<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Act of 1934
Date of Report (Date of earliest event reported): July 15, 1998
BOSTON CHICKEN, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-22802 36-3904053
- --------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
14123 Denver West Parkway, P.O. Box 4086, Golden, Colorado 80401-4086
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(303) 278-9500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changes since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On July 15, 1998, Boston Chicken, Inc. (the "Company") completed the
acquisition of the following area developers of the Company pursuant to the
conversion of a total of approximately $564 million of loans into majority
equity ownership interests in each of those area developers: B.C.B.M. Southwest,
L.P. (formerly BC Texas, Inc.), R&A Food Services, L.P. (formerly R&A Food
Services, Inc.), Finest Foodservice, L.L.C., P&L Food Services, L.L.C., BC
Boston, L.P., BCE West, L.P., BC GoldenGate, L.L.C., BC Tri-States, L.L.C., BC
Superior, L.L.C. and BC Heartland, L.L.C. The conversion prices under the loans
resulted from arms-length negotiations between the Company and each area
developer at the time of entering into the loans agreements or amendments
thereto. As a result of the conversions, the number of Company-owned Boston
Market stores increased by 527, bringing the total number of Company-owned
stores to 936, or approximately 81% of the Boston Market system.
On July 15, 1998, the Company also acquired BC Equity Funding, L.L.C.
("BCEF") and Market Partners, L.L.C. ("Market Partners"), funds that previously
held preferred equity interests in 11 of the Company's 13 area developers,
including the ten area developers whose loans were converted. BCEF and Market
Partners were acquired pursuant to a merger of those funds with a wholly-owned
subsidiary of the Company for aggregate consideration of (i) $126.8 million
liquidation preference of the Company's 10% Series A Exchangeable Preferred
Stock, par value $0.01 per share (the "Preferred Stock"), (ii) 3.5 million
shares of the Company's Common Stock, par value $0.01 per share, and (iii) $10.0
million in cash. The consideration paid by the Company was determined by arms-
length negotiations between a special committee of the Board of Directors of the
Company, consisting of disinterested directors of the Company, and a negotiating
committee representing the members of BCEF and Market Partners. The 10% dividend
on the Preferred Stock is payable in either cash or additional shares of
Preferred Stock for a period of three years and in cash thereafter. The
Preferred Stock is optionally redeemable by the Company at any time, in cash, at
redemption prices which start at 50% of the face amount of the Preferred Stock
and increase over time. The Preferred Stock is mandatorily redeemable in 2005 at
a price equal to 110% of the face amount of the Preferred Stock. The Certificate
of Designations of the Powers, Preferences and Relative, Participating, Optional
and other Special Rights of 10% Series A Exchangeable Preferred Stock and
Qualifications, Limitations and Restrictions Thereto is filed as Exhibit 4.1 to
this Current Report. Peer Pedersen, a member of the Board of Directors of the
Company, and three present officers of the Company owned an aggregate of 2.1% of
the outstanding interests in BCEF and Mr. Pedersen and five present officers of
the Company owned an aggregate of 4.6% of the outstanding interests in Market
Partners. None of these persons received cash consideration for their interests
in BCEF and Market Partners, and these persons will be restricted from offering,
selling, pledging or otherwise disposing of the Preferred Stock and Common Stock
to be received by them for a period of 36 months from the date of the merger.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
It is impracticable to provide the required financial statements of the
businesses acquired as of the date hereof. The Registrant undertakes to file by
amendment to this Form 8-K the required financial statements of the businesses
acquired within sixty (60) days from the date of this filing.
(b) Pro Forma Financial Information.
The Registrant has heretofore filed in its Current Reports on Form 8-K
dated May 19, 1998 and June 16, 1998 certain pro forma financial information
concerning the businesses acquired. Such pro forma financial information was
based on loan balances outstanding as of the end of the periods presented, which
amounts are different from the loan amounts actually converted on July 15, 1998.
It is impracticable to provide the required pro forma financial information
concerning the businesses acquired as of the date hereof. The Registrant
undertakes to file by amendment to this Form 8-K the required pro forma
financial information relating to the businesses acquired within sixty (60) days
from the date of this filing.
(c) Exhibits.
The exhibits to this report are listed in the Exhibit Index set forth
elsewhere herein.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Dated: July 30, 1998
BOSTON CHICKEN, INC.
By: /s/ Lawrence E. White
---------------------------------------
Name: Lawrence E. White
Title: Chief Financial Officer
<PAGE>
BOSTON CHICKEN, INC.
--------------------
Exhibit Index
-------------
Exhibit
- -------
Number Description of Exhibit
------ ----------------------
2.1 Agreement and Plan of Merger dated as of March 16, 1998 by and among
the Company, BCI Acquisition Sub, L.L.C. and BC Equity Funding,
L.L.C. and Market Partners, L.L.C. (incorporated by reference to
Exhibit 2.1 to the Company's Form 10-Q for the quarter ended April
19, 1998).
2.2 Form of Secured Loan Agreement between the Company and Area
Developers partially financed by the Company (incorporated by
reference to Exhibit 99 to the Company's Form 10-Q for the quarter
ended October 5, 1997).
2.3 Agreement dated July 30, 1998 by the Company to furnish
supplementally copies of omitted exhibits and schedules.
4.1 Certificate of Designations of the Powers, Preferences and Relative,
Participating, Optional and other Special Rights of 10% Series A
Exchangeable Preferred Stock and Qualifications, Limitations and
Restrictions Thereto.
<PAGE>
EXHIBIT 2.3
AGREEMENT
---------
Boston Chicken, Inc. (the "Company") hereby agrees to furnish
supplementally to the Securities and Exchange Commission, upon request, a copy
of any omitted exhibits and schedules to the Agreement and Plan of Merger dated
as of March 16, 1998 by and among the Company, BCI Acquisition Sub, L.L.C. and
BC Equity Funding, L.L.C. and Market Partners, L.L.C.
BOSTON CHICKEN, INC.
By: /s/ Lawrence E. White
------------------------
Lawrence E. White
Chief Financial Officer
Dated: July 30, 1998
<PAGE>
EXHIBIT 4.1
BOSTON CHICKEN, INC.
