Exhibit 4.B
THE FINOVA GROUP INC.
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS THEREOF
------------------------
SERIES B CONVERTIBLE
PREFERRED STOCK
AND
SERIES C CONVERTIBLE
PREFERRED STOCK
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Pursuant to Section 151 of the
Delaware General Corporation Law
------------------------
THE FINOVA GROUP INC. (the "Company"), a corporation organized and existing
under the laws of the State of Delaware, hereby certifies that pursuant to the
provisions of Section 151 of the Delaware General Corporation Law, its Board of
Directors, [by unanimous written consent], dated ___________, 200_ adopted the
following resolution, which resolution remains in full force and effect as of
the date hereof:
WHEREAS, the Board of Directors of the Company is authorized, within the
limitations and restrictions stated in the Restated Certificate of
Incorporation, to fix by resolution or resolutions the designation of preferred
stock and the powers, preferences and relative participating, optional or other
special rights and qualifications, limitations or restrictions thereof,
including, without limiting the generality of the foregoing, such provisions as
may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution or resolutions of the Board of Directors
under the Delaware General Corporation Law; and
WHEREAS, it is the desire of the Board of Directors of the Company,
pursuant to its authority as aforesaid, to authorize and fix the terms of (i) a
series of preferred stock to be designated the Series B Convertible Preferred
Stock of the Company and (ii) a series of preferred stock to be designated the
Series C Convertible Preferred Stock of the Company, and the number of shares
constituting each such series preferred stock.
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized the Series
B Convertible Preferred Stock and the Series C Convertible Preferred Stock on
the terms and with the provisions herein set forth:
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I. TERMS, PREFERENCES, RIGHTS AND LIMITATIONS
of
SERIES B CONVERTIBLE PREFERRED STOCK
of
THE FINOVA GROUP INC.
The relative rights, preferences, powers, qualifications, limitations and
restrictions granted to or imposed upon the Series B Convertible Preferred Stock
or the holders thereof are as follows:
1. DEFINITIONS. For purposes of this Designation, the following definitions
shall apply:
"Actual Gain" has the meaning set forth in Section 5(e) hereof.
"Actual Loss" has the meaning set forth in Section 5(e) hereof.
"Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
"After-Tax Gain" has the meaning set forth in Section 5(e) hereof.
"After-Tax Loss" has the meaning set forth in Section 5(e) hereof.
"Baseline" has the meaning set forth in Section 5(e) hereof.
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday, Sunday, or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Common Special Distribution" means the distribution to be made to the
certain holders of Common Stock of record on the record date established for the
distribution if the Sharing Amount results in an Upside Distribution, as
contemplated by Section 5.
"Common Stock" shall mean the Common Stock, par value $0.01 per share, of
the Company.
"Company" shall mean The FINOVA Group Inc., a Delaware corporation.
"Continuing Directors" has the meaning ascribed thereto in the Purchase
Agreement.
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"Conversion Period" has the meaning set forth in Section 8(a) hereof.
"Conversion Price" shall mean as of any date of measurement, the amount
computed by dividing the Liquidation Preference as of such date by the number of
shares of Common Stock into which one share of Series B Convertible Preferred
Stock is convertible as of such date determined in accordance with Section 8
hereof.
"Conversion Ratio" has the meaning set forth in Section 8 hereof.
"Convertible Preferred Stock" shall refer to the Series B Convertible
Preferred Stock and to the Series C Convertible Preferred Stock of the Company.
"Current Market Price," when used with reference to shares of Common Stock
or other securities on any date, shall mean the average of the daily market
prices for the five consecutive Trading Days before such date. The daily market
price for each such Trading Day shall be (i) the last sale price on such day on
the principal stock exchange or the NASDAQ National Market on which such Common
Stock is then listed or admitted to trading, (ii) if no sale takes place on such
day on any such exchange or market, the average of the last reported closing bid
and asked prices on such day as officially quoted on any such exchange or
market, (iii) if the Common Stock is not then listed or admitted to trading on
any stock exchange or such market, the average of the last reported closing bid
and asked prices on such day in the over-the-counter market, as furnished by
NASDAQ or the National Quotation Bureau, Inc., (iv) if neither such corporation
at the time is engaged in the business of reporting such prices, as furnished by
any similar firm then engaged in such business, or (v) if there is no such firm,
as furnished by any member of the National Association of Securities Dealers
("NASD") selected mutually by the Required Holders and Company or, if they
cannot agree upon such selection, as selected by two such members of the NASD,
one of which shall be selected by the Required Holders and one of which shall be
selected by Company.
"Dividend Payment Date" shall have the meaning set forth in Section 4
hereof.
"Dividend Rate" shall mean 14% per annum, compounded quarterly calculated
on a 360 day per year basis, based on the actual number of days elapsed.
"Downside Distribution" has the meaning set forth in Section 5(e) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any successor Federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Securities Exchange
Act of 1934, as amended, shall include reference to the comparable section, if
any, of any such similar Federal statute.
"Fair Market Value" shall mean the amount which a willing buyer would pay a
willing seller in an arm's-length transaction, with neither being under any
compulsion to buy or sell.
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"Fully Diluted Equity" has the meaning set forth in Section 5(e) hereof.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect from time to time.
"Junior Securities" shall have the meaning set forth in Section 3(b).
"Leucadia" shall mean Leucadia National Corporation and its successors and
Affiliates.
"Liquidation Preference" shall mean the sum of (i) $250.00 per share of
Series B Convertible Preferred Stock, and (ii) the aggregate of all declared and
unpaid dividends and all accrued and unpaid dividends in respect of a share of
Series B Convertible Preferred Stock calculated in accordance with Article 4
hereof.
"Old S/H Ownership" has the meaning set forth in Section 5(e) hereof.
"Other Equity" has the meaning set forth in Section 5(e) hereof.
"Other Equity Ownership" has the meaning set forth in Section 5(e) hereof.
"Other Equity Special Distribution" means the distribution to be made to
the holders of the Convertible Preferred Stock of record on the record dated
established for the distribution and to the Purchaser with respect to the
Warrant if the Sharing Amount results in a Downside Distribution, as
contemplated by Section 5.
"Original Issue Date" shall mean the date of the original issuance of
shares of Series B Convertible Preferred Stock.
"Parity Securities" shall have the meaning set forth in Section 3(b).
"Person" shall mean any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Portfolio" has the meaning set forth in Section 5(e) hereof.
"Preferred Ownership" has the meaning set forth in Section 5(e) hereof.
"Preferred Percentage of Other Equity" has the meaning set forth in Section
5(e) hereof.
"Purchase Agreement" shall mean the Securities Purchase Agreement, dated as
of December 20, 2000, by and among the Company and Purchaser named therein, as
it may be amended from time to time, a copy of which is on file at the principal
office of the Company.
"Purchaser" shall mean Leucadia National Corporation.
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"Purchaser Designees" has the meaning ascribed thereto in the Purchase
Agreement.
"Required Holders" shall mean the holders of at least of a majority of the
outstanding shares of Convertible Preferred Stock, determined as if both the
Series B Convertible Preferred Stock and the Series C Convertible Preferred
Stock constituted only one series of preferred stock.
"Rights Offering" shall have the meaning ascribed thereto in the Purchase
Agreement.
"Rights Ownership" has the meaning set forth in Section 5(e) hereof.
"Rights Percentage of Other Equity" has the meaning set forth in Section
5(e) hereof.
"Senior Securities" shall have the meaning set forth in Section 3(b).
"Series A Junior Participating Preferred Stock" shall refer to the Series A
Junior Participating Preferred Stock, $0.01 par value per share, of the Company.
"Series B Convertible Preferred Stock" shall refer to the Series B
Convertible Preferred Stock, $0.01 par value per share, of the Company.
"Series C Convertible Preferred Stock" shall refer to the Series C
Convertible Preferred Stock, $0.01 par value per share, of the Company.
"Sharing Amount" has the meaning set forth in Section 5(e) hereof.
"Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power or the voting equity securities or equity interest
is owned, directly or indirectly, by such Person.
"TOPrS" shall refer to the trust originated preferred securities of the
Company.
"Trading Day" shall mean a Business Day or, if the Common Stock is listed
or admitted to trading on any national securities exchange or NASDAQ market, a
day on which such exchange or market is open for the transaction of business.
"Upside Distribution" has the meaning set forth in Section 5(e) hereof.
"Warrant" shall mean the warrants to purchase shares of Common Stock dated
_________, 2001 issued by the Company to Leucadia.
"Warrant Ownership" has the meaning set forth in Section 5(e) hereof.
"Warrant Percentage of Other Equity" has the meaning set forth in Section
5(e) hereof.
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2. DESIGNATION: NUMBER OF SHARES. The designation of the preferred stock
authorized by this resolution shall be "Series B Convertible Preferred Stock"
and the number of shares of Series B Convertible Preferred Stock authorized
hereby shall be one million shares.
3. RANK.
(a) The Series B Convertible Preferred Stock shall rank, with respect to
the payment of dividends or other amounts and with respect to distribution of
assets upon liquidation, dissolution or winding up of the Company, PARI PASSU
with the Series C Convertible Preferred Stock.
(b) Any class or series of stock of the Company shall be deemed to rank:
(i) prior to the Convertible Preferred Stock, either as to the payment
of dividends or other amounts or as to distribution of assets upon
liquidation, dissolution or winding up of the Company, or both, if the
holders of such class or series shall be entitled by the terms thereof to
the receipt of dividends or other amounts and of amounts distributable upon
liquidation, dissolution or winding up of the Company, in preference or
priority to the holders of the Convertible Preferred Stock ("Senior
Securities");
(ii) on a parity with the Convertible Preferred Stock, either as to
the payment of dividends or other amounts or as to distribution of assets
upon liquidation, dissolution or winding up of the Company, or both,
whether or not the dividend rates, dividend payment dates or redemption or
liquidation prices per share thereof be different from those of the
Convertible Preferred Stock, if the holders of the Convertible Preferred
Stock and of such class of stock or series shall be entitled by the terms
thereof to the receipt of dividends or other amounts or of amounts
distributable upon liquidation, dissolution or winding up of the Company,
or both, in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences (including, but not limited
to preferences as to payment of dividends or other amounts distributable
upon liquidation), without preference or priority one over the other and
such class of stock or series is not a class of Senior Securities ("Parity
Securities"); and
(iii) junior to the Convertible Preferred Stock, either as to the
payment of dividends or as to the distribution of assets upon liquidation,
dissolution or winding up of the Company, or both, if such stock or series
shall be Common Stock or the Series A Junior Participating Preferred Stock
or if the holders of the Convertible Preferred Stock shall be entitled by
the terms thereof to receipt of dividends or other amounts, and of amounts
distributable upon liquidation, dissolution or winding up of the Company,
in preference or priority to the holders of shares of such stock or series
(including, but not limited to preferences as to payment of dividends or
other amounts distributable upon liquidation) ("Junior Securities").
