Exhibit 99.3
Exhibit A to
Securities Purchase Agreement
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
------------------------
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.
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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 Debentures due 2016 required pursuant to the terms of
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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
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C = Old S/H Ownership
E = Other Equity
(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
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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 the exercise, conversion or exchange of all rights, options,
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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
14
of stockholders held for such purpose as hereinafter provided or at any
adjournment thereof or pursuant to any written consent of stockholders.
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.
15
(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:
16
(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.
17
(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
18
denominator of which shall be such Current Market Price per
share of Common Stock less the Fair Market Value 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
19
Series B Convertible Preferred 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
20
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 0000 Xxxxx Xxxxxxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxx 00000-0000, 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.
21
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.
22
"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.
23
"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.
24
"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.
25
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").
26
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 Debentures due 2016 required pursuant to the terms of
27
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
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C = Old S/H Ownership
E = Other Equity
(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 determine to be necessary for the purpose of its
29
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 the exercise, conversion or exchange of all rights, options,
30
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%.
31
"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.
32
(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
33
of stockholders held for such purpose as hereinafter provided or at any
adjournment thereof or pursuant to any written consent of stockholders.
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.
34
(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:
35
(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.
36
(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
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denominator of which shall be such Current Market Price per
share of Common Stock less the Fair Market Value 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
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Series C Convertible Preferred 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
39
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 0000 Xxxxx Xxxxxxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxx 00000-0000, 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.
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President
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Secretary
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