EXHIBIT 3.1
RESTATED CERTIFICATE
OF
INCORPORATION
Fiber Optic Communications, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of this corporation is Fiber Optic Communications, Inc. Fiber
Optic Communications, Inc. was originally incorporated under the same name. The
original Certificate of Incorporation of this corporation was filed with the
Secretary of State of the State of Delaware on July 27, 1992.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation has been duly
adopted and restates, integrates and further amends the provisions of the
Certificate of Incorporation of this corporation.
3. This Restated Certificate of Incorporation was duly consented to, and
adopted by, the holders of (i) a majority of the outstanding shares of common
stock, par value $.01 per share, of the Corporation and 10% Senior Series 1
Cumulative Redeemable Preferred Stock, par value $.01 per share, of this
corporation ("Series 1 Preferred Stock"), consenting together as a class and by
(ii) over three-fourths (3/4s) of the outstanding shares of Series 1 Preferred
Stock, acting without a meeting by unanimous written consent pursuant to Section
228 of the General Corporation Law of the State of Delaware.
4. The text of the Restated Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:
FIRST: The name of this corporation (the "Corporation") is "IXC
Communications, Inc."
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may now or hereafter be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is fifteen million one hundred thousand (15,100,000)
consisting of (i) fifteen
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million (15,000,000) shares of common stock, par value $.01 per share, and (ii)
one hundred thousand (100,000) shares of preferred stock, par value $.01 per
share. The preferred stock may be issued at any time, and from time to time, in
one or more series pursuant hereto or to a resolution or resolutions providing
for such issue duly adopted by the board of directors (the "Board") of the
Corporation (authority to do so being hereby expressly vested in the Board), and
such resolution or resolutions shall also set forth the voting powers, full or
limited, or none, of each such series of preferred stock and shall fix the
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions of each such series of
preferred stock.
Upon the filing of this Second Amendment to Restated
Certificate of Incorporation which amends Article FOURTH to read as set forth
above, and without any further action on the part of the holders thereof, each
issued and outstanding share of common stock will be reclassified and changed
into 0.8083 shares of common stock.
FIFTH: The business and affairs of the Corporation shall be managed by and
under the direction of the Board. The exact number of directors of the
Corporation shall be fixed by or in the manner provided in the Bylaws of the
Corporation (the "Bylaws").
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the Board is expressly authorized:
(a) to adopt, repeal, rescind, alter or amend in any respect the Bylaws,
and to confer in the Bylaws powers and authorities upon the directors of the
Corporation in addition to the powers and authorities expressly conferred upon
them by statute;
(b) from time to time to set apart out of any funds or assets of the
Corporation available for dividends an amount or amounts to be reserved as
working capital or for any other lawful purpose and to abolish any reserve so
created and to determine whether any, and, if any, what part, of the surplus of
the Corporation or its net profits applicable to dividends shall be declared in
dividends and paid to its stockholders, and all rights of the holders of stock
of the Corporation in respect of dividends shall be subject to the power of the
Board so to do;
(c) subject to the laws of the State of Delaware, from time to time to
sell, lease or otherwise dispose of any part or parts of the properties of the
Corporation and to cease to conduct the business connected therewith or again to
resume the same, as it may deem best; and
(d) in addition to the powers and authorities hereinbefore and by the laws
of the State of Delaware conferred upon the Board, to execute all such powers
and to do all acts and things as may be exercised or done by the Corporation;
subject, nevertheless, to the express provisions of such laws, of the Restated
Certificate of Incorporation of the Corporation and its Bylaws.
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SEVENTH: Meetings of stockholders of the Corporation may be held within or
without the State of Delaware, as the Bylaws provide. The books of the
Corporation may be kept (subject to any provision of applicable law) outside the
State of Delaware at such place or places as may be designated from time to time
by the Board or in the Bylaws.
EIGHTH: The Corporation reserves the right to adopt, repeal, rescind,
alter or amend in any respect any provision contained in this Restated
Certificate of Incorporation in the manner now or hereafter prescribed by
applicable laws, and all rights conferred on stockholders herein are granted
subject to this reservation.
NINTH: The Corporation is to have perpetual existence.
TENTH: A director of this Corporation shall not be personally liable to
the Corporation or its stockholder for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, as the same exists or hereafter may be amended, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
Delaware Corporation Law. No amendment to or repeal of this Article Tenth shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
ELEVENTH:
A. Designation of Two Series of Preferred Stock. There are
hereby provided two series of preferred stock designated and to be known as "10%
Senior Series 1 Cumulative Redeemable Preferred Stock" and "10% Junior Series 3
Cumulative Redeemable Preferred Stock."
B. Definitions. As used in this Eleventh Article, the following
terms shall have the meanings indicated:
1. "Common Stock" shall mean the common stock, $.01 par
value per share, issued or to be issued by the Corporation.
2. "Original Issue Date" shall mean, with respect to any share of
Series Preferred Stock, the date of the original issuance of such shares.
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3. "Preferred Stock" shall mean the preferred stock,
$.01 par value per share, issued or to be issued by the Corporation.
4. "Series 1 Preferred Stock" shall mean the 10% Senior Series 1
Cumulative Redeemable Preferred Stock, $.01 par value per share, issued or to be
issued by the Corporation.
5. "Series 3 Preferred Stock" shall mean the 10% Junior Series 3
Cumulative Redeemable Preferred Stock, $.01 par value per share, issued or to be
issued by the Corporation.
6. "Series Preferred Stock" shall mean, collectively,
the Series 1 Preferred Stock and the Series 3 Preferred Stock.
C. Number of Shares. The number of shares constituting the Series 1
Preferred Stock shall be 2,000. The number of shares constituting the Series 3
Preferred Stock shall be 12,550.
D. Rights, Preferences, Privileges and Restrictions. The voting powers and
relative rights, preferences, restrictions and other mattes relating to the
Series Preferred Stock are as follows:
1. Dividends.
(a) The holders of shares of Series 1 Preferred
Stock then outstanding shall be entitled to receive, prior to the payment of any
dividend on any other Preferred Stock of the Corporation or the Common Stock of
the Corporation, when, as and if declared by the Board, out of funds legally
available for the payment of dividends, cumulative dividends in an annual amount
equal to $100 per share, plus an amount determined by applying a 10% annual
rate, compounded annually, to any accrued but unpaid dividend amount from the
last day of the period when such dividend accrues to the actual date of payment
of such dividend, and no more. The holders of shares of Series 3 Preferred Stock
then outstanding shall be entitled to receive, prior to the payment of any
dividend on any other Preferred Stock of the Corporation (other than the Series
1 Preferred Stock) or the Common Stock of the Corporation, when as and if
declared by the Board, out of funds legally available for the payment of
dividends, cumulative dividends in an annual amount equal to $100 per share,
plus an amount determined by applying a 10% annual rate, compounded annually, to
any accrued but unpaid dividend amount from the last day of the period when such
dividend accrues to the actual date of payment of such dividend, and no more;
provided, however, that (i) the Corporation may pay dividends on the
Corporation's 7-1/4% Junior Convertible Preferred Stock Due 2007 ("Convertible
Preferred Stock") with additional shares of Convertible Preferred Stock and (ii)
the Corporation may pay dividends on the Corporation's 12-1/2% Junior
Exchangeable Preferred Stock Due 2009 (the "Initial Exchangeable Preferred
Stock") and 12-1/2% Series B Junior Exchangeable Preferred Stock Due 2009 (the
"Series B Stock") with additional shares of Initial Exchangeable Preferred Stock
and Series B Stock, respectively. Such dividends on the outstanding shares of
Series Preferred Stock shall be payable on such date as the Board may from time
to time determine (each such date being a "dividend payment date"). The Board
may fix a record date for the determination of holders of shares of Series
Preferred Stock entitled to receive payment of a dividend declared thereon,
which record date shall not be more than sixty (60) days prior to the date fixed
for
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the payment thereof. Each such annual dividend shall be fully cumulative and
shall accrue from day to day (whether or not declared) from the first day of
each period in which such dividend may be payable as herein provided, except
that the first annual dividend with respect to each share of Series Preferred
Stock shall accrue from the Original Issue Date of such share or such other date
as determined by the Board, except that dividends with respect to each share of
Series 3 Preferred Stock shall accrue from August 14, 1992. Dividends, when, as
and if declared, shall be payable in cash.
(b) The holder of each outstanding fractional
share of Series Preferred Stock shall be entitled to a ratably proportionate
amount of all dividends accruing with respect to each outstanding share of
Series Preferred Stock with the same Original Issue Date and all such dividends
with respect to each such outstanding fractional share shall be fully cumulative
and shall accrue (whether or not declared) and shall be payable in the same
manner and at such times as provided for in Section 1(a).
(c) All dividends paid with respect to the
outstanding shares of Series Preferred Stock pursuant to Section 1(a) shall be
paid pro rata to the holders of each class entitled thereto. Each Series 1
Preferred Stock holder's pro rata share of such dividends shall be calculated by
multiplying the total dividends to be paid by the percentage of (i) the
aggregate accrued but unpaid dividends to the date such payment is made on all
issued and outstanding shares of Series 1 Preferred Stock represented by (ii)
the aggregate accrued but unpaid dividends to the date such payment is made on
all shares (including fractional shares) of Series 1 Preferred Stock held by
such holder, and no more. Each Series 3 Preferred Stock holder's pro rata share
of such dividends shall be calculated by multiplying the total dividends to be
paid by the percentage of (i) the aggregate accrued but unpaid dividends to the
date such payment is made on all issued and outstanding shares of Series 3
Preferred Stock represented by (ii) the aggregate accrued but unpaid dividends
to the date such payment is made on all shares (including fractional shares) of
Series 3 Preferred Stock held by such holder, and no more.
2. Liquidation Rights of Series Preferred Stock:
(a) In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of outstanding shares of Series Preferred Stock shall be entitled to be paid out
of the assets of the Corporation available for distribution to its stockholders,
whether such assets are capital, surplus, or earnings, before any payment or
declaration and setting apart for payment of any amount shall be made in respect
of the outstanding shares of any other Preferred Stock of the Corporation or
Common Stock of the Corporation, an amount equal to $1,000 per share of Series
Preferred Stock then outstanding, plus all accrued but unpaid dividends thereon
to the date such payment is actually made, and no more. If upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of the outstanding shares of
Series Preferred Stock shall be insufficient to permit the payment to such
stockholders of the full preferential amounts set forth above, then
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the entire assets of the Corporation to be distributed shall be distributed (i)
first, ratably among the holders of outstanding shares of Series 1 Preferred
Stock based on the full preferential amounts for the number of outstanding
shares of Series 1 Preferred Stock held by each holder and (ii) second, ratably
among the holders of outstanding shares of Series 3 Preferred Stock based on the
full preferential amounts for the number of outstanding shares of Series 3
Preferred Stock held by each holder. The Corporation will mail written notice of
such liquidation, dissolution or winding up, not less than sixty (60) days prior
to the payment date stated therein, to each record holder of Series Preferred
Stock.
(b) A consolidation or merger of the Corporation
with or into any other corporation or corporations or a sale of all or
substantially all of the assets of the Corporation shall not be deemed to be a
liquidation, dissolution, or winding up of the Corporation as those terms are
used in this Section 2 unless such consolidation, merger or sale shall be in
connection with a dissolution or winding up of the Corporation.
(c) The payment of preferential amounts pursuant
to this Section 2 with respect to each outstanding fractional share of Series 1
Preferred Stock shall be equal to a ratably proportionate amount of the
preferential amount payable with respect to each outstanding share of Series 1
Preferred Stock with the same Original Issue Date. The payment of preferential
amounts pursuant to this Section 2 with respect to each outstanding fractional
share of Series 3 Preferred Stock shall be equal to the ratably proportionate
amount of the preferential amount payable with respect to each outstanding share
of Series 3 Preferred Stock with the same Original Issue Date.
3. Voluntary Redemption by the Corporation.
(a) The Corporation, at the option of the Board,
may at any time or from time to time redeem the outstanding shares of Series 1
Preferred Stock in whole or in part from any source of funds legally available
therefor. The Corporation, at the option of the Board, may at any time or from
time to time redeem the outstanding shares of Series 3 Preferred Stock in whole
or in part from any source of funds legally available therefor, provided that
there shall then be no outstanding shares of Series 1 Preferred Stock.
(b) The redemption price for each outstanding
share of Series Preferred Stock shall be equal to $1,000 plus an amount equal to
any accrued and unpaid dividends on such share through the Redemption Date (as
defined below), whether or not declared (the "Redemption Price").
(c) In the event of a redemption of only a part
of the outstanding shares of a class of Series Preferred Stock, the Corporation
shall effect such redemption pro rata according to the number of shares held by
each holder of outstanding shares of such class of Series Preferred Stock.
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(d) At least ten (10) days and not more than
sixty (60) days prior to the date fixed for any redemption of shares of a class
of Series Preferred Stock (the "Redemption Date"), written notice (the
"Redemption Notice," and the class of Series Preferred Stock referenced in such
Redemption Notice shall be referred to herein as the "Redeemed Stock") shall be
sent, by registered mail, to each holder of record of the outstanding shares of
Redeemed Stock at his or her mailing address last shown on the records of the
Corporation. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
received the notice, and failure duly to give the notice by mail, or any defect
in the notice, to any holder of shares of such class of Series Preferred Stock
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of such class of Series Preferred Stock. The
Redemption Notice shall state:
(i) whether all or less than all of the outstanding
shares of the class of Series Preferred Stock are to be redeemed and the total
number of shares being redeemed;
(ii) the number of outstanding shares of Redeemed Stock
held by the holder which the Corporation intends to redeem;
(iii) the Redemption Date and the Redemption Price;
(iv) that from and after the Redemption Date, dividends
shall cease to accrue; and
(v) that the holder is to surrender to the Corporation,
in the manner and at the place designated, the certificate or certificates
representing the outstanding shares of Redeemed Stock to be redeemed.
(e) On or before the Redemption Date, each holder
of outstanding shares of Redeemed Stock shall surrender the certificate or
certificates representing such shares to the Corporation, in the manner and at
the place designated in the Redemption Notice, and thereupon the Redemption
Price for such shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be cancelled and retired. In the event less than
all of the shares represented by any such certificate or certificates are
redeemed, a new certificate or certificates shall be issued representing the
unredeemed shares. All shares of the class of Series Preferred Stock called for
redemption will cease to accrue dividends as of the Redemption Date. After the
Redemption Date, holders of such class of Series Preferred Stock shall no longer
be treated as stockholders of the Corporation with respect to the shares of
Series Preferred Stock being redeemed, except with respect to the right to
receive the Redemption Price, without interest, upon the surrender of their
respective certificates.
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(f) The Corporation may, at its option, on or
prior to the Redemption Date, deposit with its transfer agent or other
redemption agent selected by the Board of Directors of the Corporation, as a
trust fund, a sum sufficient to redeem the shares called for redemption, with
irrevocable instructions and authority to such transfer agent or other
redemption agent to give or complete the Redemption Notice and to pay to the
respective holders of such shares, as evidenced by a list of such holders
certified by an officer of the Corporation, the Redemption Price upon surrender
of their respective share certificates. Such deposit shall be deemed to
constitute full payment of such shares to their holders. In case the holders of
any shares shall not, within five (5) years after such deposit, claim the amount
deposited for redemption thereof, such transfer agent or other redemption agent
shall, upon demand, pay over to the Corporation the balance of such amount so
deposited and shall thereupon be relieved of all responsibility to the holders
thereof. Any interest accrued on any funds so deposited shall belong to the
Corporation, and shall be paid to it from time to time on demand.
(g) All shares of Series 1 Preferred Stock which
shall have been redeemed pursuant to this Section 3 shall thereupon be restored
to the status of authorized but unissued shares of Series 1 Preferred Stock.
(h) All shares of Series 3 Preferred Stock which
shall have been redeemed pursuant to this Section 3 shall thereupon be restored
to the status of authorized but unissued shares of Series 3 Preferred Stock.
4. Voting Rights. Except as otherwise provided herein or by the General
Corporation Law of the State of Delaware, holders of outstanding shares of
Series 1 Preferred Stock shall have no voting rights. At all meetings of the
stockholders of the Corporation and in the case of any actions of stockholders
in lieu of a meeting, each share of Series 3 Preferred Stock shall entitle the
holder thereof to one vote. Except as otherwise provided herein or by the
General Corporation Law of the State of Delaware, the holders of Common Stock
and Series 3 Preferred Stock shall vote together as a single class, and neither
the Common Stock nor Series 3 Preferred Stock shall be entitled to vote as a
separate class on any matter to be voted on by shareholders of the Corporation,
except that the holders of the Series 3 Preferred Stock shall be entitled to
vote as a separate class to elect one member of the Board of Directors of the
Corporation.
