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EXCHANGE AGREEMENT
by and between
RGI GROUP INCORPORATED,
and
MERIDIAN SPORTS INCORPORATED
Dated as of September 25, 1998
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EXCHANGE AGREEMENT
EXCHANGE AGREEMENT ("Agreement"), dated as of September 25, 1998,
by and between RGI Group Incorporated, a Delaware corporation ("RGI") and
Meridian Sports Incorporated, a Delaware corporation (the "Company).
WHEREAS, the Special Committee of the Board of Directors of the
Company has determined that it is in the best interest of the Company to
recapitalize in accordance with the terms and subject to the conditions set
forth in this Agreement;
WHEREAS, the respective Boards of Directors of the Company and
RGI have approved and adopted this Agreement and the transactions
contemplated hereby;
WHEREAS, the Company, as Borrower, and RGI, as Lender, have
entered into a $20,000,000 Credit Agreement, dated as of March 28, 1997,
as amended (the "Credit Agreement");
WHEREAS, the Company and RGI each desire to reduce the amount
outstanding under the Credit Agreement by $11,000,000;
WHEREAS, the Board of Directors of the Company has authorized the
issuance of 11,000 shares of 6% Series A Redeemable Convertible Perpetual
Preferred Stock, Series A par value $.01 per share (the "Series A Preferred
Stock"), having the designations, preferences and rights set forth in the
Certificate of Designations attached hereto as Exhibit A (the "Certificate
of Designations"); and
WHEREAS, the Company intends to issue 11,000 shares of Series A
Preferred Stock to Meridian Sports Holdings Inc. ("Meridian Sports
Holdings"), a wholly-owned subsidiary of RGI, in exchange for the
cancellation of $11,000,000 of indebtedness currently outstanding under the
Credit Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
EXCHANGE
SECTION 1.1 Issuance of Series A Preferred Stock. Upon the terms
and subject to the conditions set forth in this Agreement, and in
accordance with the applicable provisions of the Delaware General
Corporation Law, on the Effective Date (as defined below) the Company shall
issue to Meridian Sports Holdings 11,000 shares of Series A Preferred
Stock, having the designations, preferences and rights set forth in the
Certificate of Designations, in exchange for the cancellation of
$11,000,000 of indebtedness currently outstanding under the Credit
Agreement.
SECTION 1.2 Effective Time. The Company shall cause the actions
set forth in Section 1.1 hereof to be taken as promptly as practicable, but
no later than three business days following the satisfaction of the
covenant set forth in Section 2.1 of this Agreement, or on such other date
as the parties hereto may mutually agree in writing (the date the actions
set forth Section 1.1 are taken shall be referred to herein as the
"Effective Date")
ARTICLE II
COVENANTS
SECTION 2.1 Certificate of Designation for Series A Preferred
Stock of the Company. As promptly as practicable, the Company shall cause
the Certificate of Designations to be filed with the Secretary of State of
the State of Delaware.
SECTION 2.2 Reasonable Best Efforts; Further Actions. (a) Each
of the parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable, consistent with applicable law, to consummate and make
effective the transactions contemplated by this Agreement.
(b) Each of the parties hereto agrees, from time to time after
the Effective Date, to promptly execute and deliver, or cause to be
promptly executed and delivered, such certificates and instruments, or to
take such other action, as any of the other parties hereto may reasonably
request, in order to consummate more effectively the transactions
contemplated by this Agreement.
ARTICLE III
MISCELLANEOUS
SECTION 3.1 Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
SECTION 3.2 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflicts of laws thereof.
SECTION 3.3 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
SECTION 3.4 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by a duly authorized officer as of
the date first above written.
MERIDIAN SPORTS INCORPORATED
By: /s/ Xxxxx X. Xxxxx
---------------------------
Name: Xxxxx X. Xxxxx
Title: Assistant Secretary
RGI GROUP INCORPORATED
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President and
Secretary
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
OF
6.0% REDEEMABLE CONVERTIBLE PERPETUAL
PREFERRED STOCK, SERIES A
OF
MERIDIAN SPORTS INCORPORATED
________________________
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
________________________
MERIDIAN SPORTS INCORPORATED, a Delaware corporation (the
"Company"), certifies that pursuant to the authority contained in its
Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and in accordance with the provisions of Section 151 of
the General Corporation Law of the State of Delaware, the Board of
Directors of the Company at a meeting duly called and held on September 25,
1998, duly approved and adopted the following resolution which resolution
remains in full force and effect on the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of
Directors by the Certificate of Incorporation, the Board of Directors does
hereby designate, create, authorize and provide for the issue of a series
preferred stock having a par value of $.01 per share, with a liquidation
preference of $1,000 per share (the "Liquidation Preference") which shall
be designated as 6.0% Series A Redeemable Convertible Perpetual Preferred
Stock (the "Preferred Stock") consisting of 11,000 shares (which shares of
preferred stock were authorized to be issued by the Company by resolution
of the Board of Directors of the Company dated as of September 25, 1998,
having the following voting powers, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions thereof as follows:
1. Ranking. The Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding-up and
dissolution of the Company, rank (i) senior to all classes of Common Stock
of the Company and to each other class of capital stock or series of
preferred stock established after September 25,1998, by the Board of
Directors the terms of which do not expressly provide that it ranks senior
to or on a parity with the Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the
Company (collectively referred to with the Common Stock of the Company as
"Junior Securities"); (ii) on a parity with any additional shares of
Preferred Stock issued by the Company in the future and any other class of
capital stock or series of preferred stock issued by the Company
established after September 25, 1998, by the Board of Directors, the terms
of which expressly provide that such class or series will rank on a parity
with the Preferred Stock as to dividend distributions and distributions
upon the liquidation, winding-up and dissolution of the Company
(collectively referred to as "Parity Securities"); and (iii) junior to each
class of capital stock or series of preferred stock issued by the Company
established after September 25, 1998, by the Board of Directors the terms
of which expressly provide that such class or series will rank senior to
the Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up and dissolution of the Company (collectively
referred to as "Senior Securities").
