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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
(Amendment No. 5)
Under the Securities Exchange Act of 1934
GRUBB & ELLIS COMPANY
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(Name of Issuer)
Common Stock, par value $.01 per share
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(Title of Class of Securities)
40009-51-0
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(CUSIP Number)
Joe F. Hanauer
361 Forest Avenue
Laguna Beach, California 92651
(714) 494-2333
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 1, 1994
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is subject of this Schedule 13D, and is filing
this statement because of Rule 13d-1(b)(3) or (4), check the following box:
[ ]
Check the following box if a fee is being paid with the statement: [ ]
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SCHEDULE 13D
CUSIP No. 40009-51-0
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1. Name of Reporting Person
Joe F. Hanauer
2. Check the Appropriate Box if a Member of a Group (a) [ ]
(b) [X]
3. SEC Use Only
4. Source of Funds
BK, PF
5. Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(d) or 2(e) [ ]
6. Citizenship or Place of Organization
United States
7. Sole Voting Power
722,741 shares of Common Stock (See Item 5)
Number of
Shares 8. Shared Voting Power
Beneficially
Owned By -0- shares of Common Stock (See Item 5)
Each
Reporting 9. Sole Dispositive Power
Person
With 722,741 shares of Common Stock (See Item 5)
10. Shared Dispositive Power
-0- shares of Common Stock (See Item 5)
11. Aggregate Amount Beneficially Owned by Each Reporting Person
See Item 5 below
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
13. Percent of Class Represented by Amount in Row (11)
See Item 5 below
14. Type of Reporting Person
IN
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This Amendment No. 5 to Schedule 13D is being filed on behalf of Joe
F. Hanauer to amend the Schedule 13D dated November 11, 1992, as amended (the
"Schedule 13D"), relating to the common stock, par value $.01 per share, of
Grubb & Ellis Company, a Delaware corporation (the "Company"). Unless otherwise
indicated, all capitalized terms used herein but not defined herein shall have
the same meaning as set forth in the Schedule 13D.
This Schedule 13D is subject to the provisions of Rule 101(a)(2) of
Regulation S-T under the Securities Exchange Act of 1934, as amended, relating
to the Securities and Exchange Commission's recently adopted electronic filing
requirements. Pursuant to Rule 101(a)(2), since this amendment is the first
amendment which the Reporting Person is filing electronically, the Reporting
Person is required to restate the entire Schedule 13D.
ITEM 1. SECURITY AND ISSUER.
This statement relates to the Common Stock issued by the Company,
whose principal executive offices are at One Montgomery Street, San Francisco,
California 94104.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This statement is filed by Joe F. Hanauer. Mr. Hanauer holds all
of the securities reported in this Schedule 13D as being held by Mr. Hanauer as
trustee of the Joe F. Hanauer Trust dated June 15, 1988, except for the Stock
Option (as defined below), which Mr. Hanauer holds as an individual.
(b) The business address of Mr. Hanauer is 361 Forest Avenue, Laguna
Beach, California 92651.
(c) Mr. Hanauer is Chairman of the Board and Chief Executive Officer
of the Company. Mr. Hanauer also is a principal in Combined Investments, L.P.,
an Illinois limited partnership, which is an investment management business
which directs investments in real estate and related interests and in which
partners have active participation.
(d) Mr. Hanauer has not, during the last five years, been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) Mr. Hanauer has not, during the last five years, been a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) Mr. Hanauer is a United States citizen.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The purchase price for the Securities (as defined below) purchased by
Mr. Hanauer was $900,000, and was furnished from funds borrowed under Mr.
Hanauer's unsecured line of credit with First National Bank of Blue Island which
was entered into in the ordinary course of business. A copy of the Note
evidencing such borrowing was previously filed as an Exhibit to this Schedule
13D. Such borrowings were repaid by Mr. Hanauer with personal funds. The
purchase price for the
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21,153 shares of Common Stock acquired by Mr. Hanauer upon exercise of rights
issued in the Rights Offering (as defined below) was $50,238.38, which amount
was paid by Mr. Hanauer with personal funds.
ITEM 4. PURPOSE OF TRANSACTION.
WARBURG AND HANAUER. On January 29, 1993, Warburg, Pincus Investors,
L.P. ("WPI"), Mr. Hanauer, The Prudential Insurance Company of America
("Prudential") and the Company consummated the Restructuring (the "Closing"),
pursuant to which, among other things, WPI (for a purchase price of $12,850,000)
and Mr. Hanauer (for a purchase price of $900,000) purchased (i) 128,266 and
8,894 shares, respectively, of a newly created series of Senior Convertible
Preferred Stock of the Company (the "Senior Preferred Stock"), (ii) five-year
warrants initially to purchase 340,000 and 160,000 shares of Common Stock,
respectively, at an exercise price of $5.00 per share (the "$5.00 Warrants"),
(iii) five-year warrants initially to purchase 142,000 and 58,000 shares of
Common Stock, respectively, at an exercise price of $5.50 per share (the "$5.50
Warrants," and together with the $5.00 Warrants, the "Warrants"), and (iv) five-
year warrants initially to purchase 373,818 and 26,182 shares of Common Stock,
respectively, at an exercise price of $5.00 per share, which are exercisable
only in the event that the Company incurs a defined liability in excess of
$1,500,000 (the "Contingent Warrants"). The Senior Preferred Stock, the
Warrants and the Contingent Warrants acquired by Mr. Hanauer are sometimes
collectively referred to herein as the "Securities." A one-for-five reverse
stock split was effected on January 29, 1993 prior to the issuance of the
Securities.
PRUDENTIAL. At the Closing, the Company and Prudential restructured
certain existing Company indebtedness held by Prudential and the Company issued
Prudential (i) the $5 million Revolving Credit Note, (ii) $10 million of the
Company's New Senior Notes and (iii) $10 million of the Company's PIK Notes.
Also, Prudential (x) purchased 150,000 shares of a newly created series of
Junior Convertible Preferred Stock of the Company (the "Junior Preferred
Stock"), (y) purchased five-year warrants initially to purchase 200,000 shares
of Common Stock at an exercise price of $5.50 per share (the "Prudential $5.50
Warrants") and (z) exercised existing warrants to purchase 397,549 shares of
Common Stock. The Senior Preferred Stock and the Junior Preferred Stock are
sometimes collectively referred to herein as the "Preferred Stock."
STOCKHOLDERS' AGREEMENT. As contemplated by the Restructuring, the
Company, WPI, Mr. Hanauer and Prudential entered into the Stockholders'
Agreement (as defined below). The Stockholders' Agreement was previously filed
as an Exhibit to this Schedule 13D and is incorporated herein by reference. The
Stockholders' Agreement contains an agreement between WPI and Prudential with
respect to voting for the election of directors and grants WPI, Mr. Hanauer and
Prudential certain registration rights with respect to certain of the securities
held by them. Information in Item 6 concerning the Stockholders' Agreement is
incorporated herein by reference.
B. CERTIFICATE AMENDMENTS.
CERTIFICATE AMENDMENTS. Prior to the Closing, amendments (the
"Certificate Amendments") to the Company's Certificate of Incorporation (the
"Certificate") were filed following approval of the transactions by the
Company's stockholders. The Certificate Amendments (i) reduced the par value of
the Common Stock from $1.00 to $.01, (ii) effected a one-for-five reverse stock
split of the Common Stock, (iii) authorized 250,000 of the Senior Convertible
Preferred Stock and (iv) authorized 200,000 of the Junior Convertible Preferred
Stock. The Certificate Amendments were previously filed as an Exhibit to the
Schedule 13D.
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CERTIFICATE AND BYLAW AMENDMENTS. On May 28, 1993, the Board of
Directors of the Company unanimously approved amendments to the Certificate,
which amendments were approved at the Annual Meeting of Stockholders of the
Company on August 9, 1993. The amendments, among other things, (a) eliminate
the three classes of directors, (b) eliminate cumulative voting in the election
of directors, (c) allow for the removal of members of the Board, with or without
cause, by the affirmative vote of a majority of the outstanding shares, (d)
provide that the Bylaws may be amended by the affirmative vote of a majority of
the outstanding shares of capital stock, (e) provide that amendments to the
Certificate which have been approved by the Board require approval of a
majority, and not a supermajority, of the outstanding shares, (f) eliminate the
supermajority vote requirement for certain business combinations and (g) permit
holders of a majority of the outstanding shares of capital stock to call a
special meeting of stockholders. Removal of the limitations contained in these
provisions would allow WPI, Mr. Hanauer and Prudential, acting together, to take
certain actions as stockholders that previously were not permitted. Following
approval of the amendments to the Certificate by the stockholders, the Board
approved certain conforming amendments to the Bylaws of the Company.
C. BOARD OF DIRECTORS.
ELECTION OF DIRECTORS. On January 29, 1993, the Company's
stockholders approved the Restructuring and elected nine members to the Board of
Directors of the Company, including (i) three directors nominated by WPI:
Douglas M. Karp and Reuben S. Leibowitz, each of whom is a partner of each of
Warburg, Pincus & Co. ("WPC") and E.M. Warburg, Pincus & Company ("EMW") and a
Managing Director of E.M. Warburg, Pincus & Co., Inc. ("E.M. Warburg") and John
D. Santoleri, a Vice President of Warburg, Pincus Ventures, Inc., which is an
affiliate of WPI; (ii) two directors nominated by Prudential: Wilbert F.
Schwartz, Managing Director of Prudential Investment Corp., an affiliate of
Prudential, and John P. Mullman, Vice President -- Corporate Finance of
Prudential; and (iii) Mr. Hanauer as Chairman of the Board. Three existing
directors also were elected to the Board at the special meeting. Subsequently,
the three existing members, Douglas M. Karp, John P. Mullman and Wilbert F.
Schwartz, who had become the Company's Chief Executive Officer, resigned. The
current Board of Directors has six members.
D. FINANCING TRANSACTIONS.
On November 1, 1994, the Company completed certain financing
transactions (the "Financing Transactions") to amend its debt agreements with
Prudential to modify certain financial covenants and defer principal payments,
to provide an equity investment of $10 million and certain amendments to
existing preferred stock and warrants. The Financing Transactions are described
in Item 6 below and such description is incorporated herein by reference.
Mr. Hanauer acquired the Securities and the shares of Common Stock
issued in connection with the Rights Offering (as defined below) for investment
and in order to be in a position to work to improve profitability and enhance
the long-term strategic viability of the Company.
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Mr. Hanauer may, from time to time, acquire additional securities of
the Company in open market or privately negotiated transactions, depending on
existing market conditions and other considerations which he may deem relevant.
As CEO, Mr. Hanauer is eligible to participate in the Company's employee benefit
plans and may from time to time receive stock options or other non-cash
incentive compensation as determined by the Compensation Committee of the Board
of Directors. Mr. Hanauer intends to review his investment in the Company on a
continuing basis and, depending upon the price and availability of the Common
Stock, subsequent developments affecting the Company, the Company's business and
prospects, other investment and business opportunities available to him, general
stock market and economic conditions, tax considerations and other factors
deemed relevant, may decide to increase or decrease the size of his investment
in the Company. Except as described herein, Mr. Hanauer has no plans or
proposals which relate to, or could result in, any of the matters referred to in
paragraphs (b) through (j), inclusive, of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) By reason of the provisions of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Act"), WPI, Mr. Hanauer and Prudential
may be deemed to be a "group." By reason of the provisions of Rule 13d-5 under
the Act, the group consisting of these entities may be deemed to own all shares
of Common Stock beneficially owned by WPI, Prudential and Mr. Hanauer. WPI does
not affirm the existence of such a group and disclaims beneficial ownership of
shares of Common Stock beneficially owned by Prudential and Mr. Hanauer.
As of the date of this Report, Mr. Hanauer is the beneficial owner of
767,741 shares of Common Stock through ownership of (i) 42,306 shares of Common
Stock, (ii) 8,817 shares of Senior Preferred Stock which are convertible into an
aggregate of 332,908 shares of Common Stock, (iii) currently exercisable
Warrants to purchase an aggregate of 310,571 shares of Common Stock, (iv)
Contingent Warrants to purchase 36,956 shares of Common Stock and (v) a stock
option under the Company's Amended and Restated Stock Option Plan (the "Stock
Option") currently exercisable for 45,000 shares of Common Stock. In addition,
the Stock Option entitles Mr. Hanauer to acquire an additional 90,000 shares of
Common Stock, which have been excluded from Mr. Hanauer's beneficial holdings
reported on this Schedule 13D as the Stock Option will not be exercisable with
respect to the additional 90,000 shares within 60 days of the date hereof. Item
6 contains additional information concerning the Stock Option. The shares of
Senior Preferred Stock and Warrants, upon conversion and exercise, when combined
with the shares of Common Stock currently held by Mr. Hanauer, represent
approximately 8.1% of the shares of Common Stock calculated in accordance with
Rule 13d-3(d)(1)(i) in the manner described below. The shares of Senior
Preferred Stock and the shares of Common Stock held by Mr. Hanauer represent
2.3% of the outstanding voting power of the Company.
As of the date of this Report, WPI is the beneficial owner of
10,118,339 shares of Common Stock through its direct ownership of (i) 4,277,433
shares of Common Stock, (ii) 127,150 shares of Senior Preferred Stock which are
convertible into an aggregate of 4,828,548 shares of Common Stock, and (iii)
currently exercisable Warrants to purchase an aggregate of 1,012,358 shares of
Common Stock. The shares of Senior Preferred Stock and Warrants, upon
conversion and exercise, when combined with the Common Stock currently held by
WPI, represent approximately 69.1% of the shares of Common Stock calculated in
accordance with Rule 13d-3(d)(1)(i) in the manner described below. By reason of
the provisions of Rule 13d-5 under the Act, WPC, EMW and E.M. Warburg may be
deemed to own beneficially the shares of Common Stock beneficially owned by WPI.
The shares of Senior Preferred Stock and Common Stock held by WPI represent
54.7% of the outstanding voting power of the Company.
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As of the date of this Report, Prudential is the beneficial owner of
3,422,060 shares of Common Stock through its direct ownership of (i) 397,549
shares of Common Stock, (ii) 150,000 shares of Junior Preferred Stock which are
convertible into an aggregate of 2,674,511 shares of Common Stock, and (iii)
currently exercisable Warrants to purchase an aggregate of 350,000 shares of
Common Stock. Such shares of Junior Preferred Stock and Warrants, upon
conversion and exercise, when combined with the shares of Common Stock currently
held by Prudential, represent approximately 28.9% of the shares of Common Stock
calculated in accordance with Rule 13d-3(d)(1)(i) in the manner described below.
The shares of Junior Preferred Stock and the shares of Common Stock held by
Prudential represent 18.5% of the outstanding voting power of the Company.
The percentages used in this paragraph 5(a) are calculated based upon
the 8,796,207 shares of Common Stock issued and outstanding at the close of
business on November 1, 1994. Such information has been provided to the
Reporting Person by the Company. The number of shares beneficially owned by
Prudential as of the date hereof have been provided to the Reporting Person by
the Company. Pursuant to Rule 13d-3(d)(1)(i), shares of Common Stock which are
not outstanding which are subject to convertible securities are deemed to be
outstanding for the purpose of computing the percentage of outstanding
securities of the shares of Common Stock owned by the person holding such
convertible securities, but are not deemed to be outstanding for purposes of
computing the percentage of such shares owned by any other person.