5. Restrictions and Limitations. Except as otherwise provided by the
General Corporation Law of the State of Delaware, no amendment to this Restated
Certificate of Incorporation shall be made by the Corporation which would change
any of the terms, rights, preferences, privileges or restrictions provided
herein so as to affect adversely any shares of Series Preferred Stock without
the prior written consent of the holders of at least a majority of each of the
Series 1 Preferred Stock and the Series 3 Preferred Stock entitled to vote
thereon and outstanding at the time such action is taken; provided that no
amendment will change (i) the rate or times at which or the manner in which
dividends on any series of the Series Preferred Stock accrue or become payable,
(ii) the preferences with
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respect to dividends and liquidation payments set forth in Section 1 and 2 or
(iii) the percentage of the holders of the Series Preferred Stock required to
approve any changes described in clauses (i) or (ii) above, without the prior
written consent of the holders of at least three-fourths (3/4s) of each of the
Series 1 Preferred Stock and the Series 3 Preferred Stock, as applicable, then
outstanding; and, provided further, that no change in the terms hereof may be
accomplished by merger or consolidation of the Corporation with another
corporation unless the Corporation has obtained the prior written consent of the
holders of the applicable percentages of the Series 1 Preferred Stock and the
Series 3 Preferred Stock then outstanding.
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate
of Incorporation to be signed and attested by its duly authorized officers this
31st day of January 1994.
/s/ Ralph J. Swett
------------------
Ralph J. Swett, President
Attest:
/s/ John J. Willingham
----------------------
John J. Willingham, Secretary
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CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
IXC CARRIER GROUP, INC.
INTO
IXC COMMUNICATIONS, INC.
(PURSUANT TO SECTION 253 OF THE GENERAL
CORPORATION LAW OF DELAWARE)
IXC Communications, Inc., a Delaware corporation (the "Corporation"), does
hereby certify:
FIRST: That the Corporation is incorporated pursuant to the General
Corporation Law of the State of Delaware.
SECOND: That the Corporation owns all of the outstanding shares of each
class of the capital stock of IXC Carrier Group, Inc., a Delaware corporation
(the "Merging Corporation").
THIRD: That the Corporation, by the following resolutions of its Board of
Directors, duly adopted on the 6th day of October 1995, determined to merge into
itself the Merging Corporation on the conditions set forth in such resolutions:
"RESOLVED, that the Corporation merge into itself its subsidiary,
IXC Carrier Group, Inc., a Delaware corporation, and assume all of said
subsidiary's liabilities and obligations;
FURTHER RESOLVED, that the President and Secretary of the
Corporation be, and they hereby are, directed to make, execute and
acknowledge a certificate of ownership and merger setting forth a copy of
the resolutions to merge IXC Carrier Group, Inc. into the Corporation and
to assume said subsidiary's liabilities and obligations and the date of
adoption thereof and to file the same in the office of the Secretary of
State of the State of Delaware and a certified copy thereof in the Office
of the Recorder of Deeds of New Castle County; and
FURTHER RESOLVED, that the effective date of such merger is November
30, 1995."
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed and this certificate to be signed by Ralph J. Swett, its President, and
John J. Willingham, its Secretary, this 28th day of November 1995.
IXC COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Ralph J. Swett
Ralph J. Swett, President
ATTEST:
By: /s/ John J. Willingham
John J. Willingham, Secretary [SEAL]
FIRST AMENDMENT TO
RESTATED
CERTIFICATE OF INCORPORATION
OF
IXC COMMUNICATIONS, INC.
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware does hereby certify:
1. That Ralph J. Swett and John J. Willingham are the duty elected and
acting Chairman of the Board, Chief Executive Officer and President and Senior
Vice President, Chief Financial Officer and Secretary, respectively, of IXC
Communications, Inc., a Delaware corporation (the "Corporation").
2. Article FOURTH of the Restated Certificate of Incorporation of the
Corporation is amended to read in full as follows:
"FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is one hundred and three million (103,000,000)
consisting of (i) one hundred million (100,000,000) shares of common stock, par
value $.01 per share, and (ii) three million (3,000,000) shares of preferred
stock, par value $.01 per share. The preferred stock may be issued at any time,
and from time to time, in one or more series pursuant hereto or to a resolution
or resolutions providing for such issue duly adopted by the board of directors
(the "Board") of the Corporation (authority to do so being hereby expressly
vested in the Board), and such resolution or resolutions shall also set forth
the voting powers, full or limited, or none, of each such series of preferred
stock and shall fix the designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
of each such series of preferred stock.
Upon the filing of this First Amendment to Restated Certificate of
Incorporation which amends Article FOURTH to read as set forth above, and
without any further action on the part of the holders thereof, each issued and
outstanding share of common stock will be converted into three shares of common
stock.
3. This First Amendment to Restated Certificate of Incorporation has been
duly approved by the Board of Directors of the Corporation.
4. This First Amendment to Restated Certificate of Incorporation was duly
adopted and approved by the stockholders in accordance with the applicable
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware by the holders of (i) a majority of the outstanding voting shares of
common stock, par value $.01 per share, of the Corporation; and (ii) a majority
of the outstanding shares of the 10% Junior Series 3 Cumulative Redeemable
Preferred Stock, par value $.01 per share, of the Corporation. Prompt written
notice of the adoption of this First Amendment to Restated Certificate of
Incorporation has been given to those stockholders who have not consented in
writing thereto, as provided by Section 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by Ralph J. Swett, its Chairman of the Board, Chief Executive Officer and
President, and attested by John J. Willingham, its Senior Vice President, Chief
Financial Office and Secretary, this June 7, 1996.
IXC COMMUNICATIONS, INC.
By: /s/ RALPH J. SWETT
Ralph J. Swett,
Chairman of the Board,
Chief Executive Officer and
President
Attest:
/s/ JOHN J. WILLINGHAM
John J. Willingham,
Senior Vice President,
Chief Financial Officer and Secretary
SECOND AMENDMENT TO
RESTATED
CERTIFICATE OF INCORPORATION
OF
IXC COMMUNICATIONS, INC.
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware does hereby certify:
1. That Ralph J. Swett and John J. Willingham are the duly elected and
acting Chairman of the Board, Chief Executive Officer and President and Senior
Vice President, Chief Financial Officer and Secretary, respectively, of IXC
Communications, Inc., a Delaware corporation (the "Corporation").
2. Article FOURTH of the Restated Certificate of Incorporation of the
Corporation is amended to read in full as follows:
"FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is one hundred and three million (103,000,000)
consisting of (i) one hundred million (100,000,000) shares of common stock, par
value $.01 per share, and (ii) three million (3,000,000) shares of preferred
stock, par value $.01 per share. The preferred stock may be issued at any time,
and from time to time, in one or more series pursuant hereto or to a resolution
or resolutions providing for such issue duly adopted by the board of directors
(the "Board") of the Corporation (authority to do so being hereby expressly
vested in the Board), and such resolution or resolutions shall also set forth
the voting powers, full or limited, or none, of each such series of preferred
stock and shall fix the designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
of each such series of preferred stock.
Upon the filing of this Second Amendment to Restated Certificate of
Incorporation which amends Article FOURTH to read as set forth above, and
without any further action on the part of the holders thereof, each issued and
outstanding share of common stock will be reclassified and changed into 0.8083
shares of common stock."
3. This Second Amendment to Restated Certificate of Incorporation has been
duly approved by the Board of Directors of the Corporation.
4. This Second Amendment to Restated Certificate of Incorporation was duly
adopted and approved by the stockholders in accordance with the applicable
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware by the holders of (i) a majority of the outstanding voting shares of
common stock, par value $.01 per share, of the Corporation; and (ii) a majority
of the outstanding shares of the 10% Junior Series 3 Cumulative Redeemable
Preferred Stock, par value $.01 per share, of the Corporation. Prompt written
notice of the adoption of this Second Amendment to Restated Certificate of
Incorporation has been given to those stockholders who have not consented in
writing thereto, as provided by Sections 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by Ralph J. Swett, its Chairman of the Board, Chief Executive Officer and
President, and attested by John J. Willingham, its Senior Vice President, Chief
Financial Officer and Secretary, this June 12, 1996.
IXC COMMUNICATIONS, INC.
By: /s/ RALPH J. SWETT
Ralph J. Swett,
Chairman of the Board,
Chief Executive Officer and
President
Attest:
/s/ JOHN J. WILLINGHAM
John J. Willingham,
Senior Vice President,
Chief Financial Officer and Secretary
EXECUTION COPY
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF 7 1/4% JUNIOR
CONVERTIBLE PREFERRED STOCK DUE 2007 AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
IXC Communications, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the board of directors of the
Corporation (the "Board of Directors") by its Restated Certificate of
Incorporation (hereinafter referred to as the "Restated Certificate of
Incorporation"), and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, said Board of Directors, at a meeting
duly called and held on March 28, 1997, duly approved and adopted the following
resolution (the "Resolution"):
RESOLVED that, pursuant to the authority vested in the Board of Directors by
its Certificate of Incorporation, the Board of Directors does hereby create,
authorize and provide for the issuance of 7 1/4% Junior Convertible Preferred
Stock Due 2007, par value $.01 per share, with a stated value initially of $100
per share, consisting of up to 1,400,000 shares having the designation,
preferences, relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth in the
Restated Certificate of Incorporation and in this Resolution as follows:
(a) Designation. There is hereby created out of the authorized and unissued
shares of Preferred Stock of the Company a series of Preferred Stock designated
as the "7 1/4% Junior Convertible Preferred Stock Due 2007" (the "Convertible
Preferred Stock"). The number of shares constituting the Convertible Preferred
Stock shall be 1,400,000. The liquidation preference of the Convertible
Preferred Stock shall be $100 per share (the "Liquidation Preference").
(b) Rank. The Convertible Preferred Stock will, with respect to dividend
rights and rights on liquidation, winding-up and dissolution, rank (i) senior to
all classes of common stock and to each other class of Capital Stock or series
of Preferred Stock established hereafter by the Board of Directors of the
Company, the terms of which do not expressly provide that it ranks senior to, or
on a parity with, the Convertible Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution of the Company (collectively
referred to, together with all classes of common stock of the Company, as
"Junior Stock"); (ii) on a parity with each other class of Capital Stock or
series of Preferred Stock established hereafter by the Board of Directors of the
Company, the terms of which expressly provide that such class or series will
rank on a parity with the Convertible Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution (collectively referred to as
"Parity Stock"); and (iii) junior to each share of Series 3 Preferred Stock now
or hereafter outstanding and junior to each class of Capital Stock or series of
Preferred Stock established hereafter by the Board of Directors of the Company,
the terms of which hereafter established classes or series expressly provide
that such class or series will rank senior to the Convertible Preferred Stock as
to dividend rights or rights on liquidation, winding-up and dissolution of the
Company (collectively referred to as "Senior Stock"). The Company may not
authorize, create or increase the authorized amount of any class or series of
Senior Stock without the approval of the holders of at least two-thirds of the
shares of Convertible Preferred Stock then outstanding, voting or consenting, as
the case may be, as one class. All claims of the holders of the Convertible
Preferred Stock, including claims with respect to dividend payments, redemption
payments, mandatory repurchase payments or rights upon liquidation, winding-up
or dissolution, shall rank junior to the claims of the holders of any debt of
the Company and all other creditors of the Company.
(c) Dividends. (i) Holders of the outstanding shares of Convertible Preferred
Stock will be entitled to receive, when, as and if declared by the Board of
Directors of the Company, out of funds legally available therefor, dividends on
each share of the Convertible Preferred Stock at a rate per annum equal to 7
1/4% of the Liquidation
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Preference of such share payable quarterly (each such quarterly period being
herein called a "Dividend Period"). In addition to the dividends described in
the preceding sentence, holders of outstanding shares of Convertible Preferred
Stock which are Transfer Restricted Securities will be entitled to additional
dividends (the "Additional Dividends"), when, as and if declared by the Board of
Directors of the Company, out of funds legally available therefor, with respect
to the shares of Convertible Preferred Stock, which Additional Dividends shall
accrue as follows if any of the following events occur (each such event in
clauses (A) and (B) below being herein called a "Registration Default"): (A) if
by August 31, 1997, the Shelf Registration Statement has not been declared
effective by the Commission; or (B) if after the Shelf Registration Statement is
declared effective (1) the Shelf Registration Statement thereafter ceases to be
effective; or (2) the Shelf Registration Statement or the related prospectus
ceases to be usable (in each case except as permitted below) in connection with
resales of Transfer Restricted Securities in accordance with and during the
periods specified herein because either (I) any event occurs as a result of
which the related prospectus forming part of such Shelf Registration Statement
would include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or (II) it shall be
necessary to amend such Shelf Registration Statement or supplement the related
prospectus, to comply with the Securities Act or the Exchange Act or the
respective rules thereunder.
Additional Dividends shall accrue on the shares of Convertible Preferred
Stock which are Transfer Restricted Securities from and including the date on
which any such Registration Default shall occur, to but excluding the date on
which all such Registration Defaults have been cured, at a rate of 7 3/4% per
annum.
A Registration Default referred to in clause (B) of paragraph (c)(i) shall be
deemed not to have occurred and be continuing in relation to the Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be
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declared effective to permit Holders to use the related prospectus or (y) other
material events with respect to the Company that would need to be described in
the Shelf Registration Statement or the related prospectus and (ii) in the case
of clause (y), the Company proceeds promptly and in good faith to amend or
supplement the Shelf Registration Statement and related prospectus to describe
such events unless the Company has determined in good faith that there are
material legal or commercial impediments in doing so; provided, however, that in
any case if such Registration Default occurs for a continuous period in excess
of 45 days, Additional Dividends shall be payable in accordance with the
immediately preceding paragraphs of this paragraph (c)(i) from the day such
Registration Default initially occurs until such Registration Default is cured.
Any amounts of Additional Dividends due pursuant to clauses (A) or (B) of
this paragraph (c)(i) or pursuant to the proviso contained in the preceding
sentence will be payable on the regular dividend payment dates with respect to
the Convertible Preferred Stock and on the same terms and conditions and subject
to the same limitations as pertain at such time for the payment of regular
dividends. The amount of Additional Dividends will be determined by multiplying
the applicable Additional Dividends rate by the aggregate liquidation preference
of the outstanding shares of Convertible Preferred Stock, multiplied by a
fraction, the numerator of which is the number of days such Additional Dividend
rate was applicable during such period (determined on the basis of a 360-day
year comprised of twelve 30-day months), and the denominator of which is 360.
All dividends on the Convertible Preferred Stock, including Additional
Dividends, to the extent accrued, shall be cumulative, whether or not earned or
declared, on a daily basis from the Issue Date or, in the case of additional
shares of Convertible Preferred Stock issued in payment of a dividend, from the
date of issuance of such additional shares of Convertible Preferred Stock, and
shall be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year (each a "Dividend Payment Date"), commencing on June
30, 1997 to holders of record on the March 15, June 15, September 15 and
December 15 immediately preceding the relevant Dividend Payment Date. Any
dividend on the Convertible Preferred Stock payable pursuant to this paragraph
(c)(i) on or prior to March 31, 1999 shall be, at the option of the Company,
payable (1) in cash or (2) through the issuance of a number of additional shares
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(rounded to the nearest whole share) of Convertible Preferred Stock (the
"Additional Shares") equal to the dividend amount divided by the Liquidation
Preference of such Additional Shares. With respect to dividends accrued after
March 31, 1999, all dividends shall be payable in cash; provided, however, that
to the extent and for so long as the Company is prohibited by the terms of any
of its indebtedness then outstanding or by the terms of the Series 3 Preferred
Stock of the Company or any agreement or instrument to which the Company is then
subject, from paying cash dividends on the Convertible Preferred Stock, such
dividends will accrue on each share at the rate per annum equal to 8 3/4% of the
Liquidation Preference per share (instead of the 7 1/4% rate set forth in the
first paragraph of this paragraph (c)(i)) (together with any Additional
Dividends then payable, which for purposes of this paragraph shall be payable at
a rate of 0.50% over and above the 8 3/4% rate) payable through the issuance of
a number of Additional Shares (rounded to the nearest whole share) equal to the
dividend amount on such share divided by the Liquidation Preference of such
Additional Shares on the relevant Dividend Payment Date. Except as provided
herein, accrued and unpaid dividends, if any, will not bear interest or bear
dividends thereon.
(ii) All dividends paid with respect to shares of the Convertible Preferred
Stock pursuant to paragraph (c)(i) shall be paid pro rata to the holders
entitled thereto.
(iii) No full dividends may be declared or paid or set apart for the payment
of dividends by the Company on any Parity Stock for any period unless full
cumulative dividends in respect of each Dividend Period ending on or before such
period shall have been or contemporaneously are declared and paid (or are deemed
declared and paid) in full or declared and, if payable in cash, a sum in cash
sufficient for such payment set apart for such payment on the Convertible
Preferred Stock. If full dividends are not so paid, the Convertible Preferred
Stock will share dividends pro rata with the Parity Stock.
(iv) The Company will not (A) declare, pay or set apart funds for the payment
of any dividend or other distribution with respect to any Junior Stock or (B)
redeem, purchase or otherwise acquire for consideration any Junior Stock through
a sinking fund or otherwise, unless (1) all accrued and unpaid dividends with
respect to the Convertible Preferred Stock and any Parity Stock at the time such
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dividends are payable have been paid or funds have been set apart for payment of
such dividends and (2) sufficient funds have been paid or set apart for the
payment of the dividend for the current dividend period with respect to the
Convertible Preferred Stock and any Parity Stock. As used herein, the term
"dividend" does not include dividends payable solely in shares of Junior Stock
on Junior Stock or in options, warrants or rights to holders of Junior Stock to
subscribe or purchase any Junior Stock.