No dividend whatsoever shall be declared or paid upon, or any sum
set apart for the payment of dividends upon, any outstanding share of the
Preferred Stock with respect to any dividend period unless all dividends
for all preceding dividend periods have been declared and paid, or declared
and a sufficient sum set apart for the payment of such dividend, upon all
outstanding shares of Senior Securities.
2. Dividends.
(i) The holders of shares of the Preferred Stock shall be entitled to
receive, when, as and if dividends are declared by the Board of Directors
out of funds of the Company legally available therefor, cumulative
dividends from the Preferred Stock Issue Date accruing at the rate per
annum of 6.0% of the Liquidation Preference per share, payable quarterly in
arrears on each March 31, June 30, September 30 and December 31, commencing
on December 31, 1998 (each a "Dividend Payment Date"). If any such date
is not a Business Day, such payment shall be made on the next succeeding
Business Day, to the holders of record as of the next preceding March 1,
June 1, September 1 and December 1 (each, a "Record Date"), whether or not
such Record Date is a Business Day. Dividends will be payable in cash.
Dividends payable on the Preferred Stock will be computed on the basis of a
365/366-day year and the actual number of days elapsed and will be deemed
to accrue on a daily basis.
(ii) Dividends on the Preferred Stock shall accrue whether or not the
Company has earnings or profits, whether or not there are funds legally
available for the payment of such dividends and whether or not dividends
are declared. Dividends will accumulate to the extent they are not paid on
the Dividend Payment Date for the period to which they relate. The Company
shall take all actions required or permitted under the Delaware General
Corporation Law (the "DGCL") to permit the payment of dividends on the
Preferred Stock, including, without limitation, through the revaluation of
its assets in accordance with the DGCL, to make or keep funds legally
available for the payment of dividends.
(iii) No dividend whatsoever shall be declared or paid upon, or
any sum set apart for the payment of dividends upon, any outstanding share
of the Preferred Stock with respect to any dividend period unless all
dividends for all preceding dividend periods have been declared and paid,
or declared and a sufficient sum set apart for the payment of such
dividend, upon all outstanding shares of Preferred Stock. Unless full
cumulative dividends on all outstanding shares of Preferred Stock for all
past dividend periods shall have been declared and paid, or declared and a
sufficient sum for the payment thereof set apart, then: (a) no dividend
(other than a divided payable solely in shares of any Junior Securities)
shall be declared or paid upon, or any sum set apart for the payment of
dividends upon, any shares of Junior Securities; (b) no other distribution
shall be declared or made upon, or any sum set apart for the payment of any
distribution upon, any shares of Junior Securities, other than a
distribution consisting solely of Junior Securities; (c) no shares of
Junior Securities shall be purchased, redeemed or otherwise acquired or
retired for value (excluding an exchange for shares of other Junior
Securities) by the Company or any of its subsidiaries; and (d) no monies
shall be paid into or set apart or made available for a sinking or other
like fund for the purchase, redemption or other acquisition or retirement
for value of any shares of Junior Securities by the Company or any of its
subsidiaries. Holders of the Preferred Stock will not be entitled to any
dividends, whether payable in cash, property or stock, in excess of the
full cumulative dividends as herein described.
3. Conversion Rights.
(i) A holder of shares of Preferred Stock may convert such shares
into Common Stock at any time, unless previously redeemed, at the option of
the holder thereof. For the purposes of conversion, each share of
Preferred Stock shall be valued at the Liquidation Preference, which shall
be divided by the Conversion Price in effect on the Conversion Date to
determine the number of shares issuable upon conversion, except that the
right to convert shares of Preferred Stock called for redemption shall
terminate at the close of business on the Business Day preceding the
Redemption Date and shall be lost if not exercised prior to that time,
unless the Company shall default in payment of the Optional Redemption
Price. Immediately following such conversion, the rights of the holders of
converted Preferred Stock shall cease and the persons entitled to receive
the Common Stock upon the conversion of Preferred Stock shall be treated
for all purposes as having become the owners of such Common Stock.
(ii) To convert Preferred Stock, a holder must (A) surrender the
certificate or certificates evidencing the shares of Preferred Stock to be
converted, duly endorsed in a form satisfactory to the Company, at the
office of the Company or Transfer Agent for the Preferred Stock, (B) notify
the Company at such office that he elects to convert Preferred Stock and
the number of shares he wishes to convert, (C) state in writing the name or
names in which he wishes the certificate or certificates for shares of
Common Stock to be issued, and (D) pay any transfer or similar tax if
required. In the event that a holder fails to notify the Company of the
number of shares of Preferred Stock which he wishes to convert, he shall be
deemed to have elected to convert all shares represented by the certificate
or certificates surrendered for conversion. The date on which the holder
satisfies all those requirements is the "Conversion Date." As soon as
practical, the Company shall deliver a certificate for the number of full
shares of Common Stock issuable upon the conversion, and a new certificate
representing the unconverted portion, if any, of the shares of Preferred
Stock represented by the certificate or certificates surrendered for
conversion. The person in whose name the Common Stock certificate is
registered shall be treated as the stockholder of record on and after the
Conversion Date. No payment or adjustment will be made for accrued and
unpaid dividends on converted shares of Preferred Stock or for dividends on
any Common Stock issued upon such conversion. The holder of record of a
share of Preferred Stock at the close of business on a Record Date with
respect to the payment of dividends on the Preferred Stock will be entitled
to receive such dividends with respect to such share of Preferred Stock on
the corresponding Dividend Payment Date, notwithstanding the conversion of
such share after such Record Date and prior to such Dividend Payment Date.
