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Exhibit 2.1
CONTRIBUTION AGREEMENT
BETWEEN
POLISH INVESTMENTS HOLDING L.P.,
ECO HOLDINGS III LIMITED PARTNERSHIP,
XXXXX X. FREEDMAN, STEELE, LLC, THE AESOP FUND, L.P.,
THE XXXXXX XXXX XXXXX MARITAL TRUST,
AND
@ ENTERTAINMENT, INC.
DATED JUNE 22, 1997
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CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (the "Agreement"), is made this ____ day of
June 1997, by and between Polish Investments Holding L.P., a limited
partnership organized under the laws of Delaware ("PIHLP"); ECO Holdings III
Limited Partnership, a limited partnership organized under the laws of Delaware
("ECO"); Xxxxx X. Xxxxxxxx, an individual resident of the State of Connecticut
("RMF"), Xxxxxx, LLC, a Connecticut Limited liability company ("Xxxxxx"), The
AESOP Fund, L.P., a Delaware limited partnership ("AESOP"); The Xxxxxx Xxx
Xxxxx Marital Trust, a trust organized under the laws of Connecticut ("CACMT");
and @ Entertainment, Inc., a corporation organized under the laws of Delaware
(the "Company"). PIHLP, ECO, RMF, Xxxxxx, AESOP and CACMT shall hereinafter be
referred to as the "Shareholders."
WITNESSETH
WHEREAS, 18,948 shares of common stock, par value $0.01 per share (the
"PCI Common"), of Poland Communications, Inc., a New York corporation ("PCI")
are issued and outstanding 4,000 shares of Series A Preferred Stock, par value
$0.01 per share ("PCI Series A Preferred") of PCI are issued and outstanding
2,500 shares of Series B Preferred Stock, par value $0.01 per share ("PCI
Series B Preferred") of PCI are issued and outstanding authorized for issuance
and 2,000 shares of Series C Preferred Stock, par value $0.01 per share ("PCI
Series C Preferred") of PCI are issued and outstanding.
WHEREAS, there is no other class of capital stock PCI which has shares
issued and outstanding.
WHEREAS, the only shares of capital stock of PCI which have voting rights
are the shares of PCI Common and the shares of PCI Series B Preferred.
WHEREAS, PIHLP owns 10,303 shares of PCI Common, ECO owns 4,662 shares of
PCI Common, Xxxxxx owns 1,429 shares of PCI Common, RMF owns 1,221 shares of
PCI Common, CACMT owns 733 shares of PCI Common and AESOP owns 600 shares of
PCI Common, which in the aggregate represent all of the issued and outstanding
shares of PCI Common;
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WHEREAS, ECO owns 4,000 shares of PCI Series A Preferred and 2,500
shares of PCI Series B Preferred, and PIHLP owns 2,000 shares of PCI Series C
Preferred, which represent all of the issued and outstanding shares of such
several series of preferred stock.
WHEREAS, the Shareholders desire to contribute all of the
above-referenced shares of PCI Common and PCI Series B Preferred owned by them
(the "PCI Shares") to the Company, upon the terms and conditions and in exchange
for the consideration herein specified, pursuant to the same plan as the
Company's issuance of shares of its common stock, par value one cent ($0.01)
per share (the "Common Stock"), to members of the public in a public offering,
in a tax-free exchange qualifying under Section 351 of the Internal Revenue
Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth, and of other good and valuable consideration,
the parties, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE CONTRIBUTION
1.1 Contribution of PCI Shares. The Shareholders hereby agree to
assign, transfer, and convey to the Company at the Closing hereinafter
identified, for the consideration set forth in accordance with the provisions
of Article II, all of their rights, title, and interest in and to the PCI
Shares. At the Closing, the Shareholders shall deliver to the Company
certificates representing all the PCI Shares owned by them, validly endorsed in
blank or accompanied by stock powers with respect to such shares validly
endorsed in blank.
ARTICLE II
TERMS OF THE CONTRIBUTION
2.1 The Shareholders' Common Equity Interest in the Company. As
consideration for the contribution of shares of PCI Common to the Company, the
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Shareholders shall receive 1,000 shares of Common Stock of the Company for each
share of PCI Common so contributed.
