and in
conformity with information furnished to the Corporation through a
written instrument duly executed by such Selling Stockholder or
controlling person specifically for use in the preparation thereof.
(ii) Indemnification by Selling Stockholders. It shall be
a condition precedent to the obligation of the Corporation to include
in any registration statement any shares of Common Stock then held by
a Selling Stockholder that the Corporation shall have received an
undertaking reasonably satisfactory to it and its counsel from such
Selling Stockholder to severally indemnify and hold harmless (in the
same manner and to the same extent as set forth in subparagraph (i)
above) the Corporation, each director of the Corporation, each officer
of the Corporation who shall sign such registration statement, each
underwriter of such securities and any person who controls the
Corporation or such underwriter within the meaning of the Securities
Act, with respect to any statement or omission from such registration
statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or
omission was made in reliance upon and in conformity with information
furnished to the Corporation through a written instrument duly
executed by such Selling Stockholder specifically for use in the
preparation
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<PAGE> 48
of such registration statement, preliminary prospectus or final
prospectus or such amendment or supplement thereto.
(iii) Indemnification Procedures. Promptly after receipt
by an indemnified party of notice of the commencement of any action
involving a claim referred to in the preceding subparagraphs (i) and
(ii), such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the
indemnifying party of the commencement of such action. In case any
such action is brought against an indemnified party, the indemnifying
party will be entitled to participate in and to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof,
and provided that the indemnifying party in fact assumes such defense,
the indemnifying party will not be liable to such indemnified party
for any legal or other expenses incurred after the date of such notice
by the latter in connection with the defense thereof. Whether or not
such defense is assumed by the indemnifying party, the indemnifying
party will not be subject to any liability for any settlement made
without its consent. No indemnifying party will consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect of
such claim or litigation. The indemnified party shall be entitled to
participate with its own counsel (at the indemnified party's own
expense) if reasonably necessary to avoid a conflict of interest.
(iv) Contribution. If the indemnification provided for
in this paragraph (d) from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as
a result of such losses, claims, damages, liabilities or expenses in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified parties in connection with the
actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified parties
shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement
of a material fact or a material omission, has been made by, or
relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation
or proceeding. For purposes of the foregoing, it would not be just
and equitable if contribution pursuant to this paragraph (d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. Notwithstanding the
provisions of this subparagraph (iv), no Selling Stockholder shall be
required to contribute any amount in excess of the amount by which the
total price at which the Common Stock of such Selling
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<PAGE> 49
Stockholder was offered to the public exceeds the amount of any
damages which such Selling Stockholder has otherwise been required to
pay by reason of such untrue statement or omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(e) Expenses. All expenses incurred by the Corporation in
connection with any registration statement covering shares of Common Stock
offered by the Selling Stockholders, including, without limitation, all
registration and filing fees (including all expenses incident to filing with
the National Association of Securities Dealers, Inc.), printing expenses, fees
and disbursements of counsel for the Corporation and of its independent
certified public accountants, the reasonable fees and disbursements of one
counsel for collectively all Selling Stockholders and Other Requesting
Stockholders whose stock is included in such registration, and the expense of
qualifying such shares under state blue sky laws, shall be borne by the
Corporation; provided, all underwriter's discounts and commissions relating to
the shares of Common Stock to be sold by the Selling Stockholders shall be
borne by the Selling Stockholders.
(f) Dispositions During Registration. Upon written request by the
Corporation, the Selling Stockholders will agree, upon the registration of any
of each such Selling Stockholder's shares of Common Stock or the Common Stock
issued by the Corporation, not to sell or otherwise dispose of any shares of
Stock (other than Common Stock covered by such registration, which may be sold
in accordance with the plan or plans of distribution described in the
registration statement) owned by each such Selling Stockholder for a period of
90 days following the effective date of such registration statement or for such
longer period (not to exceed 180 days) as may be required under the plan or
plans of distribution set forth in such registration statement. Each holder of
the Series B Preferred Stock shall comply with the foregoing requirements even
if such holder's Common Stock issuable upon the conversion thereof is not being
included in such registration, if (i) at such time such holder (together with
such holder's Affiliates) owns 5% or more of the Common Stock not being
registered by such registration and (ii) other holders of 5% or more of the
Common Stock not being registered by such registration are similarly bound.
(g) Term of Registration Rights. The registration rights granted
pursuant to this Section 8 shall be effective for a period commencing upon the
date of original issuance thereof and ending on, as to any holder of shares of
Series B Preferred Stock, upon either (i) such holder's written consent or (ii)
the redemption of all of such holder's shares of Series B Preferred Stock.
9. Exclusion of Other Rights. Unless otherwise required by law, the
shares of Series B Preferred Stock shall not have any voting powers,
preferences or relative, participating, optional or other special rights other
than those specifically set forth herein.
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