A share of Preferred Stock surrendered for conversion during the period
from the close of business on any Record Date for the payment of dividends
to the opening of business of the corresponding Dividend Payment Date must
be accompanied by a payment in cash, Common Stock or a combination thereof,
depending on the method of payment that the Company has chosen to pay the
dividend, in an amount equal to the dividend payable on such Dividend
Payment Date, unless such share of Preferred Stock has been called for
redemption on a Redemption Date occurring during the period from the close
of business on any Record Date for the payment of dividends to the close of
business on the Business Day immediately following the corresponding
Dividend Payment Date. The dividend payment with respect to a share of
Preferred Stock called for redemption on a date during the period from the
close of business on any Record Date for the payment of dividends to the
close of business on the Business Day immediately following the
corresponding Dividend Payment Date will be payable on such Dividend
Payment Date to the record holder of such share on such Record Date,
notwithstanding the conversion of such share after such Record Date and
prior to such Dividend Payment Date, and the holder converting such share
of Preferred Stock need not include a payment of such dividend amount upon
surrender of such share of Preferred Stock for conversion. No payment or
adjustment will be made upon conversion of shares of Preferred Stock for
accumulated and unpaid dividends or for dividends with respect to the
Common Stock issued upon such conversion. If a holder of Preferred Stock
converts more than one share at a time, the number of full shares of Common
Stock issuable upon conversion shall be based on the total liquidation
preferences of all shares of Preferred Stock converted. If the last day on
which Preferred Stock may be converted is not a Business Day, Preferred
Stock may be surrendered for conversion on the next succeeding Business
Day.
(iii) The Company shall not issue any fractional shares of Common
Stock upon conversion of Preferred Stock. Instead the Company shall pay a
cash adjustment based upon the closing price of the Common Stock on the
business day prior to the conversion date.
(iv) If a holder converts shares of Preferred Stock, the Company shall
pay any documentary, stamp or similar issue or transfer tax due on the
issue of shares of Common Stock upon the conversion. However, the holder
shall pay any such tax that is due because the shares are issued in a name
other than the holder's name.
(v) The Company has reserved and shall continue to reserve out of its
authorized but unissued Common Stock or its Common Stock held in treasury
enough shares of Common Stock to permit the conversion of the Preferred
Stock in full. All shares of Common Stock that may be issued upon
conversion of Preferred Stock shall be fully paid and nonassessable. The
Company shall endeavor to comply with all securities laws regulating the
offer and delivery of shares of Common Stock upon conversion of Preferred
Stock and shall endeavor to list such shares on each national securities
exchange or automated quotation system on which the Common Stock is listed.
(vi) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in Common Stock
(other than the payment of dividends in Common Stock on the Preferred
Stock) or any other regularly scheduled dividend on any other preferred
stock which does not trigger any anti-dilution provisions in any other
security, the Conversion Price in effect at the opening of business on the
day following the date fixed for the determination of stockholders entitled
to receive such dividend or other distribution shall be reduced by
multiplying such Conversion Price by a fraction the numerator of which
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination and the denominator of
which shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day
following the date fixed for such determination of the holders entitled to
such dividends and distributions. For the purposes of this paragraph
3(vi), the number of shares of Common Stock at any time outstanding shall
not include shares held in the treasury of the Company. The Company will
not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.
(vii) In case the Company shall issue rights, options or warrants
to all holders of its Common Stock entitling them to subscribe for,
purchase or acquire shares of Common Stock at a price per share less than
the current market price per share (determined as provided in paragraph
3(xi) below) of the Common Stock on the date fixed for the determination of
stockholders entitled to receive such rights, options or warrants, the
Conversion Price in effect at the opening of business on the day following
the date fixed for such determination shall be reduced by multiplying such
Conversion Price by a fraction the numerator of which shall be the number
of shares of Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription, purchase or acquisition would
purchase at such current market price and the denominator of which shall be
the number of shares of Common Stock outstanding at the close of business
on the date fixed for such determination plus the number of shares of
Common Stock so offered for subscription, purchase or acquisition, such
reduction to become effective immediately after the opening of business on
the day following the date fixed for such determination of the holders
entitled to such rights, options or warrants. However, upon the expiration
of any right, option or warrant to purchase Common Stock, the issuance of
which resulted in an adjustment in the Conversion Price pursuant to this
paragraph 3(vii), if any such right, option or warrant shall expire and
shall not have been exercised, the Conversion Price shall be recomputed
immediately upon such expiration and effective immediately upon such
expiration shall be increased to the price it would have been (but
reflecting any other adjustments to the Conversion Price made pursuant to
the provisions of this paragraph 3 after the issuance of such rights,
options or warrants) had the adjustment of the Conversion Price made upon
the issuance of such rights, options or warrants been made on the basis of
offering for subscription or purchase only that number of shares of Common
Stock actually purchased upon the exercise of such rights, options or
warrants. No further adjustment shall be made upon exercise of any right,
option or warrant if any adjustment shall be made upon the issuance of such
security. For the purposes of this paragraph 3(vii), the number of shares
of Common Stock at any time outstanding shall not include shares held in
the treasury of the Company. The Company will not issue any rights,
options or warrants in respect of shares of Common Stock held in the
treasury of the Company.