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4. DIVIDENDS.
(a) So long as any shares of Series B Convertible Preferred Stock shall be
outstanding, and subject to the right of holders of Common Stock to receive the
Common Special Distribution, or if applicable, the right of the holders of the
Convertible Preferred Stock and Purchaser in respect of the Warrant to receive
the Other Equity Special Distribution, the holders of shares of Series B
Convertible Preferred Stock shall be entitled to receive during each year with
respect to each share of Series B Convertible Preferred Stock, when, as and if
declared by the Board out of any funds legally available for the payment of
dividends in cash, an amount equal to the greater of (x) the Dividend Rate on
the Liquidation Preference hereunder, or (y) all dividends paid in respect of a
share of Common Stock (excluding the Common Special Distribution) during such
year calculated on the basis of the number of shares of Common Stock into which
a share of Series B Preferred Stock may be converted, regardless of whether such
stock is then convertible. Dividends in an amount equal to the greater of
clauses (x) or (y) in the preceding sentence, shall begin to accrue on a
cumulative basis from the Original Issue Date, whether or not there shall be net
profits or net assets of the Company legally available for the payment of those
dividends and shall continue to accrue on a daily basis thereon until the date
such share is converted into Common Stock in accordance with the provisions of
this Certificate. As set forth in the definition of Liquidation Preference,
unpaid dividends, whether or not declared, shall be added to and become a part
of the Liquidation Preference.
(b) Notwithstanding the foregoing, during the period commencing on the
Original Issue Date and ending on the fifth anniversary of the Original Issue
Date, the Company may not declare or pay dividends (except as otherwise provided
herein) in respect of the Series B Convertible Preferred Stock, any Parity
Securities or any Junior Securities, but dividends in respect of the Series B
Convertible Preferred Stock shall continue to accrue in accordance with the
provisions of Section 4(a). Thereafter, dividends to the extent declared by the
Board of Directors shall be payable quarterly in arrears on the first Business
Day of each calendar quarter (a "Dividend Payment Date") to holders of record on
the tenth Business Day immediately prior to such Dividend Payment Date.
(c) So long as any share of the Series B Convertible Preferred Stock is
outstanding, no dividends (other than the Common Special Distribution, or the
Rights Offering, or if applicable, the Other Equity Special Distribution due to
Purchaser in respect of the Warrant) shall be declared or paid or set apart for
payment or other distribution, declared or made upon Junior Securities, nor
shall any Junior Securities be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Company, directly or
indirectly (except by conversion into or exchange for Junior Securities), other
than (i) a redemption, purchase or other acquisition of shares of Common Stock
(or Common Stock equivalents) made for purposes of an employee incentive or
benefit plan of the Company or any subsidiary or to satisfy the Company's
obligations pursuant to any contract or security requiring the Company to
purchase shares of Common Stock (or Common Stock equivalents), (ii) any
distribution in respect of the TOPrS or the 5 1/4% Convertible Subordinated
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Debentures due 2016 required pursuant to the terms of such securities, (iii)
dividends or distribution of shares of Common Stock or rights on Common Stock,
(iv) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged, (v) purchases of shares of Common
Stock (or Common Stock equivalents) from officers or employees of the Company or
its Subsidiaries upon termination of employment or retirement, or (vi) as a
result of a reclassification of the Company's capital stock for another class or
series of the Company's capital stock, unless and until in each case (i) all
accrued and unpaid dividends for all past dividend periods on the Series B
Convertible Preferred Stock and any other Parity Securities shall have been paid
and (ii) sufficient funds shall have been paid for the current dividend period
with respect to the Series B Convertible Preferred Stock and any such Parity
Securities.
5. SPECIAL DISTRIBUTION. As soon as practicable after December 31, 2005,
but in no event later than May 31, 2006 (or if not then permitted under Delaware
law, as soon thereafter as it is legally able to make such distribution), the
Board shall determine the Sharing Amount and shall make the distribution
provided herein. If the Sharing Amount shall be a number other than zero,
Company shall make the required distribution to (a) the holders of shares of
Common Stock that were outstanding immediately prior to consummation of the
transactions contemplated by the Purchase Agreement, if the Sharing Amount
results in an Upside Distribution, or (b) the holders of the Other Equity
determined pursuant to the provisions of this Section, if the Sharing Amount
results in a Downside Distribution. Any equity securities of Company that may be
issued on or after the Closing Date (other than the Convertible Preferred Stock,
the Warrant or pursuant to the Rights Offering to the extent provided in the
Purchase Agreement) shall not participate in the Upside Distribution or the
Downside Distribution.
(a) The distribution shall be made by Company, out of funds legally
available therefore and shall be in an amount determined in accordance with the
applicable formula below:
For Upside Distributions, the formula for the distribution (D) shall be:
D = T [(.5-C) / E]
For Downside Distributions, the formula for the distribution (D) shall be:
D = T [(.5 - E)/C]
The letters in the foregoing formulas refer to terms defined in this
Section 5, as follows:
D = Amount of the Upside Distribution or Downside Distribution
T = Sharing Amount
C = Old S/H Ownership
E = Other Equity
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(b) An Upside Distribution or Downside Distribution shall be paid in such
form or forms, including capital stock of Company, as the Board shall determine.
The valuation of any such securities or property shall be determined by the
Board, with the concurrence of a majority of the directors who are the
Continuing Directors. The Continuing Directors collectively may retain, at
Company's expense, independent advisors to advise them on any determinations
required under clauses (b) and (d) of this Section 5. If a majority of the Board
and a majority of the Continuing Directors are unable to agree upon such
valuation, the matter shall be referred for final determination to an investment
banking firm mutually acceptable to the majority of the Board and a majority of
the Continuing Directors. Company shall make available to such investment
banking firm all such information, books and records as the investment banking
firm may determine to be necessary for the purpose of its determination and
shall pay the fees and expenses of such firm. No payments are guaranteed to be
made under this Section. No interest shall be payable in respect of any
distribution pursuant to this Section.
(c) Company will maintain such records as may be required for calculation
of the Sharing Amount, including a cumulative record of the actual collection of
assets in the Portfolio measured against the gross amount recorded for each
asset as of June 30, 2000 or, in the case of commitments, actual collections
measured against the actual amount funded pursuant to or in connection with the
commitment. The gross amount recorded for each asset shall mean the amount
recorded before any specific or general reserves in respect of such asset. In
the case of loans, a particular loan will be deemed "collected" for purposes of
this calculation when the loan is collected, sold or written-off in full; it is
not deemed collected at such time as it is extended or modified. In the case of
a leased asset, the asset will be deemed "collected" for purposes of this
calculation when the leased asset is finally sold or otherwise disposed of. To
the extent the investment in any loan or lease is increased or extended pursuant
either to a revolving commitment or due to management's judgment that, to
protect collection of the loan or recovery of Company's investment in the lease,
such increase or extension is in the Company's best interest, the final
collection will be compared to the loan or lease as so increased.
(d) In determining the "Actual Gain" or "Actual Loss" for purposes of
determining the Sharing Amount hereunder, unrealized gains and unrealized
losses, if any, on the balance of the Portfolio outstanding at December 31, 2005
shall be estimated by the Board, which estimate shall be approved by a majority
of the Continuing Directors. If a majority of the Board and a majority of the
Continuing Directors are unable to agree upon any such estimate, the matter
shall be referred for final determination of an independent accounting firm
(other than the Company's or Leucadia's independent auditors), which is mutually
acceptable to a majority of the Board and a majority of the Continuing
Directors. The Company shall make available to such independent accounting firm
all such information, books and records as the independent accounting firm may
determine to be necessary for the purpose of its determination and shall pay the
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fees and expenses of such firm. Any determination made by the Board, or where so
required made by the Board with the concurrence of a majority of the Continuing
Directors, or made by an independent accounting firm or investment banking firm
as herein provided, shall be conclusive and binding and shall not be subject to
challenge or dispute absent manifest error.
Set forth on SCHEDULE 5 are examples, solely for purposes of illustration,
of various calculations of the Sharing Amount and the Upside Distribution or
Downside Distribution relating to such Sharing Amounts.
(e) For purposes of this Section, the following definitions shall apply:
"Actual Loss" shall mean the actual cumulative loss on the Portfolio.
Actual cumulative loss on the Portfolio shall include all realized and
unrealized gains and losses as set forth in (c) and (d) above. Gains and losses
on the Portfolio shall be determined without reference to any specific or
general reserves in respect of the relevant assets.
"Actual Gain" shall mean the actual cumulative gain on the Portfolio.
Actual cumulative gain on the Portfolio shall include all realized and
unrealized gains and losses as set forth in (c) and (d) above. Gains and losses
on the Portfolio shall be determined without reference to any specific or
general reserves in respect of the relevant assets.
"After-Tax Loss" shall mean the Actual Loss multiplied by 60%.
"After-Tax Gain" shall mean the Actual Gain multiplied by 60%.
"Baseline" shall mean $780 million.
"Downside Distribution" shall mean the distribution made to the holders of
the Convertible Preferred Stock and Leucadia in respect of the Warrant (the
"Other Equity"). The allocation of any Downside Distribution shall be calculated
by multiplying the amount of the Downside Distribution by the Preferred
Percentage of Other Equity, the Warrant Percentage of Other Equity and the
Rights Percentage of Other Equity, respectively. Amounts in respect of the
Preferred Percentage of Other Equity shall be paid to the holders of record of
the Series B Preferred Stock and of the Series C Preferred Stock, if any,
purchased by Leucadia as a result of its standby commitment set forth in Section
6.11(a) of the Purchase Agreement, amounts in respect of the Warrant Percentage
shall be paid to Leucadia, and amounts in respect of the Rights Percentage shall
be paid to holders of record of Series C Preferred Stock purchased in the Rights
Offering (which shall exclude shares of Series C Preferred Stock, if any,
purchased by Leucadia as a result of its standby commitment set forth in Section
6.11(a) of the Purchase Agreement, but which shall include any shares of Series
C Preferred Stock subsequently purchased by Leucadia).
"Fully Diluted Equity" shall mean all outstanding shares of Common Stock of
Company and all other shares of Common Stock that may be issued by Company upon
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the exercise, conversion or exchange of all rights, options, warrants or other
securities convertible into or exchangeable for shares of Common Stock
(including the Convertible Preferred Stock and the Warrant), whether or not such
rights, options, warrants or other securities are then vested, convertible or
exercisable.
"Other Equity Ownership" shall mean the sum of (i) Preferred Ownership,
(ii) Warrant Ownership, and (iii) Rights Ownership.
"Old S/H Ownership" shall mean the percentage of Fully Diluted Equity
represented by the shares of Common Stock of Company outstanding immediately
prior to Leucadia's acquisition of securities pursuant to the Purchase
Agreement.
