SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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United Waste Systems, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or
Organization)
13-3532338
(I.R.S. Employer Identification No.)
Four Greenwich Office Park
Greenwich, Connecticut 06830
(Address of Principal Executive Offices) (Zip Code)
1. 1992 Stock Option Plan
2. 1992 Disinterested Director Stock Option Plan
3. Options and warrants granted outside of the above-
referenced plans under individual written compensation
contracts with employees (as defined in General Instruction
A(1)(a)to Form S-8)
(Full Title of Plan)
Sandra E. Welwood
United Waste Systems, Inc.
Greenwich, Connecticut 06830
(Name and Address of Agent For Service)
(203) 622-3131
(Telephone Number, Including Area Code, of Agent for
Service)
A copy of all communications, including communications sent to
the agent for service, should be sent to:
Joseph Ehrenreich, Esq.
Ehrenreich & Krause
1140 Avenue of the Americas
New York, N.Y. 10036
(212) 302-8050
CALCULATION OF REGISTRATION FEE
Proposed
Maximum Proposed
Offering Maximum Amount
Title of Price Aggregate of
Securities to Amount to Per Offering Registration
be Registered be Registered Share Price Fee
- -------------- -------------- ---------- --------- -------------
Common Stock,
par value
$.001 per share 1,445,556(1) $26.81(6) $38,755,357 $11,745
145,776(2) $32.12(6) $ 4,682,326 $ 1,419
329,245(3) $24.31(6) $ 8,003,946 $ 2,426
119,000(4) $22.14(6) $ 2,634,660 $ 799
Total 2,039,577(5) $16,389
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(1) A stockholder resolution adopted at the Company's 1996 Annual
Meeting increased the number of shares authorized for issuance under the
Company's 1992 Stock Option Plan by 1,400,000 shares. The indicated 1,445,556
shares include (i)the additional 1,400,000 shares that may be issued as a
result of such increase upon exercise of stock options under the Company's
1992 Stock Option Plan and (ii)45,556 shares that may be issued upon exercise
of stock options granted prior to the approval of such increase.
(2) A stockholder resolution adopted at the Company's 1996 Annual
Meeting increased the number of shares authorized for issuance under the
Company's 1992 Disinterested Director Stock Option Plan by 145,776 shares. The
indicated 145,776 shares represent the additional shares that may be issued as
a result of such increase upon exercise of stock options under the Company's
1992 Disinterested Director Stock Option Plan.
(3) Represents options with respect to an aggregate of 329,245 shares
granted during the period November 1, 1995 through August 7, 1996 to 117
employees of the Registrant under individual written compensation contracts or
option agreements with such employees and not pursuant to the Registrant's
1992 Stock Option Plan.
(4) Represents warrants with respect to an aggregate of 119,000 shares
granted during the period March 1, 1996 through October 1, 1996 to four
consultants under individual written compensation contracts and not pursuant
to the Registrant's 1992 Stock Option Plan.
(5) This Registration Statement also registers an indeterminate number
of shares of Common Stock which may become issuable pursuant to the
antidilution provisions of the plans to which this Registration Statement
relates.
(6) Calculated solely for the purpose of determining the registration
fee based upon the average of the assumed offering prices of the shares
determined pursuant to Rules 457(h). In the case of shares purchasable upon
exercise of outstanding options or warrants, such assumed offering price is
the exercise price provided for in the relevant option or warrant. In the
case of shares purchasable upon exercise of options that may hereafter be
granted, such assumed offering price is $36.75, the average of the high and
low sales price of the Company's Common Stock, as quoted through NASDAQ
National Market, on October 15, 1996.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
EXPLANATORY NOTE
-----------------
As permitted by the rules of the Securities and Exchange
Commission, this Registration Statement omits the information
specified in Part I of Form S-8. The documents containing the
information specified in Part I will be delivered to the
participants in the plans covered by this Registration Statement
(the "Plans") as required by Rule 428(b) promulgated under the
Securities Act of 1933, as amended. Such documents are not being
filed with the Securities and Exchange Commission as part of this
Registration Statement or as prospectuses or prospectus
supplements pursuant to Rule 424 of such Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents By Reference
The following documents filed with the Securities and Exchange
Commission (the "Commission") by the Registrant, United Waste
Systems, Inc., a Delaware corporation (the "Company"), pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), are incorporated by reference in this registration
statement.
1. The Company's Annual Report on Form 10-K for the year
ended December 31, 1995, the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 (and Amendment No. 1 thereto
on Form 10-Q/A), and the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996.
2. The Company's Report on Form 8-K dated May 31, 1996.
3. The Company's Report on Form 8-K dated June 18, 1996.
4. The Company's Report on Form 8-K dated June 28, 1996
(filed on August 22, 1996).
5. The Company's Reports on Form 10-C dated March 8, 1996,
and June 18, 1996, respectively.
6. The Company's definitive proxy statement dated April 22,
1996, relating to its 1996 Annual Meeting of Stockholders.
7. The description of the Company's Common Stock which is
contained in its Registration Statement on Form 8-A dated November
16, 1992, filed under the Exchange Act.
All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all
shares of Common Stock offered hereby have been sold or which
deregisters all then remaining unsold, shall be deemed to be
incorporated by reference in this registration statement and to be
a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this registration statement to the
extent that a statement contained herein or in any other
subsequently filed document which also is incorporated or deemed to
be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a
part of this registration statement.
Item 4. Description of Securities.
Not Applicable.
Item 5. Interests of Named Experts and Counsel.
The validity of the shares of Common Stock registered hereby
have been passed upon for the Company by Ehrenreich & Krause,
1140 Avenue of the Americas, New York, New York 10036.
Item 6. Indemnification of Directors and Officers.
Pursuant to specific authority granted by Section 102 of the
Delaware General Corporation Law (the "DGCL"), Article X of the
Registrant's Certificate of Incorporation contains the following
provision regarding limitation of liability of directors and
officers:
The personal liability of the directors of the
corporation is hereby eliminated to the fullest extent
permitted by Paragraph (7) of subsection (b) of Section 102 of
the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented, or any corresponding
provision of the General Corporation Law of the State of
Delaware.
The Registrant, as a Delaware corporation, is empowered by
Section 145 of the DGCL, subject to the procedures and limitation
stated therein, to indemnify any person against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any
threatened, pending or completed action, suit or proceeding in
which such person is made a party by reason of his being or having
been a director, officer, employer or agent of the Registrant. The
statute provides that indemnification pursuant to its provisions is
not exclusive of other rights of indemnification to which a person
may be entitled under any by-law, agreement, vote of stockholders
or disinterested directors, or otherwise. Article IX of
Registrant's Amended and Restated Certificate of Incorporation and
Article V of Registrant's By-laws both provide for indemnification
of its officers and directors to the full extent permitted by the
DGCL. In addition, the Company has entered into indemnification
agreements with each of its directors and officers. In general,
these agreements require the Company to indemnify each of such
persons against expenses, judgments, fines, settlements and other
liabilities incurred in connection with any proceeding (including
a derivative action) to which such person may be made a party by
reason of the fact that such person is or was a director, officer
or employee of the Company or guaranteed any obligations of the
Company, provided that the right of an indemnitee to receive
indemnification is subject to the following limitations: (i) an
indemnitee is not entitled to indemnification unless he acted in
good faith and in a manner that he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to
believe such conduct was unlawful and (ii) in the case of a
derivative action, an indemnitee is not entitled to indemnification
in the event that he is judged in a final non-appealable decision
of a court of competent jurisdiction to be liable to the Company
due to willful misconduct in the performance of his duties to the
Company (unless and only to the extent that the court determines
that the indemnitee is fairly and reasonably entitled to
indemnification).
Pursuant to Section 145 of the DGCL, the Registrant has
purchased insurance on behalf of its present and former directors
and officers against any liability asserted against or incurred by
them in such capacity or arising out of their status as such.
Item 7. Exemption From Registration Claimed.
Not applicable.
Item 8. Exhibits.
Exhibit Number and Exhibit
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4.1 Amended and Restated Certificate of Incorporation dated
October 31, 1991, as amended by (i) Certificate of Increase of
Designated Number of Shares of Series B Cumulative Convertible
Preferred Stock dated March 31, 1992, (ii) Certificate of
Correction to Amended and Restated Certificate of Incorporation
dated April 30, 1992, (iii) Certificate of Amendment to Certificate
of Incorporation dated October 9, 1992, (iv) Certificate of Change
of Location of Registered Office and Registered Agent dated January
28, 1993, (v) Certificate of Amendment to Certificate of
Incorporation dated August 31, 1993, and (vi) Certificate of
Amendment to Certificate of Incorporation dated June 12, 1996
4.2 By-laws (incorporated by reference to Exhibit No. 3.5 to
the Registration Statement on Form S-1 Commission File
No. 33-53488)
5.1 Opinion of Ehrenreich & Krause
23.1 Consent of Ehrenreich & Krause (included in the opinion
filed as Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Hanson Rotter & Green
23.4 Consent of Hanson Rotter & Green
24.1 Power of Attorney (included on the signature page of the
Registration Statement)
Item 9. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the Registration Statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities and Exchange Act
of 1934) that is incorporated by reference in the Registration
Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the requirements of Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has
duly caused this Registration Statement to be signed on its behalf
by the undersigned, hereunto duly authorized, in Greenwich,
Connecticut, on the 18th day of October, 1996.
United Waste Systems, Inc.
By: Michael J. Nolan
-----------------
Michael J. Nolan
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in their respective capacities and on the respective dates
set forth opposite their names. Each person whose signature
appears below hereby authorizes Bradley S. Jacobs, John N. Milne
and Michael J. Nolan and each with full power of substitution, to
execute in the name and on behalf of such person any amendment or
any post-effective amendment to this Registration Statement and to
file the same, with exhibits thereto, and other documents in
connection therewith, making such changes in this Registration
Statement as the Registrant deems appropriate, and appoints each of
Bradley S. Jacobs, John N. Milne and Michael J. Nolan, each with
full power of substitution, attorney-in-fact to sign any amendment
and any post-effective amendment to this Registration Statement and
to file the same, with exhibits thereto, and other documents in
connection therewith.
Bradley S. Jacobs
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Bradley S. Jacobs
Chairman, Chief Executive Officer and Director (Principal Executive
Officer)
October 18, 1996
John N. Milne
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John N. Milne, Director
October 17, 1996
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G. Chris Andersen, Director
October , 1996
Lawrence J. Twill, Sr.
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Lawrence J. Twill, Sr., Director
October 17, 1996
Christian Weyer
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Christian Weyer, Director
October 17, 1996
J. Bryan Williams, III
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J. Bryan Williams, III, Director
October 17, 1996
Michael J. Nolan
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Michael J. Nolan, Chief Financial Officer
(principal financial officer)
October 18, 1996
Sandra E. Welwood
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Sandra E. Welwood, Vice President Controller
(principal accounting officer)
October 18, 1996
Exhibit Number and Exhibit
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4.1 Amended and Restated Certificate of Incorporation dated
October 31, 1991, as amended by (i) Certificate of Increase of
Designated Number of Shares of Series B Cumulative Convertible
Preferred Stock dated March 31, 1992, (ii) Certificate of
Correction to Amended and Restated Certificate of Incorporation
dated April 30, 1992, (iii) Certificate of Amendment to Certificate
of Incorporation dated October 9, 1992, (iv) Certificate of Change
of Location of Registered Office and Registered Agent dated January
28, 1993, (v) Certificate of Amendment to Certificate of
Incorporation dated August 31, 1993, and (vi) Certificate of
Amendment to Certificate of Incorporation dated June 12, 1996
4.2 By-laws (incorporated by reference to Exhibit No. 3.5 to
the Registration Statement on Form S-1 Commission File
No. 33-53488)
5.1 Opinion of Ehrenreich & Krause
23.1 Consent of Ehrenreich & Krause (included in the opinion
filed as Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Hanson Rotter & Green
23.4 Consent of Hanson Rotter & Green
24.1 Power of Attorney (included on the signature page of the
Registration Statement)
EXHIBIT 4.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
UNITED WASTE SYSTEMS, INC.
United Waste Systems, Inc., a corporation organized and
existing under the laws of the State of Delaware (the
"corporation"), hereby certifies as follows:
1. The name of the corporation is United Waste Systems,
Inc., and the name under which the corporation was originally
incorporated is Jacobs Environmental, Inc. The date of filing of
the corporation's original Certificate of Incorporation with the
Office of the Secretary of State of Delaware was July 12, 1989.
2. This Amended and Restated Certificate of Incorporation
restates and integrates and further amends the Certificate of
Incorporation of the corporation by eliminating the Class B Common
Stock.
3. This Amended and Restated Certificate of Incorporation
was duly adopted by Written Consent of the Sole Director and a
Majority of Stockholders Entitled to Vote Thereon in accordance
with the applicable provisions of Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware. Written
notice of the adoption of the Amended and Restated Certificate of
Incorporation has been given as provided by Section 228(d) of
such General Corporation Law to every stockholder entitled
thereto.
4. The text of the Certificate of Incorporation is hereby
amended in its entirety and restated to read as hereinafter set
forth:
ARTICLE I
The name of the corporation is: United Waste Systems, Inc.
ARTICLE ii
The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street,
Wilmington, County of New Castle. The name of its registered
agent is The Corporation Trust Company.
ARTICLE III
The nature of the business to be conducted or promoted is to
engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of
Delaware.
ARTICLE IV
The amount of the total authorized capital stock of the
corporation is 95,000,000 shares, divided into: (a) 75,000,000
shares of Common Stock having a par value of $0.001 per share and
the rights designated in Section (A) below; and (b) 20,000,000
shares of Preferred Stock having a par value of $0.001 per share
and the rights and preferences designated in Section (B) below.
SECTION (A) - COMMON STOCK
1. DIVIDENDS
Holders of Common Stock shall be entitled to receive on a
per share basis such dividends and other distributions in cash,
stock or property of the corporation as may be declared thereon
by the Board of Directors from time to time out of assets or
funds of the corporation legally available therefor.
2. VOTING
Except as otherwise required by statute or specifically
provided by this Amended and Restated Certificate of
Incorporation, holders of the Common Stock shall have the sole
right and power to vote on all matters on which a vote of
stockholders is to be taken. At every meeting of the
stockholders, each holder of Common Stock shall be entitled to
cast one vote in person or by proxy for each share of Common
Stock outstanding in his name on the stock record books of the
corporation.
3. LIQUIDATION RIGHTS
In the event of any dissolution, liquidation or winding up
of the affairs of the corporation, whether voluntary or
involuntary, after payment or provision for payment of the debts
and other liabilities of the corporation, subject to the
liquidation preferences of any holders of Preferred Stock, as set
forth in Section (B) hereof, the remaining assets and funds of
the Corporation shall be divided among and paid ratably to the
holders of Common Stock. A merger or consolidation of the
corporation with or into any other corporation or a sale or
conveyance of all or any
part of the assets of the corporation (which shall not in fact
result in the liquidation of the corporation and the distribution
of assets to stockholders) shall not be deemed to be a voluntary
or involuntary liquidation or dissolution or winding up of the
corporation within the meaning of this Paragraph 3.
SECTION (B) - PREFERRED STOCK
The Board of Directors is expressly authorized, from time to
time, (i) to fix the number of shares of one or more series of
the Preferred Stock; (ii) to determine the designation of any
such series; (iii) to determine or alter, without limitation or
restriction, the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series of the
Preferred Stock; and (iv) within the limits or restrictions
stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series of
Preferred Stock, to increase or decrease (but not below the
number of shares then outstanding) the number of shares of any
such series subsequent to the issue of shares of that series.
The designation and terms of the initial three series of the
Preferred Stock re as follows:
SECTION (B) (1) SERIES A REDEEMABLE PREFERRED STOCK
1. DESIGNATION
There shall be a Series of Preferred Stock to be known as
"Series A Redeemable Preferred Stock, Par Value of $0.001 Per
Share" )hereinafter sometimes referred to as "Series A Redeemable
Preferred Stock") consisting of 900 shares of Preferred Stock.
2. DIVIDENDS
The holders of shares of Series A Redeemable Preferred Stock
shall be entitled to receive, if and when declared payable from
time to time by the Board of Directors from funds legally
available therefor, dividends at the rate of $130.00 per annum
per share, and no more, payable semi-annually on March 1 and
September 1 in each year, commencing September 1, 1991, to
holders of record on the respective dates fixed for the purpose
by the Board of Directors in advance of payment of each dividend.
Dividends with respect to shares of Series A Redeemable Preferred
Stock shall accumulate from the date of issue thereof except that
dividends on any shares of Series A Redeemable Preferred Stock
subscribed for prior to the date (the "Authorization Date") on
which the Certificate of Incorporation of the corporation is
amended to authorize the issuance of shares of Preferred Stock,
shall accumulate from their respective subscription dates. If
dividends shall not have been paid, or declared and set apart for
payments, upon all outstanding shares of Series A Redeemable
Preferred Stock at the aforesaid rate, such deficiency shall be
cumulative in full (and thereby accumulate). Accumulation of
dividends on the Series A Redeemable Preferred Stock shall not
bear interest. No dividend shall be paid or declared and set
apart for payment, or made, on any date ("Junior Dividend Payment Date") on or
in respect of the Common Stock or any other class or
series of class of stock of the corporation ranking junior to the
Series A Redeemable Preferred Stock as to dividends unless the
corporation has paid all dividends on all outstanding shares of
Series A Redeemable Preferred Stock which have accumulated and
are unpaid up to the date on which the holders of Series A
Redeemable Preferred Stock were entitled to receive a dividend
payment if declared payable, which date coincides with or next
precedes the Junior Dividend Payment Date. With respect to
accumulated and unpaid dividends on Series A Redeemable Preferred
Stock and any class or series of class of stock of the
corporation which are pari passu with the shares of Series A
Redeemable Preferred Stock with regard to the right to receive
accumulated and unpaid dividends, of and when declared payable,
dividends shall be paid pro-rata in proportion with each holder's
respective amount of accumulated and unpaid dividends through the
date on which the holders were entitled to receive dividends, if
declared payable, which date coincides with or next precedes the
date on which payment is made.
3. REDEMPTION
(a) Optional Redemptions. The outstanding shares of
Series A Redeemable Preferred Stock may be redeemed, in whole or
in part, at the option of the corporation by a vote of the Board
of Directors, at any time or from time to time at the redemption
price per share of $1,000 together, in all cases, with an amount
equal to all dividends accumulated and unpaid thereon to the date
fixed for such redemption.
(b) Mandatory Redemptions. The corporation shall
redeem each share of Series A Redeemable Preferred Stock from
funds legally available therefor, at the redemption price of
$1,000 per share plus dividends accumulated and unpaid thereon to
the date fixed for such redemption, upon the earlier to occur of
(i) the third anniversary of (I) with respect to shares other
than those subscribed for prior to the Authorization Date, the
date of issue thereof or (II) with respect to shares subscribed
for prior to the Authorization Date, the subscription date, of
(ii) at the closing of a public offering by the corporation of
its equity securities if the holder of such shares of Series A
Redeemable Preferred Stock is the holder of warrants to purchase
shares of Common Stock which shares of Common Stock, upon
exercise of such warrants are included in such offering, but only
to the extent that the redemption proceeds equal the exercise
price under the warrants for the shares included in such
offering.