(b) As of the date hereof, Mr. Hanauer has the sole power to vote and
to dispose of the Common Stock, Senior Convertible Preferred Stock, Warrants,
and the Stock Option held by him, but does not have nor share such powers with
respect to any shares beneficially owned by WPI or Prudential.
(c) Except for the 21,153 shares of Common Stock acquired by Mr.
Hanauer upon exercise of rights in the Rights Offering (as defined below), Mr.
Hanauer has not effected any transactions in the Common Stock during the
preceding 60 days.
(d) Except as set forth in this Item 5, no person other than each
respective record owner referred to herein of securities is known to have the
right to receive or the power to direct the receipt of dividends from or the
proceeds of sale of such securities.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
A. RESTRUCTURING.
PURCHASE AGREEMENT. WPI, Mr. Hanauer and the Company entered into a
Securities Purchase Agreement dated November 2, 1992 (the "Purchase Agreement").
The Purchase Agreement was previously filed as an Exhibit to this Schedule 13D
and is incorporated herein by reference. Information in Item 4 concerning the
Restructuring is incorporated herein by reference.
PRUDENTIAL PURCHASE AGREEMENT. Prudential and the Company entered
into a Purchase Agreement dated November 2, 1992 (the "Prudential Purchase
Agreement"). The form of Prudential Purchase Agreement was previously filed as
an Exhibit to this Schedule 13D and is incorporated herein by reference.
Information in Item 4 concerning the Restructuring is incorporated herein by
reference.
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PRUDENTIAL NEW NOTE AGREEMENT. Prudential and the Company entered
into a Senior Note, Subordinated Note and Revolving Credit Note Agreement dated
November 2, 1992 (the "Prudential New Note Agreement"). The form of Prudential
New Note Agreement was previously filed as an Exhibit to this Schedule 13D and
is incorporated herein by reference. Information in Item 4 concerning the
Restructuring is incorporated herein by reference.
B. THE WARRANTS.
WARRANTS. Each Warrant, Prudential $5.50 Warrant and Contingent
Warrant entitles the holder thereof to purchase one fully paid and nonassessable
share of Common Stock at their respective initial exercise prices, subject to
adjustment as provided below. Prior to November 1, 1994 Warrants to purchase
500,000 shares of Common Stock had an initial exercise price of $5.00 per share,
Warrants to purchase 200,000 shares of Common Stock had an initial exercise
price of $5.50 per share, the Prudential $5.50 Warrants had an initial exercise
price of $5.50 per share and the Contingent Warrants had an initial exercise
price of $5.00 per share. Payment of the aggregate exercise price may be made
in cash or, except with respect to the Contingent Warrants, at the election of
the holder, by delivering warrants, the value of which will be deemed to be
equal to the difference between the current market price per share (as defined)
and the then current exercise price. Payment of the aggregate price of the
Prudential $5.50 Warrants may also be made by the cancellation by Prudential and
the delivery to the Company of New Senior Notes, PIK Notes or the New Revolving
Credit Note or by cancellation of accrued and unpaid interest thereon.
The Contingent Warrants become exercisable for a period of 90 days in
the event that the holder thereof is notified that the Company or any subsidiary
pays a liability or becomes obligated to pay a liability which exceeds
$1,500,000 and (ii) (A) arises out of a single event, occurrence or proceeding
(or a series of events, occurrences or proceedings which arise out of or present
the same factual issues) and (B) relates to any partnership liability of any
partnership or joint venture in which the Company or any subsidiary owns or
owned, directly or indirectly, any partnership or other equity interest, or of
which the Company or any subsidiary is or was a general partner, other than
indebtedness for borrowed money, which partnership liability is identified on
the Disclosure Schedule to the Purchase Agreement. Prior to November 1, 1994
WPI and Mr. Hanauer had the right to exercise all or a portion of their
respective Contingent Warrants up to an aggregate exercise price equal to the
lesser of (x) the amount by which such liability exceeds $500,000 and (y) the
aggregate exercise price of the Contingent Warrants. If WPI owns Contingent
Warrants and Mr. Hanauer determines not to exercise his Contingent Warrants, Mr.
Hanauer is required to offer to sell his Contingent Warrants to WPI for
aggregate consideration of $1.00.
Prior to November 1, 1994, the exercise price and the number of shares
of Common Stock issuable upon exercise of each warrant issued in connection with
the Restructuring were subject to adjustment from time to time upon the
occurrence of certain stock dividends or distributions, stock splits, reverse
stock splits or stock reclassifications, certain issuances of rights, options,
warrants or securities directly or indirectly convertible into Common Stock to
all holders of Common Stock entitling them to purchase shares of Common Stock at
a price per share less than the greater of the current market price or the
exercise price per share on the date of such issue, certain extraordinary
dividends or distributions to all holders of Common Stock, and certain issuances
of Common Stock for a consideration per share less than the greater of the
current market price or conversion price per share on the date of such issue.
C. STOCKHOLDERS' AGREEMENT.
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STOCKHOLDERS' AGREEMENT. The Company, Warburg, Mr. Hanauer and
Prudential entered into the Stockholders' Agreement dated January 29, 1993 (the
"Stockholders' Agreement"). The Stockholders' Agreement was previously filed as
an Exhibit to this Schedule 13D and is incorporated herein by reference.
VOTING AGREEMENT. Pursuant to the Stockholders' Agreement, each
Stockholder (as defined below) agrees that at any special or annual meeting of
stockholders at which Directors are to be elected or in connection with a
solicitation of consents through which Directors are to be elected, it shall
vote (or give a written consent with respect to) all of its shares of capital
stock in favor of: (i) the election to the Board of Directors of the Company of
two nominees designated by Prudential (the "Prudential Nominees") and three
nominees designated by WPI (the "WPI Nominees"); and (ii) the election to the
Board of Directors of such other nominees, not running in opposition to the
Prudential Nominees or to the WPI Nominees, who shall have been selected or
approved as such by a majority of the whole Board, provided that Prudential and
WPI will not be obligated to comply with the foregoing provisions if the Board
has failed, in the case of Prudential, to nominate for election to the Board two
Prudential Nominees after being requested to do so by Prudential, or has failed,
in the case of WPI, to nominate for election to the Board three WPI Nominees
after being requested to do so by WPI. "Stockholder" as defined in the
Stockholders' Agreement, means WPI, Prudential and any other person (except Mr.
Hanauer) who agrees to be bound by the terms of the Stockholders' Agreement,
provided that no person shall be a Stockholder if such person ceases to
beneficially own (x) at least 51% of the Securities issued pursuant to the
Purchase Agreement and all issued WPI Registrable Securities (as defined below)
or (y) at least 75% of the Junior Convertible Preferred Stock and Prudential
$5.50 Warrants issued pursuant to the Prudential Purchase Agreement and all
issued Prudential Registrable Securities (as defined below).
Pursuant to the Stockholders' Agreement, each Stockholder also agreed
that (i) it shall vote against removal of the other party's nominees (unless
requested by such party to vote for removal in which case it will do so), (ii)
it shall exercise its best efforts to cause its nominees on the Board to vote in
favor of a nominee of the other party to fill any vacancy on the Board created
by the resignation, removal or death of such party's nominee if the effect of
failing to so fill such vacancy would be that there would be less than two
Prudential Nominees or three WPI Nominees remaining on the Board, (iii) it shall
not elect cumulative voting for the election of Directors and, in the event that
any other stockholder elects such cumulative voting, it shall vote its shares of
capital stock in the manner necessary to effect the election of the three WPI
Nominees and the two Prudential Nominees, and (iv) at any special or annual
meeting of stockholders prior to the Company's 1995 annual meeting it shall vote
(or give a written consent with respect to) all of its shares of capital stock
in favor of electing Mr. Hanauer as a Director or against removal of Mr. Hanauer
as a Director.
REGISTRATION RIGHTS. The Stockholders' Agreement provides that, at
any time after the Closing each of (i) the holders of at least 30% of the
aggregate number (on the date of the Stockholders' Agreement) of shares of
Common Stock issued or issuable upon conversion of any Senior Convertible
Preferred Stock and all shares of Common Stock issued of issuable upon exercise
of any Warrants and Contingent Warrants (collectively, the "WPI Registrable
Securities") may make three written requests to the Company for registration
under the Securities Act of 1933, as amended (the "Securities Act"), of all or
part of such securities; provided, however, that WPI may make any of such three
requests for registration regardless of the percentage of WPI Registrable
Securities held by it, and (ii) the holders of at lease 30% of the aggregate
number (on the date of the Stockholders' Agreement) of shares of Common Stock
issued upon conversion of the Old Prudential Warrants, all shares of Common
Stock issued or issuable upon conversion of any Junior Convertible Preferred
Stock and all shares of Common Stock issued or issuable upon exercise of any
Prudential $5.50
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Warrants (collectively, the "Prudential Registrable Securities") may make three
written requests to the Company for registration under the Securities Act of all
or part of such securities; provided, however, that Prudential may make any of
such three requests for registration regardless of the percentage of Prudential
Registrable Securities held by it.
The Stockholders' Agreement also provides that in the event a holder
of WPI Registrable Securities requests a registration pursuant to the foregoing
provisions, Mr. Hanauer may elect to include a proportionate share of WPI
Registrable Securities held by him in which case he will be permitted to sell
such WPI Registrable Securities on the same terms as the holder of the WPI
Registrable Securities requesting such registration.
Pursuant to the Stockholders' Agreement, holders of WPI Registrable
Securities and Prudential Registrable Securities will also have certain
"piggyback" registration rights to include their securities, subject to certain
limitations, in any other registration statements filed by the Company for its
own account or pursuant to any of the foregoing requests, or otherwise.
Whenever the Company effects a registration pursuant to the registration rights
provisions of the Stockholders' Agreement, the Company will be required to pay
the costs of such registration of securities, except that each selling
stockholder will bear its pro rata share of customary underwriting discounts and
commissions, the customary fees and expenses of its counsel and applicable
transfer taxes. The Stockholders' Agreement contains customary indemnification
and contribution provisions relating to the exercise by the holders of
registrable securities of their registration rights thereunder.
TERMINATION. The provisions of the Stockholders' Agreement pertaining
to voting by Stockholders will terminate at such time as there is one
Stockholder. In any event, the provisions of the Stockholders' Agreement with
respect to voting arrangements and restrictions will terminate no later than ten
years from the date of the Stockholders' Agreement in accordance with applicable
law, subject to extension by the agreement of the remaining parties to the
Stockholders' Agreement.
AMENDMENTS TO THE STOCKHOLDERS' AGREEMENT. As of July 1, 1993, the
Company, WPI, Mr. Hanauer and Prudential entered into an Amendment to the
Stockholders' Agreement (the "Amendment"). The Amendment to the Stockholders'
Agreement was previously filed as an Exhibit to this Schedule 13D and is
incorporated herein by reference. On November 1, 1994, WPI, the Company,
Prudential and Mr. Hanauer entered into the Second Amendment to the
Stockholders' Agreement (the "Stockholders Amendment"), pursuant to which the
Stockholders Agreement was amended to provide WPI and Prudential with
registration rights for the New Warrants (as defined below), the Common Stock
issuable upon exercise of the New Warrants, and shares of Common Stock acquired
in connection with the Rights Offering. The Common Stock issuable upon exercise
of the New Warrants and the Common Stock acquired by WPI in connection with the
Rights Offering are subject to the voting requirements and other terms of the
Stockholders' Agreement. The Stockholders Amendment is attached hereto as
Exhibit 1 and is incorporated herein by reference.
D. CONSULTING AGREEMENT.
The Company entered into a consulting agreement with Mr. Hanauer after
the Closing pursuant to which the Company paid Mr. Hanauer $15,000 per month
plus expenses for his services through June 1, 1994. The consulting agreement
was terminated in June 1994 upon Mr. Hanauer's election as Executive Chairman of
the Company. It is expected that Mr. Hanauer will be granted stock options and
other forms of non-cash incentive compensation from time to time as determined
by the Compensation Committee of the Board of Directors.
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E. STOCK OPTION.
On June 8, 1993, the Company granted Mr. Hanauer a stock option to
purchase 135,000 shares of Common Stock at an exercise price of $3.50 per share
under the Company's 1993 Amended and Restated Stock Option Plan. The exercise
price represents market value at the date of grant. The option vests in three
equal, annual installments commencing on the first anniversary of the date of
grant.
F. DESCRIPTION OF PREFERRED STOCK.
The following is a brief description of the Preferred Stock prior to
the consummation of the Financing Transactions on November 1, 1994. The
description should be read in conjunction with the Certificate which contains
the terms of the Preferred Stock in effect prior to November 1, 1994, a copy of
which was previously filed as an Exhibit to this Schedule 13D and is
incorporated by reference. Pursuant to the Financing Transactions, the terms of
the Preferred Stock have been amended. A copy of the Certificate of Amendment
of Restated Certificate of Incorporation (the "1994 Certificate Amendment") is
filed as Exhibit 2 to this Schedule 13D.
SENIOR CONVERTIBLE PREFERRED STOCK. The Senior Convertible Preferred
Stock, with respect to dividend rights and rights on redemption and/or
liquidation, winding up and dissolution, ranks prior to any other equity
securities of the Company, including any other series of Preferred Stock.
Holders of Senior Convertible Preferred Stock are entitled to receive, out of
any funds legally available therefor, cumulative dividends payable in cash, at a
rate of 12% of the Senior Stated Value (as defined below) per annum. Accrued
but unpaid dividends increase at a compounding rate equal to 12% of the Senior
Stated Value per annum compounded annually. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the holders
of the shares of Senior Convertible Preferred Stock are entitled to be first
paid out of the assets of the Company available for distribution to its
stockholders an amount in cash equal to $100.00 per share (the "Senior Stated
Value") plus an amount equal to all dividends (whether or not earned or
declared) on such shares accrued and unpaid thereon to the date of final
distribution, before any payment shall be made or any assets distributed to the
holders of any other equity security of the Company.
The Senior Convertible Preferred Stock is convertible into shares of
Common Stock, at the option of the holder, at any time. The initial conversion
price was set at the Closing, such that conversion of the aggregate 137,160
shares of Senior Convertible Preferred Stock issued to WPI and Mr. Hanauer
resulted in such persons holding approximately 40% of the Company's equity on a
fully diluted basis, but before exercise of any warrants issued in connection
with the Restructuring. The Senior Convertible Preferred Stock is subject to
mandatory conversion in the event that (i) at all times during a two-year period
the ratio of consolidated debt to net income before taxes, excluding
extraordinary items, and income or loss from discontinued operations plus total
interest expense and depreciation and amortization has not exceeded 3.0:1.0,
(ii) on each trading day during a six-month period the price of the Common Stock
has exceeded $1.75 per share, and (iii) the Company is in full compliance with
the terms and conditions of all agreements pursuant to which the Company has
incurred indebtedness for borrowed money. On November 1, 2000, up to 50% of the
shares of Senior Convertible Preferred Stock issued at any time will be subject
to mandatory redemption, with the remaining shares subject to mandatory
redemption on November 1, 2001, in each case at the Senior Stated Value plus
accrued and unpaid dividends and to the extent the Company has the funds legally
available therefor. The conversion price is subject to adjustment from time to
time upon the occurrence of certain stock dividends or distributions, stock
splits, reverse stock splits or stock reclassifications, certain issuances of
rights, options, warrants or securities directly or indirectly
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convertible into Common Stock to all holders of Common Stock entitling them to
purchase shares of Common Stock at a price per share less than the greater of
the current market price or the or the conversion price per share on the date of
such issue, certain extraordinary dividends or distributions to all holders of
Common Stock, and certain issuances of Common Stock for a consideration per
share less than the greater of the current market price or the conversion price
per share on the date of such issue.