(v) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption may be declared and paid at
any time, without reference to any regular Dividend Payment Date, to holders of
record on such date, not more than 45 days prior to the payment thereof, as may
be fixed by the Board of Directors of the Company.
(vi) Dividends payable on the Convertible Preferred Stock for any period
other than a Dividend Period shall be computed on the basis of a 360-day
consisting year of twelve 30-day months and the actual number of days elapsed in
the period for which payable. Dividends payable on the Convertible Preferred
Stock for a full Dividend Period will be computed by dividing the per annum
dividend rate by four.
(vii) Certificates of Common Stock relating to Convertible Preferred Stock
surrendered for conversion by a registered Holder during the period from the
close of business on any regular record date next preceding any Dividend Payment
Date to the opening of business on such Dividend Payment Date (except
Convertible Preferred Shares called for redemption on a Redemption Date within
such period) must be accompanied by payment in cash of an amount equal to the
accrued but unpaid dividends thereon which such registered Holder is to receive
on such Dividend Payment Date with respect to the Convertible Preferred Stock so
surrendered.
(d) Liquidation Preference. (i) Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, holders of Convertible
Preferred Stock will be entitled to be paid, out of the assets of the Company
available for distribution to its stockholders, the Liquidation Preference of
the outstanding shares of Convertible Preferred Stock, plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends
6
(whether or not earned or declared and including Additional Dividends, if any,)
thereon to the date fixed for liquidation, dissolution or winding-up (including
an amount equal to a prorated dividend for the period from the last Dividend
Payment Date to the date fixed for liquidation, dissolution or winding-up that
would have been payable had the Convertible Preferred Stock been the subject of
an Optional Redemption on such date) before any distribution is made on any
Junior Stock. If, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the amounts payable with respect to the Convertible
Preferred Stock and all Parity Stock are not paid in full, the Convertible
Preferred Stock and the Parity Stock will share equally and ratably (in
proportion to the respective amounts that would be payable on such shares of
Convertible Preferred Stock and the Parity Stock, respectively, if all amounts
payable thereon had been paid in full) in any distribution of assets of the
Company to which each is entitled. After payment of the full amount of the
Liquidation Preference of the outstanding shares of Convertible Preferred Stock
(and, if applicable, an amount equal to a prorated dividend), the holders of
shares of Convertible Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company.
(ii) For the purposes of this paragraph (d), neither the 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
other entities shall be deemed to be a liquidation, dissolution or winding-up of
the Company.
(e) Redemption. (i) Optional Redemption. (A) The Convertible Preferred Stock
shall not be redeemable prior to April 3, 2000. On or after April 3, 2000, each
share of the Convertible Preferred Stock may be redeemed (subject to the legal
availability of funds therefor) at any time, in whole or in part, at the option
of the Company, at the redemption prices (expressed as a percentage of the
Liquidation Preference of such share) set forth below, plus, without
duplication, an amount in cash equal to all accrued and unpaid Liquidated
Damages and all accrued and unpaid dividends to the date fixed for redemption
(the "Optional Redemption Date") (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date immediately
prior to the Optional Redemption Date) (the
7
"Optional Redemption Price"). Notwithstanding the foregoing, prior to April 1,
2002, the Company shall only have the option to redeem shares of Convertible
Preferred Stock if, during the period of 30 consecutive Trading Days ending on
the Trading Day immediately preceding the date that the Redemption Notice is
mailed to holders, the Closing Bid Price for the Common Stock exceeded 150% of
the Conversion Price effective on the date of such Redemption Notice for at
least 20 of such Trading Days. If redeemed during the 12-month period beginning
April 1 of each of the years set forth below (or in the case of the year 2000,
April 3), the Optional Redemption Price per share shall be the applicable
percentage of the Liquidation Preference of such share set forth below plus,
without duplication, in each case, an amount in cash equal to all accrued and
unpaid Liquidated Damages and all accrued and unpaid dividends (including an
amount equal to a prorated dividend from the immediately preceding Dividend
Payment Date to the Optional Redemption Date), if any, to the Optional
Redemption Date:
Year in which redemption occurs Percentage
------------------------------- ----------
2000 . . . . . . . . . . . . . 104.83%
2001 . . . . . . . . . . . . . 104.03%
2002 . . . . . . . . . . . . . 103.22%
2003 . . . . . . . . . . . . . 102.42%
2004 . . . . . . . . . . . . . 101.61%
2005 . . . . . . . . . . . . . 100.81%
2006 . . . . . . . . . . . . . 100.00%
(B) In the event of a redemption of only a portion of the then outstanding
shares of Convertible Preferred Stock, the Company shall effect such redemption
on a pro rata basis, except that the Company may redeem all of the shares held
by holders of fewer than 100 shares (or all of the shares held by holders who
would hold less than 100 shares as a result of such redemption), as may be
determined by the Company.
(ii) Mandatory Redemption. Each share of the Convertible Preferred Stock (if
not earlier redeemed or converted) shall be subject to mandatory redemption in
whole (to the extent of lawfully available funds therefor) on March 31, 2007
(the "Mandatory Redemption Date") at a price equal to 100% of the Liquidation
Preference of such share, plus, without duplication, all accrued and unpaid
Liquidated Damages and accrued and unpaid dividends thereon (including
8
an amount equal to a prorated dividend thereon from the immediately preceding
Dividend Payment Date to the Mandatory Redemption Date), if any, to the
Mandatory Redemption Date (the "Mandatory Redemption Price").
(iii) Procedure for Redemption. (A) On and after the Optional Redemption Date
or the Mandatory Redemption Date, as the case may be (the "Redemption Date"),
unless the Company defaults in the payment of the applicable redemption price,
dividends will cease to accumulate on shares of Convertible Preferred Stock
called for redemption and all rights of holders of such shares will terminate
except for the right to receive the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be, without interest; provided, however, that
if a notice of redemption shall have been given as provided in paragraph
(iii)(B) and the funds necessary for redemption (including an amount in respect
of all dividends that will accrue to the Redemption Date) shall have been
segregated and irrevocably set apart by the Company, in trust for the benefit of
the holders of the shares called for redemption, then dividends shall cease to
accumulate on the Redemption Date on the shares to be redeemed and, at the close
of business on the day on which such funds are segregated and set apart, the
holders of the shares to be redeemed shall, with respect to the shares to be
redeemed, cease to be stockholders of the Company and shall be entitled only to
receive the Optional Redemption Price or the Mandatory Redemption Price, as the
case may be, for such shares without interest from the Redemption Date.
(B) With respect to a redemption pursuant to paragraph (e)(i) or (e)(ii), the
Company will send a written notice of redemption by first class mail to each
holder of record of shares of Convertible Preferred Stock, not fewer than 15
days nor more than 60 days prior to the Redemption Date at its registered
address (the "Redemption Notice"); provided, however, that no failure to give
such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Convertible Preferred Stock to be
redeemed except as to the holder or holders to whom the Company has failed to
give said notice or except as to the holder or holders whose notice was
defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i) or (e)(ii)
hereof;
9
(2) the Optional Redemption Price or the Mandatory Redemption Price, as the
case may be;
(3) whether all or less than all the outstanding shares of the Convertible
Preferred Stock are to be redeemed and the total number of shares of the
Convertible Preferred Stock being redeemed;
(4) the Redemption Date;
(5) that the holder is to surrender to the Company, in the manner, at the
place or places and at the price designated, his certificate or certificates
representing the shares of Convertible Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Convertible Preferred Stock to be
redeemed shall cease to accumulate on such Redemption Date unless the Company
defaults in the payment of the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be.
(C) Each holder of Convertible Preferred Stock shall surrender the
certificate or certificates representing such shares of Convertible Preferred
Stock to the Company, duly endorsed (or otherwise in proper form for transfer,
as determined by the Company), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full Optional Redemption Price
or Mandatory Redemption Price, as the case may be, for such shares shall be
payable in cash to the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. In the event that less than all of the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(f) Voting Rights. (i) The holders of Convertible Preferred Stock, except as
otherwise required under Delaware law or as set forth in paragraphs (ii) and
(iii) below, shall not be entitled or permitted to vote on any matter required
or permitted to be voted upon by the stockholders of the Company.
(ii) (A) If (1) dividends on the Convertible Preferred Stock are in arrears
and unpaid for six or more Dividend Periods (whether or not consecutive) (a
"Dividend
10
Default"); or (2) the Company fails to redeem the Convertible Preferred Stock on
March 31, 2007, or fails to otherwise discharge any redemption obligation with
respect to the Convertible Preferred Stock, then the number of directors
constituting the Board of Directors of the Company will be increased by two and
the Holders of the then outstanding shares of Convertible Preferred Stock
(together with the holders of Parity Stock upon which like rights have been
conferred and are exercisable), voting separately and as a class, shall have the
right and power to elect such two additional directors. Each such event
described in clauses (1) or (2) above is a "Voting Rights Triggering Event". A
Voting Rights Triggering Event shall not be deemed to have occurred if at the
time of such event there are less than 200,000 shares of Convertible Preferred
Stock then outstanding.
(B) The voting rights set forth in subparagraph (f)(ii)(A) above will
continue until such time as (x) in the case of a Dividend Default, all dividends
in arrears on the Convertible Preferred Stock are paid in full in cash, (y) in
all other cases, any failure, breach or default giving rise to such Voting
Rights Triggering Event is remedied or waived by the Holders of at least
two-thirds of the shares of Convertible Preferred Stock then outstanding or (z)
at any time there are less than 200,000 shares of Convertible Preferred Stock
outstanding, at which time the term of any directors elected pursuant to the
provisions of subparagraph (f)(ii)(A) above shall terminate and the number of
directors constituting the Board of Directors shall be decreased by two (until
the occurrence of any subsequent Voting Rights Triggering Event). At any time
after voting power to elect directors shall have become vested and be continuing
in the holders of Convertible Preferred Stock (together with the holders of
Parity Stock upon which like rights have been conferred and are exercisable)
pursuant to subparagraph (f)(ii)(A) hereof, or if vacancies shall exist in the
offices of directors elected by such holders, a proper officer of the Company
may, and upon the written request of the holders of record of at least 25% of
the shares of Convertible Preferred Stock then outstanding or the holders of 25%
of the shares of Parity Stock then outstanding upon which like rights have been
confirmed and are exercisable addressed to the secretary of the Company shall,
call a special meeting of the Holders of Convertible Preferred Stock and the
holders of such Parity Stock for the purpose of electing the directors which
such holders are entitled to elect pursuant to the terms hereof;
11
provided, however, that no such special meeting shall be called if the next
annual meeting of stockholders of the Company is to be held within 60 days after
the voting power to elect directors shall have become vested, in which case such
meeting shall be deemed to have been called for such next annual meeting. If
such meeting shall not be called by a proper officer of the Company within 20
days after personal service to the secretary of the Company at its principal
executive offices, then the Holders of record of at least 25% of the outstanding
shares of Convertible Preferred Stock or the holders of 25% of the shares of
Parity Stock upon which like rights have been confirmed and are exercisable may
designate in writing one of their members to call such meeting at the expense of
the Company, and such meeting may be called by the person so designated upon the
notice required for the annual meetings of stockholders of the Company and shall
be held at the place for holding the annual meetings of stockholders. Any holder
of Convertible Preferred Stock or such Parity Stock so designated shall have,
and the Company shall provide, access to the lists of holders of Convertible
Preferred Stock and the holders of such Parity Stock to be called pursuant to
the provisions hereof. If no special meeting of the Holders of Convertible
Preferred Stock and the holders of such Parity Stock is called as provided in
this paragraph (f)(ii), then such meeting shall be deemed to have been called
for the next annual meeting of stockholders of the Company or special meeting of
the holders of any other capital stock of the Company.
(C) At any meeting held for the purposes of electing directors at which the
Holders of Convertible Preferred Stock (together with the holders of Parity
Stock upon which like rights have been conferred and are exercisable) shall have
the right, voting together as a separate class, to elect directors as aforesaid,
the presence in person or by proxy of the holders of at least a majority in
voting power of the outstanding shares of Convertible Preferred Stock (and such
Parity Stock) shall be required to constitute a quorum thereof.
(D) Any vacancy occurring in the office of a director elected by the Holders
of Convertible Preferred Stock (and such Parity Stock) may be filled by the
remaining director elected by the Holders of Convertible Preferred Stock (and
such Parity Stock) unless and until such vacancy shall be filled by the Holders
of Convertible Preferred Stock (and such Parity Stock).
12
(iii) (A) So long as any shares of the Convertible Preferred Stock are
outstanding, the Company will not authorize, create or increase the authorized
amount of any class or series of Senior Stock without the affirmative vote or
consent of holders of at least two-thirds of the shares of Convertible Preferred
Stock then outstanding, voting or consenting, as the case may be, as one class,
given in person or by proxy, either in writing or by resolution adopted at an
annual or special meeting (except that no such vote or consent shall be required
for the issuance of additional shares of Series 3 Preferred Stock to be paid as
dividends on such Series 3 Preferred Stock pursuant to the terms of such Series
3 Preferred Stock).
(B) So long as any shares of the Convertible Preferred Stock are outstanding,
the Company will not amend this Certificate of Designation so as to affect
adversely the specified rights, preferences, privileges or voting rights of
Holders of shares of Convertible Preferred Stock or to authorize the issuance of
any additional shares of Convertible Preferred Stock (except to authorize the
issuance of additional shares of Convertible Preferred Stock to be paid as
dividends on the Convertible Preferred Stock, for which no consent shall be
necessary) without the affirmative vote or consent of Holders of at least
two-thirds of the issued and outstanding shares of Convertible Preferred Stock,
voting or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting.
(C) Except as set forth in paragraph (f)(iii)(A) or (B) above, (x) the
creation, authorization or issuance of any shares of any Junior Stock, Parity
Stock or Senior Stock, including the designation of a series of Convertible
Preferred Stock, or (y) the increase or decrease in the amount of authorized
Capital Stock of any class, including Preferred Stock, shall not require the
consent of Holders of Convertible Preferred Stock and shall not be deemed to
affect adversely the rights, preferences, privileges or voting rights of shares
of Convertible Preferred Stock.
(iv) In any case in which the Holders of Convertible Preferred Stock shall be
entitled to vote pursuant to this paragraph (f) or pursuant to Delaware law,
each Holder of Convertible Preferred Stock entitled to vote with respect to such
matters shall be entitled to one vote for each share of Convertible Preferred
Stock held.
13
(v) Except as required by law, the Holders of the Convertible Preferred Stock
will not be entitled to vote on any merger or consolidation involving the
Company or a sale of all or substantially all the assets of the Company.
(g) Conversion. (i) At any time after 60 days from the Issue Date, at the
option of the Holder thereof, any share of Convertible Preferred Stock may be
converted at the Liquidation Preference thereof into fully paid and
nonassessable Common Stock (calculated as to each conversion to the nearest
1/100 of a share), at the Conversion Price, determined as hereinafter provided,
in effect at the time of conversion. Such conversion right shall expire at the
close of business on the Mandatory Redemption Date. In case a share of
Convertible Preferred Stock is called for optional redemption, such conversion
right in respect of the share of Convertible Preferred Stock so called shall
expire at the close of business on the applicable Optional Redemption Date,
unless the Company defaults in making the payment due upon redemption.
The price at which Common Stock shall be delivered upon conversion (herein
called the "Conversion Price") shall be initially $23.46 per share of Common
Stock. The Conversion Price shall be adjusted in certain instances as provided
in paragraph (g)(iv) and paragraph (g)(v).
(ii) In order to exercise the conversion privilege, the Holder of any share
of Convertible Preferred Stock to be converted shall surrender the certificate
for such share of Convertible Preferred Stock, duly endorsed or assigned to the
Company or in blank, at the office of the Transfer Agent or at any office or
agency of the Company maintained for that purpose, accompanied by written notice
to the Company in the form of Exhibit B that the Holder elects to convert such
share of Convertible Preferred Stock or, if fewer than all of the shares of
Convertible Preferred Stock represented by a single share certificate are to be
converted, the number of shares represented thereby to be converted. Except as
provided in paragraph (c)(viii), no payment or adjustment shall be made upon any
conversion on account of any dividends accrued on the shares of Convertible
Preferred Stock surrendered for conversion or on account of any dividends on the
Common Stock issued upon conversion. Such notice shall also contain the office
or the address to which the Company should deliver shares of Common Stock
issuable upon conversion (and any other payments or certificates related
thereto). Except as
14
provided in paragraph (c)(viii), in no event shall the Company be obligated to
pay any converting Holder any unpaid dividend, whether or not in arrears, on
converted shares or any dividends on the shares of Common Stock issued upon such
conversion.
Shares of Convertible Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
shares of Convertible Preferred Stock for conversion in accordance with the
foregoing provisions, and at such time the rights of the Holders of such shares
of Convertible Preferred Stock as Holders shall cease, and the person or persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall issue and shall deliver to such office or agency as the converting Holder
shall have designated in its written notice to the Company a certificate or
certificates for the number of full Common Stock issuable upon conversion,
together with payment in lieu of any fraction of a share, as provided in
paragraph (g)(iii) hereof.