(c) Other Provisions. No Common Stock or any other
class or series of any class of stock of the corporation ranking
junior to the Series A Redeemable Preferred Stock as to
redemption payments may be purchased unless all redemption
payments with respect to the Series A Redeemable Preferred Stock
which are in arrears as of such date, have been paid in full.
Notice of any proposed redemption of any shares of Series A
Redeemable Preferred Stock shall be given by mailing a copy of
such notice, postage prepaid, to the holders of record of the
shares of Series A Redeemable Preferred Stock to be redeemed, at
their respective addresses then appearing on the books of the
corporation, not more than ninety (90) nor less than thirty (30)
days prior to the date fixed for redemption, but no failure to
mail such notice nor any
defect therein or in the mailing thereof shall affect the
validity of the proceeding for the redemption of Series A
Redeemable Preferred Stock to be redeemed. Notice of redemption
having been duly given, if the corporation, at its option,
deposits an amount equal to the redemption payment in a
depositary account in a bank or trust company doing business in
the Borough of Manhattan of the State and City of New York in
trust for payment to the holders of the shares to be redeemed and
delivers irrevocable instructions to the depositary to apply such
deposit only to the redemption of the shares to be redeemed if
claimed within six years of the redemption date and then return
all unclaimed amount, if any, to the corporation, then all shares
of Series A Redeemable Preferred Stock with respect to which such
deposit shall have been made shall forthwith, whether or not the
date fixed for such redemption shall have occurred or the
certificates for such shares shall have been surrendered for
cancellation, be deemed no longer to be outstanding for any
purpose, and all rights with respect to such shares shall
thereupon cease and terminate, except the right of the holders of
the certificates for such shares to receive on the redemption
date (or such earlier date, if any, as may be fixed by the Board
of Directors), the redemption price to which they are entitled,
without interest.
4. VOTING RIGHTS
The holders of the Series A Redeemable Preferred Stock shall
not, except as required by law or as otherwise set forth herein,
have any right or power to vote on any question or in any
proceeding or to be represented at, or to receive notice of, any
meeting of the corporation's stockholders. On any matters on
which the holders of the Series A Redeemable Preferred Stock
shall be entitled to vote, they shall be entitled to one vote for
each share held.
5. LIQUIDATION OR DISSOLUTION
In the event of any dissolution, liquidation or winding up
of the corporation, whether voluntary or involuntary, the holders
of the then outstanding shares of Series A Redeemable Preferred
Stock shall be entitled to receive, for each such share, payment
in cash equal to $1,000, plus an amount equal to all dividends
accumulated and unpaid thereon to the date fixed for such
payment, and no more, before any distribution of assets shall be
made to the holder of shares of Common Stock or any other class
or series of a class of stock of the corporation ranking junior
to the Series A Redeemable Preferred Stock as to distribution on
liquidation, dissolution or winding up, but if the distributable
assets are insufficient to make such payment in full to the
holders of Series A Redeemable Preferred Stock and any class or
series of class of stock of the corporation ranking pari passu to
the Series A Redeemable Preferred Stock as to distribution on
liquidation, dissolution or winding up, such assets shall be
distributed among the holder of outstanding shares of Series A
Redeemable Preferred Stock and such other classes and series,
ratably per share in proportion to the full per share amounts to
which they respectively are entitled to.
6. LIMITATIONS
(a) So long as any shares of the Series A Redeemable
Preferred Stock are outstanding and unless the vote or consent of
the holders of a greater number of shares shall then be required
by law, the consent of the holders of at least a majority of all
of the outstanding shares of Series A Redeemable Preferred Stock
(given in person or by proxy, either by written consent pursuant
to Section 228 of the Delaware General Corporation Law or by a
vote at a special meeting of stockholders called for such purpose
or at any annual meeting of stockholders, with the holders of
Series A Redeemable Preferred Stock voting as a class and with
each share of Series A Redeemable Preferred Stock having one
vote) shall be necessary for authorizing, effecting or validating
the amendment, alteration or repeal of any of the provisions of
this Section (B) which sets forth the powers, designations,
preferences and rights of Series A Redeemable Preferred Stock.
(b) So long as any shares of the Series A Redeemable
Preferred Stock are outstanding and unless the vote or consent of
the holders of a greater number of shares shall then be required
by law, the consent of the holders of at least a majority of all
of the outstanding shares of Series A Redeemable Preferred Stock
(given in person or by proxy, either by written consent pursuant
to Section 228 of the Delaware General Corporation Law or by a
vote at a special meeting of stockholders called for such purpose
or at any annual meeting of stockholders, with the holders of
Series A Redeemable Preferred Stock voting as a class and with
each share of Series A Redeemable Preferred Stock having one
vote) shall be required prior to (i) the creation of any class or
series of capital stock of the corporation ranking senior as to
the right to
receive accumulated and unpaid dividends, redemption payments in
arrears and/or liquidation preference to the Series A Redeemable
Preferred Stock or (ii) the sale, lease or conveyance of all or
substantially all of the corporation's assets or the merger or
consolidation of the corporation with or into any other entity if
as a result of such transaction the Series A Redeemable Preferred
Stock would be purchased for or otherwise converted into
consideration of less than its liquidation preference plus any
accrued and unpaid dividends, or as a result of which the Series
A Redeemable Preferred Stock would continue in existence (either
as stock in the corporation or in the surviving company in a
merger) but with an adverse alteration in its specified
designations, rights, preferences or privileges.
(c) Nothing herein contained shall be construed so as
to require a series vote or the consent of the holders of the
outstanding shares of Series A Preferred Stock (i) in connection
with any increase in the total number of authorized shares of
Common Stock or Preferred Stock, or (ii) in connection with the
authorization or increase of any class or series of capital stock
ranking junior as to or pari passu with the Series A Redeemable
Preferred Stock with regard to the right to receive accumulated
and unpaid dividends, redemption payments in arrears or
distributions upon liquidation, dissolution or winding up.
The limitations stated above shall not apply if, at or prior
to the time when the distribution, payment, purchase, redemption,
discharge, conversion, exchange, amendment, alteration, repeal,
issuance, sale, lease, conveyance merger or consolidation is to
occur, as the case may be, provision is made for the redemption
of all shares of Series A Redeemable Preferred Stock at the time
outstanding in accordance with the terms of Paragraph 3 of
Section (B)(1). Nothing herein contained shall in any way limit
the right and power of the corporation to issue the presently
authorized but unissued shares of its capital stock, or bonds,
notes, mortgages, debentures, and other obligations, and to incur
indebtedness to banks and to other lenders.
7. RANKING OF SERIES A REDEEMABLE PREFERRED STOCK
With regard to rights to receive dividends which have
accumulated and are unpaid up to a date for which the holder is
entitled to receive dividends, if declared payable, redemption
payments which are in arrears, and distribution upon liquidation,
dissolution or winding up of the corporation, except if approved
in accordance with Paragraph 6(b) of Section (B)(1), the Series A
Redeemable Preferred Stock shall rank senior to all Common Stock
of the corporation and shall not be junior to any class or series
of a class of stock of the corporation.
SECTION (B)(2) SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
1. DESIGNATION
There shall be a Series of Preferred Stock to be known as
"Series B Cumulative Convertible Preferred Stock, Par Value of
$0.001 Per Share" (hereinafter sometimes referred to as "Series B
Convertible Preferred Stock") consisting of 600,000 shares of
Preferred Stock.
2. DIVIDENDS
The holders of shares of Series B Convertible Preferred
Stock shall be entitled to receive, if and when declared payable
from time to time by the Board of Directors from funds legally
available therefore, dividends on each share of Series B
Convertible Preferred Stock at the rate of $.18 per share per
annum (adjusted proportionately in the event shares of Series B
Convertible Preferred Stock are subdivided into a greater number
or combined into a lesser number), and no more, payable semi-annually on March 1
and September 1 in each year, from and
including the date of issuance of such shares to and including
the date on which such shares are converted, to holders of record
on the respective daters fixed for the purpose by the Board of
Directors in advance of payment of each dividend. Such dividends
will accrue whether or not they have been declared and whether or
not there are profits, surplus or other funds of the corporation
legally available for the payment of dividends. The date on
which the corporation initially issues any shares will be deemed
to be its "date of issuance" regardless of the number of times
transfer of such shares is made on the stock records maintained
by or for the corporation and regardless of the number of
certificates which may be issued to evidence such shares. If
dividends shall not have been paid, or declared and set apart for
payments, upon all outstanding shares of Series B Convertible
Preferred Stock at the aforesaid rate, such deficiency shall be
cumulative in full (and thereby accumulate). Accumulation of
dividends on the Series B Convertible Preferred Stock shall not
bear interest. No dividend shall be paid or declared and set
apart for payment, or made, on any date (Junior Dividend Payment
Date") on or in respect of the Common Stock or any other class or
series of class of stock of the corporation ranking junior to the
Series B Convertible Preferred Stock as to dividends unless the
corporation has paid all dividends on all outstanding shares of
Series B Convertible Preferred Stock which have accumulated and
are unpaid up to the date on which the holders of Series B
Convertible Preferred Stock were entitled to receive a dividend
payment, which date coincides with or next precedes the Junior
Dividend Payment Date. With respect to accumulated and unpaid
dividends on Series B Convertible Preferred Stock and any class
or series of class of stock of the corporation which are pari
passu with the shares of Series B Convertible Preferred Stock
with regard to the right to receive accumulated and unpaid
dividends, dividends shall be paid pro-rata in proportion with
each holder's respective amount of accumulated and unpaid
dividends through the date on which the holders were entitled to
receive dividends, which date coincides with or next precedes the
date on which payment is made. No optional redemption of shares
of stock of any class or series of class of stock of the
corporation which is pari passu with the shares of Series B
Convertible Preferred Stock with regard to the right to receive
accumulated and unpaid dividends shall be made at a time when
there remain accumulated and unpaid dividends on any outstanding
shares of Series B Convertible Preferred Stock.
3. VOTING RIGHTS
Except as otherwise provided by law or the provisions of
this Certificate of Incorporation, the holders of Series B
Convertible Preferred Stock will vote together with the holders
of Common Stock voting together as a single class on an as
converted basis with each holder of Series B Convertible
Preferred Stock being entitled to cast the number of votes that
such holders would have been entitled to cast had they converted
their shares of Series B Convertible Preferred Stock immediately
prior to the record date of such vote. To the extent that the
holders of Series B Convertible Preferred Stock are entitled by
law or the provisions of this Certificate of Incorporation to
vote on any matter as a separate series, then the holders of
Series B Convertible Preferred Stock will note together as a
single series, and each share of the series so voting will be
entitled to one vote.
4. CONVERSION
(a) Voluntary Conversion Procedure.
(i) Any holder of Series B Convertible Preferred Stock
may convert all or any portion of the Series B Convertible
Preferred Stock (including any fraction of a share) held by such
holder into a number of shares of the corporation's Common Stock
computed by multiplying the number of shares to be converted by
$2.25 (adjusted proportionately in the case of the subdivision or
combination of shares of Series B Convertible Preferred Stock)
and dividing the result by the Conversion Price (as defined
below) then in effect.
(ii) Each conversion of Series B Convertible Preferred
Stock will be deemed to have been effected as of the close of
business on the date on which the certificate or certificates
representing the Series B Convertible Preferred Stock to be
converted have been surrendered at the principal office of the
corporation. At such time as such conversion has been effected,
the rights of the holder of such Series B Convertible Preferred
Stock as such holder will cease and the person or persons in
whose name or names any certificate or certificates for shares of
Common Stock are to be issued upon such conversion will be deemed
to have become the holder or holders of record of the shares of
Common Stock represented thereby.
(iii)As soon as possible after a conversion has been
effected (but in any event within three (3) business days in the
case of sub-paragraph (I) below), the corporation will deliver to
the converting holder: (I) a certificate or certificates
representing the number of shares of Common Stock issuable by
reason of such conversion in such name or names and such
denominations as the converting holder has specified; and (II) a
certificate representing any shares of Series B Convertible
Preferred Stock which were represented by the certificate or
certificates delivered to the corporation in connection with such
conversion but which were not converted.
(iv) The issuance of certificates for shares of Common
Stock upon conversion of Series B Convertible Preferred Stock
will be made without charge to the holders of such Series B
Convertible Preferred Stock for any issuance tax in respect
thereof or other costs incurred by the corporation in connection
with such conversion and the related issuance of shares of Common
Stock. Upon conversion of each share of Series B Convertible
Preferred Stock, the corporation will take all such actions as
are necessary in order to insure that the Common Stock issuable
with respect to such conversion will be validly issued, fully
paid and nonassessable.
(v) The corporation will not close its books against the
transfer of Series B Convertible Preferred Stock or of Common
Stock issued or issuable upon conversion of Series B Convertible
Preferred Stock in any manner which interferes with the timely
conversion of Series B Convertible Preferred Stock.
(vi) If any fractional interest in a share of Common
Stock would, except for the provisions of this sub-paragraph, be
deliverable upon any conversion of the Series B Convertible
Preferred Stock, the corporation, in lieu of delivering the
fractional share therefor, may pay an amount to the holder
thereof equal to the Market Price of such fractional interest as
of the date of conversion.
The "Market Price" of any security shall mean the average of
the closing prices of such security's sales on all securities
exchanges on which such security may at the time be listed, or,
if there has been no sale on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security
prices quoted in the NASDAQ System as of 4:00 P.M., New York
time, or, if on any day such security is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar
success organization, in each such case averaged over a period of
twenty-one (21) days consisting of the day as of which "Market
Price" is being determined and the twenty (20) consecutive
business days prior to such day. If at any time such security is
not listed on any securities exchange or quoted in the NASDAQ
System or the over-the-counter market, the "Market Price" will be
the fair value thereof determined jointly by the corporation and
the holders of a majority of the Series B Convertible Preferred
Stock. If such parties are unable to reach agreement within a
reasonable period of time, such fair value will be determined by
an independent appraiser jointly selected and compensated by the
corporation and the holders of a majority of the Series B
Convertible Preferred Stock.
(b) Automatic Conversion.
(i) All of the Series B Convertible Preferred Stock will
automatically convert into a number of shares of the
corporation's Common Stock computed by multiplying the number of
outstanding shares of Series B Convertible Preferred Stock by
$2.25 (adjusted proportionately in the case of the subdivision or
combination of shares of Series B Convertible Preferred Stock)
and dividing the result by the Conversion Price then in
effect, upon the date of admission of any class or series of the
corporation's Common Stock to quotation in an inter-dealer
quotation system of a nationally recognized securities
association such as NASDAQ System, or the listing of such Common
Stock on a national securities exchange (or immediately prior to
the exchange of the corporation's Common Stock for stock which is
so listed). Upon the occurrence of the event specified in the
previous sentence, the outstanding shares of Series B Convertible
Preferred Stock shall be converted automatically without any
further action by the holders of such shares or the corporation,
and whether or not the certificates representing such shares are
surrendered to the corporation.
(ii) Notice of the automatic conversion of shares of
Series B Convertible Preferred Stock shall be promptly given by
the corporation by mailing a notice to holders of record of the
shares of Series B Convertible Preferred Stock at their
respective addresses appearing on the books of the corporation.
Said notice shall indicate (A) that all shares of Series B
Convertible Preferred Stock have been converted into shares of
Common Stock, (B) the place at which the shares of Series B
Convertible Preferred Stock will, upon presentation and surrender
of the certificates of stock evidencing such shares, be exchanged
for shares of Common Stock, (C) the then effective Conversion
Price (as defined herein) and (D) that the Series B Convertible
Preferred Stock is no longer deemed to be outstanding. Any
failure or defect in such notice shall not, in any event, affect
the validity or effectiveness of such conversion.
(iii) The corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon
such automatic conversion unless certificates evidencing such
shares of the Series B Convertible Preferred Stock being
converted are delivered to the corporation, or the holder
notifies the corporation that such certificates have been lost,
stolen or destroyed and executed an agreement satisfactory to the
corporation to indemnify the corporation from, or otherwise
satisfies the corporation with respect to, any loss incurred by
it in connection therewith.
(iv) The corporation will, as soon as practicable after
the deposit of certificates for shares of Series B Convertible
Preferred Stock, deliver to the person whose Series B Convertible
Preferred Stock was so surrendered, or to his nominee or
nominees, certificates for the number of shares of Common Stock
to which he shall be entitled as aforesaid. The corporation
shall at the time of conversion pay to the holder of record of
any share or shares of Series B Convertible Preferred Stock any
accrued but unpaid dividend (either in cash or in additional
shares of Common Stock, valued at their Market Price at the time
of conversion) on said Series B Convertible Preferred Stock so
surrendered for conversion, except that no payment or adjustment
shall be made for any accrued but unpaid dividends for the then
current semi-annual dividend period or for the semi-annual
dividend period immediately preceding the then current semi-annual dividend
period.
(c) Conversion Price.
(i) The initial Conversion Price will be $2.25.
In order to prevent dilution of the conversion rights granted
with respect to the Series B Convertible Preferred Stock, the
Conversion Price will be subject to adjustment from time to time
pursuant to Paragraphs 4(c)(ii), 4(c)(iii) and 4(c)(iv) of this
Section (B)(2). The corporation shall be deemed to have issued
or sold Common Stock for purposes of this Paragraph 4(c) in
accordance with the provisions of Paragraph 4(d) hereof.
(ii) If during the "Initial Adjustment Period," as
hereinafter defined, the corporation has issued or is deemed to
have issued Common Stock for an "Average Price," as hereinafter
defined, of less than the Conversion Price in effect at the
beginning of the Initial Adjustment Period, then the Conversion
Price shall be reduced to such Average Price effective as of the
last day of the Initial Adjustment Period.
The "Initial Adjustment Period" shall be the period
beginning on June 10, 1991, and ending on the earlier of (A) the
date on which the corporation has issued since June 10, 1991, an
aggregate amount of Equity Securities (as defined in the Exchange
Act) including, without limitation, the face amount of any debt
or other securities of the corporation which is issued in
connection with the issuance of Equity Securities for which it
has received $10 million of consideration in the aggregate, and
(B) one hundred and eighty (180) days following the final
issuance of Series B Convertible Preferred Stock required to be
made under the Construction Agreement between the corporation and
Sevenson Environmental Services, Inc. dated as of June 10, 1991.
The "Average Price" shall mean the total consideration received
or deemed to have been received by the corporation for all of the
Common Stock issued or deemed to have been issued during the
Initial Adjustment Period divided by the total number of shares
of Common Stock issued or deemed issued during the Initial
Adjustment Period; provided, however, in determining the "Average
Price," Common Stock will be deemed to have been issued if the
price per share is less than, equal to, or greater than the
Conversion Price in effect during the Initial Adjustment Period.
(iii) If at any time after the Initial Adjustment Period,
the corporation issues or sells or is deemed to have issued or
sold, any shares of its Common Stock for a consideration per
share less than the Conversion Price in effect immediately prior
to the time of such issue or sale, the Conversion Price will be
reduced to the Conversion Price determined by dividing (A) the
sum of (1) the product derived by multiplying the Conversion
Price in effect immediately prior to such issue or sale times the
number of shares of Common Stock outstanding immediately prior to
such issue or sale, plus (2) the consideration, if any, received
by the corporation upon such issue or sale, by (B) the number of
shares of Common Stock outstanding immediately after such issue
or sale. For purpose of this Paragraph 4, all shares of Common
Stock issuable upon exercise of outstanding Options (as
hereinafter defined) or conversion of outstanding Convertible
Securities (as hereinafter defined) will be considered
outstanding.