CERTIFICATE OF DESIGNATIONS OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS
OF 10% SERIES A EXCHANGEABLE
PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
_________________________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
_________________________________________
Boston Chicken, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Company" or the
"Corporation"), does hereby certify that, pursuant to authority conferred upon
the board of directors of the Company (or any committee of such board of
directors, the "Board of Directors") by its Certificate of Incorporation, as
amended (hereinafter referred to as the "Certificate of Incorporation"), and
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, said Board of Directors, by a consent in writing dated July
13, 1998 adopted by all members of the Board of Directors in accordance with
Section 141(f) of the General Corporation Law of the State of Delaware, duly
approved and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issuance of 3,572,637 shares of 10%
Series A Exchangeable Preferred Stock, par value $0.01 per share, with an
original liquidation preference of $50 per share, having the designations,
voting power, preferences and relative, participating, optional and other
special rights, qualifications, limitations and restrictions thereof that are
set forth in the Certificate of Incorporation and in this Resolution as follows
(the terms used herein, unless otherwise defined herein, are used herein as
defined in Section I hereof):
I. Certain Definitions.
As used herein, the following terms shall have the following meanings
(with terms defined in the singular having comparable meanings when used in the
plural and vice versa), unless the context otherwise requires:
<PAGE>
"Additional Preferred Stock" means any additional shares of preferred
stock issued by the Company after the issuance of the 10% Series A
Exchangeable Preferred Stock.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means a day other than a Saturday, Sunday, national or
New York State holiday or other day on which commercial banks in New York
City are authorized or required by law to close.
"Capital Stock" means any and all shares, interests, participation,
rights or other equivalents (however designated) of corporate stock.
"Change of Control" means any of the following:
(i) the acquisition by any "person" or "group" (as such terms
are defined in the Exchange Act) through a purchase,
merger, or other acquisition transaction or series of
transactions, of more than 50.0% of the total voting power
of all shares of Voting Stock of the Company; or
(ii) any consolidation of the Company with, or merger of the
Company into, any other Person or the merger of any other
Person into the Company or any series of related
transactions other than any such transaction where (x) the
outstanding Voting Stock of the Company is not converted or
is converted or exchanged solely for voting common stock of
the surviving corporation, in each case that would not
result in a Change of Control pursuant to clause (i) above,
or (y) such transaction is effected primarily to change the
jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding
Common Stock solely into shares of common stock of the
surviving entity; or
(iii) if during any period of two years, individuals who were
members of the Board of Directors at the beginning of such
period, together with individuals nominated to the Board of
Directors or appointed to fill vacancies on the Board of
Directors by a majority of such initial directors still
remaining, cease for any reason to constitute at least a
majority of the members of the Board of Directors
(excluding, for purposes of this calculation, any director
who dies during such period); or
(iv) any sale, lease or exchange (in one or a series of related
transactions) of all or substantially all of the property
and assets
<PAGE>
of the Company (other than any refinancing of any
indebtedness or lease obligations of the Company in
existence on the date hereof) to another "person" or
"group".
"Change of Control Date" has the meaning specified in Section VII(A)
hereof.
"Change of Control Optional Redemption Price" has the meaning
specified in Section VII(A) hereof.
"Common Stock" means the common stock, par value $.01 per share, of
the Company.
"Corporation" or "Company" means Boston Chicken, Inc.
"Dividend Payment Date" means each July 15, October 15, January 15 and
April 15 of each year on which dividends shall be paid or are payable, any
Redemption Date and any other date on which dividends in arrears may be
paid.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"Dividend Record Date" means, with respect to the dividend payable on
each Dividend Payment Date, the close of business on the fifteenth day
immediately preceding such Dividend Payment Date, or such other record date
as may be designated by the Board of Directors with respect to the dividend
payable on such Dividend Payment Date; provided, however, that such record
date may not be more than 60 days or less than ten days prior to such
Dividend Payment Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Exchange Date" has the meaning specified in Section IX(A) hereof.
"Exchange Debentures" shall mean the 10% Subordinated Debentures due
2005 of the Company into which the 10% Series A Exchangeable Preferred
Stock are exchangeable at the option of the Company.
"Exchange Indenture" has the meaning specified in Section VIII(D)
hereof.
"Exchange Notice" has the meaning specified in Section IX(A) hereof.
"Holder" means a registered holder of shares of 10% Series A
Exchangeable Preferred Stock.
<PAGE>
"Immediate Family Members" means an individual's spouse, parents,
children and siblings.
"Initial Dividend Period" means the dividend period commencing on and
including the Original Issue Date and ending on the day immediately
preceding the next succeeding Dividend Payment Date.
"Junior Securities" has the meaning specified in Section III(A)(i)
hereof.
"Liquidation Preference" means, at any time, the Original Liquidation
Preference, plus an amount equal to all accumulated and unpaid dividends
thereon to the date, if any, fixed for voluntary or involuntary
liquidation, dissolution or winding up of the Company. The Liquidation
Preference of a share of 10% Series A Exchangeable Preferred Stock will
increase by the amount of accumulated and unpaid dividends on such share
and will decrease only to the extent such dividends are actually paid, all
as provided in Section IV hereof.
"Mandatory Redemption Date" means the seventh anniversary of the
Original Issue Date.
"Mandatory Redemption Price" has the meaning specified in Section
VI(B) hereof.
"Offer to Purchase" means a written offer (the "Offer") sent by the
Company by first class mail, postage prepaid, to each Holder at his
registered address as set forth on the books and records of the Transfer
Agent on the date of the Offer offering to purchase up to the Original
Liquidation Preference of 10% Series A Exchangeable Preferred Stock
specified in such Offer at the purchase price specified in such Offer (as
determined pursuant to this Certificate of Designations). The Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase
which shall be, subject to any contrary requirements of applicable law, not
less than 30 days or more than 60 days after the date of such Offer and a
settlement date (the "Purchase Date") for purchase of shares of Preferred
Stock within three Business Days after the Expiration Date. The Company
shall notify the Transfer Agent at least 15 days (or such shorter period as
is acceptable to the Transfer Agent) prior to the mailing of the Offer of
the Company's obligation to make an Offer to Purchase, and the Offer shall
be mailed by the Company or, at the Company's request, by the Transfer
Agent, in the name and at the expense of the Company. The Offer shall
contain information concerning the business of the Company and its
Subsidiaries which, at a minimum, shall include (i) the most recent annual
and quarterly financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Transfer Agent pursuant to this
Certificate of Designations (which requirements may be satisfied by
delivery of such documents together with the Offer), (ii) a description of
material developments in the Company's business subsequent to the date of
the latest of such financial statements referred to in
<PAGE>