(viii) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day
upon which such subdivision becomes effective shall be reduced, and,
conversely, in case the outstanding shares of Common Stock shall each be
combined into a smaller number of shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be increased to equal
the product of the Conversion Price in effect on such date and a fraction
the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such subdivision or combination, as the
case may be, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such subdivision or combination,
as the case may be. Such reduction or increase, as the case may be, shall
become effective immediately after the opening of business on the day
following the day upon which such subdivision or combination becomes
effective.
(ix) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock (A) evidences of its indebtedness or (B)
shares of any class of capital stock, cash or other assets (including
securities, but excluding (x) any rights, options or warrants referred to
in paragraph 3(vii) above, (y) any dividends or distributions referred to
in paragraph 3(vi) or 3(viii) above, and (z) cash dividends paid from the
Company's retained earnings, unless the sum of (1) all such cash dividends
and distributions made within the preceding 12 months in respect of which
no adjustment has been made and (2) any cash and the fair market value of
other consideration paid in respect of any repurchases of Common Stock by
the Company or any of its subsidiaries within the preceding 12 months in
respect of which no adjustment has been made, exceeds 20% of the Company's
market capitalization (being the product of the then current market price
per share (determined as provided in paragraph 3(xi) below) of the Common
Stock times the aggregate number of shares of Common Stock then outstanding
on the record date for such dividend or distribution), then in each case,
the Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of holders of Common Stock
entitled to receive such distribution shall be adjusted by multiplying such
Conversion Price by a fraction of which the numerator shall be the current
market price per share (determined as provided in paragraph 3(xi) below) of
the Common Stock on such date of determination (or, if earlier, on the date
on which the Common Stock goes "ex-dividend" in respect of such
distribution) less the then fair market value as determined by the Board of
Directors (whose determination shall be conclusive and shall be described
in a statement filed with the Transfer Agent) of the portion of the capital
stock, cash or other assets or evidences of indebtedness so distributed
(and for which an adjustment to the Conversion Price has not previously
been made pursuant to the terms of this paragraph 3) applicable to one
share of Common Stock, and the denominator shall be such current market
price per share of the Common Stock, such adjustment to become effective
immediately after the opening of business on the day following such date of
determination of the holders entitled to such distribution. The following
transactions shall be excluded from the foregoing clauses (1) and (2): (I)
repurchases of Common Stock issued under the Company's stock incentive
programs; and (II) dividends or distributions payable-in-kind in additional
shares of, or warrants, rights, calls or options exercisable for or
convertible into additional shares of Junior Securities.
(x) The reclassification or change of Common Stock into securities,
including securities other than Common Stock (other than any
reclassification upon a consolidation or merger to which paragraph 3(xviii)
below shall apply) shall be deemed to involve (A) a distribution of such
securities other than Common Stock to all holders of Common Stock (and the
effective date of such reclassification shall be deemed to be "the date
fixed for the determination of holders of Common Stock entitled to receive
such distribution" within the meaning of paragraph 3(ix) above), and (B) a
subdivision or combination, as the case may be, of the number of shares of
Common Stock outstanding immediately prior to such reclassification into
the number of Common Shares outstanding immediately thereafter (and the
effective date of such reclassification shall be deemed to be "the day upon
which such subdivision becomes effective" or "the day upon which such
combination becomes effective," as the case may be, and "the day upon which
such subdivision or combination becomes effective" within the meaning of
paragraph 3(viii) above).
(xi) For the purpose of any computation under paragraph 3(vii) or
3(ix) above, the current market price per share of Common Stock on any day
shall be deemed to be the average of the Closing Prices of the Common Stock
for the 20 consecutive Trading Days selected by the Board of Directors
commencing no more than 30 Trading Days before and ending no later than the
day before the day in question; provided, that, in the case of paragraph
3(ix), if the period between the date of the public announcement of the
divided or distribution and the date for the determination of holders of
Common Stock entitled to receive such dividend or distribution (or, if
earlier, the date on which the Common Stock goes "ex-dividend" in respect
of such dividend or distribution) shall be less than 20 Trading Days, the
period shall be such lesser number of Trading Days but, in any event, not
less than five Trading Days.
(xii) No adjustment in the Conversion Price need be made until all
cumulative adjustments amount to 1% or more of the Conversion Price as last
adjusted. Any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this paragraph 3 shall be made to the nearest 1/10,000th of a cent or to
the nearest 1/10,000th of a share, as the case may be.
(xiii) For purposes of this paragraph 3, "Common Stock" includes
any stock of any class of the Company which has no preference in respect of
dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Company and which
is not subject to redemption by the Company. However, subject to the
provisions of paragraph 3(xviii) below, shares issuable on conversion of
shares of Preferred Stock shall include only shares of the class designated
as Common Stock of the Company on the Preferred Stock Issue Date or shares
of any class or classes resulting from any reclassification thereof and
which have no preferences in respect of dividends or amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding-
up of the Company and which are not subject to redemption by the Company;
provided that, if at any time there shall be more than one such resulting
class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such
class resulting from all such reclassifications bears to the total number
of shares of all such classes resulting from all such reclassifications.
(xiv) No adjustment in the Conversion Price shall reduce the
Conversion Price below the then par value of the Common Stock. No
adjustment in the Conversion Price need be made under paragraphs 3(vi),
3(vii) and 3(ix) above if the Company issues or distributes to each holder
of Preferred Stock the shares of Common Stock, evidences of indebtedness,
assets, rights, options or warrants referred to in those paragraphs which
each holder would have been entitled to receive had Preferred Stock been
converted into Common Stock prior to the happening of such event or the
record date with respect thereto.