2.2 ECO's Preferred Equity Interest in the Company. As
consideration for the contribution of shares of PCI Series B Preferred, ECO
shall receive a like number of shares of a like series of preferred stock of
the Company. The preferred stock of the Company which shall be exchanged for
the PCI Series B Preferred shall be designated Series B Preferred Stock and
shall have rights and preferences set forth in Article Fourth of the Amended
and Restated Certificate of Incorporation of the Company in the form attached
hereto as Exhibit A.
ARTICLE III
PARTY AUTHORIZATIONS
3.1 Each party represents and warrants to the Company and each of
the other parties that it has obtained, by means in conformity with all
applicable provisions of all applicable laws, the approval of its execution and
delivery of this Agreement and the performance by such party of its obligations
hereunder.
ARTICLE IV
CLOSING
4.1 The actual consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place on the date on which the last
of the parties hereto shall have executed this Agreement (the "Closing Date").
4.2 If the IPO Closing (as defined in Article IV, Section 3(D)(2)
of Exhibit A) has not occurred by the September 1, 1997 (the "Delayed Closing
Date"), the Shareholders agree that by September 15, 1997 they will replicate,
with respect to the Company, the corporate governance and shareholder relation
provisions in effect at PCI immediately prior to the execution of this
Agreement, including but not limited to all provisions contained in the
Certificate of Incorporation and Bylaws of PCI (subject to the inherent
differences between the New York Business Corporation Law and the Delaware
General
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Corporation Law), that certain Shareholders' Agreement entered into by and
among ECO, PIHLP, Xxxxxx, RMF and PCI on March 29, 1996, as amended, that
certain Voting Agreement entered into by and among PIHLP, RMF, Xxxxxx and Xxxxx
Xxxxx on March 29, 1996 and that certain side letter between Xxxxxx, PIHLP and
ECO dated March 29, 1996.
ARTICLE V
OBLIGATIONS AT THE CLOSING
5.1. Shareholders' Obligations. At the Closing, each of the Shareholders
shall deliver to the Company:
1. If such Shareholder is not a natural person, a copy of certified
resolutions adopted by the governing body or such other authority of such
Shareholder authorizing or ratifying the execution and delivery of this
Agreement, and the performance by such Shareholder of its obligations hereunder.
2. Certificates representing all of the PCI Shares owned by such
Shareholder, together with appropriate stock powers in a form satisfactory to
the Company and executed by such Shareholder, assigning such certificates to
the Company, free and clear of any liens, claims, options, encumbrances or
restrictions of any nature whatsoever.
5.2. The Company's Obligations.
1. At the Closing, the Company shall issue Common Stock of the
Company to the Shareholders listed below in the following amounts:
10,303,000 shares PIHLP
4,662,000 shares ECO
1,429,000 shares Xxxxxx
1,221,000 shares RMF
733,000 shares CACMT
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2. At the Closing, the Company shall issue Company preferred stock
of the following series to ECO in the following amount:
2,500 shares of Series B Preferred Stock ECO
5.3 Mutual Obligations. At the Closing, each party shall deliver to the
other parties the Shareholders' Agreement in the form attached hereto as
Exhibit B and the Registration Rights Agreement in form attached hereto as
Exhibit C, the Voting Agreement in the form attached hereto as Exhibit D and
the Side Letter in the form attached hereto as Exhibit E, duly executed by such
party.
ARTICLE VI
FURTHER COVENANTS OF THE PARTIES
6.1 Further Assurances with respect to PCI Shares. The Shareholders and
the Company agree that, from time to time and without further consideration,
each of them shall execute and deliver such further documents and take such
other action as the Company may require more effectively to transfer to and
vest in the Company and put the Company in possession of the PCI Shares and all
right and interest in the PCI Shares.
6.2 Further Assurances with respect to the Company's Shares. The
Shareholders and the Company agree that, from time to time and without further
consideration, each of them shall execute and deliver such further documents
and take such other action as the Shareholders may require to issue to and vest
in the Shareholders all right and interest in the shares of Company capital
stock referenced in Section 5.2. above.
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ARTICLE VII
TAX MATTERS
7.1. Tax Free Transaction. The Shareholders and the Company intend that
the transfers described in Articles I and II, above, occur pursuant to the same
plan as the Company's issuance of Common Stock to the public in the IPO
Closing, and that the transfers constitute a tax-free exchange pursuant to
Section 351 of the Internal Revenue Code of 1986, as amended.
7.2. Each of the Shareholders agrees to file with its federal income tax
return for the taxable year in which the Closing occurs the statement required
by Treasury Regulations Section 1.351-3(a).