clause (i) (including a description of the events requiring the Company to
make the Offer to Purchase), (iii) if required under applicable law, pro
forma financial information concerning, among other things, the Offer to
Purchase and the events requiring the Company to make the Offer to Purchase
and (iv) any other information required by applicable law to be included
therein. The Offer shall contain all instructions and materials necessary
to enable such Holders to tender their shares of 10% Series A Exchangeable
Preferred Stock pursuant to the Offer to Purchase. The Offer shall also
state: (l) the section of this Certificate of Designations pursuant to
which the Offer to Purchase is being made; (2) the Expiration Date and the
Purchase Date; (3) the aggregate Original Liquidation Preference of the
outstanding shares of 10% Series A Exchangeable Preferred Stock offered to
be purchased by the Company pursuant to the Offer to Purchase (the
"Purchase Amount"); (4) the purchase price to be paid by the Company for
each $50 aggregate Original Liquidation Preference of 10% Series A
Exchangeable Preferred Stock accepted for payment (as specified pursuant to
this Certificate of Designations) (the "Purchase Price"); (5) the Holder
may tender all or any portion of the 10% Series A Exchangeable Preferred
Stock registered in the name of such Holder and that any portion of 10%
Series A Preferred Stock tendered must be tendered in an integral multiple
of $50 of Original Liquidation Preference; (6) the place or places where
the shares of 10% Series A Exchangeable Preferred Stock are to be
surrendered for tender pursuant to the Offer to Purchase; (7) that
dividends on any shares of 10% Series A Exchangeable Preferred Stock not
tendered or tendered but not purchased by the Company pursuant to the Offer
to Purchase will continue to accrue; (8) that on the Purchase Date the
Purchase Price will become due and payable upon each share of 10% Series A
Exchangeable Preferred Stock being accepted for payment pursuant to the
Offer to Purchase; (9) that each Holder electing to tender shares of 10%
Series A Exchangeable Preferred Stock pursuant to the Offer to Purchase
will be required to surrender such 10% Series A Exchangeable Preferred
Stock at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such 10% Series A Exchangeable Preferred
Stock being, if the Company or the Transfer Agent so requires, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Transfer Agent duly executed by, the
Holder thereof or his attorney duly authorized in writing); (10) that
Holders will be entitled to withdraw all or any portion, in integral
multiples of $50, of the 10% Series A Exchangeable Preferred Stock tendered
if the Company (or its paying agent) receives, not later than the close of
business on the Expiration Date, a facsimile transmission or letter setting
forth the name of the Holder, the certificate number or numbers of the 10%
Series A Exchangeable Preferred Stock the Holder tendered and a statement
that such Holder is withdrawing all or a portion of his tender and, in the
aggregate, the Original Liquidation Preference of the amount being
withdrawn thereunder, plus the amount equal to all accumulated and unpaid
dividends thereon (as specified in this Certificate of Designations); (11)
that the Company shall purchase all such shares of 10% Series A
Exchangeable Preferred Stock duly tendered and not withdrawn pursuant to
the Offer to Purchase; and (12) that in the case of any Holder whose shares
of 10% Series A Exchangeable Preferred Stock are purchased only in part,
the Company shall execute, and the Transfer Agent shall countersign and
deliver
<PAGE>
to the Holder of such 10% Series A Exchangeable Preferred Stock without
service charge, new shares of 10% Series A Exchangeable Preferred Stock of
any authorized denomination as requested by such Holder, in an aggregate
Original Liquidation Preference equal to and in exchange for the
unpurchased portion of the aggregate Original Liquidation Preference of the
10% Series A Exchangeable Preferred Stock so tendered. Any Offer to
Purchase shall be governed by and effected in accordance with the Offer for
such Offer to Purchase.
"Optional Redemption Price" has the meaning specified in Section
VI(A)(i) hereof.
"Original Issue Date" means the date on which the merger of BC Equity
Funding, L.L.C. and Market Partners, L.L.C. with and into BCI Acquisition
Sub, L.L.C., pursuant to which merger the shares of 10% Series A
Exchangeable Preferred Stock were first issued by the Company, was
consummated.
"Original Liquidation Preference" means $50 per share of 10% Series A
Exchangeable Preferred Stock.
"Parity Securities" has the meaning specified in Section III(A)(ii)
hereof.
"Person" means any individual, partnership, corporation, business
trust, joint stock company, limited liability company, trust,
unincorporated association, joint venture, governmental authority or other
entity of whatever nature.
"PIK Option Period" means the first twelve Dividend Periods in respect
of which dividends are payable hereunder, commencing with the Initial
Dividend Period.
"Purchase Date" has the meaning specified in Section I hereof under
"Offer to Purchase".
"Quarterly Dividend Period" means the quarterly period commencing on
and including a Dividend Payment Date and ending on and including the day
immediately preceding the next subsequent Dividend Payment Date.
"Redemption Date" has the meaning specified in Section VI(C)(i)
hereof.
"Redemption Notice" has the meaning specified in Section VI(C)(i)
hereof.
"Registration Rights Agreement" means the agreement, dated the
Original Issue Date, among the Company, BCI Acquisition Sub, L.L.C., BC
Equity Funding L.L.C. and Market Partners, L.L.C. pursuant to which the
Company has agreed to register, among other Securities, 3,572,637 shares of
10% Series A Exchangeable Preferred Stock with the SEC.
<PAGE>
"SEC" means the Securities and Exchange Commission.
"Shelf Registration Statement" has the meaning given to such term in
the Registration Rights Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Senior Securities" has the meaning specified in Section III(A)(iii)
hereof.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%)
of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other
Subsidiaries of such Person or a combination thereof.
"Transfer Agent" means Harris Trust and Savings Bank or any successor
transfer agent.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities (as compiled and published in the most
recent Federal Reserve Statistical Release H.15(519) which has become
publicly available at least two business days prior to the date fixed for
redemption of the 10% Series A Exchangeable Preferred Stock or, if such
Statistical Release is no longer published, any publicly available source
of similar market data with a constant maturity most nearly equal to the
then remaining period to the Mandatory Redemption Date of the 10% Series A
Exchangeable Preferred Stock); provided, however, that if such period of
the 10% Series A Exchangeable Preferred Stock is not equal to the constant
maturity of a United States Treasury security for which a weekly average
yield is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average
yields of United States Treasury securities for which such yields are
given.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Trustee" means a trustee meeting the requirements of the Trust
Indenture Act, selected by the Company to act as Trustee under the Exchange
Indenture, or any successor Trustee appointed in accordance with the terms
of the Exchange Indenture.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to vote in the general election of directors of the Company.
<PAGE>
II. Designation.
The series of preferred stock authorized hereunder shall be designated
as the "10% Series A Exchangeable Preferred Stock". The number of shares
constituting such series shall be 3,572,637, consisting of an initial issuance
of 2,536,000 shares plus up to a maximum of 1,036,637 additional shares which
may be issued to pay dividends on 10% Series A Exchangeable Preferred Stock in
accordance with Section IV(A) hereof. The par value of the 10% Series A
Exchangeable Preferred Stock shall be $0.01 per share of 10% Series A
Exchangeable Preferred Stock, and the original liquidation preference of the 10%
Series A Exchangeable Preferred Stock shall be $50 per share.