(xv) Whenever the Conversion Price is adjusted, the Company shall
promptly mail to holders of Preferred Stock, first class, postage prepaid,
a notice of the adjustment. The Company shall file with the Transfer Agent
for the Preferred Stock, if any, a certificate from the Company's
independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it. Subject to paragraph 3(xvi)
below, the certificate shall be conclusive evidence that the adjustment is
correct.
(xvi) The Company from time to time may reduce the Conversion
Price if it considers such reductions to be advisable in order that any
event treated for federal income tax purposes as a dividend of stock or
stock rights will not be taxable to the holders of Common Stock by any
amount, but in no event may the Conversion Price be less than the par value
of a share of Common Stock. Whenever the Conversion Price is reduced, the
Company shall mail to holders of Preferred Stock a notice of the reduction.
The Company shall mail, first class, postage prepaid, the notice at least
15 days before the date the reduced Conversion Price takes effect. The
notice shall state the reduced Conversion Price and the period it will be
in effect. A reduction of the Conversion Price does not change or adjust
the Conversion Price otherwise in effect for purposes of paragraphs 3(vi),
3(vii), 3(viii) and 3(ix) above.
(xvii) If:
(A) the Company takes any action which would require an
adjustment in the Conversion Price pursuant to paragraph 3(vii), 3(ix) or
3(x) above;
(B) the Company consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation, and stockholders
of the Company must approve the transaction; or
(C) there is a dissolution or liquidation of the Company;
the Company shall mail to holders of the Preferred Stock, first class,
postage prepaid, a notice stating the proposed record or effective date, as
the case may be. The Company shall mail the notice at least 10 days before
such date. However, failure to mail the notice or any defect in it shall
not affect the validity of any transaction referred to in clause (A), (B)
or (C) of this paragraph 3(xvii).
(xviii) In the case of any consolidation of the Company or the
merger of the Company with or into any other entity or the sale or transfer
of all or substantially all the assets of the Company pursuant to which the
Company's Common Stock is converted into other securities, cash or assets,
upon consummation of such transaction, each share of Preferred Stock shall
automatically become convertible into the kind and amount of securities,
cash or other assets receivable upon the consolidation, merger, sale or
transfer by a holder of the number of shares of Common Stock into which
such share of Preferred Stock might have been converted immediately prior
to such consolidation, merger, transfer or sale (assuming such holder of
Common Stock failed to exercise any rights of election and received per
share the kind and amount of consideration receivable per share by a
plurality of non-electing shares). Appropriate adjustment (as determined
by the Board of Directors of the Company) shall be made in the application
of the provisions herein set forth with respect to the rights and interests
thereafter of the holders of Preferred Stock, to the end that the
provisions set forth herein (including provisions with respect to changes
in and other adjustment of the Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of
stock or other securities or property thereafter deliverable upon the
conversion of Preferred Stock. If this paragraph 3(xviii) applies,
paragraphs 3(vi), 3(viii) and 3(x) do not apply.
(xix) In any case in which this paragraph 3 shall require that an
adjustment as a result of any event becomes effective from and after a
record date, the Company may elect to defer until after the occurrence of
such event the issuance to the holder of any shares of Preferred Stock
converted after such record date and before the occurrence of such event of
the additional shares of Common Stock issuable upon such conversion over
and above the shares issuable on the basis of the Conversion Price in
effect immediately prior to adjustment; provided, however, that if such
event shall not have occurred and authorization of such event shall be
rescinded by the Company, the Conversion Price shall be recomputed
immediately upon such rescission to the price that would have been in
effect had such event not been authorized, provided that such rescission is
permitted by and effective under applicable laws.
4. Liquidation Preference. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company or reduction or
decrease in its capital stock resulting in a distribution of assets to the
holders of any class or series of the Company's capital stock, each holder
of shares of the Preferred Stock will be entitled to payment out of the
assets of the Company available for distribution of an amount equal to the
Liquidation Preference per share of Preferred Stock held by such holder,
plus accrued and unpaid dividends, if any, to the date fixed for
liquidation, dissolution, winding-up or reduction or decrease in capital
stock (including an amount equal to a prorated dividend for the period from
the last Dividend Payment Date to the date fixed for liquidation,
dissolution, winding up or reduction or decrease in capital stock), before
any distribution is made on any Junior Securities, including, without
limitation, Common Stock of the Company. After payment in full of the
Liquidation Preference and all accrued dividends, if any, to which holders
of Preferred Stock are entitled, such holders will not be entitled to any
further participation in any distribution of assets of the Company. If,
upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, the amounts payable with respect to the Preferred Stock and
all other Parity Securities are not paid in full, the holders of the
Preferred Stock and the Parity Securities will share equally and ratably in
any distribution of assets of the Company in proportion to the full
liquidation preference and accumulated and unpaid dividends, if any, to
which each is entitled. However, neither the voluntary sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or
more Persons will be deemed to be a voluntary or involuntary liquidation,
dissolution or winding-up of the Company or reduction or decrease in
capital stock, unless such sale, conveyance, exchange or transfer shall be
in connection with a liquidation, dissolution or winding-up of the business
of the Company or reduction or decrease in capital stock.
5. Optional Redemption.
(i) The Preferred Stock may not be redeemed at the option of the
Company prior to September 25, 2001. The Preferred Stock may be redeemed
for cash, in whole or from time to time in part, at the option of the
Company on or after September 25, 2001, at the Liquidation Preference,
together with accumulated and unpaid dividends (including an amount in cash
equal to a prorated dividend for any partial dividend period), if any, to
the date of redemption (the "Applicable Redemption Price"), upon not less
than 30 nor more than 60 days' prior written notice.