"Portfolio" shall mean (a) all loans, advances, capital leases or other
investments included in the (i) gross "Investment in Financing Transactions," as
reflected on the Company's June 30, 2000 consolidated balance sheet (the "June
30 Balance Sheet"), (ii) "Investments," as reflected on the June 30 Balance
Sheet, (iii) "Offlease Aircraft," as reflected in the June 30 Balance Sheet and
(b) the aggregate amount of all unfunded commitments of the Company existing as
of June 30, 2000 as reflected on SCHEDULE 6.14(E) to the Purchase Agreement, but
only to the extent that such commitments have been funded by the Company after
June 30, 2000.
"Preferred Ownership" shall mean the percentage of Fully Diluted Equity of
Company owned by Purchaser by virtue of Purchaser's ownership of shares of
Convertible Preferred Stock (including any Convertible Preferred Stock owned by
Purchaser pursuant to Purchaser's obligations in connection with the Rights
Offering) based on the number of shares of Common Stock into which each share of
Convertible Preferred Stock may be converted, regardless of whether or not such
Convertible Preferred Stock is then convertible.
"Preferred Percentage of Other Equity" shall mean the fraction, expressed
as a percentage, the numerator of which is the Preferred Ownership and the
denominator of which is the Other Equity Ownership.
"Rights Ownership" shall mean the percentage of Fully Diluted Equity of
Company owned by stockholders (excluding Purchaser in respect of shares of
Series C Preferred Stock included in the Preferred Ownership, but including
shares of Series C Preferred Stock subsequently purchased by Purchaser) by
virtue of their respective ownership of shares of Series C Preferred Stock based
on the number of shares of Common Stock into which each share of Series C
Preferred Stock may be converted, regardless of whether or not such Series C
Preferred Stock is then convertible.
"Rights Percentage of Other Equity" shall mean the fraction, expressed as a
percentage, the numerator of which is the Rights Ownership and the denominator
of which is the Other Equity Ownership.
"Sharing Amount" shall mean the Baseline MINUS the After-Tax Loss or PLUS
the After-Tax Gain. If such amount is negative, it shall be divided by 60%.
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"Upside Distribution" shall mean the distribution to be made to certain
holders of Common Stock as contemplated by this Section 5, if the Sharing Amount
is a positive number.
"Warrant Ownership" shall mean the percentage of Fully Diluted Equity of
Company represented by the Warrant based on the number of shares of Common Stock
into which the Warrant is exercisable as of the date of determination,
regardless of whether or not the Warrant is then exercisable.
"Warrant Percentage of Other Equity" shall mean the fraction, expressed as
a percentage, the numerator of which is the Warrant Ownership and the
denominator of which is the Other Equity Ownership.
6. LIQUIDATION RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK.
(a) In the event of any liquidation, dissolution or winding up of Company,
whether voluntary or involuntary, the holders of Series B Convertible Preferred
Stock then outstanding shall be entitled to receive with respect to each share
of Series B Convertible Stock out of the assets of the Company available for
distribution to its stockholders, whether such assets are capital, surplus or
earnings, before any payment or declaration and setting apart for payment of any
amount (other than the Common Special Distribution or the Other Equity Special
Distribution, as applicable, which shall be paid first if such liquidation,
dissolution or winding up occurs after December 31, 2005) shall be made in
respect of any Junior Securities, an amount equal to the greater of (x) an
amount in cash equal to the Liquidation Preference, in respect of any
liquidation, dissolution or winding up consummated, or (y) the amount per share
that each holder of shares of Common Stock would be entitled to receive
(assuming the conversion of all Convertible Preferred Stock) multiplied by the
number of shares of Common Stock into which such shares of Series B Convertible
Preferred Stock then would be convertible (without giving effect to any
restrictions on convertibility).
(b) If, upon any liquidation, dissolution or winding up of the Company, the
assets of the Company, or proceeds thereof (after payment in full of the Common
Special Distribution or the Other Equity Special Distribution, as applicable, if
such liquidation, dissolution or winding up occurs after December 31, 2005),
shall be insufficient to pay in full the preferential amount aforesaid and
liquidating payments on all shares of Series C Convertible Preferred Stock and
all Parity Securities, if any, then such assets, or the proceeds thereof, shall
be distributed among the holders of shares of the Convertible Preferred Stock
and all such Parity Securities ratably in accordance with the respective amounts
that would be payable on the Convertible Preferred Stock and any such Parity
Securities if all amounts payable thereon were paid in full. For the purposes of
this Section 6, (i) a consolidation or merger of the Company with one or more
corporations, or (ii) a sale or transfer of all or substantially all of the
Company's assets, shall not be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary, of the Company.
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(c) Subject to the rights of the holders of any Series C Preferred Stock
and any Parity Securities, after payment shall have been made in full to the
holders of the Series B Convertible Preferred Stock, as provided in this Section
6(c), any other series or class or classes of Junior Securities shall, subject
to the respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Series B Convertible Preferred Stock shall not be entitled to share
therein, except to the extent set forth in Section 6(a) hereof.
7. VOTING RIGHTS. In addition to any voting rights provided by law, the
holders of shares of Series B Convertible Preferred Stock shall have the
following voting rights:
(a) So long as any of the Series B Convertible Preferred Stock is
outstanding, each share of Series B Convertible Preferred Stock shall entitle
the holder thereof to vote on all matters voted on by the holders of Common
Stock, voting together as a single class with the holders of the Common Stock
and the Series C Convertible Preferred Stock, and together with the holders of
other shares, if any, entitled to vote at all meetings of the stockholders of
the Company. With respect to any such vote, each share of Series B Convertible
Preferred Stock shall entitle the holder thereof to cast the number of votes
equal to two times the number of shares of Common Stock of the Company into
which such share of Series B Convertible Preferred Stock may be convertible on
the record date for such vote (without regard to any restriction or limitation
on convertibility).
(b) The affirmative vote of the Required Holders, voting together as a
single class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, or pursuant to a written consent of
stockholders shall be necessary to:
(i) authorize, adopt or approve an amendment to the Certificate of
Incorporation of the Company which would adversely affect the terms,
powers, preferences or rights (including special rights) of the shares of
Convertible Preferred Stock or grant waivers thereof, provided that no such
modification or amendment may, without the consent of each holder of
Convertible Preferred Stock affected thereby, (A) raise the Conversion
Price or reduce the Liquidation Preference or dividend, of such Convertible
Preferred Stock; or (B) reduce the percentage of outstanding Convertible
Preferred Stock necessary to modify or amend the terms thereof or to grant
waivers thereof; and
(ii) issue any Senior Securities or Parity Securities, or issue any
securities convertible into or exchangeable for any such securities (other
than the issuance of rights to subscribe for shares of Series C Preferred
Stock to be issued by the Company pursuant to the Rights Offering and the
issuance of shares of Series C Preferred Stock upon the exercise of such
rights).
(c) The foregoing rights of holders of shares of Convertible Preferred
Stock to take any actions as provided in this Section 7 may be exercised at any
annual meeting of stockholders or at a special meeting of stockholders held for
such purpose as hereinafter provided or at any adjournment thereof or pursuant
to any written consent of stockholders.
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8. CONVERSION.
(a) Subject to the provisions for adjustment hereinafter set forth, during
the period commencing on June 30, 2006 and ending on the close of business on
the tenth anniversary of the Original Issuance Date (the "Conversion Period"),
each share of Series B Convertible Preferred Stock shall be convertible at any
time and from time to time, at the option of the holder thereof, into fully paid
and nonassessable shares of Common Stock. The number of shares of Common Stock
deliverable upon conversion of each share of Series B Convertible Preferred
Stock, adjusted as hereinafter provided, shall equal the "Conversion Ratio"
which shall be a number (not necessarily a whole number) as of any date equal to
the Liquidation Preference, divided by $2.50, subject to adjustment from time to
time pursuant to paragraph (e) of this Section 8. No fractional shares shall be
issued upon the conversion of any shares of Series B Convertible Preferred
Stock. All shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series B Convertible Preferred Stock by a
holder thereof shall be aggregated for purposes of determining whether
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Company shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such fraction a sum in
cash equal to the Current Market Price of such fraction on the date of
conversion.
(b) (i) A conversion of the Series B Convertible Preferred Stock may be
effected by any such holder upon the surrender to the Company at the
principal office of the Company of the certificate for such Series B
Convertible Preferred Stock to be converted accompanied by a written notice
stating that such holder elects to convert all or a specified number of
such shares (which may be fractional shares) in accordance with the
provisions of this Section 8 and specifying the name or names in which such
holder wishes the certificate or certificates for shares of Common Stock to
be issued. If a holder of Series B Convertible Preferred Stock delivers to
the Company a notice of election to convert, the Series B Convertible
Preferred Stock to be converted shall cease to accrue dividends but shall
continue to be entitled to receive pro rata dividends for the period from
the last dividend payment date to the date of delivery of the notice of
election to convert in preference to and in priority over any dividends on
any Junior Securities. Except as provided above and in Section 8(f), the
Company shall make no payment or adjustment for accrued and unpaid
dividends on shares of Series B Convertible Preferred Stock, whether or not
in arrears, on conversion of such shares or for dividends in cash, if any,
on the shares of Common Stock issued upon such conversion.
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<PAGE>
(ii) In case the written notice specifying the name or name in which
such holder wishes the certificate or certificates for shares of Common
Stock to be issued shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name or names.
Other than such transfer taxes, the Company will pay any and all issue and
other taxes (other than taxes based on income) that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
Series B Convertible Preferred Stock pursuant hereto. As promptly as
practicable, and in any event within five (5) Business Days after the
surrender of such certificate or certificates and the receipt of such
notice relating thereto and, if applicable, payment of all transfer taxes
(or the demonstration to the satisfaction of the Company that such transfer
taxes have been paid), the Company shall deliver or cause to be delivered
(i) certificates representing the number of validly issued, fully paid and
nonassessable full shares of Common Stock to which the holder of shares of
Series B Convertible Preferred Stock being converted shall be entitled and
(ii) if less than the full number of shares of Series B Convertible
Preferred Stock evidenced by the surrendered certificate or certificates is
being converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or certificates
less the number of shares being converted.
(iii) In the event of a conversion, such conversion shall be deemed to
have been made at the close of business on the date of giving the written
notice referred to in the first sentence of (b)(ii) above and of such
surrender of the certificate or certificates representing the shares of
Series B Convertible Preferred Stock to be converted and, if applicable,
payment of all transfer taxes (or the demonstration to the satisfaction of
the Company that such transfer taxes have been paid), so that the rights of
the holder thereof as to the shares being converted shall cease except for
the right to receive shares of Common Stock in accordance herewith, and the
person entitled to receive the shares of Common Stock shall be treated for
all purposes as having become the record holder of such shares of Common
Stock at such time.
(c) The Conversion Ratio shall be subject to adjustment from time to time
in certain instances as herein provided.