III. Ranking.
(A) The 10% Series A Exchangeable Preferred Stock shall rank, with
respect to dividends and distributions upon the liquidation, dissolution or
winding-up of the Company:
(i) senior to all classes or series of Common Stock of the Company and
any Capital Stock of the Company, including any series of Additional
Preferred Stock hereafter created by the Board of Directors after the
issuance of the 10% Series A Exchangeable Preferred Stock, the terms of
which Capital Stock or Additional Preferred Stock expressly provide that it
ranks junior to the 10% Series A Exchangeable Preferred Stock as to
dividends and distributions upon liquidation, dissolution or winding-up of
the Company (collectively referred to as "Junior Securities"); and
(ii) on a parity with any Capital Stock of the Company, including any
series of Additional Preferred Stock hereafter created by the Board of
Directors after the issuance of the 10% Series A Exchangeable Preferred
Stock, the terms of which expressly provide that it ranks on a parity with
the 10% Series A Exchangeable Preferred Stock as to dividends and
distributions upon the liquidation, dissolution or winding-up of the
Company (collectively referred to as "Parity Securities"); and
(iii) junior to any Capital Stock of the Company, including any
series of Additional Preferred Stock hereafter created by the Board of
Directors after the issuance of the 10% Series A Exchangeable Preferred
Stock, the terms of which expressly provide that it ranks senior to the 10%
Series A Exchangeable Preferred Stock as to dividends and distributions
upon the liquidation, dissolution or winding-up of the Company ("Senior
Securities").
IV. Dividends.
(A) Beginning on the Original Issue Date, Holders shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available for
<PAGE>
the payment of dividends, dividends on each outstanding share of 10% Series A
Exchangeable Preferred Stock, at a rate per annum equal to 10% of the
Liquidation Preference per share of the 10% Series A Exchangeable Preferred
Stock, payable with respect to each Dividend Period; provided, however, that if
the Shelf Registration Statement has not been declared effective on or before
the 150th day after the Original Issue Date, such dividend rate per annum will
increase to 11% on the 151st day after such Original Issue Date and shall
further increase by 0.5% for each period of 90 days thereafter (for greater
certainty, if applicable, the first 90-day period would commence on the 241st
day after the Original Issue Date and end on the 330th day after the Original
Issue Date and the next 90-day period would commence on the 331st day after the
Original Issue Date) until the Shelf Registration Statement is declared
effective by the SEC, up to a maximum of 12%. In the event the annual dividend
rate increases pursuant to this Section IV(A), on the date immediately following
the date the Shelf Registration Statement is declared effective by the SEC, such
annual dividend rate will be reduced to 10%. All dividends shall be cumulative,
whether or not earned or declared for any reason, from the Original Issue Date
and shall be payable in arrears for each Dividend Period on the Dividend Payment
Date immediately following the last day of such Dividend Period, commencing on
the Dividend Payment Date immediately following the last day of the Initial
Dividend Period. Dividends paid with respect to Dividend Periods during the PIK
Option Period may, at the option of the Company, be paid either in cash or
additional shares of fully paid and non-assessable shares (including fractional
shares) of 10% Series A Exchangeable Preferred Stock with an aggregate
Liquidation Preference equal to the amount of such dividend (or in any
combination of cash and such shares). Dividends paid with respect to any
Dividend Period commencing after the PIK Option Period shall be paid only in
cash. The annual dividend rate will permanently increase by 25 basis points per
Dividend Period for each Dividend Period commencing after the PIK Option Period
with respect to which dividends are not paid in cash.
(B) Each dividend paid on the 10% Series A Exchangeable Preferred
Stock shall be payable to Holders of record as their names shall appear in the
stock ledger of the Company on the Dividend Record Date for such dividend,
except that dividends in arrears for any past Dividend Payment Date may be
declared and paid at any time without reference to such regular Dividend Payment
Date to Holders of record on a later dividend record date determined by the
Board of Directors.
(C) Dividends shall cease to accumulate in respect of shares of 10%
Series A Exchangeable Preferred Stock on the day prior to the Exchange Date or
on the day of their earlier redemption, unless the Company shall have failed to
issue the appropriate aggregate principal amount of Exchange Debentures in
respect of the 10% Series A Exchangeable Preferred Stock on the Exchange Date or
shall have failed to pay the relevant redemption price on the date fixed for
redemption.
(D) All dividends paid with respect to shares of the 10% Series A
Exchangeable Preferred Stock shall be paid pro rata to the Holders entitled
thereto based upon the number of shares of 10% Series A Exchangeable Preferred
Stock held by each such Holder on the relevant Dividend Record Date.
<PAGE>
(E) No full dividends shall be declared by the Board of Directors or
paid or funds set apart for payment by the Company on the 10% Series A
Exchangeable Preferred Stock or any Parity Securities for any period unless full
cumulative dividends have been or contemporaneously are declared and paid, or
declared and (in the case of dividends payable in cash) a sum set apart
sufficient for such payment, on the 10% Series A Exchangeable Preferred Stock
and any Parity Securities for all Dividend Periods terminating on or prior to
the date of payment of such full dividends on the 10% Series A Exchangeable
Preferred Stock or such Parity Securities. If any dividends are not paid in
full, as aforesaid, upon the shares of the 10% Series A Exchangeable Preferred
Stock and any Parity Securities, all dividends declared upon shares of the 10%
Series A Exchangeable Preferred Stock and any other Parity Securities shall be
declared pro rata so that the amount of dividends declared per share on the 10%
Series A Exchangeable Preferred Stock and such Parity Securities shall in all
cases bear to each other the same ratio that accumulated and unpaid dividends
per share on the 10% Series A Exchangeable Preferred Stock and such Parity
Securities bear to each other. Except as contemplated herein, no interest or
additional dividends, or sum of money in lieu of interest or additional
dividends, shall be payable in respect of any dividend payment or payments on
the 10% Series A Exchangeable Preferred Stock or any Parity Securities which may
be in arrears.
(F) So long as any shares of the 10% Series A Exchangeable Preferred
Stock are outstanding, except with respect to (i) repurchases of Common Stock,
or warrants, rights, calls or options exercisable for or convertible into Common
Stock, issued under the Company's stock incentive programs, and (ii) dividends
or distributions payable in kind in additional shares of, or warrants, rights,
calls or options exercisable for or convertible into additional shares of,
Junior Securities, the Company shall not declare, pay or set apart for payment
any dividend on any Junior Securities (except dividends on Junior Securities
payable in additional shares of Junior Securities), or make any payment on
account of, or set apart for payment money for a sinking or other similar fund
for, the purchase, redemption or other retirement of, any of the Junior
Securities or any warrants, rights, calls or options exercisable for or
convertible into any of the Junior Securities (excluding any convertible debt
securities), and shall not permit any corporation or other entity directly or
indirectly controlled by the Company to purchase or redeem any of the Junior
Securities or any warrants, rights, calls or options exercisable for or
convertible into any of the Junior Securities, unless prior to or concurrently
with such declaration, payment, setting apart for payment, purchase, redemption
or distribution, as the case may be, all accumulated and unpaid dividends on
shares of the 10% Series A Exchangeable Preferred Stock not paid on the dates
provided for in Section IV(A) hereof (and, to the extent previously due but not
yet paid, any and all redemption payments on the 10% Series A Exchangeable
Preferred Stock) shall have been or are concurrently being paid.