(iv) In addition, the Conversion Price shall be reduced
by $.05 per share (adjusted proportionately for any adjustment of
the Conversion Price by reason of subdivisions or combinations of
shares of Common Stock) for each $500,000 of shortfall, if any,
between the corporation's consolidated proforma net earnings for
fiscal year 1992 and its projected proforma net earnings for
fiscal year 1992 of $9,960,000, but in no event will the
Conversion Price per share be reduced to less than $1.80 (subject
to adjustment upon subdivisions or combinations of shares of
Common Stock) pursuant to this Paragraph 4(c)(iv). Consolidated
proforma net earnings of the corporation for 1992 shall be
determined by the corporation's independent public accountants,
in accordance with the requirements of Article 11 of Securities
and Exchange Commission Regulation S-X as then in effect.
(v) Notwithstanding anything herein to the contrary, no
adjustment to the Conversion Price will be made pursuant to
Paragraphs 4(c)(ii) or 4(c)(iii) of the Section (B)(2) however,
(A) upon the grant or exercise of any Options which may hereafter
be granted or exercised under any employee benefit plan,
agreement or arrangement approved by the corporation's Board of
Directors for or with its employees, officers, consultants or
directors other than Bradley S. Jacobs ("Jacobs") or an entity
controlled by him; (B) upon any issuance or sale of Common Stock
which immediately precedes the admission of such class or series
of the corporation's Common Stock to quotation in an inter-dealer
quotation system of a nationally recognized securities
association such as the NASDAQ System or the listing of such
Common Stock on a national securities exchange; (C) upon the
issuance or sale of Common Stock or Convertible Securities upon
the exercise of any rights or warrants to subscribe for or
purchase Common Stock or Convertible Securities; (D) upon the
issuance or sale of Common Stock upon conversion of any
Convertible Securities heretofore issued, whether or not any
adjustment in the Conversion Price was made or required to be
made upon the issuance or sale of such Convertible Securities;
(E) upon issuance of shares of Common Stock or Convertible
Securities (or related Options) to investment bankers, brokers,
finders or the like as compensation for services rendered or to
be rendered to the corporation in connection with the
acquisitions of businesses or the raising of equity or debt
financing for the corporation except Jacobs or an entity
controlled by him; (F) upon the issuance of shares of Common
Stock or Convertible Securities (or related Options) to any
banking or other financial institution in connection with a loan
to the corporation or any of its subsidiaries; or (G) upon the
issuance of any shares of Common Stock or Convertible Securities
(or related Options) to any person or entity which sells its
business, assets or stock to the corporation or any of its
subsidiaries in exchange for capital stock of the corporation.
(d) Effect on Conversion Price of Certain Events. For
purposes of determining the adjusted Conversion Price under
Paragraph 4(c), the following will be applicable:
(i) Issuance of Rights or Options. If the corporation
in any manner grants any rights or options to subscribe for or to
purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (such rights or
options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible
Securities") and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than the
Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares
of Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options
will be deemed to be outstanding and to have been issued and sold
by the corporation for such price per share. For purposes of
this Paragraph, the "price per share for which Common Stock is
issuable" will be determined by dividing (A) the total amount, if
any received or receivable by the corporation as consideration
for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the corporation
upon exercise of all such Options, plus in the case of such
Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to
the corporation upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of
such Options. No further adjustment of the Conversion Price will
be made when Convertible Securities are actually issued upon the
exercise of such Options or when Common Stock is actually issued
upon the exercise of such Options or the conversion or exchange
of such Convertible Securities.
(ii) Issuance of Convertible Securities.
If the corporation in any manner issues or sells any Convertible
Securities and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the
Conversion Price in effect immediately prior to the time of such
issue or sale, then the maximum number of shares of Common Stock
issuable upon conversion or exchange of such Convertible
Securities will be deemed to be outstanding and to have been
issued and sold by the corporation for such price per share. For
the purposes of this Paragraph, the "price per share for which
Common Stock is issuable" will be determined by dividing (A) the
total amount received or receivable by the corporation as
consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the corporation upon the
conversion or exchange thereof, by (B) the total maximum number
of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further
adjustment of the Conversion Price will be made when Common Stock
is actually issued upon the conversion or exchange of such
Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price have been or are to be
made pursuant to other provisions of this Paragraph 4, no further
adjustment of the Conversion Price will be made by reason of such
issue or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the conversion or exchange of
any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock
change at any time (other than pursuant to provisions which are
intended to give the holders of such Options or Convertible
Securities substantially the same protection as that provided by
Paragraph 4(c) above and this Paragraph 4(d)), the Conversion
Price in effect at the time of such change will be readjusted to
the Conversion Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at
the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Securities without the exercise of any such Option or right which
was not outstanding on June 10, 1991, the Conversion Price then
in effect hereunder will be adjusted to the Conversion Price
which would have been in effect at the time of such expiration or
termination had such Option or Convertible Security, to the
extent outstanding immediately prior to such expiration or
termination, never been issued.
(v) Calculation of Consideration Received. If any
Common Stock, Option or Convertible Security is issued or sold or
deemed to have been issued or sold for cash, the consideration
received therefor will be deemed to be the net amount received by
the corporation therefor. In case any Common Stock, Options or
Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration consists of
securities, in which case the amount of consideration received by
the corporation will be the Market Price thereof as of the date
of receipt. In computing the Market Price of a note or other
obligation which is not listed on a securities exchange or quoted
in the NASDAQ System or reported by the National Quotation
Bureau, Incorporated, the total consideration received by the
corporation (including interest) will be discounted at the prime
rate of interest at The First National Bank of Chicago in effect
at the time the note or obligation is deemed to have been issued
in connection with any merger in which the corporation is the
surviving corporation, the amount of consideration therefor will
be deemed to be the fair value of such portion of the net assets
and business of the non-surviving corporation as is attributable
to such Common Stock, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash
and securities will be determined by the corporation's Board of
Directors.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities
of the corporation, together comprising one integrated
transaction in which no specific consideration is allocated to
such Option by the parties thereto, the Option will be deemed to
have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned
or held by or for the account of the corporation or any
subsidiary of the corporation, and the disposition of any shares
so owned or held will be considered an issue or sale of Common
Stock.
(viii) Record Date. If the corporation takes a record of
the holders of Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common
Stock, Options or in Convertible Securities, or (B) to subscribe
for or purchase Common Stock, Options or Convertible Securities,
then such record date will be deemed to be the date of the issue
or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or upon the making
of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(e) Subdivision or Combination of Common Stock. If the
corporation at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) its outstanding shares
of Common Stock into a greater number of shares, the Conversion
Price in effect immediately prior to such subdivision will be
proportionately reduced, and if the corporation at any time
combines (by reverse stock split or otherwise) its outstanding
shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination
will be proportionately increased.
(f) Reorganization, Reclassification, Consolidation,
Merger of Sale. Any capital reorganization, reclassification,
consolidation, merger or sale of all or substantially all of the
corporation's assets to another person which is effected in such
a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common
Stock is referred to herein as an "Organic Change". Prior to the
consummation of any Organic Change, the corporation will make
provisions to insure that each of the holders of Series B
Convertible Preferred Stock will thereafter have the right to
acquire and receive, in lieu of or in addition to the shares of
Common Stock immediately theretofore acquirable and receivable
upon the conversion of such holder's Series B Convertible
Preferred Stock such shares of stock, securities or assets as
such holders would have received in connection with such Organic
Change if such holder had converted their Series B Convertible
Preferred Stock immediately prior to such Organic Change. In any
such case, the corporation will make provisions to insure that
the provisions of Section B(2) will thereafter be applicable to
the Series B Convertible Preferred Stock. The corporation will
not effect any such consolidation, merger or sale, unless prior
to the consummation thereof, the successor corporation (if other
than the corporation) resulting from consolidation or merger or
the corporation purchasing such assets assumes by written
instrument, the obligation to deliver to each such holder such
shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
(g) Certain Events. If any event occurs of the type
contemplated by the provisions of this Paragraph 4 but not
expressly provided for by such provisions, then the corporation's
board of directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of
Preferred Stock; provided that no such adjustment will increase
the Conversion Price as otherwise determined pursuant to
Paragraph 4 or decrease the number of shares of Common Stock
issuable upon conversion of each share of Series B Convertible
Preferred Stock.
(h) Notices.
(i) Immediately upon any adjustment of the Conversion
Price, the corporation will give written notice thereof to all
holders of Series B Convertible Preferred Stock.
(ii) The corporation will give written notice to all
holders of Series B Convertible Preferred Stock at least twenty
(20) days prior to the date on which the corporation closes its
books or takes a record (A) with respect to any dividend or
distribution upon Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock, or (C) for
determining rights to vote with respect to any Organic Change,
dissolution or liquidation.
(iii) The corporation will also give written notice to
the holders of Series B Convertible Preferred Stock at least
twenty (20) days prior to the date on which any Organic Change
will take place.
5. LIQUIDATION OR DISSOLUTION
In the event of any dissolution, liquidation or winding up
of the corporation, whether voluntary or involuntary, the holders
of the then outstanding shares of Series B Convertible Preferred
Stock shall be entitled to receive, for each such share, payment
in cash equal to $2.25 per share (adjusted proportionately in the
event shares of Series B Convertible Preferred Stock are
subdivided into a greater number or combined into a lesser
number), plus an amount equal to all dividends accumulated and
unpaid thereon to the date fixed for such payment (the
"Liquidation Value"), and no more, before any distribution of
assets shall be made to any holder of shares of Common Stock or
any other class or series of class of stock of the corporation
ranking junior to the Series B Convertible Preferred Stock as to
distribution or liquidation, dissolution or winding up, but if
the distributable assets are insufficient to make such payment in
full to the holders of Series B Convertible Preferred Stock and
any class or series of class of stock of the corporation ranking
pari passu to the Series B Convertible Preferred Stock as to
distribution or liquidation, dissolution or winding up, such
assets shall be distributed among the holders of outstanding
shares of Series B Convertible Preferred Stock and such other
classes and series, ratably per share in proportion to the full
per share amounts to which they respectively are entitled to.
6. LIMITATIONS
(a) So long as any shares of the Series B Convertible
Preferred Stock are outstanding and unless the vote or consent of
the holders of a greater number of shares shall then be required
by law, the consent of the holders of at least a majority of all
of the outstanding shares of Series B Convertible Preferred Stock
(given in person or by proxy, either by written consent pursuant
to Section 228 of the Delaware General Corporation Law or by a
vote at a special meeting of stockholders called for such purpose
or at any annual meeting of stockholders, with the holders of
Series B Convertible Preferred Stock voting as a class and with
each share of Series B Convertible Preferred Stock having one
vote) shall be necessary for (i) the authorization or issuance of
any additional shares of Series B Convertible Preferred Stock and
(ii) authorizing, effecting or validating the amendment,
alteration or repeal of any of the provisions of this Section (B)
which sets forth the powers, designations, preferences and rights
of Series B Convertible Preferred Stock.
(b) So long as any shares of the Series B Convertible
Preferred Stock are outstanding and unless the vote or consent of
the holders of a greater number of shares shall then be required
by law, the consent of the holders of at least a majority of all
of the outstanding shares of Series B Convertible Preferred Stock
(given in person or by proxy, either by written consent pursuant
to Section 228 of the Delaware General Corporation Law or by a
vote at a special meeting of stockholders called for such purpose
or at any annual meeting of stockholders, with the holders of
Series B Convertible Preferred Stock voting as a class and with
each share of Series B Convertible Preferred Stock having one
vote) shall be required prior to the creation of any class or
series of capital stock of the corporation ranking senior as to
the right to receive accumulated and unpaid dividends and/or
liquidation preference to the Series B Convertible Preferred
Stock.
(c) Nothing herein contained shall be construed so as
to require a series vote or the consent of the holders of the
outstanding shares of Series B Preferred Stock (i) in connection
with any increase in the total number of authorized shares of
Common Stock or Preferred Stock, or (ii) in connection with the
authorization or increase of any class or series of capital stock
ranking junior as to or pari passu with the Series B Convertible
Preferred Stock with regard to the right to receive accumulated
and unpaid dividends, redemption payments in arrears or
distributions upon liquidation, dissolution or winding up.
7. RANKING OF SERIES B CONVERTIBLE PREFERRED STOCK
With regard to rights to receive dividends which have
accumulated and are unpaid and distributions upon liquidation,
dissolution or winding up of the corporation, except if approved
in accordance with Paragraph 6(b) of Section (B)(2), the Series B
Convertible Preferred Stock shall rank senior to all Common Stock
of the corporation and shall not be junior to any class or series
of a class of stock of the corporation.
8. PUT RIGHTS
(a) In the event that (i) no voluntary or automatic
conversion of all of the Series B Convertible Preferred Stock has
occurred under Paragraph 4 of Section (B)(2) on or prior to July
1, 1993, or (ii) the corporation enters into a definitive
agreement relating to a transaction (other than one which would
result in or lead to an automatic conversion under Paragraph 4(b)
of Section (B)(2)), which would constitute a sale of assets of
the corporation exceeding 50% of the fair market value (as
reasonably determined by the corporation's Board of Directors) of
the total assets of the corporation on a consolidated basis, or a
transaction which would result in any party other than Jacobs or
an entity controlled by Jacobs controlling a majority in interest
of the voting power of the voting stock of the corporation which
is entitled to elect a majority of the Board of Directors of the
corporation, then the corporation shall give prompt written
notice (the "Put Notice") to any holder of the Series B
Convertible Preferred Stock, to the effect that such holders
shall have the right to require the corporation to repurchase all
or part of their Series B Convertible Preferred Stock (the "Put
Right") at the greater of: (i) the Liquidation Value thereof; or
(ii) the price per share of Common Stock or the price per share
for which Common Stock is sold, based upon the most recent (at
the time of the Put Notice) bona fide purchase of Common Stock,
by a third party purchaser who under Rule 405 of the Securities
Act of 1933, as amended (the "Act") is unaffiliated with the
corporation (the "Put Price"). A holder of Series B Convertible
Preferred Stock may exercise his Put Right by written notice
delivered to the corporation within sixty (60) days after
delivery of the Put Notice to such holder. If the holder of the
Series B Convertible Preferred Stock exercises the Put Right, the
corporation shall have ninety (90) days from receipt of the
holder's notice of exercise in which to pay such holder the Put
Price. The Put Price shall be paid by cashiers or certified
check drawn on a United States domiciled bank payable to the
order of such holder or by wire transfer of funds to an account
designated by such holder.
(b) Notice of the holder's exercise of its Put Right having
been duly given, if the corporation, at its option, deposits an
amount equal to the Put Price in a depositary account in a bank
or trust company doing business in the Borough of Manhattan of
the State and City of New York in trust for payment to the
holders of the Series B Convertible Preferred Stock and delivers
irrevocable instructions to the depositary to apply such deposit
only to the payment of the Put Price if claimed within one year
of the date of the holder's notice of exercise of the Put Right
and then return all unclaimed amounts, if any, to the
corporation, then all shares of Series B Convertible Preferred
Stock with respect to which such deposit shall have been made
shall forthwith, whether or not the date fixed for payment of the
Put Price shall have occurred or the certificates for such shares
shall have been surrendered for cancellation, be deemed no longer
to be outstanding for any purpose, and all rights with respect to
such shares shall thereupon cease and terminate, except the right
of the holders of the certificates for such shares to receive on
the date the holder is entitled to payment of the Put Price (or
such earlier date, if any, as may be fixed by the Board of
Directors), the Put Price to which they are entitled, without
interest.
9. PREEMPTIVE RIGHTS
The corporation hereby grants to each holder of Series B
Convertible Preferred Stock the right to purchase in accordance
with this Paragraph 9 additional shares of Common Stock,
Preferred Stock, Options, Convertible Securities or other
securities, rights or interests which are commonly considered to
be equity securities, or units consisting of combinations thereof
(collectively herein referred to as "Additional Securities") at
each such time as the corporation shall issue and sell such
Additional Securities, from and after the issuance of any shares
of the Series B Convertible Preferred Stock, until such time as
the SEC declares effective a registration statement filed by the
corporation in respect of the first public offering of its Common
Stock under the Act or the Common Stock is exchanged or converted
into equity securities which class of securities is registered
under the Act. In such event, each holder of the series B
Convertible Preferred Stock may elect to purchase, at the same
price and on the same terms as such Additional Securities are
sold, and the corporation hereby agrees to issue and sell to such
holder, up to that number of Additional Securities such that
following such purchase, such holder is able to maintain the same
percentage ownership of the outstanding shares of the Common
Stock of the corporation of such holder immediately prior to such
issuance and sale of Additional Securities, assuming for such
purpose that all outstanding Options and Convertible Securities
had been exercised and converted. If more than one type of
Additional Securities are issued or Additional Securities are
issued together with other types of securities, including,
without limitation, debt securities, in a single transaction, or
related transaction, the rights granted under this Paragraph 9
must be exercised to purchase all types of Additional Securities
and such other securities in the same proportion as such
Additional Securities and other securities were purchased by any
other parties. The corporation covenants and agrees to give any
holder of Series B Convertible Preferred Stock written notice of
the issuance of any Additional Securities within thirty (30) days
after its issuance, which notice shall set forth the price and
terms of such issuance. Upon each issuance of Additional
Securities, the holders may exercise the right granted by this
Paragraph 9 by giving written notice to the corporation within
thirty (30) days following receipt of the aforesaid notice, which
written notice from a holder shall specify the number of
Additional Securities being purchased by such holder, and be
accompanied by a cashiers or certified check in the full amount
of the price for the Additional Securities being purchased. The
corporation shall promptly make delivery to such holders of
certificates for the Additional Securities or other securities
upon execution of such documents and instruments as shall govern
the issuance of such Additional Securities or other securities.
Notwithstanding anything herein to the contrary, no
preemptive rights shall be granted upon the happening of any of
the following events: (A) upon the grant or exercise of any
Options which may hereafter be granted or exercised under any
employee benefit plan, agreement or arrangement approved by the
corporation's Board of Directors for or with its employees,
officers, consultants or directors other than Bradley S. Jacobs
("Jacobs") or an entity controlled by him; (B)upon any issuance
or sale of Common Stock which immediately precedes the admission
of such class or series of the corporation's Common Stock to
quotation in an inter-dealer quotation system of a nationally
recognized securities association such as the NASDAQ System or
the listing of such Common Stock on a national securities
exchange; (C) upon the issuance or sale of Common Stock or
Convertible Securities upon the exercise of any rights or
warrants to subscribe for or purchase Common Stock or Convertible
Securities; (D) upon the issuance or sale of Common Stock upon
conversion of any Convertible Securities, whether or not any
adjustment in the Conversion Price was made or required to be
made upon the issuance or sale of such Convertible Securities;
(E) upon issuance of shares of Common Stock or Convertible
Securities (or related Options) to investment bankers, brokers,
finders or the like as compensation for services rendered or to
be rendered to the corporation in connection with the
acquisitions of businesses or the raising of equity or debt
financing for the corporation except Jacobs or an entity
controlled by him; (F) upon the issuance of shares of Common
Stock or Convertible Securities (or related Options) to any
banking or other financial institution in connection with a loan
to the corporation or any of its subsidiaries; or (G) upon the
issuance of any shares of Common Stock or Convertible Securities
(or related Options) to any person or entity which sells its
business, assets or stock to the corporation or any of its
subsidiaries in exchange for capital stock of the corporation.