(d) So long as any shares of Series B Convertible Preferred Stock are
outstanding, the Company shall at all times reserve, and keep available for
issuance upon the conversion of the Series B Convertible Preferred Stock, such
number of its authorized but unissued shares of Common Stock as will from time
to time be sufficient to permit the conversion of all outstanding shares of
Series B Convertible Preferred Stock, and shall take all action required to
increase the authorized number of shares of Common Stock if necessary, to permit
the conversion of all outstanding shares of Series B Convertible Preferred
Stock.
(e) The Conversion Ratio will be subject to adjustment from time to time as
follows:
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(i) In case the Company shall at any time or from time to time after
the Original Issue Date (A) pay a dividend, or make a distribution, on the
outstanding shares of Common Stock in shares of Common Stock (other than
pursuant to the Common Special Distribution or the Rights Offering), (B)
subdivide the outstanding shares of Common Stock, (C) combine the
outstanding shares of Common Stock into a smaller number of shares or (D)
issue by reclassification of the shares of Common Stock any shares of
capital stock of the Company, then, and in each such case, the Conversion
Ratio in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the holder of any
shares of Series B Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common
Stock or other securities of the Company which such holder would have owned
or have been entitled to receive after the happening of any of the events
described above, had such shares of Series B Convertible Preferred Stock
been surrendered for conversion (without giving effect to any restrictions
on convertibility) immediately prior to the happening of such event or the
record date therefor, whichever is earlier. An adjustment made pursuant to
this clause (i) shall become effective (x) in the case of any such dividend
or distribution, immediately after the close of business on the record date
for the determination of holders of shares of Common Stock entitled to
receive such dividend or distribution, or (y) in the case of such
subdivision, reclassification or combination, at the close of business on
the day upon which such corporate action becomes effective. No adjustment
shall be made pursuant to this clause (i) in connection with any
transaction to which paragraph (e) applies.
(ii) In case the Company shall issue shares of Common Stock (or
rights, warrants or other securities convertible into or exchangeable for
shares of Common Stock) after the Original Issue Date, other than issuances
covered by clause (i) above and other than pursuant to the Common Special
Distribution, the Rights Offering, the Warrant or the Other Equity Special
Distribution, at a price per share (or having an exercise, conversion or
exchange price per share) less than the Conversion Price per share of
Common Stock, as of the date of issuance of such shares or of such rights,
warrants or other convertible or exchangeable securities, then, and in each
such case, the Conversion Price shall be reduced (but not increased) to a
price determined by dividing (A) an amount equal to the sum of (x) the
number of shares of Common Stock outstanding immediately prior to such
issue multiplied by the then existing Conversion Price, plus (y) the
consideration, if any, received by Company upon such issue, by (B) the
total number of shares of Common Stock outstanding immediately after such
issue or sale (inclusive of any shares of Common Stock issuable upon
exercise, conversion or exchange of such securities so issued). The
Conversion Ratio shall be adjusted to equal the Liquidation Preference
divided by the Conversion Price. For the purpose of determining the
consideration received by the Company upon any such issue pursuant to
clause (y) above, if the consideration received by the Company is other
than cash, its value will be deemed its Fair Market Value, as determined in
good faith by the Board.
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(iii) An adjustment made pursuant to clause (ii) above shall be made
on the next Business Day following the date on which any such issuance is
made and shall be effective retroactively immediately after the close of
business on such date. For purposes of clause (ii), the aggregate
consideration received by the Company in connection with the issuance of
shares of Common Stock or of rights, warrants or other securities
exchangeable or convertible into shares of Common Stock shall be deemed to
be equal to the sum of the aggregate offering price of all such Common
Stock and such rights, warrants, or other exchangeable or convertible
securities plus the minimum aggregate amount, if any, receivable upon
exchange or conversion of any such exchangeable or convertible securities
into shares of Common Stock. If an adjustment is made pursuant to clause
(ii) above in respect of an issuance of rights, warrants or other
securities convertible into or exchangeable for shares of Common Stock,
then no further adjustment shall be made pursuant to clause (ii) above in
connection with the issuance of shares of Common Stock upon the exercise,
conversion or exchange of such rights, warrants or securities so issued in
accordance with the terms thereof; PROVIDED, HOWEVER, that if at any time
the exercise, conversion or exchange price per share of any rights,
warrants or other securities convertible into or exchangeable for shares of
Common Stock previously issued by the Company is reduced after the date of
the issuance of such rights, warrants or other securities then, and in each
such case, a further adjustment shall be made pursuant to clause (ii) above
on the next Business Day following the date on which any such reduction is
made (which adjustment shall be effective retroactively immediately after
the close of business on such date) such that, after giving effect to such
adjustment and any previous adjustment made pursuant to clause (ii) above
in respect of such rights, warrants or other securities, the adjusted
Conversion Ratio and Conversion Price calculated pursuant to such clause
(ii) shall reflect the reduced exercise, conversion or exchange price per
share for such rights, warrants or other securities.
(iv) In case the Company shall at any time or from time to time after
the Original Issue Date declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of stock or
other securities or property or rights or warrants to subscribe for
securities of the Company or any of its Subsidiaries by way of dividend or
spinoff), on its Common Stock, other than pursuant to the Common Special
Distribution or the Rights Offering or the Other Equity Special
Distribution, and other than dividends or distributions of shares of Common
Stock which are referred to in clause (i) of this Section 8(e) or made in
compliance with Sections 3(b) or (c) hereof, then, and in each such case,
the Conversion Ratio shall be adjusted so that the holder of each share of
Series B Convertible Preferred Stock shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock determined by
multiplying (1) the applicable Conversion Ratio on the day immediately
prior to the record date fixed for the determination of stockholders
entitled to receive such dividend or distribution by (2) a fraction, the
numerator of which shall be the Current Market Price per share of Common
Stock at such record date, and the denominator of which shall be such
Current Market Price per share of Common Stock less the Fair Market Value
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<PAGE>
of such dividend or distribution per share of Common Stock. No adjustment
shall be made pursuant to this clause (iv) in connection with any
transaction to which Section 8(f) applies.
(v) For purposes of this Section 8(e), the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock
then owned or held by or for the account of the Company or any of its
wholly-owned subsidiaries.
(vi) If the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment in the number of
shares of Common Stock issuable upon exercise of the right of conversion
granted by this Section 8(e) or in the Conversion Ratio then in effect
shall be required by reason of the taking of such record.
(vii) Anything in this Section 8(e) to the contrary notwithstanding,
the Company shall not be required to give effect to any adjustment in the
Conversion Ratio unless and until the net effect of one or more adjustments
(each of which shall be carried forward), determined as above provided,
shall have resulted in a change of the Conversion Ratio by at least
one-tenth of one share of Common Stock, and when the cumulative net effect
of more than one adjustment so determined shall be to change the Conversion
Ratio by at least one-tenth of one share of Common Stock, such change in
Conversion Ratio shall thereupon be given effect.
(viii) Unless otherwise provided herein, for the purposes of this
Section 8(e), the number of shares of Common Stock outstanding at any time
shall include all shares of Common Stock issuable upon the exercise of all
options and warrants then outstanding and the conversion of all convertible
securities then outstanding other than the Convertible Preferred Stock.
(ix) If any option or warrant expires or is cancelled without having
been exercised, then, for the purposes of the adjustments set forth above,
such option or warrant shall have been deemed not to have been issued and
the Conversion Ratio shall be adjusted accordingly. No holder of Common
Stock which was previously issued upon conversion of Series B Convertible
Preferred Stock shall have any obligation to redeem or cancel any such
shares of Common Stock as a result of the operation of this clause (ix).
(f) In case of any capital reorganization or reclassification of the Common
Stock of the Company or in case of any merger or consolidation of the Company
with or into another corporation, or in case of any sale or transfer to another
corporation of the property of the Company as an entirety or substantially as an
entirety, or in case of any share tender or share exchange, in any such case
pursuant to which all of the outstanding shares of Common Stock are converted
into other securities or property, each share of Series B Convertible Preferred
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<PAGE>
Stock then outstanding shall thereafter be convertible into, in lieu of the
Common Stock issuable upon such conversion prior to consummation of such
reorganization, reclassification, merger, consolidation, sale, transfer or
tender or share exchange the kind and amount of shares of stock and other
securities and property receivable (including cash) upon the consummation of
such reorganization, reclassification, merger, consolidation, sale, transfer or
tender or share exchange by a holder of that number of shares of Common Stock
into which one share of Series B Convertible Preferred Stock would have been
convertible (without giving effect to any restriction on convertibility)
immediately prior to such reorganization, reclassification, merger,
consolidation, sale, transfer or tender or share exchange including, on a pro
rata basis, the cash, securities or property received by holders of Common Stock
in any such transaction. In case securities or property other than Common Stock
shall be issuable or deliverable upon conversion as aforesaid, then all
references in this Section 8 shall be deemed to apply, so far as appropriate and
nearly as may be, to such other securities or property.
(g) In case at any time or from time to time the Company shall pay any
stock dividend or make any other non-cash distribution to the holders of its
Common Stock, or shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of the Common
Stock of the Company or consolidation or merger of the Company with or into
another corporation, or any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, or there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Company, then, in any one or more of said cases, the Company shall give at
least 10 days' prior written notice to the registered holders of the Series B
Convertible Preferred Stock at the addresses of each as shown on the books of
the Company as of the date on which (i) the books of the Company shall close or
a record shall be taken for such stock dividend, distribution or subscription
rights or (ii) such reorganization, reclassification, consolidation, merger,
sale or conveyance, dissolution, liquidation or winding up shall take place, as
the case may be. Such notice shall also specify the date as of which the holders
of record of Common Stock shall participate in said dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale or conveyance or participate in
such dissolution, liquidation or winding up, as the case may be. Failure to give
such notice shall not invalidate any action so taken.
9. REPORTS AS TO ADJUSTMENTS. Upon any adjustment of the Conversion Ratio
then in effect and any increase or decrease in the number of shares of Common
Stock issuable upon the operation of the conversion set forth in Section 8,
then, and in each such case, the Company shall promptly deliver to each holder
of the Series B Convertible Preferred Stock, a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Company setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the Conversion Ratio then in
effect following such adjustment and the increased or decreased number of shares
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issuable upon the conversion granted by Section 8, and shall set forth in
reasonable detail the method of calculation of each and a brief statement of the
facts requiring such adjustment. Where appropriate, such notice to holders of
the Series B Convertible Preferred Stock may be given in advance.
10. CERTAIN COVENANTS. Required Holders may proceed to protect and enforce
the rights of the holders of the Convertible Preferred Stock by any available
remedy by proceeding at law or in equity, whether for the specific enforcement
of any provision in this Certificate of Designation for the Series B Convertible
Preferred Stock and the Series C Convertible Preferred Stock or in aid of the
exercise of any power granted herein or therein, or to enforce any other proper
remedy. Any protection, enforcement or remedy sought shall apply equally to the
Series B Convertible Preferred Stock and to the Series C Convertible Preferred
Stock.