(G) Dividends payable on shares of the 10% Series A Exchangeable
Preferred Stock for any period less than a year shall be computed on the basis
of a 360-day year of twelve 30-day months and the actual number of days elapsed
in the period for which payable. If any Dividend Payment Date occurs on a day
that is not a Business Day, any
<PAGE>
accumulated and unpaid dividends otherwise payable on such Dividend Payment Date
shall be paid on the next succeeding Business Day.
(H) Unless otherwise provided by applicable law, for federal income
tax purposes, distributions with respect to the 10% Series A Exchangeable
Preferred Stock will not qualify as dividends and will be treated as a return of
capital unless the Company has earnings and profits.
V. Payment on Liquidation.
(A) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, Holders will be entitled to receive out of the assets
of the Company available for distribution to the holders of its Capital Stock,
whether such assets are capital, surplus or earnings, an amount in cash equal to
the Liquidation Preference, before any payment shall be made or any assets
distributed to the holders of any of the Junior Securities, determined as of the
date of such voluntary or involuntary liquidation, dissolution or winding-up.
Except as set forth in the preceding sentence, Holders shall not be entitled to
any distribution in the event of voluntary or involuntary liquidation,
dissolution or winding-up of the Company. If upon any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Company, the assets
of the Company are not sufficient to pay in full the liquidation payments
payable to the holders of outstanding shares of the 10% Series A Exchangeable
Preferred Stock and all Parity Securities, then the holders of all such shares
shall share equally and ratably in any distribution of assets in proportion to
the full liquidation preferences, determined as of the date of such voluntary or
involuntary liquidation, dissolution or winding-up, to which they are entitled.
(B) For the purposes of this Section V only, neither the sale, lease,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
corporations shall be deemed to be a liquidation, dissolution or winding-up of
the Company (unless such sale, conveyance, exchange or transfer is in connection
with a dissolution or winding-up of the business of the Company).
VI. Redemption.
(A) Optional Redemption. (i) The Company may, at its option, redeem
(subject to contractual and other restrictions with respect thereto and the
legal availability of funds therefor), at any time, from any source of funds
legally available therefor, in whole or in part, in the manner provided in
Section VI(C) hereof, any or all of the shares of the 10% Series A Exchangeable
Preferred Stock, at the redemption prices (expressed as a percentage of the
Original Liquidation Preference thereof, determined as of such Redemption Date)
set forth
<PAGE>
below plus an amount in cash equal to all accumulated and unpaid dividends per
share, if any, to the Redemption Date (the "Optional Redemption Price"):
Through the first anniversary
of the Original Issue Date..................................... 50.0%
Thereafter for the next three
month period................................................... 52.5%
Thereafter for the next three
month period................................................... 55.0%
Thereafter for the next three
month period................................................... 57.5%
Thereafter for the next three
month period................................................... 60.0%
Thereafter for the next three
month period................................................... 62.5%
Thereafter for the next three
month period................................................... 65.0%
Thereafter for the next three
month period................................................... 67.5%
Thereafter for the next three
month period................................................... 70.0%
Thereafter through the fourth
anniversary of the Original Issue Date......................... 80.0%
Thereafter through the fifth
anniversary of the Original Issue Date......................... 90.0%
Thereafter through but not including the
seventh anniversary of the Original Issue Date................. 100.0%
Thereafter..................................................... 110.0%
(ii) In the event of a redemption pursuant to this Section VI(A) of
only a portion of the then outstanding shares of 10% Series A Exchangeable
Preferred Stock, the Company shall effect such redemption pro rata according to
the number of shares held by each Holder of such 10% Series A Exchangeable
Preferred Stock or by lot, as determined by the Company, except that the Company
may redeem such shares held by any Holders of fewer than 1000 shares (or shares
held by Holders who would hold less than 100 shares as a result of such
redemption), as determined by the Company in its sole discretion.
<PAGE>
(B) Mandatory Redemption. On the Mandatory Redemption Date, the
Company shall redeem from any source of funds legally available therefor, in the
manner provided in Section VI(C) below, all of the shares of the 10% Series A
Exchangeable Preferred Stock then outstanding at a redemption price equal to
110% of the Original Liquidation Preference thereof, plus an amount in cash
equal to all accumulated and unpaid dividends per share, if any, to the
Redemption Date (the "Mandatory Redemption Price").
(C) Procedure for Redemption. (i) Not more than sixty (60) and not
less than thirty (30) days prior to the date fixed for any redemption of the 10%
Series A Exchangeable Preferred Stock, written notice (the "Redemption Notice")
shall be given by first-class mail, postage prepaid, to each Holder of record of
shares to be redeemed on the record date fixed for such redemption of the 10%
Series A Exchangeable Preferred Stock at such Holder's address as the same
appears on the stock ledger of the Company, provided, however, that no failure
to give such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of 10% Series A Exchangeable
Preferred Stock to be redeemed except as to the Holder or Holders to whom the
Company has failed to give such notice or except as to the Holder or Holders
whose notice was defective. The Redemption Notice shall state:
(a) whether the redemption is pursuant to Section VI(A)(i) or VI(B)
hereof;
(b) the Optional Redemption Price or Mandatory Redemption Price, as
the case may be;
(c) whether all or less than all the outstanding shares of the 10%
Series A Exchangeable Preferred Stock are to be redeemed and the total
number of shares of such 10% Series A Exchangeable Preferred Stock being
redeemed;
(d) the number of shares of 10% Series A Exchangeable Preferred Stock
held by the Holder that the Company intends to redeem;
(e) the date fixed for redemption (the "Redemption Date");
(f) that the Holder is to surrender to the Company, at the place or
places, which shall be designated in such Redemption Notice, its
certificates representing the shares of 10% Series A Exchangeable Preferred
Stock to be redeemed;
(g) that dividends on the shares of the 10% Series A Exchangeable
Preferred Stock to be redeemed shall cease to accumulate on the day of such
Redemption Date unless the Company defaults in the payment of the Optional
Redemption Price or Mandatory Redemption Price, as the case may be; and
(h) the name of any bank or trust company performing the duties
referred to in Section VI(C)(v) below.
<PAGE>
(ii) On or before the Redemption Date, each Holder of 10% Series A
Exchangeable Preferred Stock to be redeemed shall surrender the certificate or
certificates representing such shares of 10% Series A Exchangeable Preferred
Stock to the Company, in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full Optional Redemption Price
or Mandatory Redemption Price, as the case may be, for such shares shall be
payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
returned to authorized but unissued shares in accordance with Section XI. In
the event that less than all of the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the unredeemed
shares.