In the case of any conversion of fewer than all the shares of Convertible
Preferred Stock evidenced by a certificate, upon such conversion the Company
shall execute and the Transfer Agent shall authenticate and deliver to the
Holder thereof (at the address designated by such Holder), at the expense of the
Company, a new certificate or certificates representing the number of
unconverted shares of Convertible Preferred Stock.
(iii) No fractional Common Stock shall be issued upon the conversion of a
share of Convertible Preferred Stock. If more than one share of Convertible
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate shares of
Convertible Preferred Stock so surrendered. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any share of
Convertible Preferred Stock, the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the closing price
(as defined in paragraph (g)(iv)(7)) per share of Common Stock at the close of
business on the Business Day prior to the day of conversion.
15
(iv) The Conversion Price shall be adjusted from time to time by the Company
as follows:
(1) If the Company shall hereafter pay a dividend or make a distribution in
Common Stock to all holders of any outstanding class or series of Common Stock
of the Company, the Conversion Price in effect at the opening of business on the
date following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the Record Date
(as defined in paragraph (g)(iv)(7)) fixed for such determination and the
denominator shall be the sum of such number of outstanding 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 Record Date. If any dividend or distribution of the type
described in this paragraph (g)(iv)(i) is declared but not so paid or made, the
Conversion Price shall again be adjusted to the Conversion Price which would
then be in effect if such dividend or distribution had not been declared.
(2) If the Company shall offer or issue rights or warrants to all holders of
its outstanding Common Stock entitling them to subscribe for or purchase Common
Stock at a price per share less than the Current Market Price (as defined in
paragraph (g)(iv)(7)) on the Record Date fixed for the determination of
shareholders entitled to receive such rights or warrants, the Conversion Price
shall be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect at the opening of business on the
date after such Record Date by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on the
Record Date plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock subject to such
rights or warrants would purchase at such Current Market Price and of which the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date plus the total number of additional shares
of Common Stock subject to such
16
rights or warrants for subscription or purchase. Such adjustment shall become
effective immediately after the opening of business on the day following the
Record Date fixed for determination of shareholders entitled to purchase or
receive such rights or warrants. To the extent that shares of Common Stock are
not delivered pursuant to such rights or warrants, upon the expiration or
termination of such rights or warrants the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered. If such rights or warrants are not so issued, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in effect
if such date fixed for the determination of shareholders entitled to receive
such rights or warrants had not been fixed. In determining whether any rights or
warrants entitle the holders to subscribe for or purchase Common Stock at less
than such Current Market Price, and in determining the aggregate offering price
of such shares of Common Stock, there shall be taken into account any
consideration received for such rights or warrants, with the value of such
consideration, if other than cash, to be determined by the Board of Directors.
(3) If 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 proportionately reduced, and, conversely, if the
outstanding shares of Common Stock shall 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 proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(4) If the Company shall, by dividend or otherwise, distribute to all holders
of its shares of Common Stock shares of any class of capital stock of the
Company (other than any dividends or distributions
17
to which paragraph (g)(iv)(1) applies) or evidences of its indebtedness, cash
or other assets (including securities, but excluding any rights or warrants of a
type referred to in paragraph (g)(iv)(2) and excluding dividends and
distributions paid exclusively in cash and excluding any capital stock,
evidences of indebtedness, cash or assets distributed upon a merger or
consolidation to which paragraph (g)(v) applies) (the foregoing hereinafter in
this paragraph (g)(iv)(4) called the "Distributed Securities"), then, in each
such case, the Conversion Price shall be reduced so that the same shall be equal
to the price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the Record Date (as defined in
paragraph (g)(iv)(7)) with respect to such distribution by a fraction of which
the numerator shall be the Current Market Price (determined as provided in
paragraph (g)(iv)(7)) of the Common Stock on such date less the fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors) on such date
of the portion of the Distributed Securities so distributed applicable to one
share of Common Stock and the denominator shall be such Current Market Price,
such reduction to become effective immediately prior to the opening of business
on the day following the Record Date; provided, however, that, in the event the
then fair market value (as so determined) of the portion of the Distributed
Securities so distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price on the Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each holder of
Convertible Preferred Stock shall have the right to receive upon conversion of a
share of Convertible Preferred Stock (or any portion thereof) the amount of
Distributed Securities such holder would have received had such holder converted
such share of Convertible Preferred Stock (or portion thereof) immediately prior
to such Record Date. If such dividend or distribution is not so paid or made,
the Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such dividend or distribution had not been declared.
If the Board of Directors determines the fair market value of any distribution
for purposes of this paragraph (g)(iv)(4) by reference to the actual or when
issued trading market for any securities comprising all
18
or part of such distribution, it must in doing so consider the prices in such
market over the same period used in computing the Current Market Price pursuant
to paragraph (g)(iv)(7) to the extent possible.
Rights or warrants distributed by the Company to all holders of Common Stock
entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Dilution Trigger Event"): (i) are deemed to be transferred with such Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this paragraph (g)(iv)(4) (and no adjustment to the Conversion Price
under this paragraph (g)(iv)(4) shall be required) until the occurrence of the
earliest Dilution Trigger Event, whereupon such rights and warrants shall be
deemed to have been distributed and an appropriate adjustment to the Conversion
Price under this paragraph (g)(iv)(4) shall be made. If any such rights or
warrants, including any such existing rights or warrants distributed prior to
the date hereof, are subject to subsequent events, upon the occurrence of each
of which such rights or warrants shall become exercisable to purchase different
securities, evidences of indebtedness or other assets, then the occurrence of
each such event shall be deemed to be such date of issuance and record date with
respect to new rights or warrants (and a termination or expiration of the
existing rights or warrants without exercise by the holder thereof). In
addition, in the event of any distribution (or deemed distribution) of rights or
warrants, or any Dilution Trigger Event with respect thereto, that was counted
for purposes of calculating a distribution amount for which an adjustment to the
Conversion Price under this paragraph (g)(iv)(4) was made, (1) in the case of
any such rights or warrants which shall all have been redeemed or repurchased
without exercise by any holders thereof, the Conversion Price shall be
readjusted upon such final redemption or repurchase to give effect to such
distribution or Dilution Trigger Event, as the case may be, as though it were a
cash distribution, equal to the per share redemption or repurchase price
received by a holder or holders of Common Stock with respect to such rights or
19
warrants (assuming such holder had retained such rights or warrants), made to
all holders of Common Stock as of the date of such redemption or repurchase, and
(2) in the case of such rights or warrants which shall have expired or been
terminated without exercise by any holders thereof, the Conversion Price shall
be readjusted as if such rights and warrants had not been issued.
Notwithstanding any other provision of this paragraph (g)(iv)(4) to the
contrary, capital stock, rights, warrants, evidences of indebtedness, other
securities, cash or other assets (including, without limitation, any rights
distributed pursuant to any shareholder rights plan) shall be deemed not to have
been distributed for purposes of this paragraph (g)(iv)(4) if the Company makes
proper provision so that each holder of shares of Convertible Preferred Stock
who converts a share of Convertible Preferred Stock (or any portion thereof)
after the date fixed for determination of shareholders entitled to receive such
distribution shall be entitled to receive upon such conversion, in addition to
the Common Stock issuable upon such conversion, the amount and kind of such
distributions that such holder would have been entitled to receive if such
holder had, immediately prior to such determination date, converted such share
of Convertible Preferred Stock into Common Stock.
For purposes of this paragraph (g)(iv)(4) and paragraphs (g)(iv)(1) and (2),
any dividend or distribution to which this paragraph (g)(iv)(4) is applicable
that also includes Common Stock, or rights or warrants to subscribe for or
purchase Common Stock to which paragraph (g)(iv)(2) applies (or both), shall be
deemed instead to be (1) a dividend or distribution of the evidences of
indebtedness, cash, assets, shares of capital stock, rights or warrants other
than (A) such shares of Common Stock or (B) rights or warrants to which
paragraph (g)(iv)(2) applies (and any Conversion Price reduction required by
this paragraph (g)(iv)(4) with respect to such dividend or distribution shall
then be made) immediately followed by (2) a dividend or distribution of such
Common Stock or such rights or warrants (and any further Conversion Price
reduction required by paragraph (g)(iv)(1) and (2) with respect to such dividend
or distribution shall then be made), except that (1) the Record Date of such
20
dividend or distribution shall be substituted as "the Record Date fixed for
the determination of stockholders entitled to receive such dividend or other
distribution", "Record Date fixed for such determination" and "Record Date"
within the meaning of paragraph (g)(iv)(1) and as "the Record Date fixed for the
determination of shareholders entitled to receive such rights or warrants", "the
date fixed for the determination of the shareholders entitled to receive such
rights or warrants" and "such Record Date" within the meaning of paragraph
(g)(iv)(2), and (2) any share of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of paragraph (g)(iv)(1).
(5) If the Company shall, by dividend or otherwise, distribute to all holders
of its Common Stock cash (excluding any cash that is distributed upon a merger
or consolidation to which paragraph (g)(v) applies or as part of a distribution
referred to in paragraph (g)(iv)) in an aggregate amount that, combined together
with (1) the aggregate amount of any other such distributions to all holders of
its Common Stock made exclusively in cash within the 12 months preceding the
date of payment of such distribution, and in respect of which no adjustment
pursuant to this paragraph (g)(iv)(5) has been made, and (2) the aggregate of
any cash plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors) of consideration payable in respect of any tender offer by
the Company or a Subsidiary of the Company for all or any portion of the Common
Stock concluded within the 12 months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to paragraph
(g)(iv)(4) has been made, exceeds 12.5% of the product of the Current Market
Price (determined as provided in paragraph (g)(iv)(7)) on the Record Date with
respect to such distribution times the number of shares of Common Stock
outstanding on such date, then, and in each such case, immediately after the
close of business on such date, the Conversion Price shall be reduced so that
the same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on
21
such Record Date by a fraction (i) the numerator of which shall be equal to
the Current Market Price on the Record Date less an amount equal to the quotient
of (x) the excess of such combined amount over such 12.5% amount divided by (y)
the number of shares of Common Stock outstanding on the Record Date and (ii) the
denominator of which shall be equal to the Current Market Price on such Record
Date; provided, however, that, if the portion of the cash so distributed
applicable to one share of Common Stock is equal to or greater than the Current
Market Price of the Common Stock on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each holder of Convertible
Preferred Stock shall have the right to receive upon conversion of a share of
Convertible Preferred Stock (or any portion thereof) the amount of cash such
holder would have received had such holder converted such share of Convertible
Preferred Stock (or portion thereof) immediately prior to such Record Date. If
such dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect if
such dividend or distribution had not been declared.
(6) If a tender or exchange offer made by the Company or any of its
Subsidiaries for all or any portion of the Common Stock expires and such tender
or exchange offer (as amended upon the expiration thereof) requires the payment
to shareholders (based on the acceptance (up to any maximum specified in the
terms of the tender offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) that, combined together with (1) the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors), as of the expiration of such tender offer, of
consideration payable in respect of any other tender offers, by the Company or
any of its Subsidiaries for all or any portion of the Common Stock expiring
within the 12 months preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to this paragraph (g)(iv)(6) has been
made and (2) the aggregate amount of any distributions to all holders of
22
the Common Stock made exclusively in cash within 12 months preceding the
expiration of such tender offer and in respect of which no adjustment pursuant
to paragraph (g)(iv)(5) has been made, exceeds 12.5% of the product of the
Current Market Price (determined as provided in paragraph (g)(iv)(7)) as of the
last time (the "Expiration Time") tenders could have been made pursuant to such
tender offer (as it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) at the Expiration Time, then, and in
each such case, immediately prior to the opening of business on the day after
the date of the Expiration Time, the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the date of the Expiration
Time by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding (including any tendered shares) at the Expiration Time
multiplied by the Current Market Price of the Common Stock on the Trading Day
next succeeding the Expiration Time and the denominator shall be the sum of (x)
the fair market value (determined as aforesaid) of the aggregate consideration
payable to shareholders based on the acceptance (up to any maximum specified in
the terms of the tender offer) of all shares validly tendered and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the product of the
number of shares of Common Stock outstanding (less any Purchased Shares) at the
Expiration Time and the Current Market Price of the Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction (if any) to become
effective immediately prior to the opening of business on the day following the
Expiration Time. If the Company is obligated to purchase shares pursuant to any
such tender offer, but the Company is permanently prevented by applicable law
from effecting any such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such tender offer had not been made. If the application of
this paragraph (g)(iv)(6) to any tender offer would result in an increase in the
Conversion Price, no adjustment shall be made for such tender offer under this
paragraph (g)(iv)(6).
23
(7) For purposes of this paragraph (g)(iv), the following terms shall have
the meaning indicated:
"closing price" with respect to any securities on any day means the closing
price on such day or, if no such sale takes place on such day, the average of
the reported high and low prices on such day, in each case on The Nasdaq
National Market or the New York Stock Exchange, as applicable, or, if such
security is not listed or admitted to trading on such national market or
exchange, on the principal national securities exchange or quotation system on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the average of the high and low prices of such security on the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated or a similar generally accepted reporting service,
or, if not so available, in such manner as furnished by any New York Stock
Exchange member firm selected from time to time by the Board of Directors for
that purpose, or a price determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors.
"Current Market Price" means the average of the daily closing prices per share
of Common Stock for the 10 consecutive trading days immediately prior to the
date in question; provided, however, that (A) if the "ex" date (as hereinafter
defined) for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
paragraphs (g)(iv)(1), (2), (3), (4), (5) or (6) occurs during such 10
consecutive trading days, the closing price for each trading day prior to the
"ex" date for such other event shall be adjusted by multiplying such closing
price by the same fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, (B) if the "ex" date for any event
(other than the issuance or distribution requiring such computation) that
requires an adjustment to the Conversion Price pursuant to paragraphs
(g)(iv)(1), (2), (3), (4), (5) or (6) occurs on or after the "ex" date for the
issuance or distribution requiring such computation and prior to the day in
question, the closing price for each trading day on and after the
24
"ex" date for such other event shall be adjusted by multiplying such closing
price by the reciprocal of the fraction by which the Conversion Price is so
required to be adjusted as a result of such other event and (C) if the "ex" date
for the issuance or distribution requiring such computation is prior to the day
in question, after taking into account any adjustment required pursuant to
clause (A) or (B) of this proviso, the closing price for each trading day on or
after such "ex" date shall be adjusted by adding thereto the amount of any cash
and the fair market value (as determined by the Board of Directors in a manner
consistent with any determination of such value for purposes of paragraphs
(g)(iv)(4) or (5), whose determination shall be conclusive and described in a
resolution of the Board of Directors) of the evidence of indebtedness, shares of
capital stock or assets being distributed applicable to one Common Stock as of
the close of business on the day before such "ex" date. For purposes of any
computation under paragraph (g)(vi), the Current Market Price on any date shall
be deemed to be the average of the daily closing prices per share of Common
Stock for such day and the next two succeeding trading days; provided, however,
that, if the "ex" date for any event (other than the tender offer requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
paragraph (g)(iv)(1), (2), (3), (4), (5) or (6) occurs on or after the
Expiration Time for the tender or exchange offer requiring such computation and
prior to the day in question, the closing price for each trading day on and
after the "ex" date for such other event shall be adjusted by multiplying such
closing price by the reciprocal of the fraction by which the Conversion Price is
so required to be adjusted as a result of such other event. For purposes of this
paragraph, the term "ex" date (I) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
on the relevant exchange or in the relevant market from which the closing price
was obtained without the right to receive such issuance or distribution, (II)
when used with respect to any subdivision or combination of Common Stock, means
the first date on which the Common Stock trades regular way on such exchange or
in such market after the time at which such subdivision or combination becomes
effective and (III) when used with respect to any tender or exchange offer means
the first date on which the Common
25
Stock trades regular way on such exchange or in such market after the
Expiration Time of such offer. Notwithstanding the foregoing, whenever
successive adjustments to the Conversion Price are called for pursuant to this
paragraph (g)(iv), such adjustments shall be made to the Current Market Price as
may be necessary or appropriate to effectuate the intent of this paragraph
(g)(iv) and to avoid unjust or inequitable results, as determined in good faith
by the Board of Directors.
"fair market value" shall mean the amount which a willing buyer would pay a
willing seller in an arm's-length transaction.
"Record Date" shall mean, with respect to any dividend, distribution or other
transaction or event in which the holders of Common Stock have the right to
receive any cash, securities or other property or in which the Common Stock (or
other applicable security) is exchanged for or converted into any combination of
cash, securities or other property, the date fixed for determination of
shareholders entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by statute, contract or
otherwise).
(8) No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this paragraph
(g)(iv)(8) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this paragraph
(g)(iv)(8) shall be made by the Company and shall be made to the nearest cent or
to the nearest one-hundredth of a share, as the case may be. No adjustment need
be made for a change in the par value or no par value of the Common Stock.
(9) Whenever the Conversion Price is adjusted as herein provided, the Company
shall promptly file with the Transfer Agent an Officers' Certificate setting
forth the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Promptly after delivery of
such certificate, the Company shall prepare a notice of such adjustment of the
Conversion Price setting forth the
26
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion Price
to each holder of Convertible Preferred Stock at such holder's last address
appearing on the register of holders maintained for that purpose within 20 days
of the effective date of such adjustment. Failure to deliver such notice shall
not affect the legality or validity of any such adjustment.