JUNIOR CONVERTIBLE PREFERRED STOCK. The Junior Convertible Preferred
Stock, with respect to dividend rights and rights on redemption and on
liquidation, winding up or dissolution ranks prior to any other equity
securities of the Company, excluding the Senior Convertible Preferred Stock.
Holders of Junior Convertible Preferred Stock are entitled to receive, out of
any funds legally available therefor, cumulative dividends payable in cash at a
rate of 5% of the Junior Stated Value (as defined below) per annum. Accrued but
unpaid dividends increase at a compounding rate equal to 5% of the Junior Stated
Value per annum compounded annually. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Company, if assets are remaining after the payment in full of the liquidation
preference of the Senior Convertible Preferred Stock, the holders of the shares
of Junior Convertible Preferred Stock then outstanding are entitled to be first
paid out of the assets of the Company available for distribution to its
stockholders an amount in cash equal to $100.00 per share (the "Junior Stated
Value") plus an amount equal to all dividends (whether or not earned or
declared) on such shares accrued and unpaid thereon to the date of final
distribution, before any payment shall be made or any assets distributed to the
holders of any equity security of the Company.
The Junior Convertible Preferred Stock is convertible into shares of
Common Stock, at the option of the holder, at any time. The initial conversion
price will be set at the Closing, such that conversion of the 150,000 shares of
Junior Convertible Preferred Stock issued to Prudential plus the shares of
Common Stock issued upon exercise of the Old Prudential Warrants would result in
Prudential holding approximately 27% of the Company's equity on a fully diluted
basis, but before exercise of any warrants issued in connection with the
Restructuring. The Junior Convertible Preferred Stock is subject to mandatory
conversion in the event that (i) at all times during a two-year period the ratio
of consolidated debt to net income before taxes, excluding extraordinary items,
and income or loss from discontinued operations plus total interest expense and
depreciation and amortization has not exceeded 3.0:1.0, (ii) on each trading day
during a six-month period the price of the Common Stock has exceeded $1.75 per
share, and (iii) the Company is in full compliance with the terms and conditions
of all agreements pursuant to which the Company has incurred indebtedness for
borrowed money. Assuming full satisfaction of the Company's mandatory
redemption obligation with respect to the Senior Convertible Preferred Stock, on
November 1, 2000, 2001, 2002, and 2003, the Company will be required to redeem
16.67%, 16.67%, 33.34% and all remaining shares, respectively, of the Junior
Convertible Preferred Stock, in each case at the Junior Stated Value plus
accrued and unpaid dividends and to the extent the Company has the funds legally
available therefor. The conversion price is subject to adjustment from time to
time upon the occurrence of certain stock dividends or distributions, stock
splits, reverse stock splits or stock reclassifications, certain issuances of
rights, options, warrants or securities directly or indirectly convertible into
Common Stock to all holders of Common Stock entitling them to purchase shares of
Common Stock at a price per share less than the greater of the current market
price or the conversion price per share on the date of such issue, certain
extraordinary dividends or distributions to all holders of Common Stock, and
certain issuances of Common Stock for a consideration per share less than the
greater of the current market price or the conversion price per share on the
date of such issue.
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VOTING RIGHTS. The Preferred Stock is entitled to vote on all matters
submitted to a vote of the stockholders of the Company on an as-converted-to
Common Stock basis. Without the consent of two-thirds of the issued and
outstanding shares of both the Senior Convertible Preferred Stock and the Junior
Convertible Preferred Stock, each voting separately as a class, the Company may
not (i) authorize or issue any class of shares, (ii) increase the authorized
shares of, or issue such shares (except in payment of dividends) of either such
security, (iii) amend, alter, waive the application of or repeal certain
provisions of the Certificate, or enter in any agreement or take any other
action which in any manner would alter, change or otherwise adversely affect the
powers, rights or preferences of either such security, (iv) effect a
reorganization, recapitalization, liquidation, dissolution, winding up, sale of
substantially all of the Company's assets or a merger, or (v) take any action
which would cause a dividend to be deemed received as either such security for
certain purposes unless actually received. The Certificate denies voting rights
to the holders of Common Stock with respect to matters described in clauses
(ii), (iii) and (v) above except as otherwise required by Delaware law.
G. RIGHTS PLAN.
In connection with the Restructuring, the Board of Directors amended
the definition of "Acquiring Person" under the Company's Stockholders' Rights
Agreement (the "Rights Plan") so that the consummation of the Restructuring
would not make WPI, Mr. Hanauer or Prudential an "Acquiring Person" as
originally defined in the Rights Plan. At the Closing of the Restructuring, the
rights issued under the Rights Plan were redeemed for $.01 per share of Common
Stock, payable in shares of Common Stock, which shares are listed on the New
York Stock Exchange and the Pacific Stock Exchange. The Common Stock was valued
for purposes of such redemption on the basis of the then current market price as
defined in the Rights Plan. The whole and fractional shares of Common Stock
received pursuant to the redemption were aggregated with the shares of Common
Stock already held by each stockholder for the purpose of calculating the shares
of Common Stock to be received by such stockholder after the reverse stock
split.
H. FINANCING TRANSACTIONS.
On November 1, 1994, the Company completed the Financing Transactions
including amendments to its debt agreements with Prudential to modify certain
financial covenants and defer principal payments, an equity investment by WPI of
$10 million and the sale of Common Stock pursuant to a rights offering (the
"Rights Offering") to the Company's stockholders, and certain amendments to the
Preferred Stock and Warrants. The Financing Transactions were approved by the
Company's stockholders at the Annual Meeting of Stockholders on September 12,
1994.
PRUDENTIAL AGREEMENTS. The Company and Prudential have entered into
an Amendment Agreement (the "Prudential Amendment") pursuant to which the
existing Prudential New Notes Agreement was amended to provide that the Company
will not be required to make principal payments on any of the Prudential debt
prior to November 1, 1997. Thereafter, the revolving credit facility will
mature on November 1, 1999, principal on the Senior Note will be payable in two
equal installments on November 1, 1997 and 1998, and principal on the PIK Notes
will be payable in two approximately equal installments on November 1, 2000 and
2001. The interest rate on the PIK Notes will increase from 10.65% to 11.65%
per annum on January 1, 1996. In addition, certain covenants of the debt
agreements remain in place, but will not be in effect until April 1, 1997. The
debt agreements, as amended, provide for supplemental principal payments
commencing July 1, 1998 if the Company meets certain financial tests.
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WPI INTERIM LOAN. In March 1994, WPI agreed to loan the Company up to
$10 million, from time to time, at an initial interest rate of 5% per annum
with a maturity date of April 28, 1995. The loan was cancelled in connection
with WPI's purchase of Common Stock pursuant to the Standby Agreement (as
defined below).
RIGHTS OFFERING. Pursuant to the Financing Transactions, the Company
obtained equity capital through the Rights Offering. The Company issued to
holders of the Company's Common Stock, including Mr. Hanauer, for each share of
Common Stock, a non-transferable right to acquire one share of Company Common
Stock at an exercise price of $2.375 per share. Subject to certain conditions,
stockholders also had certain rights to oversubscribe to the extent that other
stockholders did not subscribe. Pursuant to a Standby Agreement dated as of
July 21, 1994 between the Company and WPI (the "Standby Agreement"), WPI agreed
to acquire the rights not acquired by the holders of Common Stock in the Rights
Offering through the conversion of its loan up to an amount not exceeding $10
million plus accrued interest on the loan. Mr. Hanauer exercised rights to
purchase 21,153 shares of Common Stock at $2.375 per share. WPI acquired
4,277,433 shares of Common Stock at $2.375 per share pursuant to the Standby
Agreement.
AMENDMENTS TO PREFERRED STOCK. Pursuant to the Financing
Transactions, the existing Senior Convertible Preferred Stock held by WPI and
Mr. Hanauer and the Junior Convertible Preferred Stock held by Prudential were
amended to eliminate the mandatory redemption provisions. The Junior
Convertible Preferred Stock also was amended to increase the dividend rate to
10% per annum effective January 1, 2002, with further increases of 1% per year
effective January 1, 2003 and January 1, 2004 and 2% per year effective January
1, 2005 and each January 1 thereafter. The Senior Convertible Preferred Stock
was amended to provide that at such time as the dividend rate on the Junior
Convertible Preferred Stock would increase above 12%, the dividend rate on the
Senior Convertible Preferred Stock would increase by the same amount as the
dividend rate on the Junior Convertible Preferred Stock. The Junior Convertible
Preferred Stock also was amended to provide that under certain circumstances
following the conversion of the Senior Convertible Preferred Stock holders of
the Junior Convertible Preferred Stock will be obligated to convert such
preferred stock. Warburg and Mr. Hanauer retained certain anti-dilution rights
with respect to the Senior Preferred Stock and Warrants with respect to the
Financing Transactions. The Preferred Stock held by Warburg and Prudential also
was amended to eliminate the anti-dilution provisions with respect to the
issuance of Common Stock and Common Stock equivalents at less than the
conversion price. As a result of the Financing Transactions and upon
application of the anti-dilution provisions of the Preferred Stock, the
conversion price of the Senior Preferred Stock held by WPI and Mr. Hanauer was
adjusted from $3.0137 to $2.6564 and $2.6716, respectively, which resulted in
their Senior Preferred Stock held by WPI and Mr. Hanauer being convertible into
an aggregate of 4,828,548 and 332,908, respectively. The Junior Preferred Stock
held by Prudential continues to be convertible into 2,674,511 shares of Common
Stock and the conversion price remains $5.6085 per share. The terms of the
Preferred Stock are set forth in the 1994 Certificate Amendment filed as Exhibit
2 to this Schedule 13D, and are incorporated herein by reference.
WARRANTS. Upon consummation of the Financing Transactions, the
exercise prices on the outstanding Warrants held by Prudential and WPI were
reduced to $3.50 per share pursuant to the terms of such Warrants. The Warrants
held by Prudential and WPI also were amended to eliminate the anti-dilution
provisions with respect to the issuance of Common Stock and Common Stock
equivalents at less than the conversion price or exercise price. WPI and Mr.
Hanauer retained certain anti-dilution rights with respect to their Warrants
(and with respect to Mr. Hanauer's Contingent Warrants) with respect to the
Financing Transactions. As a result of the Financing Transactions and upon the
application of the anti-dilution provisions, the Warrants held by WPI became
convertible
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into an aggregate of 687,358 shares of Common Stock, the $5.00 Warrants held by
Mr. Hanauer became convertible into 225,847 shares of Common Stock at an initial
exercise price of $3.5422 per share, the $5.50 Warrants held by Mr. Hanauer
became convertible into 84,724 shares of Common Stock at an initial exercise
price of $3.7651 per share, and the Contingent Warrants held by Mr. Hanauer
became convertible into 36,956 shares of Common Stock at an initial exercise
price of $3.5422 per share. Upon consummation of the Financing Transactions,
the Contingent Warrants held by WPI were cancelled. Also upon consummation of
the Financing Transactions, the Company issued to WPI and Prudential warrants
(the "New Warrants") to purchase 325,000 and 150,000 shares of Common Stock,
respectively, at an exercise price of $2.375 per share.
PRUDENTIAL HOLDINGS. Pursuant to the Financing Transactions,
Prudential has agreed to work with the Company in a good faith effort to take
certain actions which would facilitate the ability of a subsidiary of the
Company to conduct certain government contracting business. Prudential's
actions could result in Prudential waiving, but not relinquishing, its right to
appoint Company directors or other rights under the Stockholders' Agreement or
limiting its voting rights.
Except as described above, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) between the person named in
Item 2 hereof and any other person with respect to any securities of the
Company, including but not limited to transfer or voting of any other
securities, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, divisions of profits or loss, or the giving or
withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Second Amendment to Stockholders' Agreement dated as of
November 1, 1994, by and among the Company, WPI, Mr. Hanauer and Prudential.
Exhibit 2. Certificate of Amendment to Certificate of Incorporation
of the Company filed November 1, 1994.
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SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Dated: November 4, 1994
By: /s/ Joe F. Hanauer
--------------------------------
Joe F. Hanauer
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Exhibit Index
Exhibit 1. Second Amendment to Stockholders' Agreement dated as of
November 1, 1994, by and among the Company, WPI, Mr. Hanauer and Prudential.
Exhibit 2. Certificate of Amendment to Certificate of Incorporation
of the Company filed November 1, 1994.
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SECOND AMENDMENT TO STOCKHOLDERS' AGREEMENT
Reference is made to that certain Stockholders' Agreement (the
"Stockholders' Agreement") dated as of January 29, 1993 and amended as of
July 1, 1993 by and among Grubb & Ellis Company, a Delaware corporation (the
"Company"), Warburg, Pincus Investors, L.P., a Delaware limited partnership
("Warburg"), Joe F. Hanauer ("Hanauer") and The Prudential Insurance Company of
America, a New Jersey insurance corporation ("Prudential"). Capitalized terms
used herein without definition shall have the meanings set forth in the
Stockholders' Agreement.
RECITALS
A. On March 28, 1994, the Company, Warburg and Prudential reached
agreement (the "Preliminary Agreement") upon the terms of a proposed financing
transaction to provide the Company with additional working capital, including:
(i) an interim credit facility pursuant to which Warburg agreed to make periodic
advances to the Company in an aggregate principal amount for all such advances
outstanding not to exceed $10 million (the "Bridge Loan"); (ii) a rights
offering by the Company (the "Rights Offering") in which the Company would issue
to each holder of Common Stock one nontransferable right (a "Right") to purchase
one share of Common Stock at a subscription price of $2.375 per share for each
share of Common Stock; (iii) a standby agreement (the "Standby Agreement")
pursuant to which Warburg agreed to acquire Rights not purchased by the
Company's stockholders in the Rights Offering up to an amount not to exceed
$10 million, plus accrued interest on the Bridge Loan; (iv) amendments to the
Note Purchase Agreement (as amended from time to time) between Prudential and
the Company (the "Prudential Loan Agreement Amendments"); (v) amendments to the
New Prudential Warrants, the Warburg Warrants and the Preferred Stock held by
Warburg, Hanauer and Prudential; and (vi) subject to certain conditions, the
issuance of new warrants to Warburg and Prudential.
B. On July 21, 1994, Warburg and the Company entered into the
Standby Agreement.
C. On September 12, 1994, the stockholders of the Company approved
the Financing Transactions, which are more fully described in the Company's
Proxy Statement dated July 29, 1994 (the "Proxy Statement").