No optional redemption pursuant to this paragraph 5(i) shall be
authorized or made unless, prior to giving the applicable redemption
notice, all accumulated and unpaid dividends for periods ended prior to the
date of such redemption notice shall have been paid in cash, or Common
Stock or a combination thereof.
(ii) In case of redemption of less than all of the shares of Preferred
Stock at the time outstanding, the shares to be redeemed shall be selected
pro rata or by lot as determined by the Company in its sole discretion,
provided that the Company may redeem all shares held by holders of fewer
than 100 shares of Preferred Stock (or by holders that would hold fewer
than 100 shares of Preferred Stock following such redemption) prior to its
redemption of other shares of Preferred Stock.
(iii) Notice of any redemption shall be sent by or on behalf of
the Company not less than 30 nor more than 60 days prior to the date
specified for redemption in such notice (the "Redemption Date"), by first
class mail, postage prepaid, to all holders of record of the Preferred
Stock at their last addresses as they shall appear on the books of the
Company; provided, however, that no failure to give such notice or any
defect therein or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any shares of Preferred Stock except as
to the holder to whom the Company has failed to give notice or except as to
the holder to whom notice was defective. In addition to any information
required by law or by the applicable rules of any exchange upon which
Preferred Stock may be listed or admitted to trading, such notice shall
state: (i) that such redemption is being made pursuant to the optional
redemption provisions hereof; (ii) the Redemption Date; (iii) the
Applicable Redemption Price; (iv) the number of shares of Preferred Stock
to be redeemed and, if less than all shares held by such holder are to be
redeemed, the number of such shares to be redeemed; (v) the place or places
where certificates for such shares are to be surrendered for payment of the
Applicable Redemption Price, including any procedures applicable to
redemptions to be accomplished through book-entry transfers; and (vi) that
dividends on the shares to be redeemed will cease to accumulate on the
Redemption Date. Upon the mailing of any such notice of redemption, the
Company shall become obligated to redeem at the time of redemption
specified thereon all shares called for redemption.
(iv) If notice has been mailed in accordance with Section 5(iii) above
and provided that on or before the Redemption Date specified in such
notice, all funds necessary for such redemption shall have been set aside
by the Company, separate and apart from its other funds in trust for the
pro rata benefit of the holders of the shares so called for redemption, so
as to be, and to continue to be available therefor, then, from and after
the Redemption Date, unless the Company defaults in the payment of the
Applicable Redemption Price, dividends on the shares of the Preferred Stock
so called for redemption shall cease to accumulate, and said shares shall
no longer be deemed to be outstanding and shall not have the status of
shares of Preferred Stock, and all rights of the holders thereof as
stockholders of the Company (except the right to receive from the Company
the Applicable Redemption Price) shall cease. Upon surrender, in
accordance with said notice, of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Company shall so
require and the notice shall so state), such shares shall be redeemed by
the Company at the Applicable Redemption Price. In case fewer than all the
shares represented by any such certificate are redeemed, a new certificate
or certificates shall be issued representing the unredeemed shares without
cost to the holder thereof.
(v) Any funds deposited with a bank or trust company for the purpose
of redeeming Preferred Stock shall be irrevocable except that:
(a) the Company shall be entitled to receive from such bank or
trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the holders of any shares redeemed
shall have no claim to such interest or other earnings; and
(b) any balance of monies so deposited by the Company and
unclaimed by the holders of the Preferred Stock entitled thereto at
the expiration of two years from the applicable Redemption Date shall
be repaid, together with any interest or other earnings earned
thereon, to the Company, and after any such repayment, the holders of
the shares entitled to the funds so repaid to the Company shall look
only to the Company for payment without interest or other earnings.
(vi) No Preferred Stock may be redeemed except with funds legally
available for such purpose. The Company shall take all actions required or
permitted under the DGCL to permit any such redemption.
(vii) Notwithstanding the foregoing provisions of this Section 5,
unless the full cumulative dividends on all outstanding shares of Preferred
Stock shall have been paid or contemporaneously are declared and paid for
all past dividend periods, none of the shares of Preferred Stock shall be
redeemed unless all outstanding shares of Preferred Stock are
simultaneously redeemed.
6. Voting Rights.
(i) The holders of record of shares of the Preferred Stock shall have
no voting rights, except as required by law and as hereinafter
provided in this Section 7.
(ii) Upon the accumulation of accrued and unpaid dividends on the
outstanding Preferred Stock in an amount equal to six (6) quarterly
dividends (whether or not consecutive) (a "Voting Rights Triggering
Event");
then the holders of a majority of the outstanding shares of Preferred
Stock, voting as a separate single class, shall be entitled to elect two
directors, and the number of members of the Company's Board of Directors
shall be immediately and automatically increased by two.
(iii) Whenever such voting right shall have vested, such right may
be exercised initially either at a special meeting of the holders of
Preferred Stock, called as hereinafter provided, or at any annual meeting
of stockholders held for the purpose of electing directors, and thereafter
at such annual meetings or by the written consent of the holders of
Preferred Stock. Such right of the holders of Preferred Stock to elect
directors may be exercised until all dividends in arrears shall have been
paid in full, at which time the term of such directors previously elected
shall thereupon terminate, and such directors shall be deemed to have
resigned.