SECTION (B)(3) - SERIES C CUMULATIVE CONVERTIBLE PREFERRED STOCK
1. DESIGNATION
There shall be a Series of Preferred Stock to be known as
"Series C Cumulative Convertible Preferred Stock, Par Value of
$0.001 Per Share" (hereinafter sometimes referred to as "Series C
Preferred Stock") consisting of 90,000 shares of Preferred Stock.
2. DIVIDENDS
(a) Each holder of Series C Preferred Stock shall be
entitled to receive, when and as declared by the Board of
Directors of the corporation, out of any assets of the
corporation legally available for the payment of dividends,
preferential cumulative cash dividends at the annual rate of
$0.88 per share (subject to adjustment for stock splits or
combinations) of the Series C Preferred Stock and no more on each
share held, which shall be calculated from the date of issuance
and shall be payable in equal quarterly installments on the 20th
day of each of April, July, October and January in each year
(each a "Dividend Payment Date"), commencing on April 20, 1992,
to holders of record as of the last day of the preceding month;
provided, however, that for the quarterly period in which any
shares of Series C Preferred Stock are issued, the quarterly
dividend thereon shall be prorated from the date of issuance. No
such dividends shall be deemed to have accrued until the Dividend
Payment Date therefor. Holders of Series C Preferred Stock shall
not be entitled to receive interest on any unpaid cumulative
dividends. For purposes of this Paragraph 2(a), "Business Day"
means any day other than a Saturday, Sunday or any business day
on which banking institutions in New York, New York are not
required to be open.
(b) Each such dividend shall be paid to the holders of
record of shares of Series C Preferred Stock as they appear on
the stock record books of the corporation on such record date as
shall be fixed by the Board of Directors of the corporation or a
duly authorized committee thereof, which date shall be not more
than 30 days nor less than 10 days preceding the Dividend Payment
Date relating thereto.
(c) No dividend shall be paid or declared and set
apart for payment on any date ("Junior Dividend Payment Date") on
or in respect of the Common Stock or any other class or series of
Preferred Stock of the corporation ranking junior to the Series C
Preferred Stock as to dividends unless the corporation has paid
all dividends on all outstanding shares of Series C Preferred
Stock which have accumulated and are unpaid up to the Dividend
Payment Date which coincides with or next precedes such Junior
Dividend Payment Date. With respect to accumulated and unpaid
dividends on the Series C Preferred Stock and any other class or
series of stock of the corporation which is pari passu with the
shares of Series C Preferred Stock with regard to the right to
receive accumulated and unpaid dividends, if and when declared
payable, dividends shall be paid pro rata in proportion with each
holder's respective amount of accumulated and unpaid dividends
through the date on which the holders were entitled to receive
dividends, which date coincides with or next precedes the date on
which payment is made. No optional redemption of shares of any
class or series of stock of the corporation which is pari passu
with the shares of Series C Preferred Stock with regard to the
right to receive accumulated and unpaid dividends shall be made
at a time when there remain accumulated and unpaid dividends on
any outstanding shares of Series C Preferred Stock.
3. VOTING RIGHTS
(a) The holders of Series C Preferred Stock shall not,
except as required by law or as otherwise set forth herein, have
any right or power to vote on any question or in any proceeding
or to be represented at, or to receive notice of, any meeting of
the corporation's stockholders. On any matter on which the
holders of the Series C Preferred Stock shall be entitled to
vote, they shall be entitled to one vote for each share held.
(b) Limited Voting Rights.
(i) During any period in which the corporation is obligated
to, but has not, redeemed all outstanding shares of Series C
Preferred Stock pursuant to Paragraph 7(a) below, each holder of
the Series C Preferred Stock shall be entitled to one vote for
each share of Common Stock issuable upon conversion of such
holder's Series C Preferred Stock on any matter submitted to a
vote of the corporation's stockholders.
(ii) During any period in which accumulated unpaid dividends
on the Series C Preferred Stock equal or exceed $0.88 per share
(subject to adjustment for stock splits or combinations), (I)
each holder of the Series C Preferred Stock shall be entitled to
one vote for each share of Common Stock issuable upon conversion
of such holder's share of Series C Preferred Stock on any matter
submitted to a vote of the corporation's stockholders and (II)
the holders of the Series C Preferred stock, voting as a class,
shall be entitled to elect one member of the Board of Directors
of the corporation at a special meeting of stockholders called
for such purpose and at each annual meeting of stockholders
thereafter until such accumulated unpaid dividends shall have
been paid in full. Any director so elected by the holders of the
Series C Preferred Stock shall serve only until such accumulated
unpaid dividends shall have been paid in full.
4. CONVERSION RIGHTS
(a) Voluntary Conversion Procedure.
(i) Subject to the provisions of this Paragraph 4(a),
any holder of the Series C Preferred stock may, at any time and
from time to time, at such holder's option convert all or any
portion of the Series C Preferred Stock (including any fraction
of a share) held by such holder into shares of the corporation's
Common Stock at the rate of one (adjusted as provided herein)
share of Common Stock for each share of Series C Preferred Stock
being converted.
(ii) each conversion of Series C Preferred Stock will
be deemed to have been effected as of the close of business on
the date on which the certificate or certificates representing
the Series C Preferred Stock to be converted have been
surrendered at the principal office of the corporation. At such
time as such conversion has been effected, the rights of the
holder of such Series C Preferred Stock as such will cease and
the person or persons in whose name or names any certificate or
certificates for shares of Common Stock are to be issued upon
such conversion will be deemed to have become the holder or
holders of record of the shares of Common Stock represented
thereby.
(iii) As soon as possible after a conversion has been
effected (but in any event within three business days in the case
of subparagraph (I) below), the corporation will deliver to the
converting holder: (I) a certificate or certificates
representing the number of shares of Common Stock issuable by
reason of such conversion in such name or names and such
denominations as the converting holder has specified; and (II) a
certificate representing any shares of Series C Preferred stock
which were represented by the certificate or certificates
surrendered to the corporation in connection with such conversion
but which were not converted.
(iv) The issuance of certificates for shares of Common Stock
upon conversion of the Series C Preferred Stock will be made
without charge to the holders of such Series C Preferred Stock
for any issuance tax in respect thereof or other cost incurred by
the corporation in connection with such conversion and the
related issuance of shares of Common Stock. Upon conversion of
each share of Series C Preferred Stock, the corporation will take
all such actions as are necessary to ensure that the Common Stock
issuable upon such conversion is validly issued, fully paid and
nonassessable.
(v) The corporation will not close its books against the
transfer of Series C Preferred Stock or of Common Stock issued or
issuable upon conversion thereof in any manner which interferes
with the timely conversion of Series C Preferred Stock.
(vi) If any fractional interest in a share of Common Stock
would, except for the provisions of this subparagraph, be
deliverable upon any conversion of the Series C Preferred Stock,
the corporation, in lieu of delivering such fractional share, may
pay an amount to the holder thereof equal to the Market Price (as
defined below) of such fractional share as of the date of
conversion. The "Market Price" of any security shall mean the
average of the closing prices of such security's sales on all
securities exchanges on which such security may at any time be
listed, or, if there has been no sale on any such exchange on any
day, the average of the highest bid and lowest asked prices on
all such exchanges at he end of such day, or, if on any day such
security is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ system as of 4:00 p.m., New
York time, or, if on any day such security is not quoted in the
NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any
similar successor organization in each such case averaged over a
period of 21 days consisting of the day as of which "Market
Price" is being determined and the 20 consecutive business days
prior to such day. If at any time such security is not listed on
any securities exchange or quoted in the NASDAQ System or the
over-the-counter market, the "Market Price" will be the fair
value thereof determined by an independent appraiser selected and
compensated by the corporation.
(vii) The corporation shall not be obligated to issue
certificates representing the shares of Common Stock issuable
upon voluntary conversion unless certificates representing the
shares of Series C Preferred Stock being converted are delivered
to the corporation or the holder notifies the corporation that
such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the corporation to
indemnify the corporation from, or otherwise satisfies the
corporation with respect to, any loss incurred by the corporation
in connection therewith.
(b) Automatic Conversion
(i) All of the then outstanding Series C Preferred stock
will automatically convert into shares of Common Stock at the
rate of one (adjusted as provided herein) share of Common Stock
for each share of Series C Preferred Stock being converted after
or upon the closing by the corporation of an initial public
offering ("IPO") or a subsequent offering of Common Stock if:
(I) the aggregate gross proceeds received by the corporation in
connection with the IPO, or the IPO and such subsequent offering
gin the event the gross proceeds from the IPO alone are
insufficient, are equal to or greater than 75% of the gross
proceeds received by the corporation in connection with the
private offering of the 8% Cumulative Convertible Preferred Stock
by PaineWebber Incorporated (the "PaineWebber Preferred Stock
Offering"), and (II) either (A) in the IPO or any subsequent
offering of Common Stock, the price per share of Common Stock is
equal to or greater than the "Minimum Offering Price" (as defined
below) in an IPO or subsequent offering, or (B) the average
closing sales price (or, if there are no sales, the average of
the closing bid and asked prices) for the Common Stock for any
90-day period ending during each 12-month period is equal to or
greater than the Minimum Offering Price in effect for such 12-month period.
Upon occurrence of the events specified in the
previous sentence, the outstanding shares of Series C Preferred
Stock shall be converted automatically without any further action
by the holders of such shares or the corporation, as whether or
not the certificates representing such shares are surrendered to
the corporation. The "Minimum Offering Price" for purposes of
this subparagraph means $5.25 per share (subject to adjustment
for stock splits or combinations of the Common Stock) in an IPO
or 12 months following the initial closing of the PaineWebber
Preferred Stock Offering, which Minimum Offering Price shall
increase by $0.50 per share for each subsequent 12-month period.
(ii) Notice of the automatic conversion of shares of Series
C Preferred Stock shall be promptly given by the corporation by
mailing a notice to holders of record of the shares of Series C
Preferred Stock at their respective addresses appearing on the
stock record books of the corporation. Such notice shall
indicate (I) that all shares of Series C Preferred Stock have
been converted into shares of Common Stock, (II) the place at
which the certificates representing shares of Series C Preferred
Stock will, upon presentation and surrender of the same, be
exchanged for certificates representing the Common Stock into
which such shares of Series C Preferred Stock were converted,
(III) the then effective Conversion Price (as defined herein) and
(IV) that the Series C Preferred Stock is no longer deemed to be
outstanding. Any failure or defect in such notice shall not, in
any event, affect the validity or effectiveness of such
conversion.
(iii) The corporation shall not be obligated to issue
certificates representing the shares of Common Stock issuable
upon automatic conversion unless Certificates representing the
shares of Series C Preferred stock being converted are delivered
to the corporation or the holder notifies the corporation that
such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the corporation to
indemnify the corporation from, or otherwise satisfies the
corporation with respect to, any loss incurred by the corporation
in connection therewith.
(iv) The corporation will, as soon as practicable after the
delivery of certificates for shares of Series C Preferred stock,
deliver to the person whose Series C Preferred Stock was so
surrendered, or to his nominee or nominees, certificates for the
number of shares of Common Stock to which such person shall be
entitled as provided above. The corporation shall at the time of
conversion pay to the holder of record of any share or shares of
Series C Preferred Stock any accrued and unpaid dividend (either
in cash or in additional shares of Common Stock, valued at their
Market Price at the time of conversion) on the Series C Preferred
stock so surrendered for conversion, except that no payment or
adjustment shall be made for any accrued and unpaid dividends for
the then current quarterly dividend period.
(c) Conversion Rate.
(i) The initial Conversion Price will be 42.25 per share of
Common Stock. To prevent dilution of the conversion rights
granted with respect to the Series C Preferred Stock, the
Conversion Price will be subject to adjustment from time to time
pursuant to the subparagraphs of Paragraph 4(c) of this Section
(B)(3). The corporation shall be deemed to have issued or sold
Common Stock for purposes of this Paragraph 4(c) in accordance
with the provisions of Paragraph 4(d) below.
(ii) If at any time the corporation issues or sells or is
deemed to have issued or sold, any shares of its common stock for
a consideration per share less than the Conversion Price in
effect immediately prior to the time of such issue or sale, the
Conversion Price will be reduced to the Conversion Price
determined by dividing (A) the sum of (1) the product derived by
multiplying the Conversion Price in effect immediately prior to
such issue or sale times the number of shares of Common Stock
outstanding immediately prior to such issue or sale, plus (2) the
consideration, if any, received by the corporation upon such
issue or sale, by (B) the number of shares of Common Stock
outstanding immediately after such issue or sale. For purposes
of Paragraph 4 of this Section (B)(3), all shares of Common Stock
issuable upon exercise of outstanding Options (as hereinafter
defined) or conversion of outstanding Convertible Securities (as
hereinafter defined) will be considered outstanding.
(iii) Notwithstanding anything herein to the contrary,
no adjustment to the Conversion Price will be made pursuant to
Paragraph 4(c)(ii) of this Section (C): (I) upon the grant or
exercise of any Options which may hereafter be granted or
exercised under any employee benefit plan, agreement or
arrangement approved by the Corporation's Board of Directors for
or with its employees, officers, consultants or directors; (II)
upon any issuance or sale of Common Stock pursuant to the initial
public offering of the corporation's securities; (III) upon the
issuance or sale of Common stock or Convertible Securities upon
the exercise of any rights or warrants to subscribe for or
purchase Common Stock or Convertible Securities; (IV) upon the
issuance or sale of Common Stock upon conversion of any
Convertible Securities heretofore issued whether or not any
adjustment in the Conversion Price was made or required to be
made upon the issuance or sale of such Convertible Securities;
(V) upon the issuance of shares of Common Stock or Convertible
Securities (or related Options) to investment bankers, brokers,
finders or the like as compensation for services rendered or to
be rendered to the corporation in connection with the
acquisitions of businesses or the raising of equity or debt
financing for the corporation; (VI) upon the issuance of shares
of Common Stock or Convertible Securities (or related Options) to
any banking or other financial institution in connection with a
loan to the corporation or any of its subsidiaries; or (VII) upon
the issuance of any shares of Common Stock or Convertible
Securities (or related Options) to any person or entity which
sells its business, assets or stock to the corporation or any of
its subsidiaries in exchange for capital stock of the
corporation.
(d) Effect on Conversion Price of Certain Events.
For purposes of determining the adjusted Conversion Price
under Paragraph 4(c) of this Section (B)(3), the following will
be applicable:
(i) Issuance of Rights or Options. If the corporation in
any manner grants any rights or options to subscribe for or to
purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (such rights or
options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible
Securities") and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or
exchange or such Convertible Securities is less than the
Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number of shares
of Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options
will be deemed to be outstanding and to have been issued and sold
by the corporation for such price per share. For purposes of
this Paragraph, the "price per share for which Common Stock is
issuable" will be determined by dividing (A) the total amount, if
any received or receivable by the corporation as consideration
for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the corporation
upon exercise of all such Options, plus in the case of such
Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to
the corporation upon the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of
all such Convertible Securities and the conversion or exchange
thereof, by (B) the total maximum number of shares of Common
Stock issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options. No further
adjustment of the Conversion Price will be made when Convertible
Securities are actually issued upon the exercise of such Options
or when Common Stock is actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities.
(ii) Issuance of Convertible Securities. If the corporation
in any manner issues or sells any Convertible Securities and the
price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Conversion Price in
effect immediately prior to the time or such issue of sale, then
the maximum number of shares of Common Stock issuable upon
conversion or exchange of such Convertible Securities will be
deemed to be outstanding and to have been issued and sold by the
corporation for such price per share. For the purposes of this
subparagraph, the "price per share for which Common Stock is
issuable" will be determined by dividing (A) the total amount
received or receivable by the corporation as consideration for
the issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any,
payable to the corporation upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common
stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment of the Conversion
Price will be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any
such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Conversion
Price have been or are to be made pursuant to other provisions of
this Paragraph 4, no further adjustment of the Conversion Price
will be made by reason of such issue or sale.
(iii) Change is Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the conversion or exchange of
any Convertible Securities are convertible into or exchangeable
for Common Stock changes at any time (other than pursuant to
provisions which are intended to give the holders of such Options
or Convertible Securities substantially the same protection as
that provided by Paragraph 4(c) above and this Paragraph 4(d)),
the Conversion Price in effect at the time of such change will be
readjusted to the conversion Price which would have been in
effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case
may be, at the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Securities without the exercise of any such Option or right which
was not outstanding on September 20, 1991, the Conversion Price
then in effect hereunder will be adjusted to the Conversion Price
which would have been in effect at the time of such expiration or
termination had such Option or Convertible Security, to the
extent outstanding immediately prior to such expiration or
termination, never been issued. <PAGE>
(v) Calculation of Consideration received. If any Common
Stock, Option or Convertible Security is issued the consideration
received therefor will be deemed to be the total amount received
by the corporation therefor. In case any Common Stock, Options
or Convertible Securities are issued or sold for a consideration
other than case, the amount of the consideration other than case
received by the corporation will be the fair value of such
consideration, except where such consideration consists of
securities, in which case the amount of consideration received by
the corporation will be the Market Price thereof as of the date
of receipt. In computing the Market Price of a note or other
obligation which is not listed on a securities exchange or quoted
in the NASDAQ System or reported by the National Quotation
Bureau, Incorporated, the total consideration received by the
corporation (including interest) will be National Bank of Chicago
in effect at the time the note or obligation is deemed to have
been issued. If any Common Stock, Option or Convertible Security
is issued in connection with any merger in which the corporation
is the surviving corporation, the amount of value of such portion
of the net assets and business of the non-surviving corporation
as is attributable to such Common Stock, Options or Convertible
securities, as the case may be. The fair value of any
consideration other than cash and securities will be determined
by the corporation's Board of Directors.
(vi) Integrated Transactions. In case any Option is issued
in connection with the issue or sale of other securities in
connection with the issue or sale of other securities of the
corporation, together comprising one integrated transaction in
which no specific consideration is allocated to such Option by
the parties thereto, the Option will be deemed to have been
issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned
or held by or for the account of the corporation or any
subsidiary of the corporation, and the disposition of any shares
so owned or held will be considered an issue or sale of Common
Stock.
(viii) Record Date. If the corporation takes a record of
the holders of Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common
Stock, Options or in Convertible Securities, or (B) to subscribe
for or purchase Common Stock, Options or Convertible Securities,
then such record date will be deemed to be the date of the issue
or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or upon the making
of such other distribution or the date of the granting of such
right of subscription or the date of the granting of such right
of subscription or purchase, as the case may be.
(e) Subdivision or Combination of Common Stock. If the
corporation at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) its outstanding shares
of Common Stock into a greater number of shares, the Conversion
Price in effect immediately prior to such subdivision will be
proportionately reduced, and if the corporation at any time
combines (by reverse stock split or otherwise) its outstanding
shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination
will be proportionately increased.