7.3. The Company agrees to file with its federal income tax return for the
taxable year in which the Closing occurs the statement required by Treasury
Regulations Section 1.351-3(b).
ARTICLE VIII
EFFECTIVENESS AND ASSIGNABILITY OF AGREEMENT
8.1. Effectiveness Generally. This Agreement shall become effective when
executed and delivered by the Company and each of the Shareholders, and shall
be binding in all respects upon the respective successors and permitted assigns
of each of the Company and the Shareholders. No party hereto may assign this
Agreement in whole or in part without first obtaining the written consent of
all other parties hereto.
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ARTICLE IX
COMPLETENESS OF AGREEMENT
This Agreement and the Exhibits hereto represent the entire contract
between the Company and the Shareholders with respect to the subject matter
hereof and supersede all offers, proposals, statements, representations and
agreements with respect to the subject matter hereof. The Exhibits hereto are
incorporated herein by reference, and shall be deemed to be included in any
reference to this Agreement. This Agreement may not be amended except by action
of the Company and each of the Shareholders hereto set forth in an instrument
in writing signed on behalf of the Company and each of the Shareholders hereto.
ARTICLE X
CAPTIONS
The captions to the Articles and Sections contained in this Agreement are
for reference only, do not form a substantive part of this Agreement and shall
not restrict nor enlarge any substantive provision of this Agreement.
ARTICLE XI
APPLICABLE LAW
This Agreement, and the Exhibits, and all other documents given in
connection herewith, shall be construed in accordance with the laws of the
State of Delaware, without regard to the principles of conflicts of laws.
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ARTICLE XII
CHOICE OF FORUM; VENUE; SERVICE OF PROCESS
Any suit, action, or proceeding among any or all of the parties hereto
relating to this Agreement, to any document, instrument, or agreement
delivered pursuant hereto, referred to herein, or contemplated hereby, or in
any other manner arising out of or relating to the transactions contemplated by
or referenced in this Agreement, shall be commenced and maintained exclusively
in the Court of Chancery of the State of Delaware or, if that Court lacks
jurisdiction over the subject matter, in a state court of competent
subject-matter jurisdiction sitting in New Castle County, Delaware. The parties
hereto hereby submit themselves unconditionally and irrevocably to the personal
jurisdiction of such courts. The parties hereto further agree that venue shall
be in New Castle County, Delaware. The parties hereto irrevocably waive any
objection to such personal jurisdiction or venue including, but not limited to,
the objection that any suit, action, or proceeding brought in Delaware, has
been brought in an inconvenient forum. The parties hereto irrevocably agree
that process issuing from such courts may be served on them, either personally
or by certified mail, return receipt requested, at the addresses on the books
and records of the Company; and further irrevocably waive any objection to
service of process made in such manner and at such addresses, including without
limitation any objection that service in such manner and at such addresses is
not authorized by the local or procedural laws of the State of Delaware.
ARTICLE XIII
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be considered an original but all of which shall constitute but one
and the same Agreement by and among the Company and the Shareholders.
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ARTICLE XIV
NO THIRD PARTY BENEFICIARY
This Agreement is intended to inure to the benefit of the Company and the
Shareholders only; and no third party shall have any rights, express or
implied, by reason of this Agreement.
ARTICLE XV
UNILATERAL RIGHT TO WAIVE FAILURES OF OTHER PARTIES
15.1. Waiver. The Company or any of the Shareholders may:
1. Extend in writing the time for the performance of any of the
obligations herein contained to be performed for the benefit of such entity; and
2. Waive in writing the failure in performance of any of the
conditions herein expressed for its benefit.
15.2. Effect of Waiver. No such waiver or extension shall be valid unless
in writing and signed by the entity granting the waiver or extension, and no
such waiver or extension shall be construed to excuse or mitigate any
subsequent breach or violation of this Agreement not specifically covered by
such waiver.
ARTICLE XVI
SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the other provisions hereof, and the Agreement shall be
construed in all respects as if such invalid or unenforceable provisions were
omitted. Furthermore, upon the request of the Company or any of the
Shareholders, the Company and the Shareholders shall add to this Agreement, in
lieu of such invalid or unenforceable provisions, provisions as similar in
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terms to such invalid or unenforceable provisions as may be possible and legal,
valid and enforceable.
IN WITNESS WHEREOF, the Company and the Shareholders have caused this
Agreement to be executed as of the day and year first above written.