11. NO REISSUANCE OF PREFERRED STOCK. No Series B Convertible Preferred
Stock acquired by the Company by reason of purchase, or otherwise shall be
reissued, and all such shares shall be cancelled, retired and eliminated from
the shares which the Company shall be authorized to issue.
12. NOTICES. All notices to the Company permitted hereunder shall be
personally delivered or sent by first class mail, postage prepaid, addressed to
its principal office located at 4800 North Scottsdale Road, Scottsdale, Arizona
85251-7623, Attention: General Counsel and Secretary, or to such other address
at which its principal office is located and as to which notice thereof is
similarly given to the holders of the Series B Convertible Preferred Stock at
their addresses appearing on the books of the Company.
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II. TERMS, PREFERENCES, RIGHTS AND LIMITATIONS
of
SERIES C CONVERTIBLE PREFERRED STOCK
of
THE FINOVA GROUP INC.
The relative rights, preferences, powers, qualifications, limitations and
restrictions granted to or imposed upon the Series C Convertible Preferred Stock
or the holders thereof are as follows:
1. DEFINITIONS. For purposes of this Designation, the following definitions
shall apply:
"Actual Gain" has the meaning set forth in Section 5(e) hereof.
"Actual Loss" has the meaning set forth in Section 5(e) hereof.
"Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
"After-Tax Gain" has the meaning set forth in Section 5(e) hereof.
"After-Tax Loss" has the meaning set forth in Section 5(e) hereof.
"Baseline" has the meaning set forth in Section 5(e) hereof.
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday, Sunday, or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Common Special Distribution" means the distribution to be made to the
certain holders of Common Stock of record on the record date established for the
distribution if the Sharing Amount results in an Upside Distribution, as
contemplated by Section 5.
"Common Stock" shall mean the Common Stock, par value $0.01 per share, of
the Company.
"Company" shall mean The FINOVA Group Inc., a Delaware corporation.
"Continuing Directors" has the meaning ascribed thereto in the Purchase
Agreement.
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"Conversion Period" has the meaning set forth in Section 8(a) hereof.
"Conversion Price" shall mean as of any date of measurement, the amount
computed by dividing the Liquidation Preference as of such date by the number of
shares of Common Stock into which one share of Series C Convertible Preferred
Stock is convertible as of such date determined in accordance with Section 8
hereof.
"Conversion Ratio" has the meaning set forth in Section 8 hereof.
"Convertible Preferred Stock" shall refer to the Series B Convertible
Preferred Stock and to the Series C Convertible Preferred Stock of the Company.
"Current Market Price," when used with reference to shares of Common Stock
or other securities on any date, shall mean the average of the daily market
prices for the five consecutive Trading Days before such date. The daily market
price for each such Trading Day shall be (i) the last sale price on such day on
the principal stock exchange or the NASDAQ National Market on which such Common
Stock is then listed or admitted to trading, (ii) if no sale takes place on such
day on any such exchange or market, the average of the last reported closing bid
and asked prices on such day as officially quoted on any such exchange or
market, (iii) if the Common Stock is not then listed or admitted to trading on
any stock exchange or such market, the average of the last reported closing bid
and asked prices on such day in the over-the-counter market, as furnished by
NASDAQ or the National Quotation Bureau, Inc., (iv) if neither such corporation
at the time is engaged in the business of reporting such prices, as furnished by
any similar firm then engaged in such business, or (v) if there is no such firm,
as furnished by any member of the National Association of Securities Dealers
("NASD") selected mutually by the Required Holders and Company or, if they
cannot agree upon such selection, as selected by two such members of the NASD,
one of which shall be selected by the Required Holders and one of which shall be
selected by Company.
"Dividend Payment Date" shall have the meaning set forth in Section 4
hereof.
"Dividend Rate" shall mean 14% per annum, compounded quarterly calculated
on a 360 day per year basis, based on the actual number of days elapsed.
"Downside Distribution" has the meaning set forth in Section 5(e) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any successor Federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Securities Exchange
Act of 1934, as amended, shall include reference to the comparable section, if
any, of any such similar Federal statute.
"Fair Market Value" shall mean the amount which a willing buyer would pay a
willing seller in an arm's-length transaction, with neither being under any
compulsion to buy or sell.
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<PAGE>
"Fully Diluted Equity" has the meaning set forth in Section 5(e) hereof.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect from time to time.
"Junior Securities" shall have the meaning set forth in Section 3(b).
"Leucadia" shall mean Leucadia National Corporation and its successors and
Affiliates.
"Liquidation Preference" shall mean the sum of (i) $250.00 per share of
Series C Convertible Preferred Stock, and (ii) the aggregate of all declared and
unpaid dividends and all accrued and unpaid dividends in respect of a share of
Series C Convertible Preferred Stock calculated in accordance with Article 4
hereof.
"Old S/H Ownership" has the meaning set forth in Section 5(e) hereof.
"Other Equity" has the meaning set forth in Section 5(e) hereof.
"Other Equity Ownership" has the meaning set forth in Section 5(e) hereof.
"Other Equity Special Distribution" means the distribution to be made to
the holders of the Convertible Preferred Stock of record on the record dated
established for the distribution and to the Purchaser with respect to the
Warrant if the Sharing Amount results in a Downside Distribution, as
contemplated by Section 5.
"Original Issue Date" shall mean the date of the original issuance of
shares of Series C Convertible Preferred Stock.
"Parity Securities" shall have the meaning set forth in Section 3(b).
"Person" shall mean any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Portfolio" has the meaning set forth in Section 5(e) hereof.
"Preferred Ownership" has the meaning set forth in Section 5(e) hereof.
"Preferred Percentage of Other Equity" has the meaning set forth in Section
5(e) hereof.
"Purchase Agreement" shall mean the Securities Purchase Agreement, dated as
of December 20, 2000, by and among the Company and Purchaser named therein, as
it may be amended from time to time, a copy of which is on file at the principal
office of the Company.
"Purchaser" shall mean Leucadia National Corporation.
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<PAGE>
"Purchaser Designees" has the meaning ascribed thereto in the Purchase
Agreement.
"Required Holders" shall mean the holders of at least of a majority of the
outstanding shares of Convertible Preferred Stock, determined as if both the
Series B Convertible Preferred Stock and the Series C Convertible Preferred
Stock constituted only one series of preferred stock.
"Rights Offering" shall have the meaning ascribed thereto in the Purchase
Agreement.
"Rights Ownership" has the meaning set forth in Section 5(e) hereof.
"Rights Percentage of Other Equity" has the meaning set forth in Section
5(e) hereof.
"Senior Securities" shall have the meaning set forth in Section 3(b).
"Series A Junior Participating Preferred Stock" shall refer to the Series A
Junior Participating Preferred Stock, $0.01 par value per share, of the Company.
"Series B Convertible Preferred Stock" shall refer to the Series B
Convertible Preferred Stock, $0.01 par value per share, of the Company.
"Series C Convertible Preferred Stock" shall refer to the Series C
Convertible Preferred Stock, $0.01 par value per share, of the Company.
"Sharing Amount" has the meaning set forth in Section 5(e) hereof.
"Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power or the voting equity securities or equity interest
is owned, directly or indirectly, by such Person.
"TOPrS" shall refer to the trust originated preferred securities of the
Company.
"Trading Day" shall mean a Business Day or, if the Common Stock is listed
or admitted to trading on any national securities exchange or NASDAQ market, a
day on which such exchange or market is open for the transaction of business.
"Upside Distribution" has the meaning set forth in Section 5(e) hereof.
"Warrant" shall mean the warrants to purchase shares of Common Stock dated
_________, 2001 issued by the Company to Leucadia.
"Warrant Ownership" has the meaning set forth in Section 5(e) hereof.
"Warrant Percentage of Other Equity" has the meaning set forth in Section
5(e) hereof.
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2. DESIGNATION: NUMBER OF SHARES. The designation of the preferred stock
authorized by this resolution shall be "Series C Convertible Preferred Stock"
and the number of shares of Series C Convertible Preferred Stock authorized
hereby shall be 600,000 shares.
3. RANK.
(a) The Series C Convertible Preferred Stock shall rank, with respect to
the payment of dividends or other amounts and with respect to distribution of
assets upon liquidation, dissolution or winding up of the Company, PARI PASSU
with the Series B Convertible Preferred Stock.
(b) Any class or series of stock of the Company shall be deemed to rank:
(i) prior to the Convertible Preferred Stock, either as to the payment
of dividends or other amounts or as to distribution of assets upon
liquidation, dissolution or winding up of the Company, or both, if the
holders of such class or series shall be entitled by the terms thereof to
the receipt of dividends or other amounts and of amounts distributable upon
liquidation, dissolution or winding up of the Company, in preference or
priority to the holders of the Convertible Preferred Stock ("Senior
Securities");
(ii) on a parity with the Convertible Preferred Stock, either as to
the payment of dividends or other amounts or as to distribution of assets
upon liquidation, dissolution or winding up of the Company, or both,
whether or not the dividend rates, dividend payment dates or redemption or
liquidation prices per share thereof be different from those of the
Convertible Preferred Stock, if the holders of the Convertible Preferred
Stock and of such class of stock or series shall be entitled by the terms
thereof to the receipt of dividends or other amounts or of amounts
distributable upon liquidation, dissolution or winding up of the Company,
or both, in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences (including, but not limited
to preferences as to payment of dividends or other amounts distributable
upon liquidation), without preference or priority one over the other and
such class of stock or series is not a class of Senior Securities ("Parity
Securities"); and
(iii) junior to the Convertible Preferred Stock, either as to the
payment of dividends or as to the distribution of assets upon liquidation,
dissolution or winding up of the Company, or both, if such stock or series
shall be Common Stock or the Series A Junior Participating Preferred Stock
or if the holders of the Convertible Preferred Stock shall be entitled by
the terms thereof to receipt of dividends or other amounts, and of amounts
distributable upon liquidation, dissolution or winding up of the Company,
in preference or priority to the holders of shares of such stock or series
(including, but not limited to preferences as to payment of dividends or
other amounts distributable upon liquidation) ("Junior Securities").
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4. DIVIDENDS.
(a) So long as any shares of Series C Convertible Preferred Stock shall be
outstanding, and subject to the right of holders of Common Stock to receive the
Common Special Distribution, or if applicable, the right of the holders of the
Convertible Preferred Stock and Purchaser in respect of the Warrant to receive
the Other Equity Special Distribution, the holders of shares of Series C
Convertible Preferred Stock shall be entitled to receive during each year with
respect to each share of Series C Convertible Preferred Stock, when, as and if
declared by the Board out of any funds legally available for the payment of
dividends in cash, an amount equal to the greater of (x) the Dividend Rate on
the Liquidation Preference hereunder, or (y) all dividends paid in respect of a
share of Common Stock (excluding the Common Special Distribution) during such
year calculated on the basis of the number of shares of Common Stock into which
a share of Series C Preferred Stock may be converted, regardless of whether such
stock is then convertible. Dividends in an amount equal to the greater of
clauses (x) or (y) in the preceding sentence, shall begin to accrue on a
cumulative basis from the Original Issue Date, whether or not there shall be net
profits or net assets of the Company legally available for the payment of those
dividends and shall continue to accrue on a daily basis thereon until the date
such share is converted into Common Stock in accordance with the provisions of
this Certificate. As set forth in the definition of Liquidation Preference,
unpaid dividends, whether or not declared, shall be added to and become a part
of the Liquidation Preference.