(10) In any case in which this paragraph (g)(iv) provides that an adjustment
shall become effective immediately after a Record Date for an event, the Company
may defer until the occurrence of such event issuing to the holder of any share
of Convertible Preferred Stock converted after such Record Date and before the
occurrence of such event the additional Common Stock issuable upon such
conversion by reason of the adjustment required by such event over and above the
Common Stock issuable upon such conversion before giving effect to such
adjustment.
(11) For purposes of this paragraph (g)(iv), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of Common Stock. The Company shall not pay any
dividend or make any distribution on Common Stock held in the treasury of the
Company.
(v) In case of any consolidation of the Company with, or merger of the
Company into, any other corporation, or in case of any merger of another
corporation into the Company (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company), or in case of any conveyance or transfer of the
properties and assets of the Company substantially as an entirety, the holder of
each share of Convertible Preferred Stock then outstanding shall have the right
thereafter, during the period such Convertible Preferred Stock shall be
convertible as specified in paragraph (g)(i), to convert such share of
Convertible Preferred Stock only into the kind and amount of securities, cash
and other property receivable upon such consolidation, merger, conveyance or
transfer by a holder of the number of
27
shares of Common Stock of the Company into which such share of Convertible
Preferred Stock might have been converted immediately prior to such
consolidation, merger, conveyance or transfer, assuming such holder of Common
Stock of the Company failed to exercise his rights of election, if any, as to
the kind or amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer (provided that, if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer is not the same for each share of
Common Stock of the Company in respect of which such rights of election shall
not have been exercised ("nonelecting share"), then for the purpose of this
paragraph (g)(v) the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, conveyance or transfer by each
nonelecting share shall be deemed to be the kind and amount so receivable per
share by a plurality of the nonelecting shares). Such securities shall provide
for adjustments which, for events subsequent to the effective date of the
triggering event, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this paragraph (g)(v). The above provisions of this
Section shall similarly apply to successive consolidations, mergers, conveyances
or transfers.
(vi) In case:
(1) the Company shall declare a dividend (or any other distribution) on its
Common Stock payable otherwise than in cash out of its earned surplus; or
(2) the Company shall authorize the granting to all holders of its Common
Stock of rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any other rights; or
(3) of any reclassification of the Common Stock of the Company (other than a
subdivision or combination of its outstanding Common Stock), or of any
consolidation or merger to which the Company is a party and for which approval
of any shareholders of the Company is required, or the sale or transfer of all
or substantially all the assets of the Company; or
28
(4) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company;
then the Company shall cause to be filed with the Transfer Agent and at each
office or agency maintained for the purpose of conversion of the Convertible
Preferred Stock, and shall cause to be mailed to all holders at their last
addresses as they shall appear in the Convertible Preferred Stock Register, at
least 20 days (or 10 days in any case specified in clause (1) or (2) above)
prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up. Failure to give the notice requested by
this Section or any defect therein shall not affect the legality or validity of
any dividend, distribution, right, warrant, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up, or the vote upon
any such action.
(vii) The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued shares of Common Stock (or
out of its authorized shares of Common Stock held in the treasury of the
Company), for the purpose of effecting the conversion of the Convertible
Preferred Stock, the full number of Common Stock then issuable upon the
conversion of all outstanding shares of Convertible Preferred Stock.
(viii) The Company will pay any and all document, stamp or similar issue or
transfer taxes that may be payable in respect of the issue or delivery of Common
Stock on conversion of the Convertible Preferred Stock pursuant hereto. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of shares of Common
Stock in a name other than that of the holder of the share of
29
Convertible Preferred Stock or the shares of Convertible Preferred Stock to be
converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such tax,
or has established to the satisfaction of the Company that such tax has been
paid.
(ix) (1) Notwithstanding any other provision in the preceding paragraphs to
the contrary, if any Change in Control occurs then, if the Company does not
elect to make a Change in Control Offer, the Conversion Price in effect shall be
adjusted immediately after such Change in Control as described below. In
addition, in the event of a Common Stock Change in Control (as defined in this
paragraph (g)(ix)), each share of the Convertible Preferred Stock shall be
convertible solely into common stock of the kind received by holders of Common
Stock as the result of such Common Stock Change in Control. For purposes of
calculating any adjustment to be made pursuant to this paragraph in the event of
a Change in Control, immediately after such Change in Control:
(A) in the case of a Non-Stock Change in Control (as defined in this
paragraph (g)(ix)), the Conversion Price shall thereupon become the lower of (x)
the Conversion Price in effect immediately prior to such Non-Stock Change in
Control, but after giving effect to any other prior adjustments, and (y) the
result obtained by multiplying the greater of the Applicable Price (as defined
in this paragraph (g)(ix)) or the then applicable Reference Market Price (as
defined in this paragraph (g)(ix)) by a fraction of which the numerator shall be
$100.00 and the denominator shall be the then current Optional Redemption Price
per share; and
(B) in the case of a Common Stock Change in Control, the Conversion Price in
effect immediately prior to such Common Stock Change in Control, but after
giving effect to any prior adjustments, shall thereupon be adjusted by
multiplying such Conversion Price by a fraction, of which the numerator shall be
the Purchaser Stock Price (as defined in this paragraph (g)(ix)) and the
denominator shall be the Applicable Price; provided, however, that in the event
of a Common Stock Change in Control in which (x) 100% of the value of the
consideration received by a holder of Common Stock is common stock of the
successor, acquiror, or other third
30
party (and cash, if any, is paid with respect to any fractional interests in
such common stock resulting from such Common Stock Change in Control) and (y)
all of the Common Stock will have been exchanged for, converted into, or
acquired for, common stock (and cash with respect to fractional interests) of
the successor, acquiror or other third party, the Conversion Price in effect
immediately prior to such Common Stock Change in Control shall thereupon be
adjusted by multiplying such Conversion Price by a fraction, of which the
numerator shall be one (1) and the denominator shall be the number of shares of
common stock of the successor, acquiror, or other third party received by a
holder of one share of Common Stock as a result of such Common Stock Change in
Control.
(3) For purposes of this paragraph (ix), the following terms shall have the
meanings indicated:
"Applicable Price" means (i) in the event of a Non-Stock Change in Control in
which the holders of the Common Stock receive only cash, the amount of cash
received by the holder of one share of Common Stock and (ii) in the event of any
other Non-Stock Change in Control or any Common Stock Change in Control, the
average of the Closing Bid Prices for the Common Stock during the ten Trading
Days prior to and including the record date for the determination of the holders
of Common Stock entitled to receive cash, securities, property or other assets
in connection with such Non-Stock Change in Control or Common Stock Change in
Control or, if there is no such record date, the date upon which the holders of
the Common Stock shall have the right to receive such cash, securities, property
or other assets, in each case, as adjusted in good faith by the Board of
Directors to appropriately reflect any of the events referred to in paragraph
(g)(iv)(1) through (6).
"Common Stock Change in Control" means any Change in Control in which more
than 50% of the value (as determined in good faith by the Board of Directors of
the Company) of the consideration received by holders of Common Stock consists
of common stock that for each of the ten consecutive Trading Days referred to in
the preceding paragraph has been admitted for listing or admitted for listing
subject to notice of issuance on a national securities exchange or quoted on The
Nasdaq
31
National Market; provided, however, that a Change in Control shall not be a
Common Stock Change in Control unless either (i) the Company continues to exist
after the occurrence of such Change in Control and the outstanding shares of
Convertible Preferred Stock continue to exist as outstanding shares of
Convertible Preferred Stock, or (ii) not later than the occurrence of such
Change in Control, the outstanding shares of Convertible Preferred Stock are
converted into or exchanged for shares of convertible preferred stock of a
corporation succeeding to the business of the Company, which convertible
preferred stock has powers, preferences and relative, participating, optional or
other rights, and qualifications, limitations and restrictions, substantially
similar to those of the Convertible Preferred Stock.
"Non-Stock Change in Control" means any Change in Control other than a Common
Stock Change in Control.
"Purchaser Stock Price" means, with respect to any Common Stock Change in
Control, the product of (i) the number of shares of common stock received in
such Common Stock Change of Control for each share of Common Stock, and (ii) the
average of the per share Closing Prices for the common stock received in such
Common Stock Change in Control for the ten consecutive Trading Days prior to and
including the record date for the determination of the holders of Common Stock
entitled to receive such common stock, or if there is no such record date, the
date upon which the holders of the Common Stock shall have the right to receive
such common stock, in each case, as adjusted in good faith by the Board of
Directors to appropriately reflect any of the events referred to in paragraph
(g)(iv)(1) through (6); provided, however, that if no such Closing Prices exist,
then the Purchaser Stock Price shall be set at a price determined in good faith
by the Board of Directors of the Company.
"Reference Market Price" shall initially mean $13.50 (which is an amount
equal to 66-2/3% of the reported last sale price for the Common Stock on The
Nasdaq National Market on March 25, 1997), and in the event of any adjustment to
the conversion prices other than as a result of a Change in Control, the
Reference Market Price shall also be adjusted so that the ratio of the Reference
Market Price to the Conversion Price
32
after giving effect to any such adjustment shall always be the same as the
ratio of $13.50 to the initial Conversion Price set forth in paragraph (g)(i).
(h) Change in Control. (i) Upon the occurrence of a Change of Control (the
date of such occurrence being the "Change in Control Date"), the Company shall
be obligated to (1) purchase all or a portion of each holder's Convertible
Preferred Stock in cash pursuant to the offer described in paragraph (h)(iii)
(the "Change of Control Offer") at a purchase price equal to 100% of the
Liquidation Preference, plus, without duplication, all accrued and unpaid
Liquidated Damages and all accrued and unpaid dividends, if any, to the Change
of Control Payment Date, including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to the
Change of Control Payment Date to the Change of Control Payment Date or (2)
adjust the conversion price as provided under paragraph (g)(ix). Notwithstanding
the foregoing, the Company shall, prior to electing to make a Change of Control
Offer, make an offer to redeem all outstanding shares of Series 3 Preferred
Stock.
(ii) Prior to the mailing of the notice referred to in paragraph (h)(iii),
but in any event within 15 days following the date on which the Company knows or
reasonably should have known that a Change in Control has occurred, the Company
covenants that it shall promptly determine if the purchase of the Convertible
Preferred Stock would violate or constitute a default under the Indenture or
other indebtedness of the Company.
(iii) Within 15 days following the date on which the Company knows or
reasonably should have known that a Change in Control has occurred, the Company
must send, by first-class mail, postage prepaid, a notice to each holder of
Convertible Preferred Stock. Such notice shall state whether the Change of
Control Offer would be permitted under the Indenture or other indebtedness of
the Company, and if permitted, such notice shall contain all instructions and
materials necessary to enable such holders to tender Convertible Preferred Stock
pursuant to the Change of Control Offer. If the Change of Control Offer would be
permitted under the Indenture or other indebtedness of the Company, such notice
shall state:
(A) that a Change of Control has occurred, that the Change of Control Offer
is being made pursuant to
33
this paragraph (h) and that all Convertible Preferred Stock validly tendered
and not withdrawn will be accepted for payment;
(B) the purchase price (including the amount of accrued dividends, if any)
and the purchase date (which must be no earlier than 30 days nor later than 75
days from the date such notice is mailed, other than as may be required by law)
(the "Change of Control Payment Date");
(C) that any shares of Convertible Preferred Stock not tendered will continue
to accrue dividends;
(D) that, unless the Company defaults in making payment therefor, any share
of Convertible Preferred Stock accepted for payment pursuant to the Change of
Control Offer shall cease to accrue dividends after the Change of Control
Payment Date;
(E) that holders electing to have any shares of Convertible Preferred Stock
purchased pursuant to a Change of Control Offer will be required to surrender
such shares of Convertible Preferred Stock, properly endorsed for transfer,
together with such other customary documents as the Company and the Transfer
Agent may reasonably request to the Transfer Agent and registrar for the
Convertible Preferred Stock at the address specified in the notice prior to the
close of business on the Business Day prior to the Change of Control Payment
Date;
(F) that holders will be entitled to withdraw their election if the Company
receives, not later than five Business Days prior to the Change of Control
Payment Date, a telegram, a telex, facsimile transmission or letter setting
forth the name of the holder, the number of shares of Convertible Preferred
Stock the holder delivered for purchase and a statement that such holder is
withdrawing his election to have such shares of Convertible Preferred Stock
purchased;
(G) that holders whose shares of Convertible Preferred Stock are purchased
only in part will be issued a new certificate representing the unpurchased
shares of Convertible Preferred Stock; and
34
(H) the circumstances and relevant facts regarding such Change of Control.
If the Change of Control Offer would not be permitted under the Indenture or
other indebtedness of the Company, such notice shall state the Conversion Price
as adjusted pursuant to paragraph (g)(ix).
(iv) The Company will comply with any tender offer rules under the Exchange
Act which then may be applicable, including Rules 13e-4 and 14e-1, in connection
with any offer required to be made by the Company to repurchase the shares of
Convertible Preferred Stock as a result of a Change of Control. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of this Certificate of Designation, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Certificate of Designation by virtue
thereof.
(v) On the Change of Control Payment Date the Company shall (A) accept for
payment the shares of Convertible Preferred Stock validly tendered pursuant to
the Change of Control Offer, (B) pay to the holders of shares so accepted the
purchase price therefor in cash and (C) cancel and retire each surrendered
certificate. Unless the Company defaults in the payment for the shares of
Convertible Preferred Stock tendered pursuant to the Change of Control Offer,
dividends will cease to accrue with respect to the shares of Convertible
Preferred Stock tendered and all rights of holders of such tendered shares will
terminate, except for the right to receive payment therefor, on the Change of
Control Payment Date.
(vi) To accept the Change of Control Offer, the holder of a share of
Convertible Preferred Stock shall deliver, on or before the 10th day prior to
the Change of Control Payment Date, written notice to the Company (or an agent
designated by the Company for such purpose) of such holder's acceptance,
together with certificates evidencing the shares of Convertible Preferred Stock
with respect to which the Change of Control Offer is being accepted, duly
endorsed for transfer.
(i) Reissuance of Convertible Preferred Stock. Shares of Convertible
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall not be reissued as shares of
35
Convertible Preferred Stock and shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized and unissued
shares of Preferred Stock undesignated as to series and may be redesignated and
reissued as part of any series of Preferred Stock; provided, however, that so
long as any shares of Convertible Preferred Stock are outstanding, any issuance
of such shares must be in compliance with the terms hereof.
(j) Business Day. If any payment, redemption or exchange shall be required by
the terms hereof to be made on a day that is not a Business Day, such payment,
redemption or exchange shall be made on the immediately succeeding Business Day.
(k) Limitation on Mergers and Asset Sales. The Company may not consolidate
with or merge with or into, or convey, transfer or lease all or substantially
all its assets to, any person unless: (1) the successor, transferee or lessee
(if not the Company) is organized and existing under the laws of the United
States of America or any State thereof or the District of Columbia and the
Convertible Preferred Stock shall be converted into or exchanged for and shall
become shares of such successor, transferee or lessee, having in respect of such
successor, transferee or lessee substantially the same powers, preference and
relative participating, optional or other special rights and the qualifications,
limitations or restrictions thereon, that the Convertible Preferred Stock had
immediately prior to such transaction; and (2) the Company delivers to the
Transfer Agent an Officers' Certificate and an Opinion of Counsel stating that
such consolidation, merger or transfer complies with this Certificate of
Designation. The successor, transferee or lessee will be the successor company.
(l) Certificates. (i) Form and Dating. The Convertible Preferred Stock and
the Transfer Agent's certificate of authentication shall be substantially in the
form of Exhibit A, which is hereby incorporated in and expressly made a part of
this Certificate of Designation. The Convertible Preferred Stock certificate may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
Each Convertible Preferred Stock certificate shall be dated the date of its
authentication. The terms of the Convertible
36
Preferred Stock certificate set forth in Exhibit A are part of the terms of this
Certificate of Designation.
(A) Global Convertible Preferred Stock. The Convertible Preferred Stock sold
in reliance on Rule 144A shall be issued initially in the form of one or more
fully registered global certificates with the global securities legend and
restricted securities legend set forth in Exhibit A hereto (the "Global
Convertible Preferred Stock"), which shall be deposited on behalf of the
purchasers represented thereby with the Transfer Agent, at its New York office,
as custodian for DTC (or with such other custodian as DTC may direct), and
registered in the name of DTC or a nominee of DTC, duly executed by the Company
and authenticated by the Transfer Agent as hereinafter provided. The number of
shares of Convertible Preferred Stock represented by Global Convertible
Preferred Stock may from time to time be increased or decreased by adjustments
made on the records of the Transfer Agent and DTC or its nominee as hereinafter
provided.
(B) Book-Entry Provisions. In the event Global Convertible Preferred Stock is
deposited with or on behalf of DTC, the Company shall execute and the Transfer
Agent shall authenticate and deliver initially one or more Global Convertible
Preferred Stock certificates that (a) shall be registered in the name of DTC for
such Global Convertible Preferred Stock or the nominee of DTC and (b) shall be
delivered by the Transfer Agent to DTC or pursuant to DTC's instructions or held
by the Transfer Agent as custodian for DTC.