(iv) At any time when such voting right shall have vested in the
holders of Preferred Stock and if such right shall not already have been
initially exercised, an officer of the Company shall, upon the written
request of holders of record of 10% or more of the Preferred Stock then
outstanding, addressed to the Secretary of the Company, call a special
meeting of holders of Preferred Stock. Such meeting shall be held at the
earliest practicable date upon the notice required for annual meetings of
stockholders at the place for holding annual meetings of stockholders of
the Company or, if none, at a place designated by the Secretary of the
Company. If such meeting shall not be called by the officers of the
Company within 30 days after the personal service of such written request
upon the Secretary of the Company, or within 30 days after mailing the same
within the United States, by registered mail, addressed to the Secretary of
the Company at its principal office (such mailing to be evidenced by the
registry receipt issued by the postal authorities), then the holders of
record of 10% of the shares of the Preferred Stock then outstanding may
designate in writing a holder of Preferred Stock to call such meeting at
the expense of the Company, and such meeting may be called by such person
so designated upon the notice required for annual meetings of stockholders
and shall be held at the place for holding annual meetings of the Company
or, if none, at a place designated by such holder. Any holder of Preferred
Stock that would be entitled to vote at such meeting shall have access to
the stock books of the Company for the purpose of causing a meeting of
stockholders to be called pursuant to the provisions of this Section 8.
Notwithstanding the provisions of this paragraph, however, no such special
meeting shall be called if any such request is received less than 90 days
before the date fixed for the next ensuing annual or special meeting of
stockholders.
(v) If any director so elected by the holders of Preferred Stock
shall cease to serve as a director before his term shall expire, the
holders of Preferred Stock then outstanding may, at a special meeting of
the holders called as provided above, elect a successor to hold office for
the unexpired term of the director whose place shall be vacant.
(vi) The Company shall not, without the affirmative vote or consent of
the holders of at least a majority of the shares of Preferred Stock then
outstanding voting or consenting as the case may be, as one class:
(a) authorize, create (by way of reclassification or otherwise)
or issue any Senior Securities or any obligation or security
convertible or exchangeable into or evidencing the right to purchase,
shares of any class or series of Senior Securities;
(b) amend or otherwise alter this Certificate of Designation
(including the provisions of Section 7 hereof) in any manner that
adversely affects the specified rights, preferences, privileges or
voting rights of holders of Preferred Stock;
(c) authorize the issuance of any additional shares of Preferred
Stock; or
(d) waive the existing Voting Rights Triggering Event or
compliance with any provision of this Certificate of Designation;
(vii) Without the consent of each holder affected, an amendment or
waiver of the Company's Certificate of Incorporation or of this Certificate
of Designation may not (with respect to any shares of Preferred Stock held
by a non-consenting holder):
(a) alter the voting rights with respect to the Preferred Stock
or reduce the number of shares of Preferred Stock whose holders must
consent to an amendment, supplement or waiver;
(b) reduce the Liquidation Preference or alter the provisions
with respect to the redemption of the Preferred Stock;
(c) reduce the rate of or change the time for payment of
dividends on any share of Preferred Stock;
(d) waive the consequences of any failure to pay dividends on
the Preferred Stock;
(e) make any share of Preferred Stock payable in any form other
than that stated in this Certificate of Designation;
(f) make any change in the provisions of this Certificate of
Designation relating to waivers of the rights of holders of Preferred
Stock to receive the Liquidation Preference and dividends on the
Preferred Stock;
(g) waive a redemption payment with respect to any share of
Preferred Stock; or
(h) make any change in the foregoing amendment and waiver
provisions.
(viii) The Company in its sole discretion may without the vote or
consent of any holders of the Preferred Stock amend or supplement this
Certificate of Designation:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Preferred Stock in addition to
or in place of certificated Preferred Stock; or
(c) to make any change that would provide any additional rights
or benefits to the holders of the Preferred Stock or that does not
adversely affect the legal rights under this Certificate of
Designation of any such holder.
(ix) The consent of the holders of the Preferred Stock will not be
required for the Company to authorize, create (by way of reclassification
or otherwise) or issue any Parity Securities or any obligation or security
convertible or exchangeable into or evidencing a right to purchase shares
of any class or series of Parity Securities.
Except as set forth above, (x) the creation, authorization or issuance of
any shares of Junior Securities, Parity Securities or Senior Securities or
(y) the increase or decrease in the amount of authorized capital stock of
any class, including any preferred stock, shall not require the consent of
the holders of the Preferred Stock and shall not be deemed to affect
adversely the rights, preferences, privileges, special rights or voting
rights of holders of shares of Preferred Stock.
7. Merger, Consolidation and Sale of Assets. Without the vote or
consent of the holders of a majority of the then outstanding shares of
Preferred Stock, the Company may not consolidate or merge with or into, or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, any person unless (i) the entity formed
by such consolidation or merger (if other than the Company) or to which
such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (in any such case, the "resulting entity") is a
corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia; (ii) if the Company is not
the resulting entity, the Preferred Stock is converted into or exchanged
for and becomes shares of such resulting entity, having in respect of such
resulting entity the same (or more favorable) powers, preferences and
relative, participating, optional or other special rights thereof that the
Preferred Stock had immediately prior to such transaction; and (iii)
immediately after giving effect to such transaction, the Voting Rights
Triggering Event has not occurred and is not continuing. The resulting
entity of such transaction shall thereafter be deemed to be the "Company"
for all purposes of this Certificate of Designation.