(b) Notwithstanding the foregoing, during the period commencing on the
Original Issue Date and ending on the fifth anniversary of the Original Issue
Date, the Company may not declare or pay dividends (except as otherwise provided
herein) in respect of the Series C Convertible Preferred Stock, any Parity
Securities or any Junior Securities, but dividends in respect of the Series C
Convertible Preferred Stock shall continue to accrue in accordance with the
provisions of Section 4(a). Thereafter, dividends to the extent declared by the
Board of Directors shall be payable quarterly in arrears on the first Business
Day of each calendar quarter (a "Dividend Payment Date") to holders of record on
the tenth Business Day immediately prior to such Dividend Payment Date.
(c) So long as any share of the Series C Convertible Preferred Stock is
outstanding, no dividends (other than the Common Special Distribution, or the
Rights Offering, or if applicable, the Other Equity Special Distribution due to
Purchaser in respect of the Warrant) shall be declared or paid or set apart for
payment or other distribution, declared or made upon Junior Securities, nor
shall any Junior Securities be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Company, directly or
indirectly (except by conversion into or exchange for Junior Securities), other
than (i) a redemption, purchase or other acquisition of shares of Common Stock
(or Common Stock equivalents) made for purposes of an employee incentive or
benefit plan of the Company or any subsidiary or to satisfy the Company's
obligations pursuant to any contract or security requiring the Company to
purchase shares of Common Stock (or Common Stock equivalents), (ii) any
distribution in respect of the TOPrS or the 5 1/4% Convertible Subordinated
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Debentures due 2016 required pursuant to the terms of such securities, (iii)
dividends or distribution of shares of Common Stock or rights on Common Stock,
(iv) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged, (v) purchases of shares of Common
Stock (or Common Stock equivalents) from officers or employees of the Company or
its Subsidiaries upon termination of employment or retirement, or (vi) as a
result of a reclassification of the Company's capital stock for another class or
series of the Company's capital stock, unless and until in each case (i) all
accrued and unpaid dividends for all past dividend periods on the Series C
Convertible Preferred Stock and any other Parity Securities shall have been paid
and (ii) sufficient funds shall have been paid for the current dividend period
with respect to the Series C Convertible Preferred Stock and any such Parity
Securities.
5. SPECIAL DISTRIBUTION. As soon as practicable after December 31, 2005,
but in no event later than May 31, 2006 (or if not then permitted under Delaware
law, as soon thereafter as it is legally able to make such distribution), the
Board shall determine the Sharing Amount and shall make the distribution
provided herein. If the Sharing Amount shall be a number other than zero,
Company shall make the required distribution to (a) the holders of shares of
Common Stock that were outstanding immediately prior to consummation of the
transactions contemplated by the Purchase Agreement, if the Sharing Amount
results in an Upside Distribution, or (b) the holders of the Other Equity
determined pursuant to the provisions of this Section, if the Sharing Amount
results in a Downside Distribution. Any equity securities of Company that may be
issued on or after the Closing Date (other than the Convertible Preferred Stock,
the Warrant or pursuant to the Rights Offering to the extent provided in the
Purchase Agreement) shall not participate in the Upside Distribution or the
Downside Distribution.
(a) The distribution shall be made by Company, out of funds legally
available therefore and shall be in an amount determined in accordance with the
applicable formula below:
For Upside Distributions, the formula for the distribution (D) shall be:
D = T [(.5-C) / E]
For Downside Distributions, the formula for the distribution (D) shall be:
D = T [(.5 - E)/C]
The letters in the foregoing formulas refer to terms defined in this
Section 5, as follows:
D = Amount of the Upside Distribution or Downside Distribution
T = Sharing Amount
C = Old S/H Ownership
E = Other Equity
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(b) An Upside Distribution or Downside Distribution shall be paid in such
form or forms, including capital stock of Company, as the Board shall determine.
The valuation of any such securities or property shall be determined by the
Board, with the concurrence of a majority of the directors who are Continuing
Directors. The Continuing Directors collectively may retain, at Company's
expense, independent advisors to advise them on any determinations required
under clauses (b) and (d) of this Section 5. If a majority of the Board and a
majority of the Continuing Directors are unable to agree upon such valuation,
the matter shall be referred for final determination to an investment banking
firm mutually acceptable to the majority of the Board and a majority of the
Continuing Directors. Company shall make available to such investment banking
firm all such information, books and records as the investment banking firm may
determine to be necessary for the purpose of its determination and shall pay the
fees and expenses of such firm. No payments are guaranteed to be made under this
Section. No interest shall be payable in respect of any distribution pursuant to
this Section.
(c) Company will maintain such records as may be required for calculation
of the Sharing Amount, including a cumulative record of the actual collection of
assets in the Portfolio measured against the gross amount recorded for each
asset as of June 30, 2000 or, in the case of commitments, actual collections
measured against the actual amount funded pursuant to or in connection with the
commitment. The gross amount recorded for each asset shall mean the amount
recorded before any specific or general reserves in respect of such asset. In
the case of loans, a particular loan will be deemed "collected" for purposes of
this calculation when the loan is collected, sold or written-off in full; it is
not deemed collected at such time as it is extended or modified. In the case of
a leased asset, the asset will be deemed "collected" for purposes of this
calculation when the leased asset is finally sold or otherwise disposed of. To
the extent the investment in any loan or lease is increased or extended pursuant
either to a revolving commitment or due to management's judgment that, to
protect collection of the loan or recovery of Company's investment in the lease,
such increase or extension is in the Company's best interest, the final
collection will be compared to the loan or lease as so increased.
(d) In determining the "Actual Gain" or "Actual Loss" for purposes of
determining the Sharing Amount hereunder, unrealized gains and unrealized
losses, if any, on the balance of the Portfolio outstanding at December 31, 2005
shall be estimated by the Board, which estimate shall be approved by a majority
of the Continuing Directors. If a majority of the Board and a majority of the
Continuing Directors are unable to agree upon any such estimate, the matter
shall be referred for final determination of an independent accounting firm,
(other than the Company's or Leucadia's independent auditors), which is mutually
acceptable to a majority of the Board and a majority of the Continuing
Directors. The Company shall make available to such independent accounting firm
all such information, books and records as the independent accounting firm may
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determine to be necessary for the purpose of its determination and shall pay the
fees and expenses of such firm. Any determination made by the Board, or where so
required made by the Board with the concurrence of a majority of the Continuing
Directors, or made by an independent accounting firm or investment banking firm
as herein provided, shall be conclusive and binding and shall not be subject to
challenge or dispute absent manifest error.
Set forth on SCHEDULE 5 are examples, solely for purposes of illustration,
of various calculations of the Sharing Amount and the Upside Distribution or
Downside Distribution relating to such Sharing Amounts.
(e) For purposes of this Section, the following definitions shall apply:
"Actual Loss" shall mean the actual cumulative loss on the Portfolio.
Actual cumulative loss on the Portfolio shall include all realized and
unrealized gains and losses as set forth in (c) and (d) above. Gains and losses
on the Portfolio shall be determined without reference to any specific or
general reserves in respect of the relevant assets.
"Actual Gain" shall mean the actual cumulative gain on the Portfolio.
Actual cumulative gain on the Portfolio shall include all realized and
unrealized gains and losses as set forth in (c) and (d) above. Gains and losses
on the Portfolio shall be determined without reference to any specific or
general reserves in respect of the relevant assets.
"After-Tax Loss" shall mean the Actual Loss multiplied by 60%.
"After-Tax Gain" shall mean the Actual Gain multiplied by 60%.
"Baseline" shall mean $780 million.
"Downside Distribution" shall mean the distribution made to the holders of
the Convertible Preferred Stock and Leucadia in respect of the Warrant (the
"Other Equity"). The allocation of any Downside Distribution shall be calculated
by multiplying the amount of the Downside Distribution by the Preferred
Percentage of Other Equity, the Warrant Percentage of Other Equity and the
Rights Percentage of Other Equity, respectively. Amounts in respect of the
Preferred Percentage of Other Equity shall be paid to the holders of record of
the Series B Preferred Stock and of the Series C Preferred Stock, if any,
purchased by Leucadia as a result of its standby commitment set forth in Section
6.11(a) of the Purchase Agreement, amounts in respect of the Warrant Percentage
shall be paid to Leucadia, and amounts in respect of the Rights Percentage shall
be paid to holders of record of Series C Preferred Stock purchased in the Rights
Offering (which shall exclude shares of Series C Preferred Stock, if any,
purchased by Leucadia as a result of its standby commitment set forth in Section
6.11(a) of the Purchase Agreement, but which shall include any shares of Series
C Preferred Stock subsequently purchased by Leucadia).
"Fully Diluted Equity" shall mean all outstanding shares of Common Stock of
Company and all other shares of Common Stock that may be issued by Company upon
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the exercise, conversion or exchange of all rights, options, warrants or other
securities convertible into or exchangeable for shares of Common Stock
(including the Convertible Preferred Stock and the Warrant), whether or not such
rights, options, warrants or other securities are then vested, convertible or
exercisable.
"Other Equity Ownership" shall mean the sum of (i) Preferred Ownership,
(ii) Warrant Ownership, and (iii) Rights Ownership.
"Old S/H Ownership" shall mean the percentage of Fully Diluted Equity
represented by the shares of Common Stock of Company outstanding immediately
prior to Leucadia's acquisition of securities pursuant to the Purchase
Agreement.
"Portfolio" shall mean (a) all loans, advances, capital leases or other
investments included in the (i) gross "Investment in Financing Transactions," as
reflected on the Company's June 30, 2000 consolidated balance sheet (the "June
30 Balance Sheet"), (ii) "Investments," as reflected on the June 30 Balance
Sheet, (iii) "Offlease Aircraft," as reflected in the June 30 Balance Sheet and
(b) the aggregate amount of all unfunded commitments of the Company existing as
of June 30, 2000 as reflected on SCHEDULE 6.14(E) to the Purchase Agreement, but
only to the extent that such commitments have been funded by the Company after
June 30, 2000.
"Preferred Ownership" shall mean the percentage of Fully Diluted Equity of
Company owned by Purchaser by virtue of Purchaser's ownership of shares of
Convertible Preferred Stock (including any Convertible Preferred Stock owned by
Purchaser pursuant to Purchaser's obligations in connection with the Rights
Offering) based on the number of shares of Common Stock into which each share of
Convertible Preferred Stock may be converted, regardless of whether or not such
Convertible Preferred Stock is then convertible.