@ ENTERTAINMENT, INC.,
a Delaware corporation
By: ______________________________
Name: Xxxxxx X. Xxxxxx, III
Title: Chief Executive Officer
POLISH INVESTMENTS HOLDING L.P.,
a Delaware limited partnership
By: CHASE POLISH ENTERPRISES, INC.,
a Delaware corporation
By: _______________________________
Name:
Title:
ECO HOLDINGS III LIMITED PARTNERSHIP,
a Delaware limited partnership
By: ADVENT ECO III L.L.C., GENERAL PARTNER
By: GLOBAL PRIVATE EQUITY II LIMITED
PARTNERSHIP, MEMBER
By: ADVENT INTERNATIONAL LIMITED
PARTNERSHIP, GENERAL PARTNER
By: ADVENT INTERNATIONAL CORPORATION,
GENERAL PARTNER
By: ________________________________
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Name:
Title:
XXXXXX LLC, a Connecticut limited liability
company
By: __________________________________
Name: Xxxxxxx X. Xxxxxx
Title:
THE XXXXXX XXXX XXXXX MARITAL TRUST,
a Connecticut trust
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
THE AESOP FUND, L.P., a Delaware limited
partnership
By: __________________________________
a __________________________________
MANAGING GENERAL PARTNER
By: __________________________________
Name:
Title:
_________________________________________
XXXXX X. XXXXXXXX
By: __________________________________
Name:
Title:
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Exhibit A
ARTICLE IV OF THE AMENDED RESTATED
CERTIFICATE OF INCORPORATION
ARTICLE IV
Section 1. Authorized. The Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to issue is
ninety million two thousand five hundred (90,002,500), of which seventy million
(70,000,000) shares are authorized for common stock, par value one cent (U.S.
$0.01) per share ("Common Stock") and twenty million two thousand five hundred
(20,002,500) shares are authorized for preferred stock, par value of one cent
(U.S. $0.01) per share ("Preferred Stock"). The Common Stock and Preferred
Stock shall have the voting rights, designations, preferences, qualifications,
privileges, limitations, options and other rights as follows:
Section 2. Common Stock.
A. Voting Rights. The holders of Common Stock shall be entitled to
one (1) vote per share on all matters submitted to the shareholders of the
Corporation.
B. Dividend Provisions. The holders of shares of Common Stock shall be
entitled to receive dividends when, as and if declared by the Board of
Directors.
Section 3. Preferred Stock. The Preferred Stock of the Corporation may be
issued as a class, without series or, if so determined from time to time by the
Board of Directors of the Corporation, in one or more series, each series to be
expressly designated by a distinguishing number, letter or title. The
Preferred Stock, and each series thereof, shall have such voting powers and
other rights, privileges, preferences and restrictions as shall be set forth in
the resolutions of the Board of Directors providing for the issuance of such
preferred stock. There is hereby expressly granted to the Board of Directors
of the Corporation the authority to determine, fix, alter or revoke any and all
of the rights, preferences, privileges and restrictions and other terms of the
Preferred Stock and any series thereof, and the number of shares constituting
any series and the designation thereof, and to increase or decrease the number
of shares of any series subsequent to the issuance of shares of that series,
but not below the number of shares of such series then outstanding, or to
eliminate entirely any series if there no longer are any outstanding shares of
such series (and, thereupon, the shares previously designated for such series
shall become authorized but undesignated shares). In case the number of shares
of any series shall be so decreased, the shares constituting such shall resume
the status they had prior to the adoption of the resolution originally setting
forth the number of shares of such series.
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Two thousand five hundred (2,500) of the authorized shares of Preferred
Stock are hereby designated the "Series B Preferred Stock."
A. Voting Rights. Except as otherwise required by law, the shares of
Series B Preferred Stock shall be entitled to vote on an equal basis together
with the shares of Common Stock and not as a separate class or series or
sub-series at any annual or special meeting of the stockholders of the
Corporation, or may act by written consent in the same manner as the Common
Stock, in either case upon the following basis: each holder of shares of Series
B Preferred Stock shall be entitled to such number of votes for the Series B
Preferred Stock held by such holder on the record date fixed for such meeting,
or on the effective date of such written consent, as shall be equal to the
number of shares (rounded to the nearest whole share) of Common Stock into
which all shares of Series B Preferred Stock held by such holder are
convertible on such date.
B. Dividend Provisions. The holders of shares of Series B Preferred Stock
shall not be entitled to receive dividends.