Members of, or participants in, DTC ("Agent Members") shall have no rights
under this Certificate of Designation with respect to any Global Convertible
Preferred Stock held on their behalf by DTC or by the Transfer Agent as the
custodian of DTC or under such Global Convertible Preferred Stock, and DTC may
be treated by the Company, the Transfer Agent and any agent of the Company or
the Transfer Agent as the absolute owner of such Global Convertible Preferred
Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Transfer Agent or any agent of the Company or the
Transfer Agent from giving effect to any written certification, proxy or other
authorization furnished by DTC or impair, as between DTC and its Agent Members,
the operation of customary practices of DTC governing the
37
exercise of the rights of a holder of a beneficial interest in any Global
Convertible Preferred Stock.
(C) Certificated Convertible Preferred Stock. Convertible Preferred Stock
initially sold to certain "accredited investors" (as defined in Rule 501(a)(1),
(2), (3), (4), (5), (6) or (7) under the Securities Act) or sold in offshore
transactions pursuant to Regulation S under the Securities Act will be issued in
fully registered certificated form ("Certificated Convertible Preferred Stock").
Except as provided in this paragraph (l)(i) or in paragraph (l)(iii), owners
of beneficial interests in Global Convertible Preferred Stock will not be
entitled to receive physical delivery of Certificated Convertible Preferred
Stock.
After a transfer of any Convertible Preferred Stock during the period of the
effectiveness of a Shelf Registration Statement with respect to such Convertible
Preferred Stock, all requirements pertaining to legends on such Convertible
Preferred Stock will cease to apply, the requirements requiring that any such
Convertible Preferred Stock issued to Holders be issued in global form will
cease to apply, and Certificated Convertible Preferred Stock without legends
will be available to the transferee of the Holder of such Convertible Preferred
Stock upon exchange of such transferring Holder's Convertible Preferred Stock or
directions to transfer such Holder's interest in the Global Convertible
Preferred Stock, as applicable.
(ii) Execution and Authentication. Two Officers shall sign the Convertible
Preferred Stock for the Company by manual or facsimile signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on the Convertible
Preferred Stock and may be in facsimile form.
If an Officer whose signature is on Convertible Preferred Stock no longer
holds that office at the time the Transfer Agent authenticates the Convertible
Preferred Stock, the Convertible Preferred Stock shall be valid nevertheless.
A Convertible Preferred Stock shall not be valid until an authorized
signatory of the Transfer Agent manually signs the certificate of authentication
on the Convertible Preferred Stock. The signature shall be conclusive evidence
38
that the Convertible Preferred Stock has been authenticated under this
Certificate of Designation.
The Transfer Agent shall authenticate and deliver 1,000,000 shares of
Convertible Preferred Stock for original issue upon a written order of the
Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. In addition, the Transfer
Agent shall authenticate and deliver, from time to time, Additional Shares for
original issue upon order of the Company signed by two Officers or by an Officer
or either an Assistant Treasurer or Assistant Secretary of the Company. Such
orders shall specify the number of shares of Convertible Preferred Stock to be
authenticated and the date on which the original issue of Convertible Preferred
Stock is to be authenticated.
The Transfer Agent may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Convertible Preferred Stock. Unless limited
by the terms of such appointment, an authenticating agent may authenticate
Convertible Preferred Stock whenever the Transfer Agent may do so. Each
reference in this Certificate of Designation to authentication by the Transfer
Agent includes authentication by such agent. An authenticating agent has the
same rights as the Transfer Agent or agent for service of notices and demands.
(iii) Transfer and Exchange. (A) Transfer and Exchange of Certificated
Convertible Preferred Stock. When Certificated Convertible Preferred Stock is
presented to the Transfer Agent with a request to register the transfer of such
Certificated Convertible Preferred Stock or to exchange such Certificated
Convertible Preferred Stock for an equal number of shares of Certificated
Convertible Preferred Stock of other authorized denominations, the Transfer
Agent shall register the transfer or make the exchange as requested if its
reasonable requirements for such transaction are met; provided, however, that
the Certificated Convertible Preferred Stock surrendered for transfer or
exchange:
(1) shall be duly endorsed or accompanied by a written instrument of transfer
in form reasonably satisfactory to the Company and the Transfer Agent, duly
executed by the Holder thereof or its attorney duly authorized in writing; and
39
(2) in the case of Transfer Restricted Securities that are Certificated
Convertible Preferred Stock, are being transferred or exchanged pursuant to an
effective registration statement under the Securities Act or pursuant to clause
(I), (II) or (III) below, and are accompanied by the following additional
information and documents, as applicable:
(I) if such Transfer Restricted Securities are being delivered to the
Transfer Agent by a Holder for registration in the name of such Holder, without
transfer, a certification from such Holder to that effect in substantially the
form of Exhibit C hereto; or
(II) if such Transfer Restricted Securities are being transferred to the
Company or to a "qualified institutional buyer" ("QIB") in accordance with Rule
144A under the Securities Act or pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the Securities Act, a
certification to that effect (in substantially the form of Exhibit C hereto); or
(III) if such Transfer Restricted Securities are being transferred to an
"accredited investor" as described in Rule 501(a)(1), (2), (3), (4), (5), (6) or
(7) under the Securities Act that is acquiring the Securities for its own
account, or for the account of such an accredited investor, in each case in a
minimum principal amount of $100,000 for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution in violation of
the Securities Act, or in reliance on another exemption from the registration
requirements of the Securities Act: a certification to that effect in
substantially the form of Exhibit C hereto, and if the Company or the Transfer
Agent so requests, evidence reasonably satisfactory to them as to the compliance
with the restrictions set forth in the legend set forth in paragraph
(l)(iii)(G)(1) below.
(B) Restrictions on Transfer of Certificated Convertible Preferred Stock for
a Beneficial Interest in Global Convertible Preferred Stock. Certificated
Convertible Preferred Stock may not be exchanged for a
40
beneficial interest in Global Convertible Preferred Stock except upon
satisfaction of the requirements set forth below. Upon receipt by the Transfer
Agent of Certificated Convertible Preferred Stock, duly endorsed or accompanied
by appropriate instruments of transfer, in form satisfactory to the Transfer
Agent, together with:
(1) if such Certificated Convertible Preferred Stock is a Transfer
Restricted Security, certification that such Certificated Convertible Preferred
Stock is being transferred to a QIB in accordance with Rule 144A under the
Securities Act; and
(2) whether or not such Certificated Convertible Preferred Stock is a
Transfer Restricted Security, written instructions directing the Transfer Agent
to make, or to direct DTC to make, an adjustment on its books and records with
respect to such Global Convertible Preferred Stock to reflect an increase in the
number of shares of Convertible Preferred Stock represented by the Global
Convertible Preferred Stock,
then the Transfer Agent shall cancel such Certificated Convertible Preferred
Stock and cause, or direct DTC to cause, in accordance with the standing
instructions and procedures existing between DTC and the Transfer Agent, the
number of shares of Convertible Preferred Stock represented by the Global
Convertible Preferred Stock to be increased accordingly. If no Global
Convertible Preferred Stock is then outstanding, the Company shall issue and the
Transfer Agent shall authenticate, upon written order of the Company in the form
of an Officers' Certificate, a new Global Convertible Preferred Stock
representing the appropriate number of shares.
(C) Transfer and Exchange of Global Convertible Preferred Stock. The transfer
and exchange of Global Convertible Preferred Stock or beneficial interests
therein shall be effected through DTC, in accordance with this Certificate of
Designation (including applicable restrictions on transfer set forth herein, if
any) and the procedures of DTC therefor.
(D) Transfer of a Beneficial Interest in Global Convertible Preferred Stock
for a Certificated Convertible Preferred Stock.
41
(1) Any person having a beneficial interest in Convertible Preferred Stock
that is being transferred or exchanged pursuant to an effective registration
statement under the Securities Act or pursuant to clause (I), (II) or (III)
below may upon request, and if accompanied by the information specified below,
exchange such beneficial interest for Certificated Convertible Preferred Stock
representing the same number of shares of Convertible Preferred Stock. Upon
receipt by the Transfer Agent of written instructions or such other form of
instructions as is customary for DTC from DTC or its nominee on behalf of any
person having a beneficial interest in Global Convertible Preferred Stock and
upon receipt by the Transfer Agent of a written order or such other form of
instructions as is customary for DTC or the person designated by DTC as having
such a beneficial interest in a Transfer Restricted Security only, and upon the
following additional information and documents (all of which may be submitted by
facsimile):
(I) if such beneficial interest is being transferred to the person
designated by DTC as being the owner of a beneficial interest in Global
Convertible Preferred Stock, a certification from such person to that effect
(in substantially the form of Exhibit C hereto);
(II) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 144 or Regulation S
under the Securities Act, a certification to that effect (in substantially
the form of Exhibit C hereto); or
(III) if such beneficial interest is being transferred to an "accredited
investor" as described in Rule 501(a)(1), (2), (3), (4), (5), (6) or (7)
under the Securities Act that is acquiring the security for its own account,
or for the account of such an accredited investor, in each case in a minimum
principal amount of $100,000 for investment purposes and not with a view to,
or for offer or sale in connection with, any distribution in violation of
the Securities Act, or in reliance on another exemption from the
registration requirements of the Securities Act, a
42
certification to that effect from the transferor (in substantially the form of
Exhibit C hereto), and if the Company or the Transfer Agent so requests,
evidence reasonably satisfactory to them as to the compliance with the
restrictions set forth in the legend set forth in paragraph (l)(iii)(G)(1)
below;
then, the Transfer Agent or DTC, at the direction of the Transfer Agent, will
cause, in accordance with the standing instructions and procedures existing
between DTC and the Transfer Agent, the number of shares of Convertible
Preferred Stock represented by Global Convertible Preferred Stock to be reduced
on its books and records and, following such reduction, the Company will execute
and the Transfer Agent will authenticate and deliver to the transferee
Certificated Convertible Preferred Stock.
(2) Certificated Convertible Preferred Stock issued in exchange for a
beneficial interest in a Global Convertible Preferred Stock pursuant to this
paragraph (l)(iii)(D) shall be registered in such names and in such authorized
denominations as DTC, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Transfer Agent. The Transfer Agent
shall deliver such Certificated Convertible Preferred Stock to the persons in
whose names such Convertible Preferred Stock are so registered in accordance
with the instructions of DTC.
(E) Restrictions on Transfer and Exchange of Global Convertible Preferred
Stock. Notwithstanding any other provisions of this Certificate of Designation
(other than the provisions set forth in paragraph (l)(iii)(F)), Global
Convertible Preferred Stock may not be transferred as a whole except by DTC to a
nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by DTC
or any such nominee to a successor depository or a nominee of such successor
depository.
(F) Authentication of Certificated Convertible Preferred Stock. If at any
time:
(1) DTC notifies the Company that DTC is unwilling or unable to continue as
depository for the Global Convertible Preferred Stock and a successor depository
for the Global Convertible Preferred Stock is not appointed by the Company
within 90 days after delivery of such notice;
43
(2) DTC ceases to be a clearing agency registered under the Exchange Act;
(3) there shall have occurred and be continuing a Voting Rights Triggering
Event; or
(4) the Company, in its sole discretion, notifies the Transfer Agent in
writing that it elects to cause the issuance of Certificated Convertible
Preferred Stock under this Certificate of Designation,
then the Company will execute, and the Transfer Agent, upon receipt of a written
order of the Company signed by two Officers or by an Officer and either an
Assistant Treasurer or an Assistant Secretary of the Company requesting the
authentication and delivery of Certificated Convertible Preferred Stock to the
persons designated by the Company, will authenticate and deliver Certificated
Convertible Preferred Stock equal to the number of shares of Convertible
Preferred Stock represented by the Global Convertible Preferred Stock, in
exchange for such Global Convertible Preferred Stock.
(G) Legend. (1) Except as permitted by the following paragraph (2), each
certificate evidencing the Global Convertible Preferred Stock and the
Certificated Convertible Preferred Stock (and all Convertible Preferred Stock
issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form:
"THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) (AND THE COMMON STOCK INTO
WHICH THIS SECURITY IS CONVERTIBLE) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY (OR THE COMMON STOCK
INTO WHICH THIS SECURITY IS CONVERTIBLE) IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY (AND OF THE COMMON STOCK INTO WHICH THIS SECURITY IN CONVERTIBLE) AGREES
FOR THE
44
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND THE COMMON STOCK INTO WHICH
THIS SECURITY IS CONVERTIBLE) MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (4) TO THE COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES."
(2) Upon any sale or transfer of a Transfer Restricted Security (including
any Transfer Restricted Security represented by Global Convertible Preferred
Stock) pursuant to Rule 144 under the Securities Act or an effective
registration statement under the Securities Act:
(I) in the case of any Transfer Restricted Security that is a Certificated
Convertible Preferred Stock, the Transfer Agent shall permit the Holder thereof
to exchange such Transfer Restricted Security for a Certificated Convertible
Preferred Stock that does not bear the legend set forth above and rescind any
restriction on the transfer of such Transfer Restricted Security; and
(II) in the case of any Transfer Restricted Security that is represented by
a Global Convertible Preferred Stock, the Transfer Agent shall permit the Holder
thereof to exchange such Transfer Restricted Security for a Certificated
Convertible Preferred Stock Security that does not bear the legend set forth
above and rescind any restriction on the transfer of such Transfer Restricted
Security, if the Holder's request for such exchange was made in reliance on Rule
144 and the Holder certifies to that effect in writing to the Transfer Agent
(such certification to be in the form set forth on the reverse of the Transfer
Restricted Security).
45
(H) Cancellation or Adjustment of Global Convertible Preferred Stock. At such
time as all beneficial interests in Global Convertible Preferred Stock have
either been exchanged for Certificated Convertible Preferred Stock, redeemed,
repurchased or canceled, such Global Convertible Preferred Stock shall be
returned to DTC for cancellation or retained and canceled by the Transfer Agent.
At any time prior to such cancellation, if any beneficial interest in Global
Convertible Preferred Stock is exchanged for Certificated Convertible Preferred
Stock, redeemed, repurchased or canceled, the number of shares of Convertible
Preferred Stock represented by such Global Convertible Preferred Stock shall be
reduced and an adjustment shall be made on the books and records of the Transfer
Agent with respect to such Global Convertible Preferred Stock, by the Transfer
Agent or DTC, to reflect such reduction.
(I) Obligations with Respect to Transfers and Exchanges of Convertible
Preferred Stock. (1) To permit registrations of transfers and exchanges, the
Company shall execute and the Transfer Agent shall authenticate Certificated
Convertible Preferred Stock and Global Convertible Preferred Stock as required
pursuant to the provisions of this paragraph (iii).
(2) All Certificated Convertible Preferred Stock and Global Convertible
Preferred Stock issued upon any registration of transfer or exchange of
Certificated Convertible Preferred Stock or Global Convertible Preferred Stock
shall be the valid obligations of the Company, entitled to the same benefits
under this Certificate of Designation as the Certificated Convertible Preferred
Stock or Global Convertible Preferred Stock surrendered upon such registration
of transfer or exchange.
(3) Prior to due presentment for registration of transfer of any shares of
Convertible Preferred Stock, the Transfer Agent and the Company may deem and
treat the person in whose name such shares of Convertible Preferred Stock are
registered as the absolute owner of such Convertible Preferred Stock and neither
the Transfer Agent nor the Company shall be affected by notice to the contrary.
(4) No service charge shall be made to a Holder for any registration of
transfer or exchange upon surrender of any Convertible Preferred Stock
46
Certificate at the office of the Transfer Agent maintained for that purpose.
However, the Company may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Convertible Preferred Stock
Certificates.
(5) Upon any sale or transfer of shares of Convertible Preferred Stock
(including any Convertible Preferred Stock represented by a Global Convertible
Preferred Stock Certificate) pursuant to an effective registration statement
under the Securities Act, pursuant to Rule 144 under the Securities Act or
pursuant to an opinion of counsel reasonably satisfactory to the Company that no
legend is required:
(A)in the case of any Certificated Convertible Preferred Stock, the Transfer
Agent shall permit the holder thereof to exchange such Convertible
Preferred Stock for Certificated Convertible Preferred Stock that does not
bear the legend set forth in paragraph (iii)(G) above and rescind any
restriction on the transfer of such Convertible Preferred Stock; and
(B)in the case of any Global Convertible Preferred Stock, such Convertible
Preferred Stock shall not be required to bear the legend set forth in
paragraph (iii)(G) above but shall continue to be subject to the
provisions of paragraph (iii)(D) hereof; provided, however, that with
respect to any request for an exchange of Convertible Preferred Stock that
is represented by Global Convertible Preferred Stock for Certificated
Convertible Preferred Stock that does not bear the legend set forth in
paragraph (iii)(G) above in connection with a sale or transfer thereof
pursuant to Rule 144 (and based upon an opinion of counsel if the Company
so requests), the Holder thereof shall certify in writing to the Transfer
Agent that such request is being made pursuant to Rule 144 (such
certification to be substantially in the form of Exhibit C hereto).