(iii) Unless the Company defaults in the payment in full of the
applicable redemption price, dividends on the 10% Series A Exchangeable
Preferred Stock called for redemption shall cease to accumulate on the
Redemption Date, and the Holders of such shares shall cease to have any further
rights with respect thereto on the Redemption Date, other than the right to
receive the Optional Redemption Price or Mandatory Redemption Price, as the case
may be, without interest.
(iv) If a Redemption Notice shall have been duly given, and if, on or
before the Redemption Date specified therein, all funds necessary for such
redemption shall have been set aside by the Company, separate and apart from its
other funds, in trust for the pro rata benefit of the Holders of the 10% Series
A Exchangeable Preferred Stock called for redemption so as to be and continue to
be available therefor, then, notwithstanding that any certificate for shares so
called for redemption shall not have been surrendered for cancellation, all
shares so called for redemption shall no longer be deemed outstanding, and all
rights with respect to such shares shall forthwith on such Redemption Date cease
and terminate, except only the right of the Holders thereof to receive the
Optional Redemption Price or Mandatory Redemption Price, as the case may be,
without interest.
(v) If a Redemption Notice shall have been duly given or if the
Company shall have given to the bank or trust company hereinafter referred to
irrevocable authorization promptly to give such notice, and if on or before the
Redemption Date specified therein the funds necessary for such redemption shall
have been deposited by the Company with such bank or trust company in trust for
the pro rata benefit of the Holders of the 10% Series A Exchangeable Preferred
Stock called for redemption, then, notwithstanding that any certificate for
shares so called for redemption shall not have been surrendered for
cancellation, from and after the time of such deposit, all shares so called, or
to be so called pursuant to such irrevocable authorization, for redemption shall
no longer be deemed to be outstanding and all rights with respect of such shares
shall forthwith cease and terminate, except only the right of the Holders
thereof to receive from such bank or trust company at any time after the time of
such deposit the funds so deposited, without interest. The aforesaid bank or
trust company shall be organized and in good standing under the laws of the
United States of America or of the State of New York, shall be doing business in
the Borough of Manhattan, The City of New York, shall have capital, surplus and
undivided profits aggregating at least $100,000,000 according to its last
published statement of condition, and shall be identified in the Redemption
<PAGE>
Notice. Any interest accrued on such funds shall be paid to the Company from
time to time. Any funds so set aside or deposited, as the case may be, and
unclaimed at the end of three years from such Redemption Date shall, to the
extent permitted by law, be released or repaid to the Company, after which
repayment the Holders of the shares so called for redemption shall look only to
the Company for payment thereof.
VII. Change of Control.
(A) Upon the occurrence of a Change of Control, the Company shall be
required (subject to any contractual and other restrictions with respect thereto
and the legal availability of funds therefor) to make an Offer to Purchase (as
provided for herein) to each Holder of shares of 10% Series A Exchangeable
Preferred Stock to repurchase all or any part of such Holder's shares of 10%
Series A Exchangeable Preferred Stock at the prevailing "Change of Control
Optional Redemption Price" at the time of the event (the "Change of Control
Date"). "Change of Control Optional Redemption Price" means the following
percentages of Original Liquidation Preference plus an amount in cash equal to
all accumulated and unpaid dividends thereon to the Change of Control Date as
set forth below:
Through the first anniversary of
the Original Issue Date................................... 65.0%
Thereafter through the second
anniversary of the Original Issue Date.................... 75.0%
Thereafter through the third
anniversary of the Original Issue Date.................... 85.0%
Thereafter through the fourth
anniversary of the Original Issue Date.................... 92.0%
Thereafter through the fifth
anniversary of the Original Issue Date.................... 99.0%
Thereafter through the sixth
anniversary of the Original Issue Date.................... 105.0%
Thereafter through the seventh
anniversary of the Original Issue Date.................... 110.0%
(B) Within 30 days following any Change of Control Date, the Company
shall mail an Offer to Purchase to such Holder.
(C) On the Purchase Date, (i) the Company shall, to the extent lawful,
(a) accept for payment shares of 10% Series A Exchangeable Preferred Stock
tendered pursuant to the Offer to Purchase, (b) promptly mail to each Holder of
shares of 10% Series A Exchangeable Preferred Stock so accepted payment in an
amount equal to the Change of
<PAGE>
Control Optional Redemption Price for such shares and (c) arrange to have
promptly authenticated and mailed (or cause to be transferred by book entry) to
each Holder a new share certificate representing any unpurchased shares of the
10% Series A Exchangeable Preferred Stock represented by the certificate
tendered pursuant to the Offer, if any, and (ii) unless the Company defaults in
the payment for the shares of 10% Series A Exchangeable Preferred Stock tendered
pursuant to the Offer to Purchase, dividends shall cease to accrue with respect
to the shares of 10% Series A Exchangeable Preferred Stock tendered and all
rights of Holders of such tendered shares shall terminate, except for the right
to receive payment therefor, on the Purchase Date. The Company shall publicly
announce the results of the Offer to Purchase on or as soon as practicable after
the Purchase Date.
(D) The Company shall comply with Rule 14e-1 under the Exchange Act
and any securities laws and regulations to the extent such laws and regulations
are applicable to the repurchase of shares of the 10% Series A Exchangeable
Preferred Stock in connection with a Change of Control.
(E) In the event a Change of Control occurs within six months
following an optional redemption under Section VI(A)(i), the Company shall be
required to immediately pay the Holders of the 10% Series A Exchangeable
Preferred Stock whose shares were so redeemed the difference between (i) the
Change of Control Optional Redemption Price that would have been paid if the
Series A Preferred Stock had been redeemed on the date of the Change of Control
and (ii) the Optional Redemption Price previously paid.
VIII. Voting Rights.
(A) Holders, except as otherwise required under Delaware law and as
set forth in paragraphs (B) and (C) below, shall not be entitled or permitted to
vote on any matter required or permitted to be voted upon by the stockholders of
the Company.
(B) Without the approval of Holders of at least a majority of the
shares of 10% Series A Exchangeable Preferred Stock then outstanding, voting or
consenting, as the case may be, separately as a single class, given in person or
by proxy, either in writing or by resolution adopted at an annual or special
meeting called for the purpose, the Company will not amend, modify or repeal the
Certificate of Designations so as to adversely affect the specified
designations, rights, preferences, privileges or voting rights of the 10% Series
A Exchangeable Preferred Stock. The authorization or consummation of a
transaction that results in the 10% Series A Exchangeable Preferred Stock being
converted or exchanged for or becoming shares of a resulting entity shall not
constitute an amendment, modification or repeal of this Certificate of
Designations for purposes of this Section VIII.
