CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF JUNIOR PARTICIPATING PREFERRED STOCK
OF
LCI INTERNATIONAL, INC.
Pursuant to Section 151 of the Corporation Law
of the State of Delaware
I, JOSEPH A. LAWRENCE, Senior Vice President of LCI
International, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 151 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Amended and Restated Certificate of Incorporation of the
Corporation (the "Restated Certificate"), the Board of Directors on January 21,
1997, adopted the following resolution creating a series of 500,000 shares of
Preferred Stock designated as Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board
by ARTICLE IV of the Restated Certificate and out of the Preferred Stock
authorized therein, the Board hereby authorizes that a series of Preferred Stock
of the Corporation be, and it hereby is, created and that the designation and
amount thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Amount; Rank. The shares of such
series shall be designated as "Junior Participating Preferred Stock" (the
"Junior Preferred Stock") and the number of shares constituting such series
shall be 500,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Junior Preferred Stock to a number less than the number
of shares then outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights or warrants or upon the conversion
or exchange of any outstanding securities issued by the Company convertible into
or exchangeable for Junior Preferred Stock. The Junior Preferred Stock shall
rank, with respect to the payment of dividends and the distribution of assets
upon liquidation, dissolution or winding up of the Company, junior to all other
series of Preferred Stock and to all other classes preferred or special stock,
and all series of any thereof, and senior to the Common Stock.
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Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock and of any shares of any other class
of preferred or special stock, and any series of any thereof, ranking prior and
superior to the shares of Junior Preferred Stock with respect to dividends, the
holders of shares of Junior Preferred Stock, in preference to the holders of
Common Stock (as referred to and defined in Article IV of the Restated
Certificate) and of any other junior stock, shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the fifteenth day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Junior Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $100.00 and (b) the sum of (i) the
Adjustment Number (as defined below) times the aggregate per share amount of all
cash dividends, and (ii) the Adjustment Number times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Junior Preferred Stock.
The "Adjustment Number" shall be 1000, as adjusted from time to time pursuant to
this paragraph (A). In the event the Corporation shall at any time after January
22, 1997 (i) declare or pay any dividend on the Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding Common Stock into a greater
number of shares, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution
on the Junior Preferred Stock as provided in paragraph (A) of this Section 2
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in like shares of Common Stock); provided that,
in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment date, a dividend of $100.00 per share on
the Junior Preferred Stock shall, when, as and if declared by the Board of
Directors out of funds legally available for such purpose,
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nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Junior Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Junior Preferred Stock,
unless the date of issue of such shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the date
of issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Junior Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Junior Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Junior Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of Junior
Preferred Stock shall have the following voting rights:
(A) Each share of Junior Preferred Stock shall entitle the
holder thereof to a number of votes equal to the Adjustment Number (as adjusted
from time to time pursuant to Section 2(A) hereof) on all matters submitted to a
vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein, in the Restated
Certificate or by-laws, the holders of shares of Junior Preferred Stock and the
holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Junior Preferred Stock
shall be in arrears in an amount equal to six quarterly dividends thereon, the
occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") that shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly period on all shares of Junior Preferred Stock then
outstanding shall have been declared and paid or set apart for payment. During
each default period, (1) the number of Directors shall be increased by two,
effective as of the time of election of such Directors as herein provided, and
(2) the holders of Junior Preferred Stock and the holders of
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other Preferred Stock upon which these or like voting rights have been conferred
and are exercisable (the "Voting Preferred Stock") with dividends in arrears
equal to six quarterly dividends thereon, voting as a class, irrespective of
series, shall have the right to elect such two Directors.
(ii) During any default period, such voting right of the
holders of Junior Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that such voting right shall not be exercised unless the
holders of at least one-third in number of the shares of Voting Preferred Stock
outstanding shall be present in person or by proxy. The absence of a quorum of
the holders of Common Stock shall not affect the exercise by the holders of
Voting Preferred Stock of such voting right.