(f) Reorganization, Reclassification, Consolidation, Merger
or Sale. Any capital reorganization, reclassification,
consolidation, merger or sale of all or substantially all of the
corporation's assets to another person which is effected in such
a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common
Stock is referred to herein as an "Organic Change." Prior to the
consummation of any Organic Change, the corporation will make
provisions to insure that each of the holders of Series C
Preferred Stock will thereafter have the right to acquire and
receive, in lieu of or in addition to the shares of Common Stock
immediately theretofore acquirable and receivable upon the
conversion of such holder's Series C Preferred Stock such shares
of stock, securities or assets as such holder would have received
in connection with such Organic Change if such holder had
converted his Series C Preferred Stock immediately prior to such
Organic Change. In any such case, the corporation will make
provisions to insure that the provisions of Section B(3) will
thereafter be applicable to the Preferred Stock. The corporation
will not effect any such consolidation, merger or sale, unless
prior to the consummation thereof, the successor corporation (if
other than the corporation) resulting from consolidation or
merger or the corporation purchasing such assets assumes by
written instrument, the obligation to deliver to each such holder
such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to acquire.
(g) Certain Events. If any event occurs of the type
contemplated by the provisions of Paragraph 4 of this Section (B)
(3) but not expressly provided for by such provisions, then the
corporation's board of directors will make an appropriate
adjustment in the Conversion Price so as to protect the rights of
the holders of Preferred Stock; provided, however, that no such
adjustment will increase the Conversion Price so as to protect
the rights of the holders of Preferred Stock, including without
limitation the Series C Preferred Stock; provided, however, that
no such adjustment will increase the Conversion Price as
otherwise determined pursuant to Paragraph 4 of this Section (B)
(3) or decrease the number of shares of Common Stock issuable
upon conversion of each share of Series C Preferred Stock.
(h) Notices.
(i) Immediately upon any adjustment of the Conversion
Price, the corporation will give written notice thereof to all
holders of Series C Preferred Stock.
(ii) The corporation will give written notice to all
holders of Series C Preferred Stock at least 20 days prior to the
date on which the corporation closes its books or takes a record
(I) with respect to any dividend or distribution upon Common
Stock, (II) with respect to any pro rata subscription offer to
holders of Common Stock, or (III) for determining rights to vote
with respect to any Organic Change, dissolution or liquidation.
(iii) The corporation will also give written notice
to the holders of Series C Preferred Stock at least 20 days prior
to the date on which Organic Change will take place.
5. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS
(a) Restrictions on Transfer.
(i) Holders of shares of Common Stock obtained
upon conversion of Series C Preferred Stock are prohibited from
selling or otherwise disposing of such shares for a period of six
months (the "Initial Quiet Period") following the closing of an
IPO by the corporation, but shall have the registration rights
described in Paragraph 5(b) of this Section (B) (3) during the
24-month period (the "Effective Period") immediately following
the expiration of the Initial Quiet Period.
(ii) If the corporation offers any of its securities in an
underwritten public offering pursuant to a registration statement
or statements during the Effective Period, shares of Common Stock
issued upon conversion of the Series C Preferred Stock may not be
sold pursuant to such registration statement or statements or
pursuant to Rule 144 promulgated under the Securities Act of
1933, as amended (the "1933 Act"), during a 90-day period (a
"Subsequent Quiet Period") beginning upon notice by the
underwriters of such underwritten public offering (which notice
may be given prior to the commencement of such offering);
provided, however, that such Subsequent Quiet Periods shall be a
minimum of 90 days apart and no more than two such Subsequent
Quiet Periods shall occur without a day-for-day extension of the
Effective Period and provided, further, that no such restrictions
on sales during the Effective Period shall exist with respect to
the shares of Common Stock into which the then outstanding shares
of Series C Preferred Stock are convertible is less than 10% of
the total number of issued and outstanding shares of Common Stock
as of the commencement of the Subsequent Quiet Period.
(b) Registration Rights.
(I) Promptly following the commencement of the Effective
Period, the corporation shall file a registration statement or
statements and register with the Securities and Exchange
Commission (the "SEC") and all state securities commissioners the
shares of Common Stock into which the Series C Preferred Stock is
or was convertible and shall maintain the effectiveness of such
registration statement(s), and keep the information contained
therein current, throughout the Effective Period (including
without limitation any extensions thereof pursuant to Paragraph
5(a) (ii) above). Such registration shall be in all respects
effected in accordance with subparagraphs (ii) through (viii) of
this Paragraph 5 (b). Notwithstanding the foregoing obligations,
the corporation shall not be required to (I) qualify generally to
do business in any jurisdiction where it would not otherwise be
required to qualify but for this Paragraph 5 (b), (II) subject
itself to tax in any such jurisdiction or (III) consent to
general service of process in any such jurisdiction.
(ii) For purposes hereof, "Registrable Shares" shall mean
(I) the Common Stock issued or issuable upon conversion of the
Series C Preferred Stock and (II) Common Stock issued in respect
of such Common Stock issued or issuable upon conversion of the
Series C Preferred Stock as a result of any stock split, stock
dividend, recapitalization or similar event, but excluding any
such shares of Common Stock which had been registered pursuant to
this paragraph 5 (b) or other shares which are no longer
Registrable Shares under clauses (I) and (II) above for any of
the following reasons: (A) they have been sold to or through a
broker, dealer or underwriter in a public distribution or public
securities transaction; (B) they have been sold in a transaction
exempt from the registration and prospectus delivery requirements
of the 1933 Act so that all transfer restrictions and restrictive
legends with respect thereto are removed upon the consummation of
such sale; or in the case of a holder who then holds less than
one percent of the then outstanding Common Stock of the
corporation (determined on the basis of assumed conversion of all
securities convertible into Common Stock of the corporation),
such shares are, in the reasonable opinion of counsel for the
corporation, available for sale in a transaction exempt from the
registration and prospectus delivery requirements of the 1933 Act
so that all transfer restrictions and restrictive legends with
respect thereto may be removed upon the consummation of such sale
(provided, however, that shares of Common Stock shall not be
excluded pursuant to clauses (A), (B) or (C) above if there
exists no public trading market for such shares).
(iii) The corporation shall bear all expenses incurred
in connection with a registration pursuant to this Paragraph
5(b), including without limitation all registration and filing
fees, printing expenses and fees and disbursements of counsel for
the corporation to the extent permitted by law, provided,
however, that the corporation shall have no obligation to pay or
otherwise bear any portion of transfer taxes, the fees or
disbursements of any special counsel which any holder of Series C
Preferred Stock may retain in connection with the registration of
his Registrable Shares or any portion of the underwriter's
commission, discounts and non-accountable expenses allowance
attributable to the Registrable Shares being offered and sold by
any holder. The corporation shall have the right to designate
the managing underwriter in respect of an underwritten public
offering pursuant to this Paragraph 5(b).
(iv) Notwithstanding the foregoing, if the managing
underwriter of any such offering determines that the number of
shares proposed to be sold by the holders of the Common Stock
issued or issuable upon conversion of the Series C Preferred
Stock and by any other holders (the "Other Stockholders") of
Common Stock (or securities convertible into or exchangeable for
Common Stock or warrants or options to purchase Common Stock) who
have been granted "piggy-back" rights by the corporation with
respect to such shares of Common Stock (together with the
Registrable Shares, the "Piggy-back Shares") is greater than the
number of shares which the underwriter believes is feasible to
sell at the time, at a price and upon the terms approved by the
corporation, then, for purposes of determining the number of
Piggy-back Shares entitled to participate in such registration,
the number of shares which the underwriter believes may be sold
shall be allocated for inclusion in the registration statement
pro rata among the holders of the Common Stock issued or issuable
upon conversion of the Series C Preferred Stock and the Other
Stockholders in proportion to the number of shares of Common
Stock to be included by them in the registration statement.
Notwithstanding anything to the contrary contained herein,
nothing in this provision shall be deemed to modify or limit in
any way the rights granted to the Other Stockholders.
(v) In connection with any registration statement referred
to in this Paragraph 5(b): (I) the corporation shall furnish to
holders of Common Stock issued or issuable upon conversion of the
Series C Preferred Stock a reasonable number of copies of such
registration statement, each amendment and supplement thereto and
each document included therein, and such number of copies of the
then current prospectus included therein as they may from time to
time reasonably request; (II) each holder of Common Stock issued
or issuable upon conversion of the Series C Preferred Stock shall
furnish to the corporation such information as the corporation
may reasonably require from such holder for inclusion in the
registration statement (and the prospectus included therein); and
(III) each holder of Common Stock issued or issuable upon
conversion of the Series C Preferred Stock shall execute and
deliver to the corporation, in form satisfactory to such counsel,
that such holder will comply with all anti-stabilization,
manipulation and similar provisions of Section 10 of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
any rules promulgated thereunder, and will furnish to the
corporation information about sales made in such public offering.
(vi) In connection with each registration of Registrable
Shares pursuant to this Paragraph 5(b), the corporation agrees to
indemnify and hold harmless each holder of Registrable Shares and
its control persons (as defined in Section 15 of the 1933 Act or
Section 20 of the 1934 Act), officers, employees and agents and
each and all of them, from and against any and all losses claims,
damages, liabilities, costs or expenses (including reasonable
attorneys' and accountants' fees) or actions, joint or several,
to which they or any of them may become subject under the 1933
Act or otherwise and to reimburse the persons indemnified as
above for any reasonable legal or other expenses (including the
cost of any investigation and preparation) incurred by them in
connection with any litigation or threatened litigation, whether
or not resulting in any liability, arising out of, or based upon,
(I) any untrue statement of a material fact contained in the
registration statement or in any application or other document
executed by the corporation in connection therewith or based upon
written information furnished by or on behalf of the corporation
filed in any jurisdiction in order to register or qualify the
Piggy-Back Shares under the securities laws thereof, or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading, or (II) the employment by the corporation
of any device, scheme or artifice to defraud, or the engaging by
the corporation in any act, practice or course of business which
operated or would operate as a fraud or deceit, or any conspiracy
with respect thereto, in which the corporation shall participate,
in connection with the issuance and sale of any of the Piggy-Back
Shares.
(vii) Each holder of Registrable Shares included in a
registration statement pursuant to this Paragraph 5(b) agrees to
indemnify and hold harmless the corporation and each person, if
any, who controls the corporation within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act, and each of its
officers, directors, employees and agents and each underwriter,
to the same extent as the foregoing indemnity from the
corporation to them, but with respect to clause (I) of such
indemnity in each case to the extent, and only to the extent,
that any statement in or omission from or alleged omission from
the registration statement was made in reliance upon information
furnished in writing to corporation by such holder specifically
for use in connection with the preparation of the registration
statement or the filing by the corporation in any jurisdiction in
order to register or qualify the Registrable Shares or the Piggy-Back Shares
under the securities laws thereof.
(Viii) If any action is brought against a person entitled
to indemnification pursuant to the foregoing subparagraphs (vi)
or (vii) (an "indemnified party") in respect of which indemnity
may be sought against a person granting indemnification (an
"indemnifying party") pursuant to such subparagraphs, such
indemnified party shall promptly notify such indemnifying party
in writing of the commencement thereof (provided the omission to
so notify the indemnifying party except to the extent such
failure shall have actually and arterially prejudiced the
indemnifying party as a result thereof). In case any such action
is brought against an indemnified party and it notifies an
indemnifying party against which a claim is t be made will be
entitled to participate therein and, to the extent that it may
wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party and the indemnifying party
and the indemnified party shall reasonably conclude based upon
advice of counsel that there may be legal defenses available to
it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the
indemnified party shall have the right to select separate counsel
to assume such legal defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so
to assume the defense of such action and approval by that
indemnified party of counsel, the indemnifying party will not be
liable to such indemnified party under subparagraphs (vi) or
(vii) for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof
unless (I) the indemnified party shall have employed such counsel
in connection with the assumption of legal defenses in accordance
with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel), (II)
the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of
commencement of the action, or (III) the indemnifying party has
authorized the employment of counsel for the indemnified party at
the expense of the indemnifying party. An indemnifying party
shall not be liable for any settlement of any action or
proceeding effected without its written consent.
6. RIGHT OF PARTICIPATION IN SALES
(a) If at any time prior to the effective date of the
IPO, Bradley S. Jacobs ("Jacobs") or any corporation,
partnership, trust or other entity in which Jacobs has a
beneficial interest (other than corporation) each, a "Jacobs
Entity") desires to sell at any time or from time to time any
shares of Common Stock to any person or entity other than a
Permitted Transferee (as defined in Paragraph 6(b) of this
Section (B) (3)) (hereinafter, the "Purchaser") in a transaction
which would result in Jacobs and any Jacobs Entity owning in the
aggregate less than 10% of the Common Stock on a fully-diluted
basis, then the holders of the Series C Preferred Stock shall
have the right to sell a pro rata portion of the shares of Common
Stock issued or issuable upon conversion of the Series C
Preferred Stock to the Purchaser, as a condition to such sale by
Jacobs and/or the Jacobs Entity, at the same price per share and
other terms of payment as Jacobs and/or the Jacobs Entity sells
his and/or its shares of Common Stock. For purposes of this
Paragraph 6, "pro rata" means in proportion to the number of
shares of Common Stock owned (or deemed to be owned) by Jacobs,
any Jacobs Entity, the holders of the Series C Preferred Stock
and all other persons or entities entitled to similar
participation rights, respectively, at the time the determination
is being made. Jacobs or the Jacobs Entity shall notify the
holders of the Series C Preferred Stock of any offer to sell
shares which is subject to this Paragraph 6, within 15 days of
the date of such offer. In order to participate in any such
sale, the holders of the Series C Preferred Stock shall notify
Jacobs or the Jacobs Entity of such intention as soon as
practicable after receipt of the offer to sell and in any event
within 20 days after the date the offer was made and,
simultaneously with such notification, The holders of the Series
C Preferred Stock shall surrender the certificates representing
the shares of Series C Preferred Stock to be sold (or, if such
shares have already been converted to shares of Common Stock, the
certificates representing such shares of Common Stock) to the
corporation. Upon receipt by Jacobs of such notice and surrender
to the corporation of such certificates the shares of Series C
Preferred Stock represented thereby or the appropriate portion
thereof shall be deemed to have been converted and the
corporation shall promptly deliver to such holders a certificate
or certificates representing the shares of Common Stock so issued
upon conversion (and, if necessary, a certificate representing
the number of shares of Series C Preferred Stock included in the
surrendered certificate or certificates which are not deemed to
have been converted hereunder).
(b) For purposes of Paragraph 6(a) of this Section (B)
(3) "Permitted Transferee" shall mean Jacobs' spouse or lineal
descendants or a trust or trusts for the benefit of Jacobs and/or
such persons.
7. REDEMPTION
(a) Mandatory Redemption. On the Redemption Date (as
defined below), the corporation shall redeem each share of Series
C Preferred Stock then outstanding, from funds legally available
therefor, at a price per share equal to the Liquidation Value at
such time (the "redemption price"), unless prior to the
Redemption Date the corporation has completed an initial public
offering of its Common Stock, the aggregate gross proceeds to the
corporation of which are, alone or together with the aggregate
gross proceeds to the corporation of any subsequent public
offering of its Common Stock completed after such initial public
offering but prior to the Redemption Date, equal to or greater
than 75% of the gross proceeds received by the corporation in
connection with the PaineWebber Preferred Stock Offering (as
defined in Paragraph 4(b)(i) above). For purposes of this
Paragraph 7(a), "Redemption Date" means the first Business Day
(as defined in Paragraph 2(a) above) following the expiration of
the 60-month period commencing on the date of the initial closing
of the PaineWebber Preferred Stock Offering. Any mandatory
redemption by the corporation pursuant to this Paragraph 7(a)
shall be made in accordance with the provisions of Paragraph 7(c)
below.
(b) Priority. No Common Stock or any other class or
series of any class of stock of the corporation ranking junior to
the Series C Preferred Stock as to redemption payments may be
redeemed unless all redemption payments with respect to the
Series C Preferred Stock which are in arrears as of such date
have been paid in full.
(c) Notice of Redemption. At least 30 days but not
more than 60 days prior to the Redemption Date, the corporation
shall mail a written notice to each holder of shares of Series C
Preferred Stock then outstanding, notifying such holder of the
redemption by the corporation of such shares and stating the
redemption price therefor, and calling upon such holder to
surrender to the corporation on the Redemption Date at the place
designated in such notice his certificate or certificates
representing shares of Series C Preferred Stock; provided,
however, that the corporation shall have no obligation to furnish
any such notice if, on the date therefor, the corporation has
completed an offering or offerings of its Common Stock such that
it will not become obligated to redeem the Series C Preferred
Stock under Paragraph 7(a) above. On or after the Redemption
Date, each holder of Shares of Series C Preferred Stock to be
redeemed shall present and surrender his certificate or
certificates for such shares to the corporation at the place
designated in such notice and thereupon the redemption price of
such shares shall be paid to or on the order of the person whose
name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be canceled. From
and after the Redemption date (unless default shall be made by
the corporation in payment of the redemption price), all
dividends on the shares of Series C Preferred Stock designated
for redemption in such notice shall cease to accumulate and all
rights of the holders theeof as stockholders of the corporation,
except the right to receive the redemption price thereof upon the
surrender of certificates representing the same, shall cease and
terminate and such shares shall not thereafter be transferred
(except with the consent of the corporation) on the books of the
corporation or deemed to be outstanding for any purpose
whatsoever. The holders of any shares of Series C Preferred
Stock which have not been presented for redemption as specified
in such notice within one year after the Redemption Date shall
have no further interest in such shares or the redemption price
therefor, except as unsecured creditors of the corporation,
subject to any applicable escheat laws.
8. LIQUIDATION OR DISSOLUTION
In the event of any liquidation, dissolution or winding up
of the corporation, whether voluntary or involuntary each holder
of the Series C Preferred Stock shall be entitled to receive, for
each such share held, a cash payment equal to the Liquidation
Value (as defined below) of such share, and no more, before any
distribution of assets shall be made to any holder of Common
Stock or any other class or series of stock of the corporation
ranking junior to the Series C Preferred Stock as to rights on
liquidation, dissolution or winding up, but if the distributable
assets are insufficient to make such payment in full to the
holders of Series C Preferred Stock and any class or series of
stock of the corportion ranking pari passu to the Series C
Preferred Stock as to rights on liquidation, dissolution or
winding up, such assets shall be distributed among the holders of
the outstanding shares of Series C Preferred Stock and such other
classes and series, ratably per share in proportion to the full
per share amount to which they are respectively entitled. For
purposes of this Section (C), "Liquidation Value" per share means
an amount equal to (I) $2.25 (subject to adjustment for stock
splits or combinations) plus (II) the sum of all accumulated and
unpaid dividends on such share to the date fixed for payment in
liquidation.
9. LIMITATIONS
(a) So long as any shares of the Series C Preferred
Stock are outstanding and unless the vote or consent of the
holders of a greater number of shares shall then be required by
law, the consent of the holders of a least a majority of all of
the outstanding shares of Series C Preferred Stock (given in
person or by proxy, either by written consent pursuant to Section
228 of the Delaware General Corporation Law or by a vote at a
annual meeting of stockholders called for such purpose or at any
annual meeting of stockholders, with the holders of Series C
Preferred Stock voting as a class and with each share of Series C
Preferred Stock having one vote) shall be necessary for (i) the
authorization or issuance of any additional shares of Series C
Preferred Stock, (ii) authorizing, effecting or validating the
amendment, alteration or repeal of any of the provisions of this
Section which sets forth the powers, designations, preferences
and rights of Series C Preferred Stock and (iii) the creation of
any class or series of stock of the corporation ranking senior to
the Series C Preferred Stock as to the right to receive
accumulated and unpaid dividends, redemption payments and/or
liquidation payments.