D. On the date hereof:
1. The Company completed the Rights Offering and Warburg
fulfilled its obligations under the Standby Agreement;
2. Prudential and the Company entered into the Prudential Loan
Agreement Amendments;
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3. The Company filed with the Delaware Secretary of State the
Company's Restated Certificate of Incorporation (the "Charter Amendment") and
Warburg surrendered to the Company for cancellation certificates representing
all of its 128,266 shares of Senior Preferred Stock in exchange for certificates
representing 128,266 shares of Series B Senior Preferred Stock;
4. Warburg surrendered to the Company for cancellation the
Warburg Warrants in exchange for amended warrants to purchase an aggregate of
687,358 shares of Common Stock at an exercise price of $3.50 per share (the
"Warburg Amended Warrants");
5. Prudential surrendered to the Company for cancellation the
New Prudential Warrants in exchange for amended warrants to purchase 200,000
shares of Common Stock at an exercise price of $3.50 per share (the "Prudential
Amended Warrants");
6. The Company issued to Warburg new warrants to purchase
325,000 shares of Common Stock at an exercise price of $2.375 per share (the
"Warburg 1994 Warrants");
7. Warburg surrendered to the Company for cancellation all of
its Contingent Warrants (as defined in the Proxy Statement); and
8. The Company issued to Prudential new warrants to purchase
150,000 shares of Common Stock at an exercise price of $2.375 per share (the
"Prudential 1994 Warrants").
E. The parties desire to make certain amendments to the
Stockholders' Agreement.
NOW, THEREFORE, in acknowledgement of the foregoing recitals, the
parties hereby agree as follows:
1. Section 1.1(g) of the Stockholders' Agreement is hereby amended
to read as follows:
(g) "Prudential Securities" shall mean the Junior Preferred Stock,
the Prudential Amended Warrants, the Prudential 1994 Warrants and the
Prudential Warrant Shares and any and all issued shares of Prudential
Registrable Securities.
2. Section 1.1(s) of the Stockholders' Agreement is hereby amended
to read as follows:
(s) "Warburg Securities" shall mean the Senior Preferred Stock, the
Warburg Amended Warrants, the Warburg 1994 Warrants and any and all issued
shares of Warburg Registrable Securities.
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3. The following definitions are hereby added to Section 1.1 of the
Stockholders' Agreement:
(t) "Preferred Stock" shall mean the Senior Preferred Stock and the
Junior Preferred Stock.
(u) "Senior Preferred Stock" shall mean the Series A Senior Preferred
Stock and the Series B Senior Preferred Stock.
(v) "Series A Senior Preferred Stock" shall mean the Company's Series
A Senior Convertible Preferred Stock, par value $.01 per share.
(w) "Series B Senior Preferred Stock" shall mean the Company's Series
B Senior Convertible Preferred Stock, par value $.01 per share.
4. References to the "date hereof" in the first paragraph of Section
4.1(a) of the Stockholders' Agreement shall mean the date as of which this
Second Amendment to Stockholders' Agreement is executed.
5. The beginning of the third paragraph of Section 4.1(a) of the
Stockholders' Agreement is hereby amended by deleting the text up to and
including the first semi-colon in the second sentence therein and replacing it
with the following:
"Warburg Registrable Securities" shall include all shares of Common
Stock issued or issuable upon conversion of any Senior Preferred Stock, all
shares of Common Stock issued or issuable upon exercise of any Warburg
Amended Warrants or Warburg 1994 Warrants, any shares of Common Stock
acquired by Warburg pursuant to the Standby Agreement and any shares of
Common Stock acquired by Hanauer in connection with the Rights Offering and
"Prudential Registrable Securities" shall include all shares of Common
Stock issued or issuable upon conversion of any Junior Preferred Stock, all
shares of Common Stock issued or issuable upon exercise of any of the Old
Prudential Warrant, the Prudential Amended Warrants or the Prudential 1994
Warrants and any shares of Common Stock acquired by Prudential in
connection with the Rights Offering (Warburg Registrable Securities and
Prudential Registrable Securities are sometimes collectively referred to
herein as "Registrable Securities"). Registrable Securities shall include
all shares of Common Stock, or Common Stock issued or issuable upon
conversion or exercise of any securities of the Company, which may be
issued or distributed with respect to, or in exchange for, the Preferred
Stock, the Warburg Amended Warrants, the Warburg 1994 Warrants, the
Prudential Warrant Shares, the Prudential Amended Warrants, the Prudential
1994 Warrants or any of the Common Stock referred
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to in the preceding sentence pursuant to a stock dividend, stock split or
other distribution, merger, consolidation, recapitalization or
reclassification or otherwise, and any securities of the Company which may
be issued or distributed with respect to, or in exchange for, any such
Common Stock or such other securities pursuant to a stock dividend, stock
split or other distribution, merger, consolidation, recapitalization or
reclassification or otherwise;
6. References to the "date hereof" in Section 5.1(b) of the
Stockholders' Agreement shall mean the date as of which this Second Amendment to
Stockholders' Agreement is executed.
7. All notices, other communications or documents given to the
parties pursuant to Section 5.3 and any copies thereof shall be given as set
forth in Section 5.3, except as follows:
(a) If to the Company, a copy to:
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111
Attention: Scott R. Haber, Esq.
Telecopy number: (415) 395-8095
(b) If to Warburg, a copy to:
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attention: Martin H. Neidell, Esq.
Telecopy number: (212) 806-6006
(c) If to Prudential, a copy to:
Sonnenschein, Nath & Rosenthal
800 Sears Tower
Chicago, Illinois 60606
Attention: Mitchell L. Hollins, Esq.
Telecopy number: (312) 876-7934
8. Except as specifically provided herein, the terms and conditions
of the Stockholders' Agreement shall remain in full force and effect.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to Stockholders' Agreement this ___ day of November, 1994.
GRUBB & ELLIS COMPANY, a Delaware
corporation
By: Robert J. Hanlon
Name: Robert J. Hanlon
Title: Chief Financial Officer
WARBURG, PINCUS INVESTORS, L.P., a
Delaware limited partnership
WARBURG, PINCUS & CO.,
General Partner
By: Reuben S. Leibowitz
Name: Reuben S. Leibowitz
Title: Partner
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, a New Jersey insurance
corporation
By: John P. Mullman
Name: John P. Mullman
Title: Vice President
JOE F. HANAUER, an individual
By: Joe F. Hanauer
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CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
GRUBB & ELLIS COMPANY, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That on June 1, 1994, the Board of Directors of said
Corporation duly adopted the following resolution setting forth proposed
amendments to the Restated Certificate of Incorporation of said Corporation,
declaring said amendments to be advisable. The resolution setting forth the
proposed amendments is as follows:
RESOLVED, that Article IV of the Certificate of Incorporation of this
Corporation is hereby amended to read in its entirety as follows:
"The total number of shares of capital stock which the Corporation
shall have authority to issue is twenty-six million (26,000,000) shares, of
which twenty-five million (25,000,000) shares with a par value of $.01 each
shall be designated Common Stock, and of which one million (1,000,000) shares
with a par value of $.01 each shall be designated Preferred Stock, of which
Preferred Stock fifty thousand (50,000) shares with a par value of $.01 each
shall be designated Series A Senior Convertible Preferred Stock ("Series A
Senior Preferred Stock"), two hundred thousand (200,000) shares with a par value
of $.01 each shall be designated Series B Senior Convertible Preferred Stock
("Series B Senior Preferred Stock") and two hundred thousand (200,000) shares
with a par value of $.01 each shall be designated Junior Convertible Preferred
Stock. Except as noted in the second following paragraph, as used herein,
"Senior Convertible Preferred Stock," shall mean collectively, the Series A
Senior Preferred Stock and the Series B Senior Preferred Stock, or either of
them. As used herein, "Convertible Preferred Stock" shall mean collectively,
the Senior Convertible Preferred Stock and the Junior Convertible Preferred
Stock, or either of them.
Upon the filing on January 29, 1993 of the Certificate of Amendment of
Certificate of Incorporation (the "Amendment"), every five shares of outstanding
Common Stock were automatically reclassified, changed and converted into one
share of Common Stock. No fractional shares of Common Stock were issued upon
such conversion, but in lieu thereof, the Corporation paid a cash adjustment in
respect of such fractional interest in an amount equal to such fractional
interest multiplied by the Market Price of a share of Common Stock on the date
on which the Amendment was filed. Unless otherwise requested by the holders
thereof, the share certificates representing the shares of Common Stock
outstanding prior to the filing of the Amendment represent such shares as
reclassified, changed and converted following the filing of the Amendment. In
addition, on December 8, 1993, the Company filed a Restated Certificate of
Incorporation restating, integrating, and not further amending the provisions of
the Company's certificate of incorporation as amended and supplemented before
that date.
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Upon the filing of this Certificate of Amendment of Restated
Certificate of Incorporation (the "Certificate of Amendment"), Warburg, Pincus
Investors, L.P. ("Warburg") will exchange all of its shares of Senior
Convertible Preferred Stock held prior to such filing ("Existing Senior
Convertible Preferred Stock") for an equal number of shares of Series B Senior
Preferred Stock. Effective immediately after the issuance of such shares of
Series B Senior Preferred Stock, each remaining share of Existing Senior
Convertible Preferred Stock shall be automatically reclassified, changed and
converted into one share of Series A Senior Preferred Stock. Unless otherwise
requested by the holders thereof, the share certificates representing the shares
of Existing Senior Convertible Preferred Stock outstanding prior to the filing
of the Certificate of Amendment which have not been exchanged for Series B
Senior Convertible Stock shall represent shares of Series A Senior Convertible
Preferred Stock as reclassified, changed and converted following the issuance of
the Series B Senior Convertible Stock.
The class of capital stock of the Corporation designated Common Stock
shall have (i) subject to the proviso at the end of this sentence, full voting
rights, with one vote represented by each share of stock; (ii) rights to payment
of dividends without preference if, as, and when declared by the Board of
Directors of the Corporation; and (iii) rights to liquidation distributions of
the Corporations's assets without preference after payment of preferential
liquidation distributions, if any, payable on any issued and outstanding series
of Preferred Stock; provided, however, that, notwithstanding the provisions of
clause (i) of this sentence, the holders of Common Stock shall not have the
right to vote on any of the matters described in Section 4(b)(i) or 4(b)(ii)
below in this Article IV except in clauses (A) and (D) thereof, except as
otherwise required by the laws of the State of Delaware.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby expressly vested with authority to fix
by resolution or resolutions the designations and the powers, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof (including, without
limitation, the voting powers, if any, the dividend rate, conversion rights,
redemption price, or liquidation preference), of any wholly unissued series of
Preferred Stock, to fix the number of shares constituting any such series, and
to increase or decrease the number of shares of any such series (but not below
the number of shares thereof then outstanding). In case the number of shares of
any such series shall be so decreased, the shares constituting such decrease
shall resume the status which they had prior to the adoption of the resolution
or resolutions originally fixing the number of shares of such series.
A statement of the designations and the voting powers, preferences and
relative, participating, optional and other special rights of the shares of the
Senior Convertible Preferred Stock and the Junior Convertible Preferred Stock,
and the qualifications, limitations or restrictions thereof are as follows:
1. RANK. The Senior Convertible Preferred Stock shall, with respect
to dividend rights and rights on liquidation, winding up and dissolution, rank
prior to any other equity securities of the Corporation, including all classes
of Common Stock and any other series of Preferred Stock of the Corporation, with
the Series A Senior Preferred Stock and the Series B Senior Preferred Stock
ranking on an equal priority in all such foregoing respects. The Junior
Convertible Preferred Stock shall, with respect to dividend rights and rights on
liquidation, winding up and dissolution, rank prior to any other equity
securities of the Corporation, including all classes of Common Stock and any
other series of Preferred Stock of the Corporation other than the Senior
Convertible Preferred Stock which shall rank prior to the Junior Convertible
Preferred Stock (all of such equity securities of the
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Corporation to which the Junior Convertible Preferred Stock ranks prior are
collectively referred to herein as the "Junior Stock").
2. DIVIDENDS.
(a) SENIOR CONVERTIBLE PREFERRED STOCK. The holders of Senior
Convertible Preferred Stock shall be entitled to receive, when and as declared
by the Board of Directors out of funds legally available therefor, cumulative
dividends at a rate (the "Senior Dividend Rate") equal to the greater of 12% or
the Junior Preferred Dividend Rate (as defined below). Such dividends shall be
computed on the basis of the Series A Senior Preferred Stock Stated Value and
the Series B Senior Preferred Stock Stated Value, respectively, and shall be
payable annually on the first day of each October commencing on the first of
such dates to occur after the Issue Date. Dividends shall accrue on each share
of Senior Convertible Preferred Stock from the Issue Date and shall accrue from
day to day, whether or not earned or declared. Accrued but unpaid dividends on
the Senior Convertible Preferred Stock shall increase at a compounding rate
equal to the Senior Dividend Rate compounded annually. Dividends paid on the
shares of Senior Convertible Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of all, but not less than all shares of Senior Convertible Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 30 days prior to the date
fixed for the payment thereof. During such time as any shares of the Senior
Convertible Preferred Stock are outstanding, the Corporation shall not declare,
pay or set apart for payment any dividend on any of the Junior Convertible
Preferred Stock or Junior Stock, other than a redemption pursuant to Section
5(h), or make any payment on account of, or set apart money for a sinking or
other similar fund or make any payment for, the purchase, redemption or other
retirement of, any of the Junior Convertible Preferred Stock or Junior Stock or
any warrants, rights, calls or options exercisable for or convertible into any
of the Junior Convertible Preferred Stock or Junior Stock, or make any
distribution in respect thereof, either directly or indirectly, and whether in
cash, obligations or shares of the Corporation or other property (other than
distributions or dividends in Junior Convertible Preferred Stock or Junior Stock
to the holders of Junior Convertible Preferred Stock or Junior Stock), and shall
not permit any corporation or other entity directly or indirectly controlled by
the Corporation to purchase or redeem any of the Junior Convertible Preferred
Stock or Junior Stock or any warrants, rights, calls or options exercisable for
or convertible into any of the Junior Convertible Preferred Stock or Junior
Stock, other than a redemption pursuant to Section 5(h), unless prior to or
concurrently with such declaration, payment, setting apart for payment,
purchase, redemption or distribution, as the case may be, the full cumulative
dividends on all outstanding shares of Senior Convertible Preferred Stock shall
have been paid in full or contemporaneously are declared and paid through the
most recent dividend payment date. Notwithstanding the foregoing, a redemption
pursuant to Section 5(h) may be effected prior to the payment in full of
cumulative dividends on all outstanding shares of Senior Convertible Preferred
Stock. The dividend rights of the Series A Senior Preferred Stock and Series B
Senior Preferred Stock shall be on an equal priority.
(b) JUNIOR CONVERTIBLE PREFERRED STOCK. The holders of Junior
Convertible Preferred Stock shall be entitled to receive, when and as declared
by the Board of Directors out of funds legally available therefor, cumulative
dividends payable in cash at a rate (the "Junior Preferred Dividend Rate") of 5%
per annum through December 31, 2001, 10% per annum from January 1, 2002 through
December 31, 2002, 11% per annum from January 1, 2003 through December 31, 2003,
12% per annum from January 1, 2004 through December 31, 2004, and commencing on
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January 1, 1995 and on each January 1 thereafter, such rate shall increase by
2%. Such dividends shall be computed on the basis of the Junior Convertible
Preferred Stock Stated Value and shall be payable annually on the first day of
each October commencing on the first of such dates to occur after the shares of
Junior Convertible Preferred Stock are initially issued. Dividends shall accrue
on each share of Junior Convertible Preferred Stock from the date of issuance
thereof and shall accrue from day to day, whether or not earned or declared.