C. Redemption.
(1) Mandatory Redemption. On March 31, 2004, the Corporation shall be
required to redeem the Series B Preferred Stock (the "Series B Redemption
Date").
(2) Optional Redemption. At the option of the Corporation, the Series B
Preferred Stock may be redeemed at any time, in whole or in part. Prior to the
date set for redemption of the Series B Preferred Stock pursuant to this
Section 3(C)(2), the holders of any shares thereof shall have the option to
convert their shares into Common Stock in accordance with Section 3(D). The
Corporation shall exercise said option by providing notice of redemption in
accordance with Article IV, Section 3(C)(4).
(3) Redemption Price. The redemption price per share of Series B
Preferred Stock to be paid upon a redemption under this Section 3(C) shall be
equal to ten thousand dollars (U.S. $10,000) (the "Series B Redemption Price").
The Series B Redemption Price shall be adjusted proportionately in the event
the Series B Preferred Stock is adjusted into a lesser number of shares or
subdivided into a greater number of shares. The Series B Redemption Price
shall be paid in cash.
(4) Redemption Notice. Notice of any redemption pursuant to this
Section 3(C), shall be given by the Corporation by mailing notice (the "Series B
Redemption Notice"), via registered or certified mail, postage prepaid, or by
hand delivery to the holders of record of the Series B Preferred Stock (as the
close of business on the business day next preceding the day on which the Series
B Redemption Notice is given) at their respective addresses as the same shall
appear on the stock books of the Corporation, not less than 3 days nor more than
60
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days prior to the date of such redemption and the Series B Redemption
Notice shall state the time and place fixed for such redemption.
(5) Surrender of Certificates. Upon surrender of a certificate or
certificates representing shares to be redeemed pursuant to this Section 3(C),
the Corporation shall remit an amount equal to the product of, (i) the Series B
Redemption Price, times (ii) the number of shares of the Series B Preferred
Stock to be redeemed. If fewer than all of the shares represented by any such
certificate or certificates presented for redemption are to be redeemed, a new
certificate shall be issued representing the unredeemed shares without cost to
the holder. If so required by the Corporation, any certificate for Series B
Preferred Stock surrendered for redemption shall be accompanied by instruments
of transfer, duly executed by the holder of such Series B Preferred Stock or
his duly authorized representative.
(6) Rights After the Series B Redemption Date. From and after the close
of business on the Series B Redemption Date, unless there shall have been a
default in the payment of the redemption price, all rights of holders of shares
of Series B Preferred Stock redeemed pursuant to Section 3(C) shall cease with
respect to such shares, and thereafter such shares shall not be deemed to be
outstanding for any purposes whatsoever.
(7) Cancellation of Redeemed Shares. Any shares of Series B preferred
Stock that shall at any time have been redeemed or repurchased by the
Corporation shall, after such redemption or repurchase, be cancelled by the
Corporation and shall not be available for reissuance.
D. Conversion Rights.
(1) Conversion Ratio. Subject to and in compliance with the provisions
of this Section 3(D), each holder of outstanding shares of Series B Preferred
Stock shall have the right at any time, or from time to time, prior to March 31,
2004, at such holder's option, without charge by the Corporation to such holder,
to convert such shares of Series B Preferred Stock into that number of fully
paid and nonassessable shares of Common Stock (calculated as to each conversion
to the nearest 1/100th of a share) equal to the then applicable Conversion Ratio
(as defined below) multiplied by the number of shares of Series B Preferred
Stock to be converted pursuant to this Section 3(D). The Conversion Ratio per
share of Series B Preferred Stock shall be 1,944.80 shares of Common Stock for
each share of Series B Preferred Stock, subject to adjustment from time to time
as provided in Sections 4(D)(4) and 4(D)(5).
(2) Automatic Conversion. Notwithstanding any other provision of this
Section 3(D), each share of Series B Preferred Stock shall automatically be
converted into shares of Common Stock at the then applicable Conversation Ratio
for such shares of Series B Preferred Stock (i) simultaneously with the closing
(the "IPO Closing") of an underwritten public offering of shares to be listed
on the New York Stock Exchange or the American Stock Exchange, or to be quoted
on the National Association of Securities Dealers Automated
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Quotation System or the National Market System of the National Association
of Securities Dealers pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale to the public
of at least twenty percent (20%) of the Common Stock of the Corporation
outstanding immediately after the IPO Closing or (ii) immediately prior to the
closing of a merger or consolidation of the Corporation with or into another
corporation or entity which is not an affiliate of the Corporation. For
purposes of this Section 4(D)(2), "affiliate of the Corporation" shall mean any
person or entity that controls, is controlled by or is under common control
with the Corporation.