(b) Nothing herein contained shall be construed so as
to require a class vote or the consent of the holders of the
outstanding shares of Series C Preferred Stock (I) in connection
with any increase in the total number of authorized shares of
Common Stock or Preferred Stock, or (ii) in connection with the
authorization or increase of any class or series of capital stock
ranking junior to or pari passu with the Series C Preferred Stock
with regard to the right to receive accumulated and unpaid
dividends, redemption payments and/or liquidation payments.
10. RANKING OF SERIES C PREFERRED STOCK
With regard to rights to receive accumulated and unpaid
dividends, redemption payments and/or liquidation payments,
except if approved in accordance with Paragraph 9(a) of this
Section(B)(3), the Series C Preferred Stock shall rank senior to
or pari passu with any equity securities or securities into which
any convertible indebtedness is convertible which are issued by
the corporation after September 20, 1991, and prior to an initial
public offering of the Common Stock.
The Series C Preferred Stock shall also be subject to the
miscellaneous provisions regarding the corporation's Preferred
Stock set forth in Section (B)(5).
SECTION (B)(4) - 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
1. DESIGNATION
There shall be a Series of Preferred Stock to be known as
"8% Cumulative Convertible Preferred Stock, Par Value of $0.001
Per Share" (hereinafter sometimes referred to as "8% Preferred
Stock") consisting of 2,500,000 shares of Preferred Stock.
2. DIVIDENDS
(a) Dividends shall be paid in cash on the shares of
8% Preferred Stock at the rate of 8% annum ($0.88 per share
subject to adjustment for stock splits or combinations), when and
s declared by the Board of Directors of the corporation out of
any assets legally available for the payment of dividends,
payable in equal quarterly installments on the 20th day of each
of April, July, October and January in each year or, if such day
is not a Business Day (as defined below), on the next Business
Day (each a "Dividend Payment Date"), commencing on April 20,
1992, to holders of record as of the last day of the preceding
month ("Record Date"); provided, however, that for the quarterly
period in which any shares of 8% Preferred Stock are issued, the
quarterly dividend thereon shall be prorated from the date of
issuance. No such dividends shall be deemed to have accrued
until the Dividend Payment Date therefor. Holders of 8%
Preferred Stock shall not be entitled to receive interest on any
unpaid cumulative dividends. For purposes of this Section
(B)(4), "Business Day" means any day other than a Saturday,
Sunday or any business day on which banking institutions in New
York, New York are not required to be open.
(b) Each such dividend shall be paid to the holders of
record of shares of 8% Preferred Stock as they appear on the
stock record books of the corporation on each Record Date.
(c) No dividend shall be paid, declared or set apart
for payment on any date ("Junior Dividend Payment Date") on or in
respect of the Common Stock or any other class or series of
Preferred Stock of the corporation ranking junior to the 8%
Preferred Stock as to dividends unless the corporation has paid
all dividends on all outstanding shares of 8% Preferred Stock
which have accumulated and are unpaid up to the Dividend Payment
Date which coincides with or next precedes such Junior Dividend
Payment Date. With respect to accumulated and unpaid dividends
onthe 8% Preferred Stock and any other class or series of stock
of the corporation which is pari passu with the shares of 8%
Preferred Stock with regard to the right to receive accumulated
and unpaid dividends, if and when declared payable, dividends
shall be paid pro rata in proportion with each holder's
respective amount of accumulated and unpaid dividends through the
date on whcih the holders were entitled to receive dividends,
which date coincides with or next precedes the date on which
payment is made. No redemption of shares of any class or series
of stock of the corporation which is pari passu with or junior to
the shares of 8% Preferred Stock with regard to the right to
receive accumulated and unpaid dividends shall be made at a time
when there remain accumulated and unpaid dividends on any
outstanding shares of 8% Preferred Stock.
3. VOTING RIGHTS
(a) The holders of 8% Preferred Stock shall not,
except as required by law or as otherwise set forth herein, have
any right or power to vote on any question or in any proceeding
or to be represented at, or to receive notice of, any meeting of
the corporation's stockholders. On any matter on which the
holders of the 8% Preferred Stock shall be entitled to vote, they
shall be entitled to one vote for each share held.
(b) Limited Voting Rights.
(I) During any period after the expiration of a
ninety (90) day period following the expiration of the Notice
Period (as defined in Paragraph 7(a) below) in which the
corporation is obligated to, but has not, re-purchased all
outstanding shares of 8% Preferred Stock pursuant to Paragraph
7(a) below, the holders of the 8% Preferred Stock shall be
entitled to vote on any matter as if they held the number of
shares equal to the sum of one plus the aggregate number of all
other shares of the Company's capital stock entitled to vote on
such matter. Such votes shall be voted by the holders of the 8%
Preferred Stock pro rata in accordance with the number of shares
of 8% Preferred Stock then held.
(ii) During any period in which accumulated unpaid
dividends on the 8% Preferred Stock equal or exceed $0.88 per
share (subject to adjustment for stock splits or combinations),
(I) each holder of the 8% Preferred Stock shall be entitled to
one vote, for each share of Common Stock issuable upon conversion
of such holder's shares of 8% Preferred Stock, on any matter
submitted to a vote of the corporation's stockholders and (II)
the holders of the 8% Preferred Stock, voting as a class shall be
entitled to elect one member of the Board of Directors of the
corporation either (x) at a special meeting of stockholders
called for such purpose or (y) through consent of the holders of
the 8% Preferred Stock in lieu of a meeting pursuant to Section
228 of the Delaware General Corporation Law and at each annual
meeting of stockholders thereafter until such accumulated unpaid
dividends shall have been paid in full. Any director so elected
by the holders of the 8% Preferred Stock shall serve only until
such accumulated unpaid dividends shall have been paid in full.
4. CONVERSION RIGHTS
(a) Voluntary Conversion Procedure.
(I) Subject to the provisions of this Paragraph 4(a), shares of
the 8% Preferred Stock (including any fraction of a share) may
be, at any time, and from time to time at the option of the
holder thereof, converted into shares of the Common Stock at the
rate specified in Paragraph 4(c).
(ii) Each conversion of 8% Preferred Stock and issuance of the
Common Stock issued upon such conversion will be deemed to have
been effected as of the close of business on the date on which
the certificate or certificates representing the shares of the 8%
Preferred Stock to be converted have been surrendered at the
principal office of the corporation. At such time as such
conversion has been effected, the rights of the holder of such 8%
Preferred Stock as such will cease and the person or persons in
whose name or names any certifcate or certificates for shares of
Common Stock are to be issued upon such conversion will be deemed
to have become the holder or holders or record of the shares of
Common Stock represented thereby.
(iii) As soon as possible after a conversion has been
effected (but in any event within three business days in the case
of subparagraph (I) below), the corporation will deliver to the
converting holder: (I) a certificate or certificates representing
the number of shares of Common Stock issued upon such conversion
in such name or names and such denominations as the converting
holder has specified; and (II) a certificate representing any
shares of 8% Preferred Stock which were represented by the
certificate or certificates surrendered to the corporation in
connection with such conversion but which were not converted.
(iv) The issuance of certificates for shares of Common Stock upon
conversion of the 8% Preferred Stock will be made without charge
to the holders of such 8% Preferred Stock for any issuance tax in
respect thereof or other cost incurred by the corporation in
connection with such conversion and the related issuance of
shares of Common Stock. Upon conversion of each share of 8%
Preferred Stock, the Common Stock issuable upon such conversion
shall be duly authorized, validly issued, fully paid and
nonassessable.
(v) The corporation will not close its books against the
transfer of 8% Preferred Stock or of Common Stock issued or
issuable upon conversion thereof in any manner which interferes
with the timely conversion of 8% Preferred Stock.
(vi) If any fractional interest in a share of Common Stock would,
except for the provisions of this sub-paragraph, be deliverable
upon any conversion of the 8% Preferred Stock, whether
voluntarily or automatically, the corporation, in lieu of
delivering such fractional share as of the date of conversion.
The "Market Price" of any security shall mean the average of the
closing prices of such security's sales on all securities
exchanges on which such security may at the time be listed, or,
if there has been no sale on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day such security
is not so listed, the average of the representative bed and asked
prices quoted in the NASDAQ System, the average of the highest
bid and lowest asked prices on such day inthe domestic over-the-counter market
as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such
case averaged over a period of twenty-one (21) Business Days
consisting of the day as of which "Market Price" is being
determined and the twenty (20) consecutive Business Days prior to
such day. If at any time such security is not listed on any
securities exchange or quoted in the NASDAQ System or the over-the-counter
market, the "Market Price" will be the fair value
thereof reasonably determined by the board of directors of the
corporation.
(vii) The corporation shall not be obligated to issue
certificates representing the shares of Common Stock issuable
upon conversion pursuant to this Paragraph 4(a) unless
certificates representing the shares of 8% Preferred Stock being
converted are delivered to the corporation or the holder notifies
the corporation that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the
corporation to indemnify the corporation with respect to, any
loss incurred by the corporation in connection therewith.
(b) Automatic Conversion.
(I) All of the then outstanding 8% Preferred Stock will
automatically convert into shares of Common Stock at the rate
specified in Paragraph 4 upon the closing by the corporation of
an offering of Common Stock registered with the Securities and
Exchange Commission ("SEC") on Form S-1 or any other available
form or any Organic Change (as defined below) which results in
the Common Stock for which the Common Stock is exchanged being
registered with the SEC ("IPO") or any subsequent public offering
of Common Stock if: (I) the consideration received by the
corporation in connection with the IPO, or the IPO and any such
subsequent public offering, is equal to or greater than 75% of
the amount paid by purchasers in connection with the private
offering of the 8% Preferred Stock pursuant to that certain Sales
Agency Agreement dated as of October 10, 1991, between the
corporation and PaineWebber Incorporated (the "8% Preferred Stock
Offering"), and (II) either (A) in the IPO or any subsequent
public offering of Common Stock, the public offering price per
share of Common Stock is equal to or greater than the "Minimum
Offering Price" (as defined below) in an IPO or subsequent public
offering, or (B) the average closing sales price )or, of there
are no sales prices quoted, the average of the closing bed and
asked prices) for the Common Stock for any 90-day period ending
during each 12-month period following the initial issuance of the
8% Preferred Stock is equal to or greater than the Minimum
Offering Price" for purposes of this subparagraph means $5.25 per
share (subject to adjustment as set forth in Paragraph 4(d)) in
an IPO or subsequent public offering, the closing of which occurs
in the twelve (12) months following the initial issuance of the
8% Preferred Stock, which Minimum Offering Price shall increase
by $0.50 per share at the beginning of each subsequent 12-month
period. For the purpose of this Paragraph 4(b)(I), the
consideration received by the corporation shall be determined in
accordance with Paragraph 4(d)(v).
(ii) At such time as such conversion has been effected, the
rights of the holder of such 8% Preferred Stock as such will
cease and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock are to be
issued upon such conversion will be deemed to have become the
holder or holders of record of the shares of Common Stock
represented thereby.
(iii) Notice of the automatic conversion specified in Paragraph
4(b)(I) shall be promptly given by the corporation by mailing a
notice to holders of record of the shares of 8% Preferred Stock
at their respective addresses appearing on the stock record books
of the corporation. Such notice shall indicate (I) that all
shares of 8% Preferred Stock have been converted into shares of
Common Stock, (II) the place at which the certificates
representing shares of 8% Preferred Stock will, upon presentation
and surrender of the same, be exchanged for certificates
representing the Common Stock into which such shares of 8%
Preferred Stock were converted, (III) the then effective
Conversion Price (as defined herein) and (IV) that the 8%
Preferred Stock is no longer needed to be outstanding. Any
failure or defect in such notice shall not, in any event, affect
the validity or effectiveness of such conversion.
(iv) The corporation shall not be obligated to issue certificates
representing the shares of Common Stock issuable upon conversion
pursuant to this Paragraph 4(b) unless certificates representing
the shares of 8% Preferred Stock being converted are delivered to
the corporation or the holder notifies the corporation that such
certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the corporation to indemnify the
corporation from, or otherwise satisfies the corporation with
respect to, any loss incurred by the corporation in connection
therewith.
(v) The corporation will, as soon as practicable after the
delivery of certificates for shares of 8% Preferred Stock,
deliver to the person whose 8% Preferred Stock was so
surrendered, or to his nominee or nominees, certificates for the
number of shares of Common Stock to which such person shall be
entitled as provided above. The corporation shall at the time of
conversion pay in cash to the holder of record of any share or
shares of 8% Preferred Stock so surrendered for conversion except
that no payment or adjustment shall be made for any accrued and
unpaid dividends for the then current quarterly dividend period.
(c) Conversion Rate.
(I) The number of shares of Common Stock into which each
share of 8% Preferred Stock is convertible will be determined
from time to time by dividing $11.00 (subject to adjustments as
set forth in Paragraph 4(e)) by the conversion price ("Conversion
Price") then in effect. The initial Conversion Price will be
$2.75 and the initial number of shares of Common Stock into which
each share of 8% Preferred Stock is convertible will be four. To
prevent dilution of the conversion rights granted with respect to
the 8% Preferred Stock, the Conversion Price will be subject to
adjustment from time to time pursuant to the subparagraphs of
this Paragraph 4(c). The corporation shall be deemed to have
issued or sold Common Stock for purposes of this Paragraph 4 in
accordance with the provisions of Paragraph 4(d) below.
(ii) If at any time, so long as shares of 8% Preferred Stock
are outstanding, the corporation issues or sells or is deemed to
have issued or sold, any shares of its Common Stock for a
consideration per share less than the Conversion Price in effect
immediately prior to the time of such issue or sale, the
Conversion Price will be recalculated by dividing (I) the sum of
(A) the product derived by multiplying the Conversion Price in
effect immediately prior to such issue or sale times the number
of shares of Common Stock outstanding immediately prior to such
issue or sale, by (II) the number of shares of Common Stock
outstanding immediately after such issue or sale. For the
purposes of Paragraph 4 of this Section (B)(4), if the initial
closing of the 8% Preferred Stock Offering occurs on or before
November 22, 1991, all shares of Common Stock issuable upon
exercise of Options (as hereinafter defined) or conversion of
Convertible Securities (as hereinafter defined) issued and
outstanding on October 1, 1991, will be considered outstanding,
and if the initial closing of the 8% Preferred Stock Offering
occurs after November 22, 1991, all shares of Common Stock
issuable upon exercise of Options (as hereinafter defined) issued
and outstanding as of the initial closing of the 8% Preferred
Stock Offering will be considered outstanding.
(iii) Notwithstanding anything herein to the contrary, no
adjustment to the Conversion Price will be made pursuant to
Paragraph 4(c)(ii) of this Section (B)(4): (I) upon the grant or
exercise of any Options which may hereafter be granted or
exercised under any employee benefit plan, agreement or
arrangement approved by the corporation's Board of Directors for
or with its employees, officers, consultants or directors, other
than Bradley S. Jacobs, up to a maximum of 1,500,000 shares of
Common Stock in excess of Options committed to employees,
officers, consultants or directors by the Company on or prior to
October 1, 1991; (II) upon the issuance or sale of Common Stock
or Convertible Securities upon the exercise of any rights or
warrants to subscribe for or purchase Common Stock or Convertible
Securities; (III) upon the issuance or sale of Common Stock upon
conversion of any Convertible Securities heretofore issued,
whether or not any adjustment in the Conversion Price was made or
required to be made upon the issuance or sale of such Convertible
Securities; (IV) upon the issuance or sale of shares of Common
Stock, Convertible Securities or Options pursuant to any
contractual commitments of the corporation existing on or prior
to October 1, 1991; or (V) upon the issuance in one or more
transactions, to one or more persons or entities that sell a
business, assets or stock to the corporation or any of its
subsidiaries (an "Acquisition Transaction") in exchange, in part
or in full, for the capital stock of the corporation, of shares
of Common Stock (including shares of Common Stock into which
Convertible Securities are convertible and which are issued upon
exercise of Options) (1) which Acquisition Transaction as of
October 1, 1991 is the subject of a contract or letter of intent
to which the Company or any of its subsidiaries is a party or (2)
of up to 4,139,154 shares of Common Stock in excess of any
issuances pursuant to clause 1 of this Paragraph 4(c)(iii)(v).
(d) Effect on Conversion Price of Certain Events. For
purposes of determining the Conversion Price under Paragraph 4
of this Section (B)(4), the following will be applicable:
(I) Issuance of Rights or Options. If the corporation in
any manner grants any rights or options to subscribe for or to
purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (such rights or
options being herein called "Options" and such convertible or
exchangeable stock or securities being herein called "Convertible
Securities") and the purchase price per share for which Common
Stock is issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities is less
than the Conversion Price in effect immediately prior to the time
of the granting of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such
Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options will be
deemed to be outstanding and to have been issued and sold by the
corporation for such purchase price per share. For purposes of
this Paragraph, the "purchase price per share for which Common
Stock is issuable" will be determined by dividing (A) the total
amount, if any, received or receivable by the corporation as
consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the
corporation upon exercise of all such Options, plus in the case
of such Options which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any,
payable to the corporation upon the issuance or sale of such
Convertible Securities and the conversion or exchange thereof, by
(B) the total maximum number of shares of Common Stock issuable
upon the exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the
exercise of such Options. No further adjustment of the
Conversion Price will be made when Convertible Securities are
actually issued upon the exercise of such Options or when Common
Stock is actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the corporation
in any manner issues or sells any Convertible Securities and the
purchase price per share for which Common Stock is issuable upon
such conversion or exchange is less than the Conversion Price in
effect immediately prior to the time of such issue or sale, then
the maximum number of shares of Common Stock issuable upon
conversion or exchange of such Convertible Securities will be
deemed to be outstanding and to have been issued and sold by the
corporation for such purchase price per share. For the purposes
of this subparagraph, the "purchase price per share for which
Common Stock is issuable" will be determined by dividing (A) the
total amount received or receivable by the corporation as
consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the corporation upon the
conversion or exchange thereof, by (B) the total maximum number
of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further
adjustment of the Conversion Price will be made when Common Stock
is actually issued upon the conversion or exchange of such
Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price have been or are to be
made pursuant to other provisions of this Paragraph 4, no further
adjustment of the Conversion Price will be made by reason of such
issue or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the conversion or exchange of
any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock
changes at any time (other than pursuant to provisions which are
intended to give the holders of such Options or Convertible
Securities substantially the same protection as that provided by
Paragraph 4 above and this Paragraph 4(d)), the Conversion Price
in effect at the time of such change will be readjusted to the
Conversion Price which would have been if effect at such time had
such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Securities which resulted in an adjustment to the Conversion
Price, without the exercise of any such Option or right which was
not outstanding on the first issuance of any shares of 8%
Preferred Stock, the Conversion Price then in effect hereunder
will be adjusted to the Conversion Price which would have been in
effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination, never been
issued.