Accrued but unpaid dividends shall increase at a compounding rate equal to the
Junior Preferred Dividend Rate compounded annually. Dividends paid on the
shares of Junior Convertible Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Junior Convertible Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
be not more than 30 days prior to the date fixed for the payment thereof.
During such time as any shares of the Junior Convertible Preferred Stock are
outstanding, the Corporation shall not declare, pay or set apart for payment any
dividend on any of the Junior Stock or make any payment on account of, or set
apart money for a sinking or other similar fund or make any payment for, the
purchase, redemption or other retirement of, any of the Junior Stock or any
warrants, rights, calls or options exercisable for or convertible into any of
the Junior Stock, or make any distribution in respect thereof, either directly
or indirectly, and whether in cash, obligations or shares of the Corporation or
other property (other than distributions or dividends in Junior Stock to the
holders of Junior Stock), and shall not permit any corporation or other entity
directly or indirectly controlled by the Corporation to purchase or redeem any
of the Junior Stock or any warrants, rights, calls or options exercisable for or
convertible into any of the Junior Stock, unless prior to or concurrently with
such declaration, payment, setting apart for payment, purchase, redemption or
distribution, as the case may be, the full cumulative dividends on all
outstanding shares of Junior Convertible Preferred Stock shall have been paid in
full or contemporaneously are declared and paid through the most recent dividend
payment date.
3. LIQUIDATION PREFERENCE.
(a) SENIOR CONVERTIBLE PREFERRED STOCK. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, the holders of the shares of Series A Senior Preferred Stock
and Series B Senior Preferred Stock then outstanding shall be entitled to be
first paid out of the assets of the Corporation available for distribution to
its stockholders an amount in cash equal to $100.00 per share of Series A Senior
Preferred Stock (the "Series A Senior Preferred Stock Stated Value") and $100.00
per share of Series B Senior Preferred Stock (the "Series B Senior Preferred
Stock Stated Value"), respectively, plus an amount equal to all dividends
(whether or not earned or declared) on such shares accrued and unpaid thereon to
the date of final distribution, before any payment shall be made or any assets
distributed to the holders of the Junior Convertible Preferred Stock or Junior
Stock. Except as provided in the preceding sentence, holders of the Senior
Convertible Preferred Stock shall not be entitled to any distribution in the
event of liquidation, dissolution or winding up of the affairs of the
Corporation. If, upon any such liquidation, dissolution or winding up of the
Corporation, the remaining assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders of the Senior
Convertible Preferred Stock the full amount to which they shall be entitled, the
holders of any of the Senior Convertible Preferred Stock shall share ratably in
any distribution of the remaining assets and funds of the Corporation in
proportion to the respective amounts which would otherwise be payable in respect
of the shares held by them upon such distribution if all amounts payable on or
with respect to such shares were paid in full. The distribution rights of the
Series A Senior Preferred Stock and Series B Senior Preferred Stock shall be on
an equal priority.
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(b) JUNIOR CONVERTIBLE PREFERRED STOCK. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, if assets are remaining after the payment in full of the
preferential amount of the Series A Senior Preferred Stock Stated Value and the
Series B Senior Preferred Stock Stated Value set forth in Section 3(a) plus an
amount equal to all dividends (whether or not earned or declared) on such shares
accrued and unpaid thereon, the holders of the shares of Junior Convertible
Preferred Stock then outstanding shall be next entitled to be first paid out of
the assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $100.00 per share (the "Junior Convertible Preferred
Stock Stated Value") plus an amount equal to all dividends (whether or not
earned or declared) on such shares accrued and unpaid thereon to the date of
final distribution, before any payment shall be made or any assets distributed
to the holders of any of the Junior Stock. Except as provided in the preceding
sentence, holders of the Junior Convertible Preferred Stock shall not be
entitled to any distribution in the event of liquidation, dissolution or winding
up of the affairs of the Corporation. If, upon any such liquidation,
dissolution or winding up of the Corporation, the remaining assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the holders of the Junior Convertible Preferred Stock the full amount to
which they shall be entitled, the holders of the Junior Convertible Preferred
Stock shall share ratably in any distribution of the remaining assets and funds
of the Corporation in proportion to the respective amounts which would otherwise
be payable in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.
(c) For the purposes of this Section 3, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation or merger of the Corporation with one or more
other corporations shall be deemed a liquidation, dissolution or winding up,
voluntary or involuntary.
(d) The liquidation payment with respect to each outstanding
fractional share of Convertible Preferred Stock shall be equal to a ratably
proportionate amount of the liquidation payment with respect to each outstanding
share of Convertible Preferred Stock.
4. VOTING RIGHTS.
(a) RIGHT TO VOTE. Except as otherwise required by law, the Senior
Convertible Preferred Stock, the Junior Convertible Preferred Stock, the Common
Stock and any other capital stock of the Corporation entitled to vote with the
Common Stock shall be deemed to be one class for the purpose of voting, or
giving written consent in lieu of voting, on all matters submitted for the
approval of the stockholders of the Corporation. Each person in whose name
shares of Convertible Preferred Stock shall be registered on the record date for
determining the holders of the Convertible Preferred Stock entitled to vote at
any meeting of stockholders (or adjournment thereof) or to consent to corporate
action in writing without a meeting shall be entitled to, at such meeting or
with respect to such action, one vote for each share of Common Stock of the
Corporation into which each share of Convertible Preferred Stock registered in
the name of such person on such record date could be converted (with any
fractional share determined on an aggregate conversion basis being rounded to
the nearest whole share).
(b) SIGNIFICANT EVENTS.
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(i) During such time as any shares of Senior Convertible
Preferred Stock are outstanding, the Corporation will not, without the
affirmative vote or consent of the holders of at least two-thirds of the
issued and outstanding shares of Senior Convertible Preferred Stock voting
together as one single and separate class, (A) create, authorize or issue
(including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) any class or series of shares ranking on
a parity with or prior to the Senior Convertible Preferred Stock, either as
to dividends upon voluntary or involuntary liquidation, dissolution or
winding up, (B) increase the authorized shares of, or issue (including on
conversion or exchange of any convertible or exchangeable securities or by
reclassification) any shares of Senior Convertible Preferred Stock,
(C) amend, alter, waive the application of, or repeal (whether by merger,
consolidation or otherwise) any provision of the Certificate of
Incorporation of the Corporation, enter into any agreement or take any
other corporate action which in any manner would alter, change or otherwise
adversely affect the powers, rights or preferences of the Senior
Convertible Preferred Stock, (D) effect the reorganization,
recapitalization, liquidation, dissolution or winding up of the
Corporation, or the sale, lease, conveyance or exchange of all or
substantially all of the assets, property or business of the Corporation,
or the merger or consolidation of the Corporation with or into any other
corporation, if such transaction in any manner would alter, change or
otherwise adversely affect the powers, rights or preferences of the Senior
Convertible Preferred Stock or (E) take any action which would cause a
dividend or other distribution to be deemed to be received by the holders
of the Senior Convertible Preferred Stock for federal income tax purposes
unless such dividend or other distribution is actually received by such
holders.
(ii) During such time as any shares of Junior Convertible
Preferred Stock are outstanding, the Corporation will not, without the
affirmative vote or consent of the holders of at least two-thirds of the
issued and outstanding shares of Junior Convertible Preferred Stock voting
together as a separate class, (A) create, authorize or issue (including on
conversion or exchange of any convertible or exchangeable securities or by
reclassification) any class or series of shares ranking on a parity with or
prior to the Junior Convertible Preferred Stock, either as to dividends or
redemption or upon voluntary or involuntary liquidation, dissolution or
winding up, (B) increase the authorized shares of, or issue (including on
conversion or exchange of any convertible or exchangeable securities or by
reclassification) any shares of Junior Convertible Preferred Stock,
(C) amend, alter, waive the application of, or repeal (whether by merger,
consolidation or otherwise) any provision of the Certificate of
Incorporation of the Corporation, enter into any agreement or take any
other corporate action which in any manner would alter, change or otherwise
adversely affect the powers, rights or preferences of the Junior
Convertible Preferred Stock, (D) effect the reorganization,
recapitalization, liquidation, dissolution or winding up of the
Corporation, or the sale, lease, conveyance or exchange of all or
substantially all of the assets, property or business of the Corporation,
or the merger or consolidation of the Corporation with or into any other
corporation, if such transaction in any manner would alter, change or
otherwise adversely affect the powers, rights or preferences of the Junior
Convertible Preferred Stock or (E) take any action which would cause a
dividend or other distribution to be deemed to be received by the holders
of the Junior Convertible Preferred Stock for federal income tax purposes
unless such dividend or other distribution is actually received by such
holders.
(c) WRITTEN CONSENT. Whenever holders of the Convertible Preferred
Stock are required or permitted to take any action by vote, such action may be
taken without a meeting by written consent, setting forth the action so taken
and signed by the holders of the outstanding Senior
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Convertible Preferred Stock or Junior Convertible Preferred Stock, as the case
may be, 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 such shares entitled
to vote thereon were present and voted.
5. CONVERSION. Holders of the Convertible Preferred Stock shall
have the following conversion rights (collectively, the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series A Senior Preferred Stock,
Series B Senior Preferred Stock and Junior Convertible Preferred Stock shall be
convertible, at the option of the holder thereof, at any time and from time to
time, into such number of validly issued, fully paid and nonassessable shares of
Common Stock of the Corporation, as is determined by dividing the Series A
Senior Preferred Stock Stated Value, the Series B Senior Preferred Stock Stated
Value or the Junior Convertible Preferred Stock Stated Value, as the case may
be, by the respective "Conversion Prices" (as defined below) in effect at the
time of the conversion; provided, however, that if such share shall be called
for redemption pursuant to Section 5(h), it may not be converted after the
redemption date unless the Corporation shall have failed to pay or provide for
the payment of the redemption price therefor (in accordance with Section 5(h)).
The Conversion Prices initially in effect shall be $2.6716 for the Series A
Senior Preferred Stock (the "Series A Senior Preferred Stock Conversion Price"),
$2.6564 for the Series B Senior Preferred Stock (the "Series B Senior Preferred
Stock Conversion Price"), and $5.6085 for the Junior Convertible Preferred Stock
(the "Junior Preferred Stock Conversion Price") (the Series A Senior Preferred
Stock Conversion Price, the Series B Senior Preferred Stock Conversion Price,
and the Junior Preferred Stock Conversion Price, collectively the "Conversion
Prices" and each individually, a "Conversion Price"). Such initial Conversion
Prices, and the rate at which shares of Convertible Preferred Stock may be
converted into shares of Common Stock, shall be subject to adjustment as
provided in Section 5(d) below.
(b) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of the Convertible Preferred Stock, but in lieu thereof,
the Corporation shall pay a cash adjustment in respect of such fractional
interest in an amount equal to such fractional interest multiplied by the Market
Price of a share of Common Stock on the date on which such shares of Convertible
Preferred Stock are deemed to have been converted.
(c) MECHANICS OF CONVERSION.
(i) In order for a holder of the Convertible Preferred Stock to
convert shares of Convertible Preferred Stock into shares of Common Stock,
such holder shall surrender the certificate or certificates for such shares
of Convertible Preferred Stock, at the office of the transfer agent for the
Convertible Preferred Stock (or at the principal office of the Corporation
if the Corporation serves as its own transfer agent), together with written
notice that such holder elects to convert all or any number of the shares
of the Convertible Preferred Stock represented by such certificate or
certificates. Such notice shall state such holder's name or the names of
the nominees in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. If required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by
a written instrument or instruments of transfer, in form satisfactory to
the Corporation, duly executed
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by the registered holder or his or its attorney duly authorized in writing.
The date on which the transfer agent (or the Corporation, if the
Corporation serves as its own transfer agent) receives such certificate or
certificates and notice shall be the conversion date ("Conversion Date").
As soon as practicable, and in any event within five business days, after
the Conversion Date, the Corporation shall issue and deliver, or cause to
be issued and delivered, to such holder of Convertible Preferred Stock, or
to his or its nominees, (i) a certificate or certificates for the number of
validly issued, fully paid and nonassessable shares of Common Stock to
which such holder shall be entitled upon conversion and (ii) if fewer than
the full number of shares of Convertible Preferred Stock evidenced by the
surrendered certificate or certificates are being converted, a new
certificate or certificates of like tenor for the number of shares
evidenced by such surrendered certificate or certificates less the number
of shares converted.
(ii) During such times as any shares of Convertible Preferred
Stock are outstanding, the Corporation shall reserve and keep available out
of its authorized but unissued stock, for the purpose of effecting the
conversion of Convertible Preferred Stock, such number of its duly
authorized shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of Convertible Preferred
Stock.
(iii) All shares of Convertible Preferred Stock which shall
have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares
(including the rights, if any, to receive notices and to vote) shall
immediately cease and terminate on the Conversion Date, except only the
right of the holders thereof to receive shares of Common Stock in exchange
therefor. Such conversions shall be deemed to have been made at the close
of business on the Conversion Date and the converting holder shall be
treated for all purposes as having become the record holder of such Common
Stock at such time. Any shares of Convertible Preferred Stock so converted
shall be retired and canceled and shall not be reissued, and the
Corporation may from time to time take such appropriate action as may be
necessary to reduce the authorized Convertible Preferred Stock accordingly.
(d) ANTI-DILUTION PROVISIONS.
(i) ADJUSTMENTS; CAPITAL STOCK. The Series A Senior Preferred
Stock Conversion Price set forth above shall be subject to adjustment from
time to time as hereinafter provided. For purposes of this Section 5, the
term "Capital Stock" as used herein includes the Corporation's Common Stock
and shall also include any capital stock of any class of the Corporation
thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate
in dividends and in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
(ii) ADJUSTMENT OF SERIES A SENIOR PREFERRED STOCK CONVERSION
PRICE UPON ISSUANCE OF ADDITIONAL SHARES OF CAPITAL STOCK.
(A) In case the Corporation, at any time or from time to
time after the Issue Date shall issue or sell Additional Shares of
Capital Stock without consideration or for a consideration per share
less than the greater of the Series A Senior Preferred Stock
Conversion Price or the Market Price in effect, in each case, on the
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date of such issue or sale, then, and in each such case, subject to
Section 5(d)(viii), the Series A Senior Preferred Stock Conversion
Price shall be reduced, concurrently with such issue or sale, to a
price (calculated to the nearest .001 of a cent) determined by
multiplying such Series A Senior Preferred Stock Conversion Price by a
fraction:
(1) the numerator of which shall be (a) the number of
shares of Capital Stock outstanding immediately prior to such
issue or sale plus (b) the number of shares of Capital Stock
which the aggregate consideration received by the Corporation for
the total number of such Additional Shares of Capital Stock so
issued or sold would purchase at the greater of such Market Price
or such Series A Senior Preferred Stock Conversion Price, and
(2) the denominator of which shall be the number of shares
of Capital Stock outstanding immediately after such issue or
sale,
provided that, for the purposes of this Section 5(d)(ii)(A),
(w) immediately after any Additional Shares of Capital Stock are deemed to
have been issued pursuant to Section 5(d)(iii) or 5(d)(iv), such Additional
Shares shall be deemed to be outstanding, and (x) treasury shares shall not
be deemed to be outstanding; and provided further that, for the purposes of
this Section 5(d)(ii)(A), (y) the crediting of shares of the Corporation's
Common Stock to participating real estate salespersons under the
Corporation's Deferred Equity Program which was adopted by the Corporation
on October 18, 1989 shall cause an adjustment in the Series A Senior
Preferred Stock Conversion Price concurrently with such crediting of the
shares of the Corporation's Common Stock and (z) the issuance of such
shares previously credited to participating real estate salespersons under
the Corporation's Deferred Equity Program shall not cause an adjustment in
the Series A Senior Preferred Stock Conversion Price.