(3) De Minimis Conversion. At no time shall any holder of outstanding
shares of Series B Preferred Stock convert less than twenty-five percent (25%)
of the total number of authorized shares of Series B Preferred Stock into
shares of Common Stock pursuant to this Section 3(D), provided, however, if at
any time a holder of Series B Preferred Stock holds less than twenty-five
percent (25%) of the total number of authorized shares of Series B Preferred
Stock, such holder shall have the right to convert all such holder's shares of
Series B Preferred Stock into Common Stock.
(4) Anti-Dilution. If at any time, or from time to time, the
Corporation shall declare and pay on or in respect of, Common Stock any dividend
payable in Common Stock or subdivide the outstanding number of shares of Common
Stock into a greater number of shares, or contract the number of outstanding
shares of Series B Preferred Stock by combining such shares into a smaller
number of shares of Series B Preferred Stock, the Conversion Ratio in effect at
the time of the taking of a record for such dividend or the taking of such other
action shall be proportionately increased as of such time;
(5) Anti-Dilution. If at any time, or from time to time, the
Corporation shall reduce the number of outstanding shares of Common Stock by
combining such shares into a smaller number of shares, or subdivide the
outstanding shares of Series B Preferred Stock into a greater number of shares
of Series B Preferred Stock, the Conversion Ratio in effect at the time of the
taking of any such action shall be proportionately decreased as of such time;
(6) Merger, Consolidation or Reclassification. If the Corporation shall
consolidate with or merge into any corporation (other than a merger or
consolidation referred to in clause (ii) of Section 3(D)(2) or reclassify its
outstanding Common Stock, each share of Series B Preferred Stock shall
thereafter be convertible into the number of shares of stock or other
securities or property of the Corporation, or of the entity resulting from such
consolidation or merger, to which a holder of the number of shares of Common
Stock deliverable upon conversion of such share of Series B Preferred Stock
would have been entitled upon such consolidation or merger or reclassification,
had the holder of such share of Series B Preferred Stock exercised his right of
conversion and had such shares been issued and outstanding and had such holder
been the holder of record of such shares of Common Stock at
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the time of such consolidation, merger or reclassification; and the Corporation
shall make lawful provision therefor as part of such consolidation, merger or
reclassification;
(7) Conversion Notice. In order to exercise his conversion privilege,
the holder of any Series B Preferred Stock to be converted into Common Stock
shall present and surrender the certificate representing such Series B Preferred
Stock during usual business hours at any office or agency of the Corporation and
shall deliver a written notice of the election of such holder to convert the
shares represented by such certificate or any portion thereof specified in such
notice, and shall fix a date for conversion which is not less than five nor more
than ten days ("conversion date") from the date of the notice. Such notice
shall also specify the name or names (with addresses) in which the certificate
or certificates representing the Common Stock which shall be issuable on such
conversion shall be issued. If so required by the Corporation, any certificate
for Series B Preferred Stock surrendered for conversion into Common Stock shall
be accompanied by instruments of transfer, duly executed by the holder of such
Series B Preferred Stock or his duly authorized representative. Each conversion
of Series B Preferred Stock into Common Stock shall be deemed to have been
effected on the conversion date provided for in such notice, provided that the
certificates representing the Series B Preferred Stock, and any required
instruments of transfer, shall have been received by the Corporation as
aforesaid, and thereafter the person or persons in whose name or names any
certificate or certificates representing Common Stock which shall be issuable on
such conversion shall be deemed to have become, immediately prior to the close
of business on the conversion date, the holder or holders of record of the
Common Stock represented thereby;
(8) Lapse of Rights on Redemption. In case any of the Series B
Preferred Stock shall have been redeemed by the Corporation, such rights of
conversion shall cease and terminate with respect to such shares so redeemed
unless default shall have been made in the payment of the redemption price on
the date fixed for the redemption of such shares;
(9) Corporation's Obligation. As promptly as practicable after the
presentation and surrender for conversion into Common Stock, as herein provided,
of any certificate representing any Series B Preferred Stock, after the
conversion date, the Corporation shall issue and deliver to or upon the written
order of the holder thereof, certificates representing the number of shares of
Common Stock issuable upon such conversion. In case any certificates
representing Series B Preferred Stock shall be surrendered for conversion of
only a part of the shares represented thereby into Common Stock, the Corporation