(iii) Unless the holders of Voting Preferred Stock shall,
during an existing default period, have previously exercised their right to
elect Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than 10% of the total number of
shares of Voting Preferred Stock outstanding, irrespective of series, may
request, the calling of a special meeting of the holders of Voting Preferred
Stock, which meeting shall thereupon be called by the Chairman of the Board, the
President, the Chief Executive Officer, any Vice President or the Secretary of
the Corporation. Notice of such meeting and of any annual meeting at which
holders of Voting Preferred Stock are entitled to vote pursuant to this
paragraph (C)(iii) shall be given to each holder of record of Voting Preferred
Stock by mailing a copy of such notice to him at his last address as the same
appears on the books of the Corporation. Such meeting shall be called for a time
not earlier than 10 days and not later than 60 days after such order or request
or, in default of the calling of such meeting within 60 days after such order or
request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than 10% of the total number of
shares of Voting Preferred Stock outstanding. Notwithstanding the provisions of
this paragraph (C)(iii), no such special meeting shall be called during the
period within 60 days immediately preceding the date fixed for the next annual
meeting of the stockholders.
(iv) In any default period, after the holders of Voting
Preferred Stock shall have exercised their right to elect Directors voting as a
class, (x) the Directors so elected by the holders of Voting Preferred Stock
shall continue in office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y) any vacancy in
the
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Board of Directors may be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class or classes of stock
which elected the Director whose office shall have become vacant. References in
this paragraph (C) to Directors elected by the holders of a particular class or
classes of stock shall include Directors elected by such Directors to fill
vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Voting Preferred Stock as a class to elect Directors
shall cease, (y) the term of any Directors elected by the holders of Voting
Preferred Stock as a class shall terminate and (z) the number of Directors shall
be such number as may be provided for in or pursuant to the Restated Certificate
or By-Laws irrespective of any increase made pursuant to the provisions of this
paragraph (C) (such number being subject, however, to change thereafter in any
manner provided by law or in the Restated Certificate or By-Laws). Any vacancies
in the Board of Directors effected by the provisions of clauses (y) and (z) in
the preceding sentence may be filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Junior Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Stock as provided in Section 2 are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Junior Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Junior Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Junior Preferred Stock, except dividends paid ratably on the Junior
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as
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to dividends or upon liquidation, dissolution or winding up) to the
Junior Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the Corporation ranking junior
(as to dividends and upon dissolution, liquidation or winding up) to
the Junior Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Junior Preferred Stock, or any shares of stock ranking on a
parity with the Junior Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Junior Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock, without serial designation, and may be reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (A) to the holders of Common Stock or shares of other stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Junior Preferred Stock unless, prior thereto, the holders of shares of
Junior Preferred Stock shall have received per share an amount equal to the
Adjustment Number times $1.00, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, or (B) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Junior
Preferred Stock, except distributions made ratably on the Junior Preferred Stock
and all other such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which
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the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Junior Preferred Stock then outstanding shall at the same time be similarly
exchanged or changed in an amount per share equal to the Adjustment Number times
the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged.
Section 8. No Redemption. The shares of Junior Preferred Stock
shall not be redeemable.
Section 9. Amendment. The Restated Certificate shall not be
amended in any manner which would materially alter or change the powers,
preferences or special rights of the Junior Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of two-thirds of the
outstanding shares of Junior Preferred Stock, voting together as a single class.
Section 10. Fractional Shares. At the Corporation's sole
discretion, Junior Preferred Stock may be issued in fractions of a share which
shall entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Junior Preferred Stock.
IN WITNESS WHEREOF, I have executed and subscribed this
Certificate and do affirm the foregoing as true and under the penalties of
perjury this 22nd day of January, 1997.
/s/ Joseph A. Lawrence
---------------------------
Name: Joseph A. Lawrence
Title: Senior Vice President
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