(B) In case the Corporation, at any time or from time to
time after the Issue Date, shall declare, order, pay or make a
dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or
property or Options by way of dividend or spinoff, reclassification,
recapitalization or similar corporate rearrangement) on the Capital
Stock, other than (1) a dividend payable in Additional Shares of
Capital Stock or in Options for Capital Stock or Convertible
Securities or (2) a dividend payable in cash or other property and
declared out of retained earnings of the Corporation, then, and in
each such case, subject to Section 5(d)(viii), the Series A Senior
Preferred Stock Conversion Price in effect immediately prior to the
close of business on the record date fixed for the determination of
holders of any class of securities entitled to receive such dividend
or distribution shall be reduced, effective as of the close of
business on such record date, to a price (calculated to the nearest
.001 of a cent) determined by multiplying the Series A Senior
Preferred Stock Conversion Price by a fraction:
(1) the numerator of which shall be the Market Price in
effect on such record date or, if any class of Capital Stock
trades on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading, less the value of such
dividend or distribution which has not been declared out of
retained earnings (as determined in good faith by the Board of
Directors of the Corporation) applicable to one share of Capital
Stock, and
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(2) the denominator of which shall be such Market Price.
(iii) TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In
case the Corporation, at any time or from time to time after the Issue
Date, shall issue, sell, grant or assume, or shall fix a record date for
the determination of holders of any class of securities entitled to
receive, any Options or Convertible Securities, then, and in each such
case, the maximum number of Additional Shares of Capital Stock (as set
forth in the instrument relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such number) issuable upon
the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securi-
ties, shall be deemed to be Additional Shares of Capital Stock issued as of
the time of such issue, sale, grant or assumption or, in case such a record
date shall have been fixed, as of the close of business on such record
date, provided that such Additional Shares of Capital Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to Section 5(d)(v)) of such shares would be less than the greater
of the applicable Conversion Price or the Market Price in effect, in each
case, on the date of and immediately prior to such issue, sale, grant or
assumption or immediately prior to the close of business on such record
date or, if the Capital Stock trades on an ex-dividend basis, on the date
prior to the commencement of ex-dividend trading, as the case may be, and
provided, further, that in any such case in which Additional Shares of
Capital Stock are deemed to be issued,
(A) no further adjustment of the Series A Senior Preferred
Conversion Price shall be made upon the subsequent issue or sale of
Additional Shares of Capital Stock or Convertible Securities upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any change
in the consideration payable to the Corporation, or change in the
number of Additional Shares of Capital Stock issuable, upon the
exercise, conversion or exchange thereof (by change of rate or
otherwise), the Conversion Price computed upon the original issue,
sale, grant or assumption thereof (or upon the occurrence of the
record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such change becoming effective, be
recomputed to reflect such change insofar as it affects such Options,
or the rights of conversion or exchange under such Convertible
Securities, which are outstanding at such time;
(C) upon the expiration of any such Options or of the
rights of conversion or exchange under any such Convertible Securities
which shall not have been exercised (or upon purchase by the
Corporation and cancellation or retirement of any such Options which
shall not have been exercised or of any such Convertible Securities
the rights of conversion or exchange under which shall not have been
exercised), the Conversion Price computed upon the original issue,
sale, grant or assumption thereon (or upon the occurrence of the
record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as if:
(1) in the case of Options for Capital Stock or of
Convertible Securities, the only Additional Shares of Capital
Stock issued or sold (or
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deemed issued or sold) were the Additional Shares of Capital
Stock, if any, actually issued or sold upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor were (a) an
amount equal to (i) the consideration actually received by the
Corporation for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus (ii) the consideration
actually received by the Corporation upon such exercise, minus
(iii) the consideration paid by the Corporation for any purchase
of such Options which were not exercised, or (b) an amount equal
to (i) the consideration actually received by the Corporation for
the issue, sale, grant or assumption of all such Convertible
Securities which were actually converted or exchanged, plus (ii)
the additional consideration, if any, actually received by the
Corporation upon such conversion or exchange, minus (iii) the
excess, if any, of the consideration paid by the Corporation for
any purchase of such Convertible Securities, the rights of
conversion or exchange under which were not exercised, over an
amount that would be equal to the fair value (as determined in
good faith by the Board of Directors of the Corporation) of the
Convertible Securities so purchased if such Convertible
Securities were not convertible into or exchangeable for
Additional Shares of Capital Stock, and
(2) in the case of Options for Convertible Securities, only
the Convertible Securities, if any, actually issued or sold upon
the exercise of such Options were issued at the time of the
issue, sale, grant or assumption of such Options, and the
consideration received by the Corporation for the Additional
Shares of Capital Stock deemed to have then been issued were an
amount equal to (a) the consideration actually received by the
Corporation for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus (b) the consideration
deemed to have been received by the Corporation (pursuant to
Section 5(d)(v)) upon the issue or sale of the Convertible
Securities with respect to which such Options were actually exer-
cised, minus (c) the consideration paid by the Corporation for
any purchase of such Options which were not exercised.
(iv) TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC.; CERTAIN
STOCK REPURCHASES.
(A) In case the Corporation, at any time or from time to time
after the Issue Date, shall declare or pay any dividend or other
distribution on the Capital Stock payable in Capital Stock, or shall
effect a subdivision of the outstanding shares of Capital Stock into a
greater number of shares of Capital Stock (by reclassification or
otherwise than by payment of a dividend in Capital Stock), then, and
in each such case, Additional Shares of Capital Stock shall be deemed
to have been issued (1) in the case of any such dividend, immediately
after the close of business on the record date for the determination
of holders of any class of securities entitled to receive such
dividend, or (2) in the case of any such subdivision, at the close of
business on the day immediately prior to the day upon which such
corporate action becomes effective.
(B) If the Corporation at any time or from time to time after
the Issue Date shall, directly or indirectly, including through a
Subsidiary (as defined below) or
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otherwise, purchase, redeem or otherwise acquire (a "Repurchase") any
of its Capital Stock at a price per share greater than the Market
Price, then the Series A Senior Preferred Stock Conversion Price upon
each such Repurchase shall be adjusted to the price determined by
multiplying the Series A Senior Preferred Stock Conversion Price by a
fraction (1) the numerator of which shall be the number of shares of
Capital Stock outstanding immediately prior to the such Repurchase
minus the number of shares of Capital Stock which the aggregate
consideration for total repurchased Capital Stock would purchase at
the Market Price; and (2) the denominator of which shall be the number
of shares of Capital Stock outstanding immediately after such
Repurchase. For the purposes of this Subsection 5(d)(iv)(B), the date
as of which the Series A Senior Preferred Stock Conversion Price shall
be computed shall be the earlier of (x) the date on which the
Corporation shall enter into contract for the Repurchase of such
Capital Stock, or (y) the date of the actual Repurchase of such
Capital Stock. For purposes of this Section 5(d)(iv)(B), a Repurchase
of Convertible Securities shall be deemed to be a Repurchase of the
underlying Capital Stock, and the computation herein required shall be
made on the basis of the full exercise, conversion or exchange for
such Convertible Securities on the date as of which such computation
is required hereby to be made even if such Convertible Securities are
not exercisable, convertible or exchangeable on such date.
(v) COMPUTATION OF CONSIDERATION. For the purposes of this
Section 5:
(A) The consideration for the issue or sale of
any Additional Shares of Capital Stock or for the issue, sale, grant
or assumption of any Options or Convertible Securities, irrespective
of the accounting treatment of such consideration,
(1) insofar as it consists of cash, shall be computed as
the amount of cash received by the Corporation, and insofar as it
consists of securities or other non-cash consideration, shall be
computed as of the date immediately preceding such issue, sale,
grant or assumption as the fair value (as determined in good
faith by the Board of Directors of the Corporation) of such
consideration (or, if such consideration is received for the
issue or sale of Additional Shares of Capital Stock and the
Market Price thereof is less than the fair value, as so
determined, of such consideration, then such consideration shall
be computed as the Market Price of such Additional Shares of
Capital Stock), in each case without deducting any expenses paid
or incurred by the Corporation, any commissions or compensation
paid or concessions or discounts allowed to underwriters, dealers
or others performing similar services and any accrued interest or
dividends in connection with such issue or sale, and
(2) in case Additional Shares of Capital Stock are issued
or sold or Options or Convertible Securities are issued, sold,
granted or assumed together with other stock or securities or
other assets of the Corporation for a consideration which covers
both, shall be the proportion of such consideration so received,
computed as provided in subsection (1) above, allocable to such
Additional Shares of Capital Stock or Options or Convertible
Securities, as the case may be, all as determined in good faith
by the Board of Directors of the Corporation.
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(B) All Additional Shares of Capital Stock, Options or
Convertible Securities issued in payment of any dividend or other
distribution on any class of stock of the Corporation and all
Additional Shares of Capital Stock issued to effect a subdivision of
the outstanding shares of Capital Stock into a greater number of
shares of Capital Stock (by reclassification or otherwise than by
payment of a dividend in Capital Stock) shall be deemed to have been
issued without consideration.
(C) Additional Shares of Capital Stock deemed to have been
issued for consideration pursuant to Section 5(d)(iii), relating to
Options and Convertible Securities, shall be deemed to have been
issued for a consideration per share determined by dividing
(1) the total amount, if any, received and receivable by
the Corporation as consideration for the issue, sale, grant or
assumption of the Options or Convertible Securities in question,
plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to
any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise
in full of such Options or the conversion or exchange of such
Convertible Securities or, in the case of Options for Convertible
Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities, in each case comprising such consideration as
provided in the foregoing subsection (A), by
(2) the maximum number of shares of Capital Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(D) In case the Corporation shall issue any Additional
Shares of Capital Stock, Options or Convertible Securities in
connection with the acquisition by the Corporation of the stock or
assets of any other corporation or the merger of any other corporation
into the Corporation under circumstances where on the date of issue of
such Additional Shares of Capital Stock, Options or Convertible
Securities the consideration received for such Additional Shares of
Capital Stock or deemed to have been received for the Additional
Shares of Capital Stock deemed to be issued pursuant to Section
5(d)(iii) is less than the Market Price of the Capital Stock in effect
immediately prior to such issue but on the date the number of
Additional Shares of Capital Stock or the amount and the exercise
price or conversion price of such Options or Convertible Securities to
be so issued were set forth in a binding agreement between the
Corporation and the other party or parties to such transaction the
consideration received for such Additional Shares of Capital Stock or
deemed to have been received for the Additional Shares of Capital
Stock deemed to be issued pursuant to Section 5(d)(iii) would not have
been less than the Market Price of the Capital Stock then in effect,
such Additional Shares of Capital Stock shall not be deemed to have
been issued for less than the Market Price of the Capital Stock if
such terms so set forth in such binding agreement are not changed
prior to the date of issue.
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(vi) ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding
shares of Capital Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Capital
Stock, the Conversion Prices in effect immediately prior to such
combination or consolidation shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately increased.
(vii) DILUTION IN CASE OF OTHER SECURITIES. In case
any Other Securities shall be issued or sold or shall become subject to
issue or sale upon the conversion or exchange of any securities of the
Corporation or to subscription, purchase or other acquisition pursuant to
any options issued or granted by the Corporation for a consideration such
as to dilute, on a basis to which the standards established in the other
provisions of this Section 5 are applicable, the conversion rights of the
holders of the Series A Senior Preferred Stock, then, and in each such
case, the computations, adjustments and readjustments provided for in this
Section 5 with respect to the applicable Conversion Price shall be made as
nearly as possible in the manner so provided and applied to determine the
amount of Other Securities from time to time receivable upon the conversion
of the Series A Senior Preferred Stock, so as to protect the holders of the
Series A Senior Preferred Stock against the effect of such dilution.
(viii) MINIMUM ADJUSTMENT AND TIMING OF ADJUSTMENT OF CONVERSION
PRICE.
(A) If the amount of any adjustment of the Series A Senior
Preferred Stock Conversion Price required pursuant to this Section 5
would be less than one percent (1%) of such Conversion Price in effect
at the time such adjustment is otherwise so required to be made, such
amount shall be carried forward and adjustment with respect thereto
made at the time of and together with any subsequent adjustment which,
together with such amount and any other amount or amounts so carried
forward, shall aggregate at least one percent (1%) of such Conversion
Price; provided that, upon the conversion of any shares of Series A
Senior Preferred Stock, all adjustments carried forward and not
theretofore made up to and including the date of such conversion
shall, with respect to the Series A Senior Preferred Stock then
converted, be made to the nearest .001 of a cent.
(B) Each Series A Senior Preferred Conversion Price shall
be adjusted within 90 days of the end of each fiscal year of the
Corporation with respect to events subject to the anti-dilution
provisions of the Series A Senior Preferred Stock which have occurred
during such fiscal year; provided that, upon the conversion of any
shares of Series A Senior Preferred Stock, all adjustments carried
forward and not theretofore made up to and including the date of such
conversion shall, with respect to the shares of Series A Senior
Preferred Stock then converted, be made to the nearest .001 of a cent
and provided further that the applicable Series A Senior Preferred
Conversion Price shall also be adjusted prior to any transfer or other
disposition of any Series A Senior Preferred Stock and promptly at any
time upon the request of the holder of any Series A Senior Preferred
Stock, subject to the provisions of clause 5(d)(viii)(A) above.
(ix) CHANGES IN CAPITAL STOCK; SERIES A SENIOR PREFERRED STOCK.