47
(iv) Replacement Certificates. If a mutilated Convertible Preferred Stock
certificate is surrendered to the Transfer Agent or if the Holder of a
Convertible Preferred Stock certificate claims that the Convertible Preferred
Stock certificate has been lost, destroyed or wrongfully taken, the Company
shall issue and the Transfer Agent shall countersign a replacement Convertible
Preferred Stock certificate if the reasonable requirements of the Transfer Agent
and of Section 8-405 of the Uniform Commercial Code as in effect in the State of
New York are met. If required by the Transfer Agent or the Company, such Holder
shall furnish an indemnity bond sufficient in the judgment of the Company and
the Transfer Agent to protect the Company and the Transfer Agent from any loss
which either of them may suffer if a Convertible Preferred Stock certificate is
replaced. The Company and the Transfer Agent may charge the Holder for their
expenses in replacing a Convertible Preferred Stock certificate.
(v) Temporary Certificates. Until definitive Convertible Preferred Stock
certificates are ready for delivery, the Company may prepare and the Transfer
Agent shall countersign temporary Convertible Preferred Stock certificates.
Temporary Convertible Preferred Stock certificates shall be substantially in the
form of definitive Convertible Preferred Stock certificates but may have
variations that the Company considers appropriate for temporary Convertible
Preferred Stock certificates. Without unreasonable delay, the Company shall
prepare and the Transfer Agent shall countersign definitive Convertible
Preferred Stock certificates and deliver them in exchange for temporary
Convertible Preferred Stock certificates.
(vi) Cancellation. (A) In the event the Company shall purchase or otherwise
acquire Certificated Convertible Preferred Stock, the same shall thereupon be
delivered to the Transfer Agent for cancellation.
(B) At such time as all beneficial interests in Global Convertible Preferred
Stock have either been exchanged for Certificated Convertible Preferred Stock,
redeemed, repurchased or canceled, such Global Convertible Preferred Stock shall
thereupon be delivered to the Transfer Agent for cancellation.
(C) The Transfer Agent and no one else shall cancel and destroy all
Convertible Preferred Stock certificates surrendered for transfer, exchange,
replacement
48
or cancellation and deliver a certificate of such destruction to the Company
unless the Company directs the Transfer Agent to deliver canceled Convertible
Preferred Stock certificates to the Company. The Company may not issue new
Convertible Preferred Stock certificates to replace Convertible Preferred Stock
certificates to the extent they evidence Convertible Preferred Stock which the
Company has purchased or otherwise acquired.
(m) Additional Rights of Holders. In addition to the rights provided to
Holders under this Certificate of Designation, Holders shall have the rights set
forth in the Registration Rights Agreement.
(o) Certain Definitions. As used in this Certificate of Designation, the
following terms shall have the following meanings (and (1) terms defined in the
singular have comparable meanings when used in the plural and vice versa, (2)
"including" means including without limitation, (3) "or" is not exclusive and
(4) an accounting term not otherwise defined has the meaning assigned to it in
accordance with United States generally accepted accounting principles as in
effect on the Issue Date and all accounting calculations will be determined in
accordance with such principles), unless the content otherwise requires:
"Business Day" means each day which is not a Legal Holiday.
"capital stock" of any person means any and all shares, interests, rights to
purchase, warrants, options, participation or other equivalents of or interests
in (however designated) equity of such person, including any Preferred Stock,
but excluding any debt securities convertible into or exchangeable for such
equity.
49
"Change in Control" or "Change of Control" means: (i) the sale, lease,
transfer, conveyance other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), (other than officers, directors and stockholders of
the Company and their affiliates on the date of this Certificate of
Designation), becomes the beneficial owner (as determined in accordance with
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the voting stock of the Company or (iv) the first day on which a
majority of the members of the board of directors (excluding the directors
elected pursuant to paragraph (f) are not Continuing Directors.
"Closing Bid Price" means on any day the last reported bid price on such day,
or in case no bid takes place on such day, the average of the reported closing
bid and asked prices, in each case on the Nasdaq National Market or, if the
Common Stock is not quoted on such system, on the principal national securities
exchange on which such stock is listed or admitted to trading, or if not listed
or admitted to trading on any national securities exchange, the average of the
closing bid and asked prices as furnished by any independent registered
broker-dealer firm, selected by the Company for that purpose.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors who (i) was a member of such Board of Directors on the
date of this Certificate of Designation or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election.
"Default" means any event which is, or after notice or passage of time or
both would be, a Voting Rights Triggering Event.
"DTC" means The Depository Trust Company.
50
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holders" means the registered holders from time to time of the Convertible
Preferred Stock.
"Indenture" means the Indenture dated as of October 5, 1995 between the
Company and IBJ Schroder Bank & Trust Company.
"Issue Date" means the date on which the Convertible Preferred Stock is
initially issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Liquidated Damages" means, with respect to any share of Convertible
Preferred Stock, the Additional Dividends then accrued, if any, on such share
pursuant to paragraph (c).
"Officer" means the Chairman of the Board of Directors, the President, any
Vice President, the Treasurer, the Secretary or any Assistant Secretary of the
Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Transfer Agent. The counsel may be an employee of or counsel
to the Company or the Transfer Agent.
"person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
51
"Registration Rights Agreement" means the Registration Rights Agreement dated
March 25, 1997 among the Company, Credit Suisse First Boston Corporation and
Dillon, Read & Co. Inc. with respect to the Convertible Preferred Stock.
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Series 3 Preferred Stock" means the 10% Junior Series 3 Preferred Stock of
the Company.
"Shelf Registration Statement" means a shelf registration statement filed
with the SEC to cover resales of Transfer Restricted Securities by holders
thereof, as required by the Registration Rights Agreement.
"Subsidiary" means any corporation, association, partnership, limited
liability company or other business entity of which more than 50% of the total
voting power of shares of capital stock or other interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the Company, the Company and one or more Subsidiaries
or one or more Subsidiaries and any partnership the sole general partner or the
managing partner of which the Company or any Subsidiary or the only general
partners of which are the Company and one or more Subsidiaries or one or more
Subsidiaries.
"Trading Day" means, in respect of any securities exchange or securities
market, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day
on which securities are not traded on the applicable securities exchange or in
the applicable securities market.
"Transfer Agent" means the transfer agent for the Convertible Preferred Stock
appointed by the Company, which initially shall be ChaseMellon Shareholder
Services, L.L.C.
"Transfer Restricted Securities" means each share of Convertible Preferred
Stock (or the shares of Common Stock into which such share of Convertible
Preferred Stock is convertible) (including additional shares of Convertible
Preferred Stock issued in payment of dividends on the
52
Convertible Preferred Stock, if any, as permitted in accordance with the terms
hereof) until (i) the date on which such security has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (ii) the date on which such security is distributed to
the public pursuant to Rule 144 under the Securities Act or is saleable pursuant
to Rule 144(k) under the Securities Act (or any successor rule thereof) or would
be saleable pursuant to Rule 144(k) under the Securities Act had it not been
held by, or had it never been held by, an affiliate of the Company.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
53
IN WITNESS WHEREOF, said IXC Communications, Inc., has caused this
Certificate of Designation to be signed by John J. Willingham, its Senior Vice
President and Chief Financial Officer, this 31st day of March, 1997.
IXC COMMUNICATIONS, INC.,
by /s/ John J. Willingham
Name: John J. Willingham
Title: Senior Vice President
and Chief Financial Officer
54
EXHIBIT A
FORM OF CONVERTIBLE PREFERRED STOCK
FACE OF SECURITY
[THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) (AND THE COMMON STOCK
INTO WHICH THIS SECURITY IS CONVERTIBLE) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY (OR THE COMMON STOCK
INTO WHICH THIS SECURITY IS CONVERTIBLE) IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY (AND OF THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) AGREES
FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND THE COMMON STOCK INTO
WHICH THIS SECURITY IS CONVERTIBLE) MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2)
IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO THE
COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES.]*
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OF PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON
- - ----------------------------------
* Subject to removal upon registration under the Securities Act of 1933 or
otherwise when the security shall no longer be a restricted security.
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST
HEREIN.]**
[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
CERTIFICATE OF DESIGNATION REFERRED TO BELOW.]**
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR AND
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.
Number of Shares of Convertible
Certificate Number Preferred Stock
[ ] [ ]
CUSIP NO.: [ ]
7 1/4% Junior Convertible Preferred Stock Due 2007
(par value $0.01) (liquidation preference $100
per share of Convertible Preferred Stock)
of
IXC Communications, Inc.
IXC Communications, Inc., a Delaware corporation (the "Company"), hereby
certifies that [ ] (the "Holder") is the registered owner of fully paid and
non-assessable preferred securities of the Company designated the 7 1/4% Junior
Convertible Preferred Stock Due 2007 (par value $0.01) (liquidation preference
$100 per share of Convertible Preferred Stock) (the "Convertible Preferred
Stock"). The shares of Convertible Preferred Stock are transferable on the books
and records of the Registrar, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer. The
designation, rights, privileges,
- - ----------------------------------
** Subject to removal if not a global security.
2
restrictions, preferences and other terms and provisions of the Convertible
Preferred Stock represented hereby are issued and shall in all respects be
subject to the provisions of the Certificate of Designation dated March [ ],
1997, as the same may be amended from time to time (the "Certificate of
Designation"). Capitalized terms used herein but not defined shall have the
meaning given them in the Certificate of Designation. The Company will provide a
copy of the Certificate of Designation to a Holder without charge upon written
request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Convertible Preferred
Stock set forth on the reverse hereof, and to the Certificate of Designation,
which select provisions and the Certificate of Designation shall for all
purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of
Designation and is entitled to the benefits thereunder.
Unless the Transfer Agent's Certificate of Authentication hereon has been
properly executed, these shares of Convertible Preferred Stock shall not be
entitled to any benefit under the Certificate of Designation or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has executed this certificate this [ ]
day of [ ],
[ ].
IXC COMMUNICATIONS, INC.,
By:
Name:
Title:
[Seal]
By:
Name:
Title:
3
TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Preferred Stock referred to in the within
mentioned Certificate of Designation.
Dated: [ ], [ ]
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
as Transfer Agent,
By:
Authorized Signatory
4
REVERSE OF SECURITY
Dividends on each share of Convertible Preferred Stock shall be payable at a
rate per annum set forth in the face hereof or as provided in the Certificate of
Designation (including Additional Dividends).
The shares of Convertible Preferred Stock shall be redeemable as provided in
the Certificate of Designation. The shares of Convertible Preferred Stock shall
be convertible into the Company's Common Stock in the manner and according to
the terms set forth in the Certificate of Designation.
As required under Delaware law, the Company shall furnish to any Holder upon
request and without charge, a full summary statement of the designations, voting
rights preferences, limitations and special rights of the shares of each class
or series authorized to be issued by the Company so far as they have been fixed
and determined and the authority of the Board of Directors to fix and determine
the designations, voting rights, preferences, limitations and special rights of
the class and series of shares of the Company.
5
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of
Convertible Preferred Stock evidenced hereby to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints:
agent to transfer the shares of Convertible Preferred Stock evidenced hereby on
the books of the Transfer Agent and Registrar. The agent may substitute another
to act for him or her.
Date:
Signature:
(Sign exactly as your name appears on the other side of this Convertible
Preferred Stock Certificate)
Signature Guarantee:***
***(Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.)
6
EXHIBIT B
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Convertible, Preferred Stock)
The undersigned hereby irrevocably elects to convert (the "Conversion") shares
of 7 1/4% Junior Convertible Preferred Stock (the "Convertible Preferred
Stock"), represented by stock certificate No(s). _______________ (the
"Convertible Preferred Stock Certificates") into shares of common stock ("Common
Stock") of IXC Communications, Inc. (the "Company") according to the conditions
of the Certificate of Designations, Preferences and Rights of the Convertible
Preferred Stock (the "Certificate of Designation"), as of the date written
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates. No fee will be charged to
the holder for any conversion, except for transfer taxes, if any. A copy of each
Convertible Preferred Stock Certificate is attached hereto (or evidence of loss,
theft or destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Convertible Preferred Stock shall be made pursuant to
registration of the Common Stock under the Securities Act of 1933 (the "Act"),
or pursuant to any exemption from registration under the Act.
Any holder, upon the exercise of its conversion rights in accordance with the
terms of the Certificate of Designation and the Convertible Preferred Stock,
agrees to be bound by the terms of the Registration Rights Agreement.
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Certificate of Designation.
Date of Conversion: ________________________
Applicable Conversion Price: _______________
Number of shares of Convertible Preferred Stock to
be Converted: ____________
Number of shares of
Common Stock to be Issued: _________________
Signature: _________________________________
Name: ______________________________________
Address:** _________________________________
Fax No.: ___________________________________
* The Company is not required to issue shares of Common Stock until the
original Convertible Preferred Stock Certificate(s) (or evidence of loss, theft
or destruction thereof) to be converted are received by the Company or its
Transfer Agent. The Company shall issue and deliver shares of Common Stock to an
overnight courier not later than three business days following receipt of the
original Convertible Preferred Stock Certificate(s) to be converted.
** Address where shares of Common Stock and any other payments or certificates
shall be sent by the Company.
2
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF CONVERTIBLE PREFERRED STOCK
Re: 7 1/4% Junior Convertible Preferred Stock Due 2007 (the "Convertible
Preferred Stock") of IXC Communications, Inc. (the "Company")
This Certificate relates to ____ shares of Convertible Preferred Stock held
in [ ] */ book-entry or [ ] */ definitive form by _______________ (the
"Transferor").
The Transferor*:
[ ] has requested the Transfer Agent by written order to deliver in exchange
for its beneficial interest in the Convertible Preferred Stock held by the
depository shares of Convertible Preferred Stock in definitive, registered form
equal to its beneficial interest in such Convertible Preferred Stock (or the
portion thereof indicated above); or
[ ] has requested the Transfer Agent by written order to exchange or register
the transfer of Convertible Preferred Stock.
In connection with such request and in respect of such Convertible Preferred
Stock, the Transferor does hereby certify that the Transferor is familiar with
the Certificate of Designation relating to the above captioned Convertible
Preferred Stock and that the transfer of this Convertible Preferred Stock does
not require registration under the Securities Act of 1933 (the "Securities Act")
because */:
[ ] Such Convertible Preferred Stock is being acquired for the Transferor's
own account without transfer.
[ ] Such Convertible Preferred Stock is being transferred to the Company.
[ ] Such Convertible Preferred Stock is being transferred (i) to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in
reliance on Rule 144A or (ii) pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act (and, in the case of clause
(ii), based on an opinion of counsel if the Company so requests and together
- - ----------------------------------
*/Please check applicable box.
with a certification in substantially the form of Exhibit E to the Certificate
of Designation).
[ ] Such Convertible Preferred Stock is being transferred to an accredited
investor within the meaning of Rule 501(a)(1), (2), (3), (4), (5), (6) or (7)
under the Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (together with a certification
in substantially the form of Exhibit D to the Certificate of Designation).
[ ] Such Convertible Preferred Stock is being transferred in reliance on and
in compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).
[INSERT NAME OF TRANSFEROR]
Date: By
2
EXHIBIT D
FORM OF CERTIFICATE
TO BE DELIVERED BY ACCREDITED INVESTORS
-------------, -----
ChaseMellon Shareholder Services, L.L.C.
Attention: [ ]
Ladies and Gentlemen:
In connection with our proposed purchase of certain 7 1/4% Junior Convertible
Preferred Stock Due 2007 (the "Convertible Preferred Stock"), of IXC
Communications, Inc., a Delaware corporation (the "Company"), we represent that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1),(2),(3),(4),(5),(6) or (7) under the Securities Act of 1933 (the
"Securities Act") (an "Accredited Investor"), or an entity in which all of the
equity owners are Accredited Investors;
(ii) any purchase of Convertible Preferred Stock will be for our own account
or for the account of one or more other Accredited Investors as to which we
exercise sole investment discretion;
(iii) we have such knowledge and experience in financial and business matters
that we are capable of evaluating the merits and risks of purchasing Convertible
Preferred Stock and we and any accounts for which we are acting are able to bear
the economic risks of our or their investment;
(iv) we are not acquiring Convertible Preferred Stock with a view to any
distribution thereof in a transaction that would violate the Securities Act or
the securities laws of any State of the United States or any other applicable
jurisdiction; provided that the disposition of our property and the property of
any accounts for which we are acting as fiduciary shall remain at all times
without our control; and
(v) we acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such questions of
representatives of the Company and receive answers
thereto, as we deem necessary in connection with our decision to purchase
Convertible Preferred Stock.
We understand that the Convertible Preferred Stock has not been registered
under the Securities Act, and we agree, on our own behalf and on behalf of each
account for which we acquire any Convertible Preferred Stock, that such
Convertible Preferred Stock may be offered, resold, pledged or otherwise
transferred only (i) to a person whom we reasonably believe to be a qualified
institutional buyer (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A, in a transaction meeting the
requirements of Rule 144 under the Securities Act, outside the United States to
a foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act (and, unless such transfer occurs in a transaction meeting the
requirements of Rule 144A, based upon an opinion of counsel, if the Company so
requests), (ii) to the Company or (iii) pursuant to an effective registration
statement, and, in each case, in accordance with any applicable securities laws
of any State of the United States or any other applicable jurisdiction. We
understand that the registrar will not be required to accept for registration of
transfer any shares of Convertible Preferred Stock, except upon presentation of
evidence satisfactory to the Company that the foregoing restrictions on transfer
have been complied with. We further understand that the Convertible Preferred
Stock purchased by us will bear a legend reflecting the substance of this
paragraph. We further agree to provide to any person acquiring any of the
Convertible Preferred Stock from us a notice advising such person that resales
of the Convertible Preferred Stock are restricted as stated herein.