(v) Calculation of Consideration Received. If any Common
Stock, Option or Convertible Security is issued or sold or deemed
to have been issued or sold for cash, the consideration received
therefor will be deemed to be the total amount paid by the
purchasers thereof to the corporation therefor. In case any
Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the corporation will be
the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the corporation will be the Market
Price thereof as of the date of receipt. In computing the Market
Price of a note or other obligation which is not listed on a
securities exchange or quoted in the NASDAQ System or reported by
the National Quotation Bureau, Incorporated, the total
consideration received by the corporation (including interest)
will be discounted based upon the maturity of such note or other
obligation at the prime rate of interest at The First National
Bank of Chicago in effect at the time the note or obligation is
deemed to have been issued. If any Common Stock, Option or
Convertible Security is issued in connection with any Acquisition
Transaction, the amount of consideration received by the
corporation therefor will be deemed to be the fair value of such
portion of the net assets and business of the seller as is
acquired for such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any
consideration received by the corporation other than cash and
securities in any Acquisition Transaction will be determined by a
majority of the independent directors (as defined, from time to
time, under the rules of the American Stock Exchange) of the
acquisition committee of the corporation's board of directors or
if an acquisition committee is not then appointed, the
corporation's board of directors. The fair market value of any
consideration other than cash and securities in connection with
any stock issuance in any transaction other than an Acquisition
Transaction shall be determined by a majority of the independent
directors (as defined, from time to time, under the rules of the
American Stock Exchange) of the finance committee of the
corporation's board of directors, or if a finance committee is
not then appointed, the corporation's board of directors.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities
of the corporation, together comprising one integrated
transaction in which no specific consideration is allocated to
such Option by the parties thereto, the Option will be deemed to
have been issued for a consideration of $.01.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time does not include shares owned
or held by or for the account of the corporation or any
subsidiary of the corporation, and the disposition of any shares
so owned or held will be considered an issue or sale of Common
Stock.
(viii) Record Date. If the corporation takes a record
of the holders of Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common
Stock, Options or in Convertible Securities, or (B) to subscribe
for or purchase Common Stock, Options or Convertible Securities,
then such record date will be deemed to be the date of the issue
or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or upon the making
of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(e) Subdivision or Combination of Common Stock. If
the corporation at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) its outstanding shares
of Common Stock into a greater number of shares, the Conversion
Price in effect immediately prior to such subdivision will be
proportionately reduced, and if the corporation at any time
combines (by reverse stock split or otherwise) its outstanding
shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination
will be proportionately increased.
(f) Reorganization, Reclassification, Consolidation,
Merger or Sale. Any capital reorganization, reclassification,
consolidation, merger or sale of all or substantially all of the
corporation's assets to another person which is effected in such
a way holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is
referred to herein as an "Organic Change." Prior to the
consummation of any Organic Change, the corporation will make
provisions to insure that each of the holders of 8% Preferred
Stock will thereafter have the right to acquire and receive, in
lieu of or in addition to the shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such
holder's 8% Preferred Stock such shares of stock, securities or
assets as such holder would have received in connection with such
Organic Change if such holder had converted his 8% Preferred
Stock immediately prior to such Organic Change. In any such
case, the corporation will make provisions to insure that the
provisions of this Section (B)(4) will thereafter be applicable
to the Preferred Stock. The corporation will not effect any such
consolidation, merger or sale, unless prior to the consummation
thereof, the successor corporation (if other than the
corporation) resulting from consolidation or merger or in the
corporation purchasing such assets assumes by written instrument,
the obligation to deliver to each such holder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
(g) Certain Events. If any event occurs of the type
contemplated by the provisions of Paragraph 4 of this
Section(B)(4) but not expressly provided for by such provisions,
then the corporation's board of directors will make an
appropriate adjustment in the Conversion Price so as to protect
the rights of the holders of Preferred Stock, including without
limitation the 8% Preferred Stock; provided, however, that no
such adjustment will increase the Conversion Price as otherwise
determined pursuant to Paragraph 4 of this Section (B)(4) or
decrease the number of shares of Common Stock issuable upon
conversion of each share of 8% Preferred Stock.
(h) Notices.
(I) Immediately upon any adjustment of the
Conversion Price, the corporation will give written notice
thereof to all holders of 8% Preferred Stock.
(II) The corporation will give written notice to
all holders of 8% Preferred Stock at least twenty (20) days prior
to the date on which the corporation closes its books or takes a
record (I) with respect to any dividend or distribution upon
Common Stock, (II) with respect to any pro rata subscription
offer to holders of Common Stock, or (III) for determining rights
to vote with respect to any Organic Change, dissolution or
liquidation.
(III) The corporation will also give written
notice to the holders of 8% Preferred Stock at least twenty (20)
days prior to the date on which any Organic Change will take
place.
(iv) The corporation will give written notice as
required by Paragraph 7(a).
5. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS
(a) Restrictions on Transfer.
(I) Holders of shares of Common Stock obtained
upon conversion of 8% Preferred Stock are prohibited from selling
or otherwise disposing of such shares for a period of six (6)
months following the closing of an IPO by the corporation (the
"Initial Quiet Period"), but shall have the registration rights
described in Paragraph 5(b) of this Section (B)(4) during the 24-month period
immediately following the expiration of the Initial
Quiet Period (the "Effective Period").
(ii) If the corporation offers any of its
securities in an underwritten public offering pursuant to a
registration statement or statements during the Effective Period,
shares of Common Stock issued upon conversion of the 8% Preferred
Stock may not be sold pursuant to such registration statement or
statements or pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended (the "1933 Act"), during a 90-day period
(a "Subsequent Quiet Period") beginning upon notice by
the underwriters of such underwritten public offering (which
notice may be given prior to the commencement such offering);
provided, however, that such Subsequent Quiet Periods shall be a
minimum of ninety (90) days apart and no more than two such
Subsequent Quiet Periods shall occur without a day-for-day
extension of the Effective Period and provided, further, that no
such restrictions on sales during the Effective Period shall
exist with respect to the shares of Common Stock issued or
issuable upon conversion of the 8% Preferred Stock if the number
of shares of Common Stock into which the then outstanding shares
of 8% Preferred Stock are convertible is less than 10% of the
total number of issued and outstanding shares of Common Stock as
of the commencement of the Subsequent Quiet Period.
(b) Registration Rights.
(I) Upon the commencement of the Effective Period, the
corporation shall have a registration statement or statements in
effect with the SEC and all state securities commissioners
relating to the shares of Common Stock into which the 8%
Preferred Stock is or was convertible and shall maintain the
effectiveness of such registration statement(s), and keep the
information contained therein current, throughout the Effective
Period (including without limitation any extensions thereof
pursuant to Paragraph 5(a)(ii) above). Such registration shall
be in all respects effected in accordance with subparagraphs (ii)
through (viii) of this Paragraph 5(b). The offering to which
such registration statement or statements relates need not be an
underwritten offering. Notwithstanding the foregoing
obligations, the corporation shall not be required to (I) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Paragraph 5(b),
(II) subject itself to tax in any such jurisdiction or (III)
consent to general service of process in any such jurisdiction.
(ii) For purposes hereof, "Registrable Shares" shall
mean (I) the Common Stock issued or issuable upon conversion of
the 8% Preferred Stock as a result of any stock split, stock
dividend, recapitalization or similar event, but excluding any
such shares of Common Stock which had been registered pursuant to
this Paragraph 5(b) or other shares which are no longer
Registrable Shares under clauses (I) and (II) above for any of
the following reasons: (A) they have been sold to or through a
broker, dealer or underwriter in a public distribution or public
securities transaction; (B) they have been sold in a transaction
exempt from the registration and prospectus delivery requirements
of the 1933 Act so that all transfer restrictions and restrictive
legends with respect thereto are removed upon the consummation of
such sale; or in the case of a holder who then holds less than
one percent of the then outstanding Common Stock of the
corporation), such shares are, in the reasonable opinion of
counsel for the corporation, may be sold by such holder in a
transaction exempt from the registration and prospectus delivery
requirements of the 1933 Act so that all transfer restrictions
and restrictive legends with respect thereto may be removed upon
the consummation of such sale (provided, however, that shares of
Common Stock shall not be excluded pursuant to clauses (A), (B)
or above if the shares are not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter
market).
(iii) The corporation shall bear all expenses incurred
in connection with a registration pursuant to this Paragraph
5(b), including without limitation all registration and filing
fees, printing expenses and fees and disbursements of counsel for
the corporation to the extent permitted by law, provided,
however, that the corporation shall have no obligation to pay or
otherwise bear any portion of transfer taxes, the fees or
disbursements of any special counsel which any holder of 8%
Preferred Stock may retain in connection with the registration of
his Registrable Shares or any portion of the underwriter's
commission, discounts and non-accountable expenses allowance
attributable to the Registrable Shares being offered and sold by
any holder. The corporation shall have the right to designate
the managing underwriter in respect of an underwritten public
offering pursuant to this Paragraph 5(b).
(iv) In connection with each registration of
Registrable Shares pursuant to this Paragraph 5(b), the
corporation agrees to indemnify and hold harmless each holder of
Registrable Shares and its control persons (as defined in Section
15 of the 1933 Act or Section 20 of the 1934 Act), officers,
employees and agents and each and all of them, from and against
any and all losses, claims, damages, liabilities, costs or
expenses (including reasonable attorneys' and accountants' fees)
or actions, joint or several, to which they or any of them may
become subject under the 1933 Act or otherwise and to reimburse
the persons indemnified as above for any reasonable legal or
other expenses (including the cost of any investigation and
preparation) incurred by them in connection with any litigation
or threatened litigation, whether or not resulting in any
liability, arising out of, or based upon, (I) any untrue
statement of a material fact contained in the registration
statement or in any application or other document executed by the
corporation in connection therewith or based upon written
information furnished by or on behalf of the corporation filed in
any jurisdiction in order to register or qualify the Registrable
Shares under the securities laws thereof, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, or (II) the employment by the corporation of any
device, scheme or artifice to defraud, or the engaging by the
corporation in any act, practice or course of business which
operated or would operate as a fraud or deceit, or any conspiracy
with respect thereto, in which the corporation shall participate,
in connection with the issuance and sale of any of the
Registrable Shares.
(v) Each holder of Registrable Shares included in a
registration statement pursuant to this Paragraph 5(b) agrees to
indemnify and hold harmless the corporation and each person, if
any, who controls the corporation within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act, and each of its
officers, directors, employees and agents and each underwriter,
to the same extent as the foregoing indemnity from the
corporation to them, but with respect to clause (I) of such
indemnity in each case to the extent, and only to the extent,
that any statement in or omission from or alleged omission from
the registration statement was made in reliance upon information
furnished in writing to corporation by such holder specifically
for use in connection with the preparation of the registration
statement or the filing by the corporation in any jurisdiction in
order to register or qualify the Registrable Shares under the
securities laws thereof.
(vi) If any action is brought against a person entitled
to indemnification pursuant to the foregoing subparagraphs (vi)
or (vii) (an "indemnified party") in respect of which indemnity
may be sought against a person granting indemnification (an
"indemnifying party") pursuant to such subparagraphs, such
indemnified party shall promptly notify such indemnifying party
in writing of the commencement thereof (provided the omission to
so notify the indemnifying party of any such action shall not
release the indemnifying party from any liability it may have to
such indemnified party except to the extent such failure shall
have actually and materially prejudiced the indemnifying party as
a result thereof). In case any such action is brought against an
indemnified party and it notifies an indemnifying party of the
commencement thereof, the indemnifying party against which a
claim is to be made will be entitled to participate therein and,
to the extent that it may wish, to assume the defense thereof,
with counsel reasonable satisfactory to such indemnified party;
provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and
the indemnified party shall reasonably conclude based upon advice
of counsel that there may be legal defenses available to it
and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the
indemnified party shall have the right to select separate counsel
to assume such legal defenses and otherwise to participate in the
defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to
such indemnified party of its election so to assume the defense
of such action and approval by that indemnified party of counsel,
the indemnifying party will not be liable to such indemnified
party under subparagraphs (vi) or (vii) for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (I) the indemnified
party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to
the next preceding sentence (it being understood, however, that
the indemnifying party shall not be liable for the expenses of
more than one separate counsel), (II) the indemnifying party
shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a
reasonable time after notice of commencement of the action, or
(III) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the
indemnifying party. An indemnifying party shall not be liable
for any settlement of any action or proceeding effected without
its written consent.
(c) Additional Registration Rights. As soon as
practicable and in no event later than three months after the
final closing date of the 8% Preferred Stock Offering, the
corporation shall (at its own expense) register the 8% Preferred
Stock with the SEC under the 1934 Act.
6. RIGHT OF PARTICIPATION IN SALES
(a) If at any time prior to the commencement of the
Effective Period, Bradley S. Jacobs ("Jacobs") or any
corporation, partnership, trust or other entity in which Jacobs
has a beneficial interest (other than the corporation) (each, a
"Jacobs Entity") desires to sell at any time or from time to time
any shares of Common Stock to any person or entity other than a
Permitted Transferee (as defined in Paragraph 6(b) of this
Section (B)(4)) (hereinafter, the "Purchaser"), then the holders
of the 8% Preferred Stock shall have the right to sell a pro rata
portion of the shares of Common Stock issued or issuable upon
conversion of the 8% Preferred Stock to the Purchaser, as a
condition to such sale by Jacobs and/or the Jacobs Entity, at the
same price per share and other terms of payment as Jacobs and/or
the Jacobs Entity sells his and/or its shares of Common Stock,
provided, however, that the provisions of this Paragraph 6 shall
not apply to the first 4,344,095 shares of Common Stock (subject
to adjustments pursuant to Paragraph 4(e)) sold by Jacobs and/or
the Jacobs Entity on or after October 1, 1991, and shall no
longer apply once the number of shares of Common Stock held of
record or beneficially by Jacobs is 1,000,000 (subject to
adjustments pursuant to Paragraph 4(e)) or less. For purposes of
this Paragraph 6, "pro rata" means in proportion to the number of
shares of Common Stock owned (or deemed to be owned) by Jacobs,
any Jacobs Entity, the holders of the 8% Preferred Stock and all
other persons or entities entitled to similar participation
rights, respectively, at the time the determination is being
made. Jacobs or the Jacobs Entity shall notify the holders of
the 8% Preferred Stock of any offer to sell shares which is
subject to this Paragraph 6, within fifteen (15) days of the date
of such offer. In order to participate in any such sale, the
holders of the 8% Preferred Stock shall notify Jacobs or the
Jacobs Entity of such intention as soon as practicable after
receipt of the offer to sell and in any event within twenty (20)
days after the date the offer was made and, simultaneously with
such notification, the holders of the 8% Preferred Stock shall
surrender the certificates representing the shares of 8%
Preferred Stock to be sold (or, if such shares have already been
converted to shares of Common Stock, the certificates
representing such shares of Common Stock) to the corporation.
(If the holder of any such certificate notifies the corporation
that such certificate has been lost, stolen or destroyed and
executes an agreement satisfactory to the corporation to
indemnify the corporation from, or otherwise satisfies the
corporation with respect to, any loss incurred by the corporation
in connection therewith, then delivery of such notice and
agreement shall be deemed fro this purpose to constitute
surrender of such certificates.) Upon receipt by Jacobs of such
notice and surrender to the corporation of such certificates, the
shares of 8% Preferred Stock represented thereby or the
appropriate portion thereof shall be deemed to have been
converted and the corporation shall promptly deliver to such
holders a certificate or certificates representing the shares of
Common Stock so issued upon conversion (and, if necessary, a
certificate representing the number of shares of 8% Preferred
Stock included in the surrendered certificate or certificates
which are not deemed to have been converted hereunder).
(b) For purposes of Paragraph 6(a) of this Section
(B)(4), "Permitted Transferee" shall mean Jacobs' spouse or
lineal descendants or a trust or trusts for the benefit of Jacobs
and/or such persons, provided that the shares of Common Stock
transferred, sold or otherwise disposed of to such Permitted
Transferee (except to another Permitted Transferee) unless such
Permitted Transferee complies with the provisions of Paragraph
6(a).
7. REPURCHASE
(a) Repurchase. On the first Business Day following
the expiration of the 60-month period commencing on the date of
the initial issuance of the 8% Preferred Stock, the Company will
notify the holders of the 8% Preferred Stock that, for a period
of ninety (90) days thereafter (the "Notice Period"), each holder
of the 8% Preferred Stock shall be entitled, by giving written
notice thereof to the corporation, to require the corporation to
repurchase the number of shares of 8% Preferred Stock specified
in such notice, which may be all or any portion of the shares of
8% Preferred Stock then held by such holder, for a repurchase
price per share equal to the Liquidation Value (as defined
below), payable, only from funds legally available therefore, in
a lump sum in accordance with the following sentence. The
corporation shall be obligated to repurchase all shares of 8%
Preferred Stock with respect to which it received written notices
during the Notice Period, all such repurchases to occur at one
time within the 90-day period following the expiration of the
Notice Period. To the extent that such repurchase shall not be
permitted under the provisions of Section 160 of the Delaware
General Corporation Law (or any successor provision) ("Section
160"), the corporation shall repurchase those shares which it is
permitted to repurchase under Section 160 (pro rata with respect
to the number of shares each holder has specified in its notice
to the corporation for repurchase), and then on the earliest date
and dates subsequent thereto when the Company shall be permitted
under Section 160 to effect any such repurchase, it shall effect
such repurchase (pro rata with respect to the number of shares
each holder specified in its notice to the corporation for
repurchase).
(b) Exception to Repurchase Obligation. The
corporation shall not, however, be obligated to repurchase any
shares of 8% Preferred Stock pursuant to Paragraph 7(a) if prior
to the commencement of the Notice Period the corporation has
completed the IPO in which the consideration received by the
corporation (determined in accordance with Paragraph 4(d)(v)) is,
alone or together with the consideration received by the
corporation in any subsequent public offering of its Common Stock
completed after the IPO but prior to the commencement of the
Notice Period, equal to or greater than 75% of the amount paid by
purchasers in connection with the 8% Preferred Stock Offering (as
defined in Paragraph 4(b)(I) above).
8. LIQUIDATION OR DISSOLUTION
In the event of any liquidation, dissolution or winding up
of the corporation, whether voluntary or involuntary, each holder
of the 8% Preferred Stock shall be entitled to receive, for each
such share held, a cash payment equal to the Liquidation Value of
such share, and no more, before any distribution of assets shall
be made to any holder of Common Stock or any other class or
series of stock of the corporation ranking junior to the 8%
Preferred Stock as to rights on liquidation, dissolution or
winding up, but if the distributable assets are insufficient to
make such payment in full to the holders of 8% Preferred Stock
and any class or series of stock of he corporation ranking pari
passu to the 8% Preferred Stock as to rights on liquidation,
dissolution or winding up, such assets shall be distributed among
the holders of the outstanding shares of 8% Preferred Stock and
such other classes and series, ratably per share in proportion to
the full per share amount to which they are respectively
entitled. For purposes of this Section (B)(4), "Liquidation
Value" per share means an amount equal to (I) $11.00 (subject to
adjustment as set forth in Paragraph 4(c)) plus (II) the sum of
all accumulated and unpaid dividends on such share to the date
fixed for payment in liquidation.