(C) Without the approval of the Holders of the 10% Series A
Exchangeable Preferred Stock, the Company shall be permitted to issue Senior
Securities only if such Senior Securities are issued (i) in exchange for
securities that are senior to the 10% Series A Exchangeable Preferred Stock,
(ii) for cash in a public offering of securities offered and sold
<PAGE>
pursuant to an effective registration statement or pursuant to Rule 144A under
the Securities Act (a "Public Offering"), or (iii) for cash in a sale of
securities that is not a Public Offering, provided that if any of the purchasers
in such private placement are, or are "controlled" by (as such term is defined
in Rule 405 under the Securities Act), the Company, its officers or directors or
their Immediate Family Members, the Company will obtain an opinion from a
nationally recognized investment banking firm that the transaction is fair to
the Company from a financial point of view
(D) In connection with the exchange of 10% Series A Exchangeable
Preferred Stock for Exchange Debentures in accordance with Section IX, the
Company shall enter into an Indenture with the Trustee for the Exchange
Debentures (the "Exchange Indenture") in substantially the form of the draft
thereof attached as Appendix C to the Joint Information Statement/Offering
Memorandum delivered to the initial Holders of the 10% Series A Exchangeable
Preferred Stock, with only such changes thereto as (i) would have been permitted
under the Exchange Indenture, without any vote or consent of the holders of the
Exchange Debentures if any Exchange Debentures were then outstanding or (ii)
have been approved by the affirmative vote or consent of Holders of at least a
majority of the shares of 10% Series A Exchangeable Preferred Stock then
outstanding, voting or consenting, as the case may be, separately as a single
class, given in person or by proxy, either in writing or by resolution adopted
at an annual or special meeting called for the purpose.
(E) The Holders of at least a majority of the shares of 10% Series A
Exchangeable Preferred Stock then outstanding, voting or consenting, as the case
may be, separately as a single class, whether voting in person or by proxy,
either in writing or by resolution adopted at an annual or special meeting
called for the purpose, may waive compliance with any provision of this
Certificate of Designations.
(F) Notwithstanding anything herein to the contrary, (i) the creation,
authorization or issuance of any shares of any Parity Securities or Junior
Securities or (ii) the increase or decrease in the amount of authorized Capital
Stock of any class, including any preferred stock, shall not require the consent
of the Holders of 10% Series A Exchangeable Preferred Stock and shall not be
deemed to affect adversely the rights, preferences, privileges or voting rights
of Holders of 10% Series A Exchangeable Preferred Stock.
IX. Exchange.
(A) The Company may, at its option, at any time, exchange the shares
of 10% Series A Exchangeable Preferred Stock, in whole but not in part, for the
Exchange Debentures to be issued pursuant to an Exchange Indenture (such date,
the "Exchange Date"). Notwithstanding the foregoing, the Company may not
exercise such exchange option unless all accumulated and unpaid dividends in
respect of shares of 10% Series A Exchangeable Preferred Stock surrendered to
the Company upon exchange shall have been paid either in cash or, in respect of
accumulated and unpaid dividends that accrued during the PIK Option Period, at
the option of the Company, in cash or a principal amount of Exchange Debentures
equal to
<PAGE>
such amount in lieu of a payment in cash; provided that, the Company may elect
to set aside Exchange Debentures (in respect of accumulated and unpaid dividends
that accrued during the PIK Option Period) or funds to provide for the payment
in full of such dividends. At least thirty (30) and not more than sixty (60)
days prior to the date fixed for exchange, the Company shall send a written
notice (the "Exchange Notice") of exchange by mail to each Holder, which notice
shall state: (a) that the Company has elected to exchange the 10% Series A
Exchangeable Preferred Stock into Exchange Debentures pursuant to this
Certificate of Designations; (b) the Exchange Date; (c) that the Holder is to
surrender to the Company, at the place or places and in the manner designated in
the Exchange Notice, its certificate or certificates representing the shares of
10% Series A Exchangeable Preferred Stock; (d) that dividends on the shares of
10% Series A Exchangeable Preferred Stock to be exchanged shall cease to
accumulate at the close of business on the day prior to the Exchange Date,
whether or not certificates for shares of 10% Series A Exchangeable Preferred
Stock are surrendered for exchange on the Exchange Date, unless the Company
shall default in the delivery of Exchange Debentures; and (e) that interest on
the Exchange Debentures shall accrue from the Exchange Date whether or not
certificates for shares of 10% Series A Exchangeable Preferred Stock are
surrendered for exchange on the Exchange Date. On the Exchange Date, if the
conditions set forth in clauses (i) through (iv) below are satisfied and if the
exchange is then permitted under the Exchange Indenture, the Company shall issue
Exchange Debentures in exchange for the 10% Series A Exchangeable Preferred
Stock as provided in the next paragraph, provided that on the Exchange Date: (i)
there shall be legally available funds sufficient for the exchange to occur
(including, without limitation, legally available funds sufficient therefor
under Sections 160 and 170 (or any successor provisions), to the extent
applicable, of the General Corporation Law of the State of Delaware); (ii)
either (a) a registration statement relating to the Exchange Debentures shall
have been declared effective under the Securities Act prior to such exchange and
shall continue to be in effect on the Exchange Date or (b)(1) the Company shall
have obtained a written opinion of counsel acceptable to the Company that an
exemption from the registration requirements of the Securities Act is available
for such exchange and (2) such exemption is relied upon by the Company for such
exchange; (iii) the Exchange Indenture and the Trustee shall have been qualified
under the Trust Indenture Act or the Company shall have obtained a written
opinion of counsel that such qualification is not required; and (iv) immediately
after giving effect to such exchange, no Default or Event of Default (each as
defined in the Exchange Indenture) would exist under the Exchange Indenture. In
the event that any of the conditions set forth in clauses (i) through (iv) of
the preceding sentence are not satisfied on the Exchange Date, then no shares of
10% Series A Exchangeable Preferred Stock shall be exchanged, and in order to
effect an exchange as provided for in this Section IX, the Company shall be
required to fix another date for the exchange and issue a new Exchange Notice.
(B) Upon any exchange pursuant to Section IX(A), Holders shall be
entitled to receive a principal amount of Exchange Debentures equal to the
Liquidation Preference of 10% Series A Exchangeable Preferred Stock, plus,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends thereon, if any, to the Exchange Date; provided that the Company shall
pay cash in lieu of issuing an Exchange Debenture in a principal amount of less
than $1,000 and provided further that the Exchange Debentures will be issuable
<PAGE>
only in denominations of $1,000 and integral multiples thereof. If any amount is
owed by the Company in respect of accumulated and unpaid dividends that accrued
during the PIK Option Period, such amount may, at the option of the Company, be
paid in a principal amount of Exchange Debentures equal to such amount in lieu
of a payment in cash.