"Preferred Percentage of Other Equity" shall mean the fraction, expressed
as a percentage, the numerator of which is the Preferred Ownership and the
denominator of which is the Other Equity Ownership.
"Rights Ownership" shall mean the percentage of Fully Diluted Equity of
Company owned by stockholders (excluding Purchaser in respect of shares of
Series C Preferred Stock included in the Preferred Ownership, but including
shares of Series C Preferred Stock subsequently purchased by Purchaser) by
virtue of their respective ownership of shares of Series C Preferred Stock based
on the number of shares of Common Stock into which each share of Series C
Preferred Stock may be converted, regardless of whether or not such Series C
Preferred Stock is then convertible.
"Rights Percentage of Other Equity" shall mean the fraction, expressed as a
percentage, the numerator of which is the Rights Ownership and the denominator
of which is the Other Equity Ownership.
"Sharing Amount" shall mean the Baseline MINUS the After-Tax Loss or PLUS
the After-Tax Gain. If such amount is negative, it shall be divided by 60%.
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"Upside Distribution" shall mean the distribution to be made to certain
holders of Common Stock as contemplated by this Section 5 if the Sharing Amount
is a positive number.
"Warrant Ownership" shall mean the percentage of Fully Diluted Equity of
Company represented by the Warrant based on the number of shares of Common Stock
into which the Warrant is exercisable as of the date of determination,
regardless of whether or not the Warrant is then exercisable.
"Warrant Percentage of Other Equity" shall mean the fraction, expressed as
a percentage, the numerator of which is the Warrant Ownership and the
denominator of which is the Other Equity Ownership.
6. LIQUIDATION RIGHTS OF SERIES C CONVERTIBLE PREFERRED STOCK.
(a) In the event of any liquidation, dissolution or winding up of Company,
whether voluntary or involuntary, the holders of Series C Convertible Preferred
Stock then outstanding shall be entitled to receive with respect to each share
of Series C Convertible Stock out of the assets of the Company available for
distribution to its stockholders, whether such assets are capital, surplus or
earnings, before any payment or declaration and setting apart for payment of any
amount (other than the Common Special Distribution or the Other Equity Special
Distribution, as applicable, which shall be paid first if such liquidation,
dissolution or winding up occurs after December 31, 2005) shall be made in
respect of any Junior Securities, an amount equal to the greater of (x) an
amount in cash equal to the Liquidation Preference, in respect of any
liquidation, dissolution or winding up consummated, or (y) the amount per share
that each holder of shares of Common Stock would be entitled to receive
(assuming the conversion of all Convertible Preferred Stock) multiplied by the
number of shares of Common Stock into which such shares of Series C Convertible
Preferred Stock then would be convertible (without giving effect to any
restrictions on convertibility).
(b) If, upon any liquidation, dissolution or winding up of the Company, the
assets of the Company, or proceeds thereof (after payment in full of the Common
Special Distribution or the Other Equity Special Distribution, as applicable, if
such liquidation, dissolution or winding up occurs after December 31, 2005),
shall be insufficient to pay in full the preferential amount aforesaid and
liquidating payments on all shares of Series B Convertible Preferred Stock and
all Parity Securities, if any, then such assets, or the proceeds thereof, shall
be distributed among the holders of shares of the Convertible Preferred Stock
and all such Parity Securities ratably in accordance with the respective amounts
that would be payable on the Convertible Preferred Stock and any such Parity
Securities if all amounts payable thereon were paid in full. For the purposes of
this Section 6, (i) a consolidation or merger of the Company with one or more
corporations, or (ii) a sale or transfer of all or substantially all of the
Company's assets, shall not be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary, of the Company.
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(c) Subject to the rights of the holders of any Series B Preferred Stock
and any Parity Securities, after payment shall have been made in full to the
holders of the Series C Convertible Preferred Stock, as provided in this Section
6(c), any other series or class or classes of Junior Securities shall, subject
to the respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Series C Convertible Preferred Stock shall not be entitled to share
therein, except to the extent set forth in Section 6(a) hereof.
7. VOTING RIGHTS. In addition to any voting rights provided by law, the
holders of shares of Series C Convertible Preferred Stock shall have the
following voting rights:
(a) So long as any of the Series C Convertible Preferred Stock is
outstanding, each share of Series C Convertible Preferred Stock shall entitle
the holder thereof to vote on all matters voted on by the holders of Common
Stock, voting together as a single class with the holders of the Common Stock
and the Series B Convertible Preferred Stock, and together with the holders of
other shares, if any, entitled to vote at all meetings of the stockholders of
the Company. With respect to any such vote, each share of Series C Convertible
Preferred Stock shall entitle the holder thereof to cast the number of votes
equal to two times the number of shares of Common Stock of the Company into
which such share of Series C Convertible Preferred Stock may be convertible on
the record date for such vote (without regard to any restriction or limitation
on convertibility).
(b) The affirmative vote of the Required Holders, voting together as a
single class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, or pursuant to a written consent of
stockholders shall be necessary to:
(i) authorize, adopt or approve an amendment to the Certificate of
Incorporation of the Company which would adversely affect the terms,
powers, preferences or rights (including special rights) of the shares of
Convertible Preferred Stock or grant waivers thereof, provided that no such
modification or amendment may, without the consent of each holder of
Convertible Preferred Stock affected thereby, (A) raise the Conversion
Price or reduce the Liquidation Preference or dividend, of such Convertible
Preferred Stock; or (B) reduce the percentage of outstanding Convertible
Preferred Stock necessary to modify or amend the terms thereof or to grant
waivers thereof; and
(ii) issue any Senior Securities or Parity Securities, or issue any
securities convertible into or exchangeable for any such securities (other
than the issuance of rights to subscribe for shares of Series C Preferred
Stock to be issued by the Company pursuant to the Rights Offering and the
issuance of shares of Series C Preferred Stock upon the exercise of such
rights).
(c) The foregoing rights of holders of shares of Convertible Preferred
Stock to take any actions as provided in this Section 7 may be exercised at any
annual meeting of stockholders or at a special meeting of stockholders held for
such purpose as hereinafter provided or at any adjournment thereof or pursuant
to any written consent of stockholders.
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8. CONVERSION.
(a) Subject to the provisions for adjustment hereinafter set forth, during
the period commencing on June 30, 2006 and ending on the close of business on
the tenth anniversary of the Original Issuance Date (the "Conversion Period"),
each share of Series C Convertible Preferred Stock shall be convertible at any
time and from time to time, at the option of the holder thereof, into fully paid
and nonassessable shares of Common Stock. The number of shares of Common Stock
deliverable upon conversion of each share of Series C Convertible Preferred
Stock, adjusted as hereinafter provided, shall equal the "Conversion Ratio"
which shall be a number (not necessarily a whole number) as of any date equal to
the Liquidation Preference, divided by $2.50, subject to adjustment from time to
time pursuant to paragraph (e) of this Section 8. No fractional shares shall be
issued upon the conversion of any shares of Series C Convertible Preferred
Stock. All shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series C Convertible Preferred Stock by a
holder thereof shall be aggregated for purposes of determining whether
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Company shall, in lieu of issuing any
fractional share, pay the holder otherwise entitled to such fraction a sum in
cash equal to the Current Market Price of such fraction on the date of
conversion.
(b) (i) A conversion of the Series C Convertible Preferred Stock may be
effected by any such holder upon the surrender to the Company at the
principal office of the Company of the certificate for such Series C
Convertible Preferred Stock to be converted accompanied by a written notice
stating that such holder elects to convert all or a specified number of
such shares (which may be fractional shares) in accordance with the
provisions of this Section 8 and specifying the name or names in which such
holder wishes the certificate or certificates for shares of Common Stock to
be issued. If a holder of Series C Convertible Preferred Stock delivers to
the Company a notice of election to convert, the Series C Convertible
Preferred Stock to be converted shall cease to accrue dividends but shall
continue to be entitled to receive pro rata dividends for the period from
the last dividend payment date to the date of delivery of the notice of
election to convert in preference to and in priority over any dividends on
any Junior Securities. Except as provided above and in Section 8(f), the
Company shall make no payment or adjustment for accrued and unpaid
dividends on shares of Series C Convertible Preferred Stock, whether or not
in arrears, on conversion of such shares or for dividends in cash, if any,
on the shares of Common Stock issued upon such conversion.
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(ii) In case the written notice specifying the name or name in which
such holder wishes the certificate or certificates for shares of Common
Stock to be issued shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name or names.
Other than such transfer taxes, the Company will pay any and all issue and
other taxes (other than taxes based on income) that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
Series C Convertible Preferred Stock pursuant hereto. As promptly as
practicable, and in any event within five (5) Business Days after the
surrender of such certificate or certificates and the receipt of such
notice relating thereto and, if applicable, payment of all transfer taxes
(or the demonstration to the satisfaction of the Company that such transfer
taxes have been paid), the Company shall deliver or cause to be delivered
(i) certificates representing the number of validly issued, fully paid and
nonassessable full shares of Common Stock to which the holder of shares of
Series C Convertible Preferred Stock being converted shall be entitled and
(ii) if less than the full number of shares of Series C Convertible
Preferred Stock evidenced by the surrendered certificate or certificates is
being converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or certificates
less the number of shares being converted.
(iii) In the event of a conversion, such conversion shall be deemed to
have been made at the close of business on the date of giving the written
notice referred to in the first sentence of (b)(ii) above and of such
surrender of the certificate or certificates representing the shares of
Series C Convertible Preferred Stock to be converted and, if applicable,
payment of all transfer taxes (or the demonstration to the satisfaction of
the Company that such transfer taxes have been paid), so that the rights of
the holder thereof as to the shares being converted shall cease except for
the right to receive shares of Common Stock in accordance herewith, and the
person entitled to receive the shares of Common Stock shall be treated for
all purposes as having become the record holder of such shares of Common
Stock at such time.
(c) The Conversion Ratio shall be subject to adjustment from time to time
in certain instances as herein provided.
(d) So long as any shares of Series C Convertible Preferred Stock are
outstanding, the Company shall at all times reserve, and keep available for
issuance upon the conversion of the Series C Convertible Preferred Stock, such
number of its authorized but unissued shares of Common Stock as will from time
to time be sufficient to permit the conversion of all outstanding shares of
Series C Convertible Preferred Stock, and shall take all action required to
increase the authorized number of shares of Common Stock if necessary, to permit
the conversion of all outstanding shares of Series C Convertible Preferred
Stock.