9. LIMITATIONS
(a) So long as any shares of the 8% Preferred Stock
are outstanding and unless the vote or consent of the holders of
a greater number of shares shall then be required by law, the
consent of the holders of at least a majority of all of the
outstanding shares of 8% Preferred Stock (given in person or by
proxy, either by written consent pursuant to Section 228 of the
Delaware General Corporation Law or by a vote at a special
meeting of stockholders called for such purpose or at any annual
meeting of stockholders, with the holders of 8% Preferred Stock
voting as a class and with each share of 8% Preferred Stock
having one vote) shall be necessary for (I) the authorization or
issuance of any additional shares of 8% Preferred Stock, (ii)
authorizing, effecting or validating the amendment, alteration or
repeal of any of the provisions of this Section (B)(4) which sets
forth the powers, designations, preferences and rights of 8%
Preferred Stock , and (iii) the creation of any class or series
of stock of the corporation ranking senior to the 8% Preferred
Stock as to the right to receive accumulated and unpaid
dividends, redemption payments and/or liquidation payments.
(b) Nothing herein contained shall be construed so as
to require a class vote or the consent of the holders of the
outstanding shares of 8% Preferred Stock (I) in connection with
any increase in the total number of authorized shares of Common
Stock or Preferred Stock, or (ii) in connection with the
authorization or increase of any class or series of capital stock
ranking junior to or pari passu with the 8%Preferred Stock with
regard to the right to receive accumulated and unpaid dividends,
redemption payments and/or liquidation payments.
10. RANKING OF 8% PREFERRED STOCK
With regard to rights to receive accumulated and unpaid
dividends, redemption payments and/or liquidation payments,
except if approved in accordance with Paragraph 9(a) of this
Section (B)(4), the 8% Preferred Stock shall rank senior to or
pari passu with any equity securities or securities into which
any convertible indebtedness is convertible which are issued by
the corporation after August 30, 1991, and prior to the IPO.
The 8% Preferred Stock shall also be subject to the
miscellaneous provisions regarding the corporation's Preferred
Stock set forth in Section (B)(5).
SECTION (B)(5) - MISCELLANEOUS PROVISIONS RELATING TO PREFERRED
STOCK
1. REGISTRATION OF TRANSFER
The corporation will keep at its principal office a register
for the registration of its classes and series of Preferred
Stock. Upon the surrender of any certificate representing any
Preferred Stock at such place, the corporation will, at the
request of the record holder of such certificate, execute and
deliver (at the corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate
the number of shares represented by the surrendered certificate.
Each such new certificate will be registered in such name and
will represent such number of shares as is requested by the
holder of the surrendered certificate, and dividends will accrue
on the Preferred Stock represented by such new certificate from
the date to which dividends have been fully paid on such
Preferred Stock represented by the surrendered certificate.
2. REPLACEMENT
Upon receipt of evidence reasonably satisfactory to the
corporation (an affidavit of the registered holder will be
satisfactory) of the ownership and the loss, theft, destruction
or mutilation of any certificate evidencing shares of any class
or series of Preferred Stock, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably
satisfactory to the corporation (provided that if the holder is
an institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the corporation will (at its
expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of
such class or series represented by such lost, stolen, destroyed
or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate, and dividends will accrue on
the Preferred Stock represented by such new certificate from the
date to which dividends have been fully paid on such lost,
stolen, destroyed or mutilated certificate.
3. NOTICES
Except as otherwise expressly provided, all notices referred
to herein will be in writing and will be delivered by registered
or certified mail, return receipt requested, postage prepaid and
will be deemed to have been given when so mailed (a) to the
corporation, at its principal executive offices, and (b) to any
stockholder, at such holder's address as it appears in the stock
records of the corporation (unless otherwise indicated by any
such holder).
ARTICLE V
Any and all right, title, and interest and claim in or to
any dividends declared by the corporation, whether in cash,
stock, or otherwise, which are unclaimed by the stockholder
entitled thereto for a period of six years after the close of
business on the payment date, shall be and is deemed to be
extinguished and abandoned; and such unclaimed dividends in the
possession of the corporation, its transfer agents or other
agents or depositories shall at such time become the absolute
property of the corporation, free and clear of any and all claims
of any persons whatsoever.
ARTICLE VI
In Furtherance and not in limitation of the power conferred
by statute, the Board of Directors is expressly authorized to
make, alter, amend or repeal the bylaws of the corporation.
ARTICLE VII
A director of the corporation shall not in the absence of
fraud be disqualified from his office from dealing or contracting
with the corporation either as a vendor, purchaser or otherwise,
nor in the absence of fraud shall a director of the corporation
be liable to account to the corporation for any profit realized
by him from or through any transaction or contract of the
corporation by reason of the fact that he, or any other firm of
which he is a member or any corporation of which he is an
officer, director, or stockholder, was interested in such
transaction or contract if such transaction or contract has been
authorized, approved or ratified in the manner provided in the
General Corporation Law of Delaware for authorization, approval
or ratification of transactions or contracts between the
corporation and one or more of its directors or officers, or
between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its
directors or officers are directors or officers, or have a
financial interest.
ARTICLE VIII
Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or
between this corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this
corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the corporation, as
the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the
case may be, agree to any compromise or arrangement and to any
reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and
the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders
or class of stockholders, of this corporation, as the case may
be, and also on this corporation.
ARTICLE IX
The corporation shall indemnify its officers and directors
to the full extent permitted by the Delaware General Corporation
Law.
ARTICLE X
The personal liability of the directors of the corporation
is hereby eliminated to the fullest extent permitted by Paragraph
(7) of subsection (b) of Section 102 of the General Corporation
Law of the State of Delaware, as the same may be amended and
supplemented, or any corresponding provision of the General
Corporation Law of the State of Delaware.
ARTICLE XI
Elections of directors need not be by written ballot unless
the bylaws of the corporation so provide.
ARTICLE XII
The corporation reserves the right to amend, alter, change
or repeal any provision contained in this Amended and Restated
Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
IN WITNESS WHEREOF, I have signed this Amended and Restated
Certificate of Incorporation this day of .
United Waste Systems, Inc.
By:
President
[SEAL]
Secretary
<PAGE>
CERTIFICATE OF INCREASE OF
DESIGNATED NUMBER OF SHARES OF
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
FOR
UNITED WASTE SYSTEMS, INC.
Charter No. 2201957
UNITED WASTE SYSTEMS, INC. (the "Corporation"), a
corporation organized and existing under the General Corporation
Law of the State of Delaware.
DOES HEREBY CERTIFY that the Certificate of Amendment of the
Certificate of Incorporation, setting forth the designations and
terms of the Series B Cumulative Convertible Preferred Stock of
the Corporation (the "Series B. Preferred Stock"0, was filed int
he office of the Secretary of State of Delaware on July 24, 1991
and filed for recording in the office of the Recorder of Deeds
for Newcastle County, Delaware on July 26, 1991 as document
number 47116 at bk1175, p0722; and that the Amended and Restated
Certificate of Incorporation of the Corporation was filed in the
office of the Secretary of Sate on October 31, 1991 and filed for
recording in the office of the Recorder of Deeds for New Castle
county on November 8, 1991 as document number 76965 at bk1213,
pg0062.
That the Board of Directors of the Corporation at a meeting
held on January 16, 1992, duly adopted a resolution authorizing
and directing an increase in the authorized number of shares
constituting the Series B Preferred Stock from 600,000 shares to
850,000 shares, in accordance with the provisions of section 151
of the General Corporation Law of the State of Delaware; and that
the sole stockholder of the Series B Preferred Stock, by written
consent, duly adopted a resolution consenting to such increase.
This Certificate of Increase of Number of Shares shall be
effective immediately upon its filing date.
IN WITNESS WHEREOF, said United Waste Systems, Inc. has
caused this certificate to be signed by Richard A. Volonino, its
President, and attested by John N. Milne, its Secretary, this
31st day of March, 1992.
UNITED WASTE SYSTEMS, INC.
By: Richard A. Volonino
Richard A. Volonino
President
ATTEST:
By: John N. Milne
John N. Milne, Secretary
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
UNITED WASTE SYSTEMS, INC.
FILED IN THE OFFICE OF THE SECRETARY OF STATE
OF DELAWARE ON OCTOBER 31, 1991
UNITED WASTE SYSTEMS, INC. (the "Company"), a corporation
organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "Act")
DOES HEREBY CERTIFY:
1. That the name of the Company is United Waste Systems,
Inc.
2. That an Amended and Restated Certificate of
Incorporation was filed by the Secretary of Sate of Delaware on
October 31, 1992, and that such Certificate requires correction
as permitted by Section 103 of the Act.
3. The inaccuracy or defect of such Certificate to be
corrected is as follows:
The dividend specified for holders of the Series C
Cumulative Convertible Preferred Stock is
incorrect.
4. Article IV, Section (B)(3), paragraph 2(a) of the
Certificate is corrected to read as follows:
(a) Each holder of Series C Preferred Stock shall
be entitled to receive, when and as declared by the
Board of Directors of the corporation, out of any
assets of the corporation legally available for the
payment of dividends, preferential cumulative cash
dividends at the annual rate of 8% ($0.18 per share)
(subject to adjustment for stock splits or
combinations) of the Series C Preferred Stock and no
more on each share held, which shall be calculated from
the date of issuance and shall be payable in equal
quarterly installments on the 20th day of each of
April, July, October and January in each year (each a
"Dividend Payment Date"), commencing April 20, 1992, to
holders of record as of the last day of the preceding
month; provided, however, that for the quarterly period
in which any shares of Series C Preferred Stock are
issued, the quarterly dividend thereon shall be
prorated from the date of issuance. No such dividends
shall be deemed to have accrued until the Dividend
Payment Date therefor. Holders of Series C Preferred
Stock shall not be entitled to receive interest on any
unpaid cumulative dividends. For purposes of this
Paragraph 2(a), "Business Day" means any day others
than a Saturday, Sunday or any business day on which
banking institutions in New York, New York are not
required to be open.
5. Article IV, Section (B)(3), Paragraph 3(b)(ii) of the
Certificate is corrected to read as follows:
(ii) During any period in which accumulated unpaid
dividends on the Series C Preferred Stock equal or
exceed $0.18 per share (subject to adjustment for stock
splits or combinations), (I) each holder of the Series
C Preferred Stock shall be entitled to one vote for
each share of Common Stock issuable upon conversion of
such holder's shares of Series C Preferred Stock on any
matter submitted to a vote of the corporation's
stockholders and 9ii) the holders of the Series C
Preferred Stock, voting as a class, shall be entitled
to elect one member of the Board of Directors of the
corporation at a special meeting of stockholders called
for such purpose and at each annual meeting of
stockholders thereafter until such accumulated unpaid
dividends shall have been paid in full. Any director
so elected by the holders of the Series C Preferred
Stock shall serve only until such accumulated unpaid
dividends shall have been paid in full.
IN WITNESS WHEREOF, the Company has caused this certificate
to be duly executed this 30th day of April, 1992.
UNITED WASTE SYSTEMS, INC.
BY: John N. Milne
Its: President
Attest:
BY: Bradley S. Jacobs
Its: Chief Executive Officer
CERTIFICATE OF AMENDMENT
TO CERTIFICATE OF INCORPORATION
OF
UNITED WASTE SYSTEMS, INC.
The name of the corporation is UNITED WASTE SYSTEMS, INC.
The Certificate of incorporation of the corporation is
hereby amended as follows:
1. The outstanding shares of Common Stock of the
corporation, par value $0.001 per share, shall be combined on the
basis of one share for each four and one-half shares heretofore
outstanding, and the par value of each resulting combined share
shall be $0.001. No fractional shares of Common Stock shall be
issued as a result of this combination. In lieu of any
fractional shares which would otherwise be deliverable to the
holder as a result of such combination the corporation shall
instead deliver to such holder one whole share of Common Stock.
2. The first paragraph of ARTICLE IV of the Certificate of
Incorporation is hereby amended to read as follows:
"(a) The amount of the total authorized capital stock of
the corporation is 55,000,000 shares, divided into: (a)
35,000,000 shares of Common Stock having a par value equal of
$0.001 per shares and the rights designated in Section (A) below;
and 9b) 20,000,000 shares of Preferred Stock having a par value
of $0.001 per share and the rights and preferences designated in
Section (B) below.
3. The following new Article XIII is added to the
Certificate of Incorporation:
ARTICLE XIII
Special meetings of shareholders shall be called upon the
request of shareholders owning the aggregate not less than
40% of the total shares of stock entitled to vote, or by the
Board of Directors, or by the Chairman of the Board of
Directors.
The amendment was duly adopted by the directors and eh
consent of shareholders of the Corporation in accordance with the
provisions of Sections 242(b)(1) and 228 of the General
Corporation Law of the State of Delaware. Written notice has
been given as provided in such Section 228.
IN WITNESS WHEREOF, the undersigned hereby certify that the
facts herein stated are true and, accordingly, have signed this
Certificate of Amendment this 9th day of October 1992.
John N. Milne
John N. Milne, President
Attest:
Michael J. Nolan
Michael J. Nolan
Assistant Secretary<PAGE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
UNITED WASTE SYSTEMS, INC.
The name of the corporation is UNITED WASTE SYSTEMS, INC.
The Certificate of Incorporation of the Incorporation is
hereby amended to read as follows:
"The amount of the total authorized capital stock of the
corporation is 30,000,000 shares, divided into: (a) 25,00,000
shares of Common Stock having a par value of $0.001 per shares
and the rights designated in Section 9A) below; and (b) 5,000,000
shares of Preferred Stock having a par value of $0.001 per share
and the rights and preferences designated in Section (B) below."
This amendment was duly adopted by the directors and the
shareholders of the corporation in accordance with the provisions
of Section 242(b)(1) of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, the undersigned hereby certifies that
the facts herein stated are true and, accordingly, has signed
this Certificate of Amendment this 31st day of August 1993.
Edward T. Sheehan
Edward T. Sheehan, President
Attest:
Michael J. Nolan
Michael J. Nolan
Assistant Secretary
CERTIFICATE OF CHANGE OF LOCATION OF
REGISTERED OFFICE AND REGISTERED AGENT
OF
UNITED WASTE SYSTEMS, INC.
The undersigned corporation hereby certifies as follows:
FIRST: The name of the corporation is
United Waste Systems, Inc.
SECOND: The address of the new registered office shall be
15 East North Street, in the City of Dover, County
of Kent, State of Delaware 19901.
THIRD: The name of the new registered agent is united
Corporate Services, Inc.
FOURTH: The aforesaid changes were duly authorized by
appropriate resolutions adopted by the Board of
Directors at a meeting thereof.
IN WITNESS WHEREOF, we have hereunto signed our names and
affirm that the statements made herein are true under the
penalties of perjury, this 14th day of January, 1993.
UNITED WASTE SYSTEMS, INC.
John N. Milne
(President or Vice President)
ATTEST:
Robert S. Durkin
(Secretary or Assistant Secretary)
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
UNITED WASTE SYSTEMS, INC.
The name of the corporation is "United Waste Systems, Inc."
The first paragraph of ARTICLE IV of the
Amended and Restated Certificate of Incorporation, as amended, of
the Corporation is hereby amended to read as follows:
The amount of the total authorized capital stock of the
Corporation is 80,000,000 shares, divided into: (a)
75,000,000 shares of Common Stock having a par value of
$0.001 per share and the rights designated in Section (A)
below; and (b) 5,000,000 shares of Preferred Stock having par value of
$0.001 per share and the rights ands preferences designated
in Section (B) below.
This amendment to the Amended and Restated Certificate of
Incorporation of the Corporation has been duly adopted by the
directors and shareholders of the Corporation in accordance with
the provisions of Section 242(b)(1) of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned hereby certifies that
the facts herein stated are true and, accordingly, has signed
this Certificate of Amendment this 12th day of June, 1996.
UNITED WASTE SYSTEMS, INC.
By: Robert S. Durkin
Robert S. Durkin
Vice President, Finance
ATTEST:
Michael J. Nolan
Michael J. Nolan
Assistant Secretary
Exhibit 5.1
October 18, 1996
United Waste Systems, Inc.
Four Greenwich Office Park
Greenwich, Connecticut 06830
Re: Registration Statement on Form S-8
Relating to 2,039,577 Shares of Common Stock
Gentlemen:
You have requested our opinion in connection with the
above-referenced registration statement (the "Registration
Statement") relating to up to 2,039,577 shares of Common Stock,
par value $.001 per share, of United Waste Systems, Inc. (the
"Company") that may from time to time be sold by the Company upon
exercise of options/warrants that have been, or may hereafter be,
granted pursuant to the plans referenced in the Registration
Statement. Such shares are referred to as the "Option Shares."
We have reviewed copies of the Amended and Restated
Certificate of Incorporation of the Company (including amendments
thereto), the By-laws of the Company, the Registration Statement
and exhibits thereto and have examined such corporate documents
and records and other certificates, and have made such
investigations of law, as we have deemed necessary in order to
render the opinion hereinafter set forth. As to certain
questions of fact material to our opinion, we have relied upon
the certificate of an officer of the Company and upon
certificates of public officials.
Based upon and subject to the foregoing, we are of the
opinion that the Option Shares, when issued and paid for in
accordance with the terms of the applicable Plan and any
applicable stock option or other agreement entered into pursuant
to such Plan, will be duly authorized, validly issued, fully paid
and non-assessable.
We hereby consent to the reference to us under the
caption "Interests of Named Experts and Counsel" in the
Registration Statement and to the use of this opinion as an
exhibit to the Registration Statement. In giving this consent,
we do not hereby admit that we come within the category of
persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations
of the Securities and Exchange Commission thereunder.
Very truly yours,
Ehrenreich & Krause
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the
Registration Statement (Form S-8) pertaining to the 1992 Stock
Option Plan, 1992 Disinterested Director Stock Option Plan and
options and warrants granted outside of the above-referenced
plans under individual written compensation contracts with
employees and consultants of United Waste Systems, Inc. for the
registration of up to 2,039,577 shares of its common stock, of
our report dated February 20, 1996 with respect to the
consolidated financial statements of United Waste Systems, Inc.
included in its Annual Report on Form 10-K for the year ended
December 31, 1995, and of our report dated June 28, 1996, except
for Note 13 as to which the date is August 22, 1996, with respect
to the supplemental consolidated financial statements of United
Waste Systems, Inc. included in its Current Report on Form 8-K
dated June 28, 1996, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
MetroPark, New Jersey
October 18, 1996
Exhibit 23.3
October 18, 1996
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this
Registration Statement on Form S-8 of United Waste Systems, Inc.,
for the registration of up to 2,039,577 shares of its common
stock, of our report dated November 21, 1995 with respect to the
combined financial statements of Carmel Marina Corporation and
Affiliates as of December 31, 1994, included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995
filed with the Securities and Exchange Commission.
HANSON ROTTER GREEN
Exhibit 23.4
October 18, 1996
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this
Registration Statement on Form S-8 of United Waste Systems, Inc.,
for the registration of up to 2,039,577 shares of its common
stock, of our report dated May 20, 1994 with respect to the
combined financial statements of Carmel Marina Corporation and
Affiliates as of December 31, 1993, included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995
filed with the Securities and Exchange Commission.
HANSON ROTTER GREEN