(C) On or before the Exchange Date, each Holder shall surrender the
certificate or certificates representing such shares of 10% Series A
Exchangeable Preferred Stock, in the manner and at the place designated in the
Exchange Notice. The Company shall cause the Exchange Debentures to be executed
on the Exchange Date and, upon surrender in accordance with the Exchange Notice
of the certificates for any shares of 10% Series A Exchangeable Preferred Stock
so exchanged (properly endorsed or assigned for transfer, if the Exchange Notice
shall so state), such shares shall be exchanged by the Company into Exchange
Debentures as aforesaid. The Company shall pay interest on the Exchange
Debentures at the rate and on the dates specified therein from the Exchange Date
(D) If the Exchange Notice has been mailed as aforesaid, and if
before the Exchange Date all Exchange Debentures necessary for such exchange
shall have been duly executed by the Company and delivered to the Trustee with
irrevocable instructions to authenticate the Exchange Debentures necessary for
such exchange, then the rights of the Holders as stockholders of the Company
shall cease (except the right to receive Exchange Debentures and accumulated and
unpaid dividends (in cash or, in respect of accumulated and unpaid dividends
that accrued during the PIK Option Period, at the option of the Company, in cash
or a principal amount of Exchange Debentures equal to such amount in lieu of a
payment in cash) to the Exchange Date), and the Person or Persons entitled to
receive the Exchange Debentures issuable upon exchange shall be treated for all
purposes as the registered holder or holders of such Exchange Debentures as of
the date of exchange. Upon the exchange of the 10% Series A Exchangeable
Preferred Stock for Exchange Debentures, the rights of Holders as stockholders
of the Company shall cease (except the right to receive the Exchange Debentures
and accumulated and unpaid dividends (in cash or, in respect of accumulated and
unpaid dividends that accrued during the PIK Option Period, at the option of the
Company, in cash or a principal amount of Exchange Debentures equal to such
amount in lieu of a payment in cash) to the Exchange Date), and the Person or
Persons entitled to receive the Exchange Debentures issuable upon exchange shall
be treated for all purposes as registered holder or holders of such Exchange
Debentures as of the date of exchange. The Company will pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of notes evidencing Exchange Debentures on exchange of the 10%
Series A Exchangeable Preferred Stock pursuant hereto; provided that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issue or delivery of notes evidencing Exchange
Debentures in a name other than that of the record holder of the 10% Series A
Exchangeable Preferred Stock to be exchanged and no such issue or delivery shall
be made unless and until the Person requesting such issue or delivery has paid
to the Company the amount of any such tax or has established, to the
satisfaction of the Company, that such tax has been paid.
<PAGE>
X. Mutilated or Missing 10% Series A Exchangeable Preferred Stock Certificates.
---------------------------------------------------------------------------
If any of the 10% Series A Exchangeable Preferred Stock certificates
shall be mutilated, lost, stolen or destroyed, the Company shall issue, in
exchange and in substitution for and upon cancellation of the mutilated 10%
Series A Exchangeable Preferred Stock certificate, or in lieu of and
substitution for the 10% Series A Exchangeable Preferred Stock certificate lost,
stolen or destroyed, a new 10% Series A Exchangeable Preferred Stock certificate
of like tenor and representing an equivalent amount of shares of 10% Series A
Exchangeable Preferred Stock, but only upon receipt of evidence of such loss,
theft or destruction of such 10% Series A Exchangeable Preferred Stock
certificate and indemnity or bond, if requested, satisfactory to the Company and
the Transfer Agent (if other than the Company).
Upon the issuance of any replacement 10% Series A Exchangeable
Preferred Stock under this Section, the Company may require the payment of a sum
sufficient to pay all documentary, stamp or similar issue or transfer taxes or
other governmental charges that may be imposed in relation thereto and any other
expenses connected therewith.
XI. Reissuance; Conversion; Preemptive Rights.
-----------------------------------------
(i) Shares of 10% Series A Exchangeable Preferred Stock that have
been issued and reacquired in any manner, including shares purchased or redeemed
or exchanged, shall (upon compliance with any applicable provisions of the laws
of the State of Delaware) have the status of authorized and unissued shares of
preferred stock undesignated as to series and may be redesignated and reissued
as part of any series of Additional Preferred Stock other than the 10% Series A
Exchangeable Preferred Stock.
(ii) The Holders of 10% Series A Exchangeable Preferred Stock shall
not have any rights hereunder to convert such shares into or exchange such
shares for shares of any other class or classes or of any other series of any
class or classes of Capital Stock of the Company.
(iii) No shares of 10% Series A Exchangeable Preferred Stock shall
have any rights of preemption whatsoever as to any securities of the Company, or
any warrants, rights or options issued or granted with respect thereto,
regardless of how such securities or such warrants, rights or options may be
designated, issued or granted.
XII. Business Day.
------------
If any payment or redemption shall be required by the terms hereof to
be made on a day that is not a Business Day, such payment, redemption or
exchange shall be made on the immediately succeeding Business Day and no further
dividends shall accumulate after the day payment was required.
<PAGE>
XIII. Headings of Subdivisions.
------------------------
The headings of various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
XIV. Severability of Provisions.
--------------------------
If any right, preference or limitation of the 10% Series A
Exchangeable Preferred Stock set forth in these resolutions and the Certificate
of Designations filed pursuant hereto (as such Certificate of Designations may
be amended from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule or law or public policy, all other rights,
preferences and limitations set forth in such Certificate of Designations, as
amended, which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless remain in full
force and effect, and no right, preference or limitation herein set forth shall
be deemed dependent upon any other such right, preference or limitation unless
so expressed herein.
XV. Notice to the Company.
---------------------
All notices and other communications required or permitted to be given
to the Company hereunder shall be made by first-class mail, postage prepaid, to
the Company at its principal executive offices (currently located on the date of
the adoption of these resolutions at the following address: Boston Chicken,
Inc., 14123 Denver West Parkway, P.O Box 4086, Golden, Colorado 80401-4086,
Attention: General Counsel). Minor imperfections in any such notice shall not
affect the validity thereof.
XVI. Limitations.
-----------
Except as may otherwise be required by law, the shares of 10% Series A
Exchangeable Preferred Stock shall not have any powers, preferences or relative,
participating, optional or other special rights other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) or otherwise in the Certificate of Incorporation of the Company.
<PAGE>
IN WITNESS WHEREOF, this Certificate has been signed on this 14th day
of July, 1998.
BOSTON CHICKEN, INC.
By: /s/ Lawrence E. White
--------------------------------------
Name: Lawrence E. White
Title: Chief Financial Officer
Attested by:
/s/Michael R. Daigle
- -----------------------------
Name: Michael R. Daigle
Title: Senior Vice President