8. Reports. The Company shall file within 15 days after it files
them with the Commission copies of the annual and quarterly reports and the
information, documents and other reports that the Company is required to
file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange
Act ("SEC Reports") with the Transfer Agent. In the event the Company is
not required or shall cease to be required to file SEC Reports, pursuant to
the Exchange Act, the Company shall nevertheless continue to file such
reports with the Commission (unless the Commission shall not accept such a
filing) and the Transfer Agent. Whether or not required by the Exchange
Act to file SEC Reports with the Commission, so long as any Preferred Stock
are outstanding, the Company shall furnish copies of the SEC Reports to the
holders of Preferred Stock at the time the Company is required to make such
information available to the Transfer Agent and any investors who request
it in writing. In addition, the Company shall, for so long as any
Preferred Stock remain outstanding, furnish to the holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144(A)(d)(4) under
the Securities Act.
9. Amendment. This Certificate of Designation shall not be amended,
either directly or indirectly, or through merger or consolidation with
another entity, in any manner that would alter or change the powers,
preferences or special rights of the Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of a majority or more
of the outstanding Preferred Stock, voting separately as a class.
10. Exclusion of Other Rights. Except as may otherwise be required
by law, the shares of Preferred Stock shall not have any voting powers,
preferences and relative, participating, optional or other special rights,
other than those specifically set forth in this resolution (as such
resolution may be amended from time to time) and in the Certificate of
Incorporation. The shares of Preferred Stock shall have no preemptive or
subscription rights.
11. Headings of Subdivisions. The headings of the various
subdivisions hereof are for convenience of reference only and shall not
affect the interpretation of any of the provisions hereof.
12. Severability of Provisions. If any voting powers, preferences
and relative, participating, optional and other special rights of the
Preferred Stock and qualifications, limitations and restrictions thereof
set forth in this resolution (as such resolution may be amended from time
to time) is invalid, unlawful or incapable of being enforced by reason of
any rule of law or public policy, all other voting powers, preferences and
relative, participating, optional and other special rights of Preferred
Stock and qualifications, limitations and restrictions thereof set forth in
this resolution (as so amended) which can be given effect without the
invalid, unlawful or unenforceable voting powers, preferences and relative,
participating, optional or other special rights of Preferred Stock and
qualifications, limitations and restrictions thereof shall, nevertheless,
remain in full force and effect and no voting powers, preferences and
relative, participating, optional or other special rights of Preferred
Stock and qualifications, limitations and restrictions thereof herein set
forth shall be deemed dependent upon any other such voting powers,
preferences and relative, participating, optional or other special rights
of Preferred Stock and qualifications, limitations and restrictions thereof
unless so expressed herein.
13. Re-issuance of Preferred Stock. Shares of Preferred Stock that
have been issued and reacquired in any manner, including shares purchased
or redeemed or exchanged or converted, shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of
authorized but unissued shares of preferred stock of the Company
undesignated as to series and may be designated or re-designated and issued
or reissued, as the case may be, as part of any series of preferred stock
of the Company, provided that any issuance of such shares as Preferred
Stock must be in compliance with the terms hereof.
14. Mutilated or Missing Preferred Stock Certificates. If any of the
Preferred Stock certificates shall be mutilated, lost, stolen or destroyed,
the Company shall issue, in exchange and in substitution for and upon
cancellation of the mutilated Preferred Stock certificate, or in lieu of
and substitution for the Preferred Stock certificate lost, stolen or
destroyed, a new Preferred Stock certificate of like tenor and representing
an equivalent amount of shares of Preferred Stock, but only upon receipt of
evidence of such loss, theft or destruction of such Preferred Stock
certificate and indemnity, if requested, satisfactory to the Company and
the Transfer Agent (if other than the Company).
15. Certain Definitions. As used in this Certificate of Designation,
the following terms shall have the following meanings (with terms defined
in the singular having comparable meanings when used in the plural and vice
versa), unless the context otherwise requires:
"Business Day" means any day except a Saturday, a Sunday, or any day
on which banking institutions in New York, New York are required or
authorized by law or other governmental action to be closed.
"Closing Price" means, for each Trading Day, the last reported sale
price regular way on the Nasdaq National Market or, if the Common Stock is
not quoted on the Nasdaq National Market, the average of the closing bid
and asked prices in the over-the-counter market as furnished by any New
York Stock Exchange member firm selected from time to time by the
corporation for that purpose.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company.
"Conversion Price" shall initially mean $1.25 per share and thereafter
shall be subject to adjustment from time to time pursuant to the terms of
paragraph 3 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or
any other entity.
"Preferred Stock Continuing Directors" means, as of any date of
determination, any member of the Board of Directors of the Company who (a)
was a member of the Board of Directors on the date of original issuance of
the Preferred Stock or (b) was nominated for election to the Board of
Directors with the approval of, or whose election was ratified by, at least
two-thirds of the Preferred Stock Continuing Directors who were members of
the Board of Directors at the time of such nomination or election.
"Preferred Stock Issue Date" means the date on which the Preferred
Stock is originally issued by the Company under this Certificate of
Designation.
"Trading Day" means any day on which the Nasdaq National Market or
other applicable stock exchange or market is open for business.
"Transfer Agent" shall be American Stock Transfer & Trust Company
unless and until a successor is selected by the Company.
IN WITNESS WHEREOF, the Company has caused this certificate to be
duly executed by J. Xxxx Xxxxxx, President and Chief Executive Officer of
the Company and attested by Xxxxx X. Xxxxx Assistant Secretary of the
Company, this September 25, 1998.
MERIDIAN SPORTS INCORPORATED
By: /s/ J. Xxxx Xxxxxx
---------------------------------
Name: J. Xxxx Xxxxxx
Title: President and Chief Executive
Officer
ATTEST:
By: /s/ Xxxxx X. Xxxxx
-----------------------
Name: Xxxxx X. Xxxxx
Title: Assistant Secretary