In case at any time the Corporation shall be a party to any transaction
(including, without limitation, a merger, consolidation, sale of all or
substantially all of the Corporation's assets, liquidation or
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<PAGE>
recapitalization of the Capital Stock) in which the previously outstanding
Capital Stock shall be changed into or exchanged for different securities
of the Corporation or common stock or other securities of another
corporation or interests in a noncorporate entity or other property (in-
cluding cash) or any combination of any of the foregoing or in which the
Capital Stock ceases to be a publicly traded security either listed on the
New York Stock Exchange or the American Stock Exchange or quoted by NASDAQ
or any successor thereto or comparable system (each such transaction being
herein called the "Transaction," the date of consummation of the
Transaction being herein called the "Consummation Date," the Corporation
(in the case of a recapitalization of the Capital Stock or any other such
transaction in which the Corporation retains substantially all of its
assets and survives as a corporation) or such other corporation or entity
(in each other case) being herein called the "Acquiring Company," and the
common stock (or equivalent equity interests) of the Acquiring Company
being herein called the "Acquirer's Common Stock"), then, as a condition of
the consummation of the Transaction, lawful and adequate provisions shall
be made so that each holder of Series A Senior Preferred Stock, upon the
conversion thereof at any time on or after the Consummation Date (but
subject, in the case of an election pursuant to clause (B) or (C) below, to
the time limitation hereinafter provided for such election),
(A) shall be entitled to receive, and any Series A Senior
Preferred Stock shall thereafter represent the right to receive, in
lieu of the Common Stock issuable upon such conversion prior to the
Consummation Date, such number of shares of the Acquirer's Common
Stock as are issuable in exchange for each share of Common Stock,
unless the Acquiring Company fails to meet the requirements set forth
in clauses (D), (E) and (F) below, in which case shares of the common
stock of the corporation (herein called a "Parent") which directly or
indirectly controls the Acquiring Company if it meets the requirements
set forth in clauses (D), (E) and (F) below, at an aggregate
conversion price for such number of shares equal to the lesser of (1)
the Conversion Price in effect immediately prior to the Consummation
Date multiplied by a fraction the numerator of which is the aggregate
market price for such number of shares (determined in the same manner
as provided in the definition of Market Price) of the Acquirer's
Common Stock or the Parent's common stock, as the case may be,
immediately prior to the Consummation Date and the denominator of
which is the Market Price per share of Common Stock immediately prior
to the Consummation Date, or (2) the aggregate market price for such
number of shares (as so determined) of the Acquirer's Common Stock or
the Parent's common stock, as the case may be, immediately prior to
the Consummation Date (subject in each case to adjustments from and
after the Consummation Date as nearly equivalent as possible to the
adjustments provided for in this Section 5),
or at the election of the holder of such Series A Senior Preferred Stock
pursuant to notice given to the Corporation on or before the later of (1)
the thirtieth day following the Consummation Date, and (2) the sixtieth day
following the date of delivery or mailing to such holder of the last proxy
statement relating to the vote on the Transaction by the holders of the
Capital Stock,
(B) shall be entitled to receive, and any Series A Senior
Preferred Stock shall thereafter represent the right to receive, in
lieu of the Capital Stock issuable upon such conversion prior to the
Consummation Date, the highest amount of securities or other property
to which such holder would actually have been entitled as
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<PAGE>
a stockholder upon the consummation of the Transaction if such holder
had converted such Series A Senior Preferred Stock immediately prior
thereto (subject to adjustments from and after the Consummation Date
as nearly equivalent as possible to the adjustments provided for in
this Section 5), provided that if a purchase, tender or exchange offer
shall have been made to and accepted by the holders of more than 50%
of the outstanding shares of Capital Stock, and if the holder of such
Series A Senior Preferred Stock so designates in such notice given to
the Corporation, the holder of such Series A Senior Preferred Stock
shall be entitled to receive in lieu thereof, the highest amount of
securities or other property to which such holder would actually have
been entitled as a stockholder if such holder had converted such
Series A Senior Preferred Stock prior to the expiration of such
purchase, tender or exchange offer and accepted such offer (subject to
adjustments from and after the consummation of such purchase, tender
or exchange offer as nearly equivalent as possible to the adjustments
provided for in this Section 5),
or, if neither the Acquiring Company nor the Parent meets the requirements
set forth in clauses (D), (E) and (F) below, at the election of the holder
of Series A Senior Preferred Stock pursuant to notice given to the
Corporation on or before the later of (1) the thirtieth day following the
Consummation Date, and (2) the sixtieth day following the date of delivery
or mailing to such holder of the last proxy statement relating to the vote
on the Transaction by the holders of the Common Stock,
(C) shall be entitled to receive, within 15 days after such
election, in full satisfaction of the Conversion Rights afforded to
the Series A Senior Preferred Stock held by such holder under this
Section 5, an amount equal to the fair market value of such conversion
rights as determined by an independent investment banker (with an
established national reputation as a valuer of equity securities)
selected by the Corporation, such fair market value to be determined
with regard to all material relevant factors but without regard to the
effects on such value of the Transaction.
The Corporation agrees to obtain, and deliver to each holder of Series A
Senior Preferred Stock a copy of, the determination of an independent
investment banker (selected by the Corporation and reasonably satisfactory
to the holders of Series A Senior Preferred Stock) necessary for the
valuation under clause (C) above within 15 days after the Consummation Date
of any Transaction to which clause (C) is applicable.
The requirements referred to above in the case of the Acquiring
Company or its Parent are that immediately after the Consummation Date:
(D) it is a solvent corporation organized under the laws of
any State of the United States of America having its common stock
listed on the New York Stock Exchange or the American Stock Exchange
or quoted by NASDAQ or any successor thereto or comparable system, and
such common stock continues to meet such requirements for such listing
or quotation,
(E) it is required to file, and in each of its three fiscal
years immediately preceding the Consummation Date has filed, reports
with the Securities and Exchange Commission pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, and
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<PAGE>
(F) in the case of the Parent, such Parent is required to
include the Acquiring Company in the consolidated financial statements
contained in the Parent's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission and is not itself included in the
consolidated financial statements of any other Person (other than its
consolidated subsidiaries).
Notwithstanding anything contained herein to the contrary, the Corporation
shall not effect any Transaction unless prior to the consummation thereof
each corporation or entity (other than the Corporation) which may be
required to deliver any securities or other property upon the conversion of
Series A Senior Preferred Stock, the surrender of Series A Senior Preferred
Stock or the satisfaction of conversion rights as provided herein shall
assume, by written instrument delivered to each holder of Series A Senior
Preferred Stock, the obligation to deliver to such holder such securities
or other property to which, in accordance with the foregoing provisions,
such holder may be entitled, and such corporation or entity shall have
similarly delivered to each holder of Series A Senior Preferred Stock an
opinion of counsel for such corporation or entity, satisfactory to each
holder of Series A Senior Preferred Stock, which opinion shall state that
all the outstanding Series A Senior Preferred Stock, including, without
limitation, the conversion provisions applicable thereto, if any, shall
thereafter continue in full force and effect and shall be enforceable
against such corporation or entity in accordance with the terms hereof and
thereof, together with such other matters as such holders may reasonably
request.
(x) TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC.; CERTAIN
TRANSACTIONS. In case the Corporation, at any time or from time to time
after the Issue Date, shall be a party to any Transaction, each holder of
Series B Senior Preferred Stock and each holder of Junior Convertible
Preferred Stock, upon the exercise thereof at any time on or after the
Consummation Date shall be entitled to receive, and such Series B Senior
Preferred Stock and Junior Convertible Preferred Stock shall thereafter
represent the right to receive, in lieu of the Common Stock issuable upon
conversion prior to the Consummation Date the kind and amount of securities
or property (including cash) which it would have owned or have been
entitled to receive after the happening of such Transaction had such Series
B Senior Preferred Stock or Junior Convertible Preferred Stock been
converted immediately prior to such Transaction.
Notwithstanding anything contained herein to the contrary, the
Corporation shall not effect any Transaction unless prior to the
consummation thereof each corporation or entity (including, without
limitation, the Corporation) which may be required to deliver any secu-
rities or property (including cash) upon the conversion of Series B Senior
Preferred Stock or Junior Convertible Preferred Stock, the surrender of
Series B Senior Preferred Stock or Junior Convertible Preferred Stock or
the satisfaction of conversion rights as provided herein shall assume, by
written instrument delivered to each holder of Series B Senior Preferred
Stock or Junior Convertible Preferred Stock, the obligation to deliver to
such holder such securities or other property to which, in accordance with
the foregoing provisions, such holder may be entitled, and such corporation
or entity shall have similarly delivered to each holder of Series B Senior
Preferred Stock or Junior Convertible Preferred Stock an opinion of counsel
for such corporation or entity, satisfactory to each such holder, which
opinion shall state that all the rights and privileges, including without
limitation, conversion privileges of the Series B Senior Preferred Stock
and the Junior Convertible Preferred Stock shall thereafter continue in
full force and effect and shall be enforceable against such
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<PAGE>
corporation or entity in accordance with the terms hereof and thereof,
together with such other matters as such holders may reasonably request.
In case the Corporation shall (i) pay a dividend in shares of
Capital Stock or securities convertible into Capital Stock or make a
distribution to all holders of shares of Capital Stock in shares of Capital
Stock or securities convertible into Capital Stock, (ii) subdivide its
outstanding shares of Capital Stock, (iii) combine its outstanding shares
of Capital Stock into a smaller number of shares of Capital Stock or (iv)
issue by reclassification of its shares of Capital Stock other securities
of the Corporation, the Series B Preferred Stock Conversion Price and the
Junior Preferred Stock Conversion Price shall be adjusted (to the nearest
cent) by multiplying, (x) in the case of the Series B Senior Preferred
Stock, the Series B Preferred Stock Conversion Price immediately prior to
such adjustment by a fraction, of which the numerator shall be the number
of shares of Capital Stock outstanding immediately prior to the occurence
of such event, and of which the denominator shall be the number of shares
of Capital Stock outstanding (including any convertible securities issued
pursuant to clause (i) or (iv) above on an as converted basis) immediately
thereafter, or (y) in the case of the Junior Preferred Stock Conversion
Price, the Junior Preferred Stock Conversion Price immediately prior to
such adjustment by a fraction, of which the numerator shall be the number
of shares of Capital Stock outstanding immediately prior to the occurrence
of such event, and of which the denominator shall be the number of shares
of Capital Stock outstanding (including any convertible securities issued
pursuant to clause (i) or (iv) above on an as converted basis) immediately
thereafter. An adjustment made pursuant to the foregoing sentence shall
become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(xi) CERTAIN ISSUES AND REPURCHASES EXCEPTED. Anything herein to
the contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Series A Senior Preferred Conversion Prices in the
case of (A) the issuance of shares of the Senior Convertible Preferred
Stock on the Issue Date and the issuance of shares of Series A Senior
Preferred Stock and Series B Senior Preferred Stock pursuant to this
Article IV upon the filing of the Certificate of Amendment as described
herein, (B) the issuance of shares of the Junior Convertible Preferred
Stock on the Issue Date, (C) the issuance of warrants to purchase shares of
Common Stock (the "Warburg Warrants") concurrently with the issuance of the
Senior Convertible Preferred Stock on January 29, 1993 (the "Restructuring
Date"), and any amendments to such Warburg Warrants through the date of
filing of the Certificate of Amendment, (D) the issuance to The Prudential
Insurance Company of America ("Prudential") of warrants to purchase shares
of Common Stock (the "New Prudential Warrants") concurrently with the
issuance of the Junior Convertible Preferred Stock, and any amendments to
such New Prudential Warrants through the date of filing of the Certificate
of Amendment, (E) the issuance of warrants to purchase shares of Common
Stock (the "1994 Warrants") concurrently with the filing of this
Certificate of Amendment, and any amendments to such 1994 Warrants, (F) the
issuance of shares of Capital Stock issuable upon conversion of the
Convertible Preferred Stock or upon exercise of the Warburg Warrants, the
New Prudential Warrants, the 1994 Warrants, the Stock Subscription Warrant,
dated as of November 25, 1986, by the Corporation to Prudential or any
other Option or right outstanding on the Issue Date to purchase or
otherwise acquire Capital Stock, (G) the granting by the Corporation, after
the Issue Date, of Options to purchase Capital Stock or the sale or grant,
after the Issue Date, of Capital Stock, pursuant to option or stock
purchase plans or agreements, or other incentive compensation plans or
agreements, heretofore or hereafter
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adopted in respect of, or entered into with, directors, officers, employees
or salespersons (other than pursuant to the Corporation's Preferred Equity
Program) of the Corporation or any of its Subsidiaries in connection with
their employment, being directors or acting as salesperson, provided that
the consideration for the sale or grant of any such Options or Capital
Stock (including the exercise price of any Option) is at least equal to the
Market Price of such shares of Capital Stock on the date such Options are
granted or the date established by any such plan for a purchase thereunder,
as the case may be, (H) the Repurchase from any director, officer, employee
or salesperson of the Corporation or any Subsidiary of any Option or share
of Capital Stock upon his resignation or other termination from being a
director, officer, employee or salesperson of the Corporation or any
Subsidiary or (I) the issuance of shares of Common Stock in payment of the
redemption price of the Rights issued pursuant to the Rights Agreement,
dated as of March 13, 1989, as amended, between the Corporation and Bank of
America N.T. & S.A., as Rights Agent.
(xii) NOTICE OF ADJUSTMENT. Upon the occurrence of any event
requiring an adjustment of any Conversion Price, then and in each such case
the Corporation shall promptly deliver to each holder of Convertible
Preferred Stock a certificate signed by the President or any Vice President
and the Secretary or any Assistant Secretary of the Corporation (an
"Officers' Certificate") stating the applicable Conversion Price resulting
from such adjustment and the increase or decrease, if any, in the number of
shares of Common Stock issuable upon conversion of such Convertible
Preferred Stock, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Within 90
days after each fiscal year in which any such adjustment shall have
occurred, or within 30 days after any request therefor by any holder of
Convertible Preferred Stock stating that such holder contemplates
conversion of such Convertible Preferred Stock, the Corporation will obtain
and deliver to each holder of Convertible Preferred Stock the opinion of
its regular independent auditors or another firm of independent public
accountants of recognized national standing selected by the Corporation's
Board of Directors who are satisfactory to the registered holders of a
majority of the Convertible Preferred Stock, which opinion shall confirm
the statements in the most recent Officers' Certificate delivered under
this Section 5(d)(xi). It is understood and agreed that the independent
public accountant rendering any such opinion shall be entitled expressly to
assume in such opinion the accuracy of any determination of fair value made
by the Board of Directors of the Corporation pursuant to Section 5(d)(v).
(xiii) OTHER NOTICES. In case at any time:
(A) the Corporation shall declare or pay to the holders of
Capital Stock any dividend other than a regular periodic cash dividend
or any periodic cash dividend in excess of 115% of the cash dividend
for the comparable fiscal period in the immediately preceding fiscal
year;
(B) the Corporation shall declare or pay any dividend upon
Capital Stock payable in stock or make any special dividend or other
distribution (other than regular cash dividends) to the holders of
Capital Stock;
(C) the Corporation shall offer for subscription pro rata
to the holders of Capital Stock any additional shares of stock of any
class or other rights;
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(D) there shall be any capital reorganization, or
reclassification of the Capital Stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets to, another corporation or other
entity;
(E) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation; or
(F) there shall be any other Transaction;
then, in any one or more of such cases, the Corporation shall give to each
holder of Convertible Preferred Stock (1) at least 15 days prior to any
event referred to in clause (A) or (B) above, at least 30 days prior to any
event referred to in clause (C), (D) or (E) above, and within five business
days after it has knowledge of any pending Transaction, written notice of
the date on which the books of the Corporation shall close or a record
shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such reorganization, re-
classification, consolidation, merger, sale, dissolution, liquidation,
winding-up or Transaction and (2) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or Transaction known to the Corporation, at least 30 days prior
written notice of the date (or, if not then known, a reasonable
approximation thereof by the Corporation) when the same shall take place.
Such notice in accordance with the foregoing clause (1) shall also specify,
in the case of any such dividend, distribution or subscription rights, the
date on which the holders of Capital Stock shall be entitled thereto, and
such notice in accordance with the foregoing clause (2) shall also specify
the date on which the holders of Capital Stock shall be entitled to
exchange their Capital Stock for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, winding-up or Transaction, as the case may be.
Such notice shall also state that the action in question or the record date
is subject to the effectiveness of a registration statement under the
Securities Act of 1933, as amended, or to a favorable vote of security
holders, if either is required.