(e) The Conversion Ratio will be subject to adjustment from time to time as
follows:
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(i) In case the Company shall at any time or from time to time after
the Original Issue Date (A) pay a dividend, or make a distribution, on the
outstanding shares of Common Stock in shares of Common Stock (other than
pursuant to the Common Special Distribution or the Rights Offering), (B)
subdivide the outstanding shares of Common Stock, (C) combine the
outstanding shares of Common Stock into a smaller number of shares or (D)
issue by reclassification of the shares of Common Stock any shares of
capital stock of the Company, then, and in each such case, the Conversion
Ratio in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the holder of any
shares of Series C Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common
Stock or other securities of the Company which such holder would have owned
or have been entitled to receive after the happening of any of the events
described above, had such shares of Series C Convertible Preferred Stock
been surrendered for conversion (without giving effect to any restrictions
on convertibility) immediately prior to the happening of such event or the
record date therefor, whichever is earlier. An adjustment made pursuant to
this clause (i) shall become effective (x) in the case of any such dividend
or distribution, immediately after the close of business on the record date
for the determination of holders of shares of Common Stock entitled to
receive such dividend or distribution, or (y) in the case of such
subdivision, reclassification or combination, at the close of business on
the day upon which such corporate action becomes effective. No adjustment
shall be made pursuant to this clause (i) in connection with any
transaction to which paragraph (e) applies.
(ii) In case the Company shall issue shares of Common Stock (or
rights, warrants or other securities convertible into or exchangeable for
shares of Common Stock) after the Original Issue Date, other than issuances
covered by clause (i) above and other than pursuant to the Common Special
Distribution, the Rights Offering, the Warrant or the Other Equity Special
Distribution, at a price per share (or having an exercise, conversion or
exchange price per share) less than the Conversion Price per share of
Common Stock, as of the date of issuance of such shares or of such rights,
warrants or other convertible or exchangeable securities, then, and in each
such case, the Conversion Price shall be reduced (but not increased) to a
price determined by dividing (A) an amount equal to the sum of (x) the
number of shares of Common Stock outstanding immediately prior to such
issue multiplied by the then existing Conversion Price, plus (y) the
consideration, if any, received by Company upon such issue, by (B) the
total number of shares of Common Stock outstanding immediately after such
issue or sale (inclusive of any shares of Common Stock issuable upon
exercise, conversion or exchange of such securities so issued). The
Conversion Ratio shall be adjusted to equal the Liquidation Preference
divided by the Conversion Price. For the purpose of determining the
consideration received by the Company upon any such issue pursuant to
clause (y) above, if the consideration received by the Company is other
than cash, its value will be deemed its Fair Market Value, as determined in
good faith by the Board.
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(iii) An adjustment made pursuant to clause (ii) above shall be made
on the next Business Day following the date on which any such issuance is
made and shall be effective retroactively immediately after the close of
business on such date. For purposes of clause (ii), the aggregate
consideration received by the Company in connection with the issuance of
shares of Common Stock or of rights, warrants or other securities
exchangeable or convertible into shares of Common Stock shall be deemed to
be equal to the sum of the aggregate offering price of all such Common
Stock and such rights, warrants, or other exchangeable or convertible
securities plus the minimum aggregate amount, if any, receivable upon
exchange or conversion of any such exchangeable or convertible securities
into shares of Common Stock. If an adjustment is made pursuant to clause
(ii) above in respect of an issuance of rights, warrants or other
securities convertible into or exchangeable for shares of Common Stock,
then no further adjustment shall be made pursuant to clause (ii) above in
connection with the issuance of shares of Common Stock upon the exercise,
conversion or exchange of such rights, warrants or securities so issued in
accordance with the terms thereof; PROVIDED, HOWEVER, that if at any time
the exercise, conversion or exchange price per share of any rights,
warrants or other securities convertible into or exchangeable for shares of
Common Stock previously issued by the Company is reduced after the date of
the issuance of such rights, warrants or other securities then, and in each
such case, a further adjustment shall be made pursuant to clause (ii) above
on the next Business Day following the date on which any such reduction is
made (which adjustment shall be effective retroactively immediately after
the close of business on such date) such that, after giving effect to such
adjustment and any previous adjustment made pursuant to clause (ii) above
in respect of such rights, warrants or other securities, the adjusted
Conversion Ratio and Conversion Price calculated pursuant to such clause
(ii) shall reflect the reduced exercise, conversion or exchange price per
share for such rights, warrants or other securities.
(iv) In case the Company shall at any time or from time to time after
the Original Issue Date declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of stock or
other securities or property or rights or warrants to subscribe for
securities of the Company or any of its Subsidiaries by way of dividend or
spinoff), on its Common Stock, other than pursuant to the Common Special
Distribution or the Rights Offering or the Other Equity Special
Distribution, and other than dividends or distributions of shares of Common
Stock which are referred to in clause (i) of this Section 8(e) or made in
compliance with Sections 3(b) or (c) hereof, then, and in each such case,
the Conversion Ratio shall be adjusted so that the holder of each share of
Series C Convertible Preferred Stock shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock determined by
multiplying (1) the applicable Conversion Ratio on the day immediately
prior to the record date fixed for the determination of stockholders
entitled to receive such dividend or distribution by (2) a fraction, the
numerator of which shall be the Current Market Price per share of Common
Stock at such record date, and the denominator of which shall be such
Current Market Price per share of Common Stock less the Fair Market Value
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of such dividend or distribution per share of Common Stock. No adjustment
shall be made pursuant to this clause (iv) in connection with any
transaction to which Section 8 (f) applies.
(v) For purposes of this Section 8(e), the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock
then owned or held by or for the account of the Company or any of its
wholly-owned subsidiaries.
(vi) If the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment in the number of
shares of Common Stock issuable upon exercise of the right of conversion
granted by this Section 8(e) or in the Conversion Ratio then in effect
shall be required by reason of the taking of such record.
(vii) Anything in this Section 8(e) to the contrary notwithstanding,
the Company shall not be required to give effect to any adjustment in the
Conversion Ratio unless and until the net effect of one or more adjustments
(each of which shall be carried forward), determined as above provided,
shall have resulted in a change of the Conversion Ratio by at least
one-tenth of one share of Common Stock, and when the cumulative net effect
of more than one adjustment so determined shall be to change the Conversion
Ratio by at least one-tenth of one share of Common Stock, such change in
Conversion Ratio shall thereupon be given effect.
(viii) Unless otherwise provided herein, for the purposes of this
Section 8(e), the number of shares of Common Stock outstanding at any time
shall include all shares of Common Stock issuable upon the exercise of all
options and warrants then outstanding and the conversion of all convertible
securities then outstanding other than the Convertible Preferred Stock.
(ix) If any option or warrant expires or is cancelled without having
been exercised, then, for the purposes of the adjustments set forth above,
such option or warrant shall have been deemed not to have been issued and
the Conversion Ratio shall be adjusted accordingly. No holder of Common
Stock which was previously issued upon conversion of Series C Convertible
Preferred Stock shall have any obligation to redeem or cancel any such
shares of Common Stock as a result of the operation of this clause (ix).
(f) In case of any capital reorganization or reclassification of the Common
Stock of the Company or in case of any merger or consolidation of the Company
with or into another corporation, or in case of any sale or transfer to another
corporation of the property of the Company as an entirety or substantially as an
entirety, or in case of any share tender or share exchange, in any such case
pursuant to which all of the outstanding shares of Common Stock are converted
into other securities or property, each share of Series C Convertible Preferred
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Stock then outstanding shall thereafter be convertible into, in lieu of the
Common Stock issuable upon such conversion prior to consummation of such
reorganization, reclassification, merger, consolidation, sale, transfer or
tender or share exchange the kind and amount of shares of stock and other
securities and property receivable (including cash) upon the consummation of
such reorganization, reclassification, merger, consolidation, sale, transfer or
tender or share exchange by a holder of that number of shares of Common Stock
into which one share of Series C Convertible Preferred Stock would have been
convertible (without giving effect to any restriction on convertibility)
immediately prior to such reorganization, reclassification, merger,
consolidation, sale, transfer or tender or share exchange including, on a pro
rata basis, the cash, securities or property received by holders of Common Stock
in any such transaction. In case securities or property other than Common Stock
shall be issuable or deliverable upon conversion as aforesaid, then all
references in this Section 8 shall be deemed to apply, so far as appropriate and
nearly as may be, to such other securities or property.
(g) In case at any time or from time to time the Company shall pay any
stock dividend or make any other non-cash distribution to the holders of its
Common Stock, or shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of the Common
Stock of the Company or consolidation or merger of the Company with or into
another corporation, or any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, or there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Company, then, in any one or more of said cases, the Company shall give at
least 10 days' prior written notice to the registered holders of the Series C
Convertible Preferred Stock at the addresses of each as shown on the books of
the Company as of the date on which (i) the books of the Company shall close or
a record shall be taken for such stock dividend, distribution or subscription
rights or (ii) such reorganization, reclassification, consolidation, merger,
sale or conveyance, dissolution, liquidation or winding up shall take place, as
the case may be. Such notice shall also specify the date as of which the holders
of record of Common Stock shall participate in said dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale or conveyance or participate in
such dissolution, liquidation or winding up, as the case may be. Failure to give
such notice shall not invalidate any action so taken.
9. REPORTS AS TO ADJUSTMENTS. Upon any adjustment of the Conversion Ratio
then in effect and any increase or decrease in the number of shares of Common
Stock issuable upon the operation of the conversion set forth in Section 8,
then, and in each such case, the Company shall promptly deliver to each holder
of the Series C Convertible Preferred Stock, a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Company setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the Conversion Ratio then in
effect following such adjustment and the increased or decreased number of shares
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issuable upon the conversion granted by Section 8, and shall set forth in
reasonable detail the method of calculation of each and a brief statement of the
facts requiring such adjustment. Where appropriate, such notice to holders of
the Series C Convertible Preferred Stock may be given in advance.
10. CERTAIN COVENANTS. Required Holders may proceed to protect and enforce
the rights of the holders of the Convertible Preferred Stock by any available
remedy by proceeding at law or in equity, whether for the specific enforcement
of any provision in this Certificate of Designation for the Series B Convertible
Preferred Stock and the Series C Convertible Preferred Stock or in aid of the
exercise of any power granted herein or therein, or to enforce any other proper
remedy. Any protection, enforcement or remedy sought shall apply equally to the
Series B Convertible Preferred Stock and to the Series C Convertible Preferred
Stock.
11. NO REISSUANCE OF PREFERRED STOCK. No Series C Convertible Preferred
Stock acquired by the Company by reason of purchase, or otherwise shall be
reissued, and all such shares shall be cancelled, retired and eliminated from
the shares which the Company shall be authorized to issue.
12. NOTICES. All notices to the Company permitted hereunder shall be
personally delivered or sent by first class mail, postage prepaid, addressed to
its principal office located at 4800 North Scottsdale Road, Scottsdale, Arizona
85251-7623, Attention: General Counsel and Secretary, or to such other address
at which its principal office is located and as to which notice thereof is
similarly given to the holders of the Series C Convertible Preferred Stock at
their addresses appearing on the books of the Company.
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IN WITNESS WHEREOF, THE FINOVA GROUP INC. has caused this Certificate to be
signed by its President and Secretary, respectively, on this ____ day of
________, 2001.
__________________________________
President
__________________________________
Secretary
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