shall also deliver to or upon the written order of the holder thereof, a
certificate or certificates representing the number of shares of Series B
Preferred Stock represented by such surrendered certificate which are not being
converted. The issuance of certificates representing Common Stock issuable upon
conversion of Series B Preferred Shares shall be made without charge by the
Corporation to the converting holder including, without limitation, charges for
any tax imposed on the Corporation with respect to the issuance thereof. The
Corporation shall not, however, be required to pay any tax which may be payable
with respect to any transfer involved in the issue and delivery of any
certificate in a name other than that of
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the holder of the shares being converted, and the Corporation shall not be
required to issue or deliver any such certificate unless and until the person
requesting the issue thereof shall have paid to the Corporation the amount of
such tax or shall have established to the satisfaction of the Corporation that
such tax has been paid;
(10) Rights of Converted Shares. All Series B Preferred Stock which
shall have been surrendered for conversion into Common Stock as herein provided
upon the conversion date shall no longer be deemed to be outstanding, and all
rights of the holders of such surrendered shares including the rights, if any,
to receive dividends, proceeds from redemption or liquidation and notices and to
vote, shall thereupon cease and terminate, except only the right of the holders
thereof to receive Common Stock in exchange therefor;
(11) Conversion Adjustment. If applicable, whenever the Conversion
Ratio is adjusted, as herein provided or as provided in the appropriate
amendment to this Certificate of Incorporation, the Corporation shall promptly
file with the transfer agent, if any, for the Common Stock of the Corporation a
statement signed by the President or a Vice President or the Secretary or the
Treasurer setting forth the adjusted Conversion Ratio determined as so provided.
Such statement shall set forth in reasonable detail such facts as may be
necessary to show the reason for and the manner of computing such adjustment;
and
(12) No Reissuance. Upon conversion of any shares of Series B Preferred
Stock into Common Stock, such shares of Series B Preferred Stock so converted
shall be canceled and shall not be reissued.
(13) No Fractional Shares. No fractional shares or securities
representing fractional shares of Common Stock shall be issued upon conversion
of the Series B Preferred Stock. Any fractional interest in a share of Common
Stock resulting from conversion of Series B Preferred Stock shall be paid in
cash (computed to the nearest cent). Consideration paid for each fractional
share shall be an amount equal to (i) the amount resulting from dividing (x)
the fraction for such fractional share by (y) the Conversion Ratio, multiplied
by (ii) the Series B Redemption Price.
Section 4. Liquidation Preferences of Preferred Stock.
A. Order of Distribution. Subject to Section 6(B), upon the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, after payment or provisions for the payment of the debts
and other liabilities of the Corporation, the assets then available for
distribution to the shareholders shall be distributed as follows:
(1) First to the holders of the Series B Preferred Stock, to the extent
available, in an amount equal to $10,000.00 per share (the "Series B
Liquidation Preference"), but if the funds available therefor are insufficient,
then to the holders of Series B Preferred Stock on a pro-rata basis in
accordance with the number of shares held by each holder.
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(2) After distribution in accordance with clause (1) above, all
remaining assets available for distribution to the shareholders shall be
distributed to the holders of shares of the outstanding Common Stock on a pro
rata basis in accordance with the number of shares held by each holder.
B. Distributions after IPO Closing. Upon the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation that occurs after the IPO Closing, after payment or provisions for
the payment of the debts and other liabilities of the Corporation, the assets
then available for distribution to the shareholders shall be distributed as
follows: first, an amount equal to the aggregate Series B Liquidation
Preference for all outstanding shares of Series B Preferred Stock shall be
distributed pro rata among all holders of the Series B Preferred Stock based on
the number of shares held by each holder; and second, all remaining assets
available for distribution to the shareholders shall be distributed to the
holders of the outstanding Common Stock on a pro rata basis in accordance with
the number of shares held by each holder.
C. Adjustments to Liquidation Preference. Notwithstanding the foregoing,
the Series B Liquidation Preference, as the case may be, shall be adjusted
proportionately in the event that the number of shares of such series of
preferred stock is adjusted into a lesser number of shares or adjusted into a
greater number of shares.
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Exhibit B
SHAREHOLDERS' AGREEMENT
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