(xiv) CERTAIN EVENTS. If any event occurs as to which, in
the good faith judgment of the Board of Directors of the Corporation, the
other provisions of this Section 5 are not strictly applicable or if
strictly applicable would not fairly protect the conversion rights of the
holders of the Series A Senior Preferred Stock in accordance with the
essential intent and principles of such provisions, then the Board of
Directors of the Corporation shall appoint its regular independent auditors
or another firm of independent public accountants of recognized national
standing who are satisfactory to the holders of a majority of the Series A
Senior Preferred Stock which shall give their opinion upon the adjustment,
if any, on a basis consistent with such essential intent and principles,
necessary to preserve, without dilution, the rights of the holders of the
Series A Senior Preferred Stock. Upon receipt of such opinion, the Board
of Directors of the Corporation shall forthwith make the adjustments
described therein; provided, that no such adjustment shall have the effect
of increasing any Series A Senior Preferred Stock Conversion Price as
otherwise determined pursuant to this Section 5. The Corporation may make
such reductions in the Series A Senior Preferred Conversion Price or
increase in the number of shares of Common Stock purchasable hereunder as
it deems advisable, including any reductions or increases, as the case may
be, necessary to ensure that any event treated for Federal income tax
purposes as a distribution of stock or stock rights not be taxable to
recipients.
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(e) NO IMPAIRMENT. The Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Senior Preferred Stock against impairment.
(f) MANDATORY CONVERSION. If (i) at all times during a two-year
period prior to the date of conversion the ratio of Consolidated Debt to EBITDA
(each as defined below) of the Corporation has not exceeded 3.0:1.0, (ii) on
each Trading Day during a six-month period prior to the date of conversion the
Daily Market Price of the Common Stock has exceeded $8.75 per share, subject to
proportionate adjustment whenever there shall occur a stock split, combination,
reclassification or other similar event involving the Common Stock, and (iii)
the Corporation is in full compliance with all of the terms and conditions of
all agreements pursuant to which the Corporation or any Subsidiary shall have
incurred Indebtedness for borrowed money all, but not less than all, of the then
outstanding shares of Convertible Preferred Stock shall be converted into shares
of Common Stock as provided below. The Corporation shall provide written notice
of the occurrence of the foregoing events giving rise to such mandatory
conversion by United States certified or registered mail, postage prepaid,
mailed not more than 30 days thereafter to all holders of record of the shares
to be converted at such holders' addresses as the same appear on the stock
register of the Corporation. Each such notice shall state the proposed date on
which such mandatory conversion will occur (which date shall not be fewer than
30 days after the date notice thereof is received), the applicable Conversion
Price and the place or places where certificates for shares of the Convertible
Preferred Stock are to be surrendered for conversion. From and after the date
of mandatory conversion, the certificates for the Convertible Preferred Stock
shall be deemed to represent only the shares of Common Stock into which such
shares of Convertible Preferred Stock shall have been converted. The Holder of
such certificates shall surrender such certificates for conversion upon and
pursuant to the request of the Corporation.
(g) CERTAIN DEFINITIONS. For purposes of this Article IV, the
following terms shall have the following meanings:
(i) "ADDITIONAL SHARES OF CAPITAL STOCK" shall mean all
shares (including treasury shares) of Capital Stock issued or sold
(or, pursuant to Sections 5(d)(iii) or 5(d)(iv) deemed to be issued)
by the Corporation after the Issue Date, whether or not subsequently
reacquired or retired by the Corporation, other than shares of Common
Stock issued upon the conversion of the Convertible Preferred Stock.
(ii) "CONSOLIDATED DEBT" shall mean with respect to any
Person, the total Indebtedness of such Person and its Subsidiaries on
a consolidated basis determined in accordance with GAAP.
(iii) "CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares of stock (other than Common Stock)
or securities directly or indirectly convertible into or exchangeable
for Additional Shares of Capital Stock.
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(iv) "DAILY MARKET PRICE" shall mean, on any date specified
herein, (A) if any class of Capital Stock is listed or admitted to
trading on any national securities exchange, the average of the high
and low sale price of shares of each such class of Capital Stock or if
no such sale takes place on such date, the average of the highest
closing bid and lowest closing asked prices thereof on such date, in
each case as officially reported on all national securities exchanges
on which each such class of Capital Stock is then listed or admitted
to trading, or (B) if no shares of any class of Capital Stock are then
listed or admitted to trading on any national securities exchange, the
highest closing price of any class of Capital Stock on such date in
the over-the-counter market as shown by NASDAQ or, if no such shares
of any class of Capital Stock are then quoted in such system, as
published by the National Quotation Bureau, Incorporated or any
similar successor organization, and in either case as reported by any
member firm of the New York Stock Exchange selected by the
Corporation. If no shares of any class of Capital Stock are then
listed or admitted to trading on any national securities exchange and
if no closing bid and asked prices thereof are then so quoted or
published in the over-the-counter market, "Daily Market Price" shall
mean the higher of (x) the book value per share of Capital Stock
(assuming for the purposes of this calculation the economic
equivalence of all shares of all classes of Capital Stock) as
determined on a fully diluted basis in accordance with generally
accepted accounting principles by a firm of independent public
accountants of recognized standing (which may be its regular auditors)
selected by the Board of Directors of the Corporation as of the last
day of any month ending within 60 days preceding the date as of which
the determination is to be made or (y) the fair value per share of
Capital Stock (assuming for the purposes of this calculation the
economic equivalence of all shares of all classes of Capital Stock),
as determined on a fully diluted basis in good faith by an independent
brokerage firm or Standard & Poor's Corporation (as selected by the
Board of Directors of the Corporation), as of a date which is 15 days
preceding the date as of which the determination is to be made.
(v) "EBITDA" shall mean, with respect to any Person, for
any period, the sum of (A) the net income of such Person and its
Subsidiaries on a consolidated basis before taxes, excluding
extraordinary items and income or loss from discontinued operations,
(B) total interest expense of such Person and its Subsidiaries on a
consolidated basis and (C) depreciation and amortization for such
Person and its Subsidiaries on a consolidated basis.
(vi) "GAAP" shall mean generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting
profession.
(vii) "INDEBTEDNESS" shall mean, with respect to any
Person, all items (excluding items of contingency reserves or of
reserves for deferred income taxes) which in accordance with GAAP
would be included in determining total liabilities as shown on the
liability side of a balance sheet of such Person as of the date on
which Indebtedness is to be determined.
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(viii) "ISSUE DATE" shall mean the date on which shares of
Convertible Preferred Stock are first issued by the Corporation.
"Issue Date" with respect to the shares of Series A Senior Preferred
Stock and Series B Senior Preferred Stock outstanding on the date of
filing of the Certificate of Amendment shall be deemed to be the date
of issuance of the respective shares of Existing Senior Convertible
Preferred Stock which were exchanged for or converted into such shares
of Series A Senior Preferred Stock and Series B Senior Preferred
Stock.
(ix) "MARKET PRICE" shall mean, on any date specified
herein, (A) if any class of Capital Stock is listed or admitted to
trading on any national securities exchange, the highest price
obtained by taking the arithmetic mean over a period of 20 consecutive
Trading Days ending the second Trading Day prior to such date of the
average, on each such Trading Day, of the high and low sale price of
shares of each such class of Capital Stock or if no such sale takes
place on such date, the average of the highest closing bid and lowest
closing asked prices thereof on such date, in each case as officially
reported on all national securities exchanges on which each such class
of Capital Stock is then listed or admitted to trading, or (B) if no
shares of any class of Capital Stock are then listed or admitted to
trading on any national securities exchange, the highest closing price
of any class of Capital Stock on such date in the over-the-counter
market as shown by NASDAQ or, if no such shares of any class of
Capital Stock are then quoted in such system, as published by the
National Quotation Bureau, Incorporated or any similar successor
organization, and in either case as reported by any member firm of the
New York Stock Exchange selected by the Corporation. If no shares of
any class of Capital Stock are then listed or admitted to trading on
any national securities exchange and if no closing bid and asked
prices thereof are then so quoted or published in the over-the-counter
market, "Market Price" shall mean the higher of (x) the book value per
share of Capital Stock (assuming for the purposes of this calculation
the economic equivalence of all shares of all classes of Capital
Stock) as determined on a fully diluted basis in accordance with
generally accepted accounting principles by a firm of independent
public accountants of recognized standing (which may be its regular
auditors) selected by the Board of Directors of the Corporation as of
the last day of any month ending within 60 days preceding the date as
of which the determination is to be made or (y) the fair value per
share of Capital Stock (assuming for the purposes of this calculation
the economic equivalence of all shares of all classes of Capital
Stock), as determined on a fully diluted basis in good faith by an
independent brokerage firm or Standard & Poor's Corporation (as
selected by the Board of Directors of the Corporation), as of a date
which is 15 days preceding the date as of which the determination is
to be made.
(x) "OPTIONS" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Additional Shares
of Capital Stock or Convertible Securities.
(xi) "OTHER SECURITIES" shall mean any stock (other than
Capital Stock) and any other securities of the Corporation or any
other Person (corporate or otherwise) which the holders of the
Convertible Preferred Stock at any time shall be entitled to receive,
or shall have received, upon the conversion or partial conversion of
the Convertible Preferred Stock, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in
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replacement of Common Stock or Other Securities pursuant to Section
5(d)(ix) or otherwise.
(xii) "PERSON" shall mean any individual, firm, corporation
or other entity, and shall include any successor (by merger or
otherwise) of such entity.
(xiii) "SUBSIDIARY" shall mean any corporation or other
entity the majority of the outstanding voting shares of which is at
the time owned (either alone or through Subsidiaries or together with
Subsidiaries) by the Corporation or another Subsidiary.
(xiv) "TRADING DAY" shall mean any day on which the New
York Stock Exchange is open for trading on a regular basis.
(xv) "TRANSACTION" shall have the meaning set forth in
Section 5(d)(ix).
(h) JUNIOR CONVERTIBLE PREFERRED STOCK.
(i) In the event that the Corporation undertakes to sell its
Common Stock through an underwritten public offering (an "Offering"), and
if the underwriter advises the Corporation that in order to complete such
Offering on the most favorable terms to the Corporation it is necessary for
the Junior Convertible Preferred Stock to be retired, then the Corporation
may so notify the holders of the Junior Convertible Preferred Stock (the
"Conversion Notice"), and such holders shall, on or prior to the Conversion
Date (as defined below) convert their Junior Convertible Preferred Stock
into Common Stock pursuant to the terms of this Article IV. The holders of
the Junior Convertible Preferred Stock shall be obligated to convert their
Junior Convertible Preferred Stock only if (A) on or prior to the
Conversion Date, all the holders of the Series B Senior Preferred Stock
shall have converted their Series B Senior Preferred Stock into Common
Stock, or all Series B Senior Preferred Stock shall otherwise have been
retired, and (B) the Market Price of the Common Stock at the Conversion
Date is greater than the sum of the Junior Preferred Stock Stated Value
plus accrued dividends per share of Junior Convertible Preferred Stock
(such sum being referred to herein as the "Accreted Value"); PROVIDED that
if at the Conversion Date, the Market Price of the Common Stock is less
than the Accreted Value, then each holder of the Junior Convertible
Preferred Stock must either, at its option (A) convert the Junior
Convertible Preferred Stock into Common Stock on or prior to the Conversion
Date or (B) require the Corporation to redeem the Junior Convertible
Preferred Stock at the Accreted Value, in which case such holder shall
notify the Corporation of its election on or prior to the Conversion Date.
If a holder elects to require the Corporation to redeem the Junior
Convertible Preferred Stock, then the Corporation shall make such
redemption within 60 days after the Conversion Date; PROVIDED that the
Corporation shall be obligated to redeem the Junior Convertible Preferred
Stock only if it has sufficient funds legally available on the redemption
date in order to redeem shares of Junior Convertible Preferred Stock
pursuant to this Section 5(h); PROVIDED FURTHER that if the Board
determines not to proceed with the Offering any notice of redemption shall
be withdrawn and the Corporation's obligation to redeem such shares shall
terminate. "Conversion Date" shall mean the date stated in the Conversion
Notice on or prior to which the holders of the Junior Convertible Preferred
Stock shall be required to convert their Junior Convertible Preferred Stock
in accordance with this Section 5(h). Without the consent of
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<PAGE>
each holder of Junior Convertible Preferred Stock, the Conversion Date may
not be a date earlier than the closing date of the Offering; PROVIDED that
the Conversion Notice may identify the Offering's closing date as "the
closing date," in lieu of using a calendar date.
(ii) If the Corporation shall be required to redeem shares Junior
Convertible Preferred Stock pursuant to Section 5(h)(i), then notice of
such redemption shall be given by United States certified or registered
mail, postage prepaid, mailed not less than thirty (30) days nor more than
sixty (60) days prior to the redemption date, to all holders of record of
the shares to be redeemed at such holders' addresses as the same appear on
the stock register of the Corporation. Each such notice shall state: (A)
the redemption date; (B) the number of shares of Junior Convertible
Preferred Stock to be redeemed and, if less than all the shares held by
such holder are to be redeemed from such holder, the number of shares to be
redeemed from such holder; (C) the redemption price; and (D) the place or
places where certificates for shares of the Junior Convertible Preferred
Stock are to be surrendered for payment of the redemption price.
(iii) Notice having been mailed as aforesaid, from and after
the redemption date (unless default shall be made by the Corporation in
providing payment of the redemption price by deposit with a bank or trust
company having capital and surplus of at least $50,000,000 of the shares
called for redemption) said shares shall no longer be deemed to be
outstanding, and all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation the
redemption price) shall cease. Upon surrender, in accordance with the
above-mentioned notice, of the certificates for any shares so redeemed
(properly endorsed or signed for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the redemption price provided for
in this Section 5(h). In the event fewer than all of the shares
represented by any such certificate are redeemed, a new certificate shall
be issued, without cost to the holder thereof, representing the unredeemed
shares. The provisions of this Section 5(h)(iii) shall be subject to
Section 5(h)(i).
(i) REACQUIRED SHARES. Shares of Convertible Preferred Stock which
have been issued and reacquired in any manner, including shares purchased or
redeemed or exchanged, shall (upon compliance with any applicable provisions of
the laws of the State of Delaware) have the status of authorized and unissued
shares of Preferred Stock undesignated as to series and may be redesignated and
reissued as part of any series of the Preferred Stock; provided, however, that
no such issued and reacquired shares of Senior Convertible Preferred Stock shall
be reissued or sold as Series A Senior Preferred Stock and no such issued and
reacquired shares of Junior Convertible Preferred Stock shall be reissued or
sold as Junior Convertible Preferred Stock.
SECOND: That thereafter, pursuant to resolution of the Board of
Directors duly adopted on May 10, 1994, a meeting of the stockholders of said
corporation was duly called and held, upon notice in accordance with Section 222
of the General Corporation Law of the State of Delaware at which meeting the
necessary number of shares as required by statute were voted in favor of the
amendments.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
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IN WITNESS WHEREOF, GRUBB & ELLIS COMPANY has caused this certificate
to be signed by Robert J. Walner, its Senior Vice President, and Carol M.
Vanairsdale, its Assistant Secretary, this 1st day of November, 1994.
GRUBB & ELLIS COMPANY
Robert J. Walner
Senior Vice President
Attest:
Carol M. Vanairsdale
Assistant Secretary
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