We acknowledge that you, the Company and others will rely upon our
confirmations, acknowledgements and agreements set forth herein, and we agree to
notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.
2
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
Very truly yours,
(Name of Transferee)
By:
Name:
Title:
Address:
3
EXHIBIT E
FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
----------, ----
ChaseMellon Shareholder Services, L.L.C.
Attention: [ ]
Ladies and Gentlemen:
In connection with our proposed sale of certain 7 1/4% Junior Convertible
Preferred Stock Due 2007 (the "Convertible Preferred Stock") of IXC
Communications, Inc., a Delaware corporation ("the "Company"), we represent
that:
(i) the offer of the Convertible Preferred Stock was not made to a
person in the United States;
(ii) at the time the buy order was originated, the transferee was outside the
United States or we and any person acting on our behalf reasonably believed that
the transferee was outside the United States;
(iii) no directed selling efforts have been made by us in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S under the Securities Act of 1933 (the "Securities Act"), as applicable; and
(iv) the transaction is not part of a plan or scheme by us to evade the
registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
(Name of Transferor)
By:
Name:
Title:
Address:
2
THIRD AMENDMENT TO
RESTATED
CERTIFICATE OF INCORPORATION
OF
IXC COMMUNICATIONS, INC.
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware does hereby certify:
1. That Ralph J. Swett and John J. Willingham are the duly elected and
acting Chairman of the Board, Chief Executive Officer and President and Senior
Vice President, Chief Financial Officer and Assistant Secretary, respectively,
of IXC Communications, Inc., a Delaware corporation (the "Corporation").
2. Section D.1(a) of Article ELEVENTH of the Restated Certificate of
Incorporation of the Corporation is amended to read in full as follows:
"1. Dividends.
(a) The holders of shares of Series 1 Preferred Stock then outstanding
shall be entitled to receive, prior to the payment of any dividend on any
other Preferred Stock of the Corporation or the Common Stock of the
Corporation, when, as and if declared by the Board, out of funds legally
available for the payment of dividends, cumulative dividends in an annual
amount equal to $100 per share, plus an amount determined by applying a
10% annual rate, compounded annually, to any accrued but unpaid dividend
amount from the last day of the period when such dividend accrues to the
actual date of payment of such dividend, and no more. The holders of
shares of Series 3 Preferred Stock then outstanding shall be entitled to
receive, prior to the payment of any dividend on any other Preferred
Stock of the Corporation (other than the Series 1 Preferred Stock) or the
Common Stock of the Corporation, when, as and if declared by the Board,
out of funds legally available for the payment of dividends, cumulative
dividends in an annual amount equal to $100 per share, plus an amount
determined by applying a 10% annual rate, compounded annually, to any
accrued but unpaid dividend amount from the last day of the period when
such dividend accrues to the actual date of payment of such dividend, and
no more; provided, however, that the Corporation may pay dividends on the
Corporation's 7 1/4% Junior Convertible Preferred Stock due 2007
("Convertible Preferred Stock") with additional shares of Convertible
Preferred Stock. Such dividends
on the outstanding shares of Series Preferred Stock shall be payable on
such date as the Board may from time to time determine (each such date
being a "dividend payment date"). The Board may fix a record date for the
determination of holders of shares of Series Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall
not be more than sixty (60) days prior to the date fixed for the payment
thereof. Each such annual dividend shall be fully cumulative and shall
accrue from day to day (whether or not declared) from the first day of
each period in which such dividend may be payable as herein provided,
except that the first annual dividend with respect to each share of
Series Preferred Stock shall accrue from the Original Issue Date of such
share or such other date as determined by the Board, except that
dividends with respect to each share of Series 3 Preferred Stock shall
accrue from August 14, 1992. Dividends, when, as and if declared, shall
be payable in cash."
3. This Third Amendment to Restated Certificate of Incorporation has been
duly approved by the Board of Directors of the Corporation.
4. This Third Amendment to Restated Certificate of Incorporation was duly
adopted and approved by the stockholders in accordance with the applicable
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware by the holders of (i) a majority of the outstanding shares of Common
Stock, par value $.01 per share, and the outstanding shares of 10% Junior Series
3 Cumulative Redeemable Preferred Stock, par value $.01 per share (the "Series 3
Preferred Stock"), of the Corporation, voting as a class; and (ii) at least
three-fourths (3/4ths) of the outstanding shares of Series 3 Preferred Stock,
voting as a class. Prompt written notice of the adoption of this Third Amendment
to Restated Certificate of Incorporation has been given to those stockholders
who have not consented in writing thereto, as provided by Section 228 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by Ralph J. Swett, its Chairman of the Board, Chief Executive Officer and
President, and attested by John J. Willingham, its Senior Vice President, Chief
Financial Officer and Assistant Secretary, this 23 day of June, 1997.
IXC COMMUNICATIONS, INC.
By: /s/ RALPH J. SWETT
Ralph J. Swett,
Chairman of the Board,
Chief Executive Officer and
President
Attest:
/s/ JOHN J. WILLINGHAM
John J. Willingham,
Senior Vice President, Chief Financial
Officer and Assistant Secretary
IXC COMMUNICATIONS, INC.
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF 12 1/2% JUNIOR
EXCHANGEABLE PREFERRED STOCK DUE 2009 AND 12 1/2% SERIES B
JUNIOR EXCHANGEABLE PREFERRED STOCK DUE 2009 AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
IXC Communications, Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that (i) pursuant to authority conferred upon the
board of directors of the Company (the "Board of Directors") by its Restated
Certificate of Incorporation (hereinafter referred to as the "Restated
Certificate of Incorporation"), and pursuant to the provisions of Sections
141(c)(2) and 151 of the General Corporation Law of the State of Delaware, said
Board of Directors is authorized to issue Preferred Stock of the Company in one
or more series and has authorized a committee of the Board of Directors (the
"Placement Committee") to adopt the resolution set forth below and (ii) the
Placement Committee duly approved and adopted the following resolution on August
14, 1997 (the "Resolution"):
RESOLVED that, pursuant to the authority vested in the Board of
Directors by its Restated Certificate of Incorporation, and the authority
vested by such Board of Directors in a committee of the Board (the
"Placement Committee"), all the members of which are members of such
Board, the Placement Committee does hereby create, authorize and provide
for the issuance of 12 1/2% Junior Exchangeable Preferred Stock Due 2009,
par value $0.01 per share, with a stated value of $1000 per share,
initially consisting of up to 450,000 shares and 12 1/2% Series B Junior
Exchangeable Preferred Stock Due 2009, par value $0.1 per share, with a
stated value of $1,000
2
per share, initially consisting of up to 450,000 shares (collectively, the
"Exchangeable Preferred Stock") having the designation, preferences,
relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth in
the Restated Certificate of Incorporation and in this Resolution as
follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Company (i) a series of Preferred
Stock designated as the "12 1/2% Junior Exchangeable Preferred Stock Due 2009"
(the "Initial Exchangeable Preferred Stock") and (ii) a series of Preferred
Stock designated as the "12 1/2% Series B Junior Exchangeable Preferred Stock
Due 2009" (the "Series B Stock"). The number of shares constituting the Initial
Exchangeable Preferred Stock shall be 450,000, and the number of shares
constituting the Series B Stock shall be 450,000. The Initial Exchangeable
Preferred Stock and the Series B Stock are referred to as the Exchangeable
Preferred Stock. The liquidation preference of the Exchangeable Preferred Stock
shall be $1000 per share (the "Liquidation Preference").
(b) Rank. The Exchangeable Preferred Stock will, with respect to
dividend rights and rights on liquidation, winding-up and dissolution, rank (i)
senior to all classes of common stock and to each other class of Capital Stock
or series of Preferred Stock established hereafter by the Board of Directors of
the Company, the terms of which do not expressly provide that it ranks senior
to, or on a parity with, the Exchangeable Preferred Stock as to dividend rights
and rights on liquidation, winding-up and dissolution of the Company
(collectively referred to, together with all classes of common stock of the
Company, as "Junior Stock"); (ii) on a parity with each share of Convertible
Preferred Stock now or hereafter outstanding and on a parity with each other
class of Capital Stock or series of Preferred Stock established hereafter by the
Board of Directors of the
3
Company, the terms of which expressly provide that such class or series will
rank on a parity with the Exchangeable Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution (collectively referred to as
"Parity Stock"); and (iii) junior to each share of Series 3 Preferred Stock now
or hereafter outstanding and junior to each class of Capital Stock or series of
Preferred Stock established hereafter by the Board of Directors of the Company,
the terms of which hereafter established classes or series expressly provide
that such class or series will rank senior to the Exchangeable Preferred Stock
as to dividend rights or rights on liquidation, winding-up and dissolution of
the Company (collectively referred to as "Senior Stock"). All claims of the
holders of the Exchangeable Preferred Stock, including claims with respect to
dividend payments, redemption payments, mandatory repurchase payments or rights
upon liquidation, winding-up or dissolution, shall rank junior to the claims of
the holders of any debt of the Company and all other creditors of the Company.
(c) Dividends. (i) Holders of the outstanding shares of
Exchangeable Preferred Stock will be entitled to receive, when, as and if
declared by the Board of Directors of the Company, out of funds legally
available therefor, cumulative preferential dividends on each share of the
Exchangeable Preferred Stock at a rate per annum equal to 12 1/2% of the
Liquidation Preference of such share payable quarterly (each such quarterly
period being herein called a "Dividend Period"). In addition to the dividends
described in the preceding sentence, holders of outstanding shares of
Exchangeable Preferred Stock will be entitled to additional dividends (the
"Additional Dividends"), when, as and if declared by the Board of Directors of
the Company, out of funds legally available therefor, with respect to the shares
of Exchangeable Preferred Stock, which Additional Dividends shall accrue as
follows if any of the following events occur (each such event in clauses (A),
(B) and (C) below being herein called a "Registration Default"): (A) if by
October 6, 1997, neither the Exchange Offer Registration Statement nor the Shelf
Registration Statement has been filed with the SEC; (B) if by January 19, 1998,
neither the Registered Exchange Offer is consummated nor the Shelf
4
Registration Statement declared effective by the SEC; or (C) if after January
19, 1998 and after either the Exchange Offer Registration Statement or the Shelf
Registration Statement is declared effective, such Registration Statement
thereafter ceases to be effective (in each case except as permitted below) in
connection with resales of Exchangeable Preferred Stock in accordance with and
during the periods specified herein.
Additional Dividends shall accrue on the shares of
Exchangeable Preferred Stock from and including the date on which any such
Registration Default shall occur, to but excluding the date on which all such
Registration Defaults have been cured, at a rate of .50% per annum.
A Registration Default referred to in clause (C) of paragraph (c)(i)
shall be deemed not to have occurred and be continuing in relation to a
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Registration Statement to incorporate annual audited financial
information with respect to the Company where such post-effective amendment is
not yet effective and needs to be declared effective to permit Holders to use
the related prospectus or (y) other material events with respect to the Company
that would need to be described in the Registration Statement or the related
prospectus and (ii) in the case of clause (y), the Company proceeds promptly and
in good faith to amend or supplement the Registration Statement and related
prospectus to describe such events unless the Company has determined in good
faith that there are material legal or commercial impediments in doing so;
provided, however, that in any case if such Registration Default occurs for a
continuous period in excess of 45 days, Additional Dividends shall be payable in
accordance with the immediately preceding paragraphs of this paragraph (c)(i)
from the day such Registration Default initially occurs until such Registration
Default is cured.
Any amounts of Additional Dividends due pursuant to clauses (A), (B)
or (C) of this paragraph (c)(i) or pursuant to the proviso contained in the
preceding sentence will be payable on the regular dividend payment dates with
5
respect to the Exchangeable Preferred Stock and on the same terms and conditions
and subject to the same limitations as pertain at such time for the payment of
regular dividends. The amount of Additional Dividends will be determined by
multiplying the applicable Additional Dividends rate by the aggregate
liquidation preference of the outstanding shares of Exchangeable Preferred
Stock, multiplied by a fraction, the numerator of which is the number of days
such Additional Dividend rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.
All dividends on the Exchangeable Preferred Stock, including
Additional Dividends, to the extent accrued, shall be cumulative, whether or not
earned or declared, on a daily basis from the Issue Date or, in the case of
additional shares of Exchangeable Preferred Stock issued in payment of a
dividend, from the date of issuance of such additional shares of Exchangeable
Preferred Stock, and shall be payable quarterly in arrears on each February 15,
May 15, August 15 and November 15 (each, a "Dividend Payment Date"), commencing
on November 15, 1997, to holders of record on the February 1, May 1, August 1
and November 1 immediately preceding the relevant Dividend Payment Date. Any
dividend on the Exchangeable Preferred Stock payable pursuant to this paragraph
(c)(i) on or prior to February 15, 2001 shall be, at the option of the Company,
payable (1) in cash or (2) through the issuance of a number of additional shares
(including fractional shares) of Exchangeable Preferred Stock (the "Additional
Shares") equal to the dividend amount divided by the Liquidation Preference of
such Additional Shares. With respect to dividends accrued after February 15,
2001, all dividends shall be payable in cash.
Any dividend accruing after February 15, 2001 that is not paid in
cash on the relevant Dividend Payment Date shall accrue interest at a rate per
annum equal to the then applicable dividend rate per annum from such Dividend
Payment Date to the date of payment of such dividend. Such interest, if any,
shall be payable in cash on each Dividend Payment Date. Any accrued interest not
paid on a Dividend Payment Date shall accrue interest on such interest pursuant
to this paragraph. Any references herein to the payment of
6
accrued and unpaid dividends shall be deemed to include any such interest.
(ii) In the event the Company notifies the holders of
Exchangeable Preferred Stock of its election not to make a Change of Control
Offer (as defined in paragraph (h)(i)) pursuant to paragraph (h)(iii), then,
within 60 days of the occurrence of the applicable Change of Control, holders of
a majority of the outstanding shares of the Exchangeable Preferred Stock will
designate an Independent Financial Advisor to determine, within 20 days of such
designation, in the opinion of such firm, the appropriate dividend rate that the
Exchangeable Preferred Stock should bear so that, after such reset, the
Exchangeable Preferred Stock would have a market value of 101% of the
Liquidation Preference; provided, however, that no such reset shall be required
to be made if such Independent Financial Advisor determines that the
Exchangeable Preferred Stock has a market value of 101% or greater. If within 5
days of the designation of an Independent Financial Advisor by the Holders, the
Company determines that such Independent Financial Advisor is reasonably
unacceptable to the Company, the Company shall designate a second Independent
Financial Advisor to determine, within 15 days of such designation, in its
opinion, such an appropriate reset dividend rate for the Exchangeable Preferred
Stock. In the event that the two Independent Financial Advisors cannot agree,
within 25 days of the designation of an Independent Financial Advisor by the
Holders of a majority of the outstanding shares of the Exchangeable Preferred
Stock, on the appropriate reset dividend rate, the two Independent Financial
Advisors shall, within 10 days of such 25th day, designate a third Independent
Financial Advisor, which, within 15 days of designation, will determine, in its
opinion, an appropriate reset dividend rate which is between the two rates
selected by the first two Independent Financial Advisors. Upon the determination
of the reset rate, the Exchangeable Preferred Stock shall accrue and accumulate
dividends at the reset rate as of the date of occurrence of the Change of
Control; provided, however, that the reset rate shall in no event be less than
12 1/2% per annum or greater than 15% per annum. The reasonable fees and
expenses including reasonable fees and expenses of legal counsel, if any, and
customary
7
indemnification of each of the three above-referenced Independent Financial
Advisors, shall be borne by the Company.
(iii) All dividends paid with respect to shares of the
Exchangeable Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata
to the holders entitled thereto.
(iv) No dividend may be declared or paid or set apart for the
payment of dividends by the Company on any Parity Stock for any period unless
full cumulative dividends in respect of each Dividend Period ending on or before
such period shall have been or contemporaneously are declared and paid (or are
deemed declared and paid) in full or declared and, if payable in cash, a sum in
cash sufficient for such payment set apart for such payment on the Exchangeable
Preferred Stock. If full dividends are not so paid, the Exchangeable Preferred
Stock will share dividends pro rata with the Parity Stock.
(v) The Company will not (A) declare, pay or set apart funds for the
payment of any dividend or other distribution with respect to any Junior Stock
or (B) redeem, purchase or otherwise acquire for consideration any Junior Stock
through a sinking fund or otherwise, unless (1) all accrued and unpaid dividends
with respect to the Exchangeable Preferred Stock and any Parity Stock at the
time such dividends are payable have been paid or funds have been set apart for
payment of such dividends and (2) sufficient funds have been paid or set apart
for the payment of the dividend for the current dividend period with respect to
the Exchangeable Preferred Stock and any Parity Stock. As used herein, the term
"dividend" does not include dividends payable solely in shares of Junior Stock
on Junior Stock or in options, warrants or rights to holders of Junior Stock to
subscribe or purchase any Junior Stock.
(vi) Dividends on account of arrears for any past Dividend Period
and dividends in connection with any optional redemption may be declared and
paid at any time, without reference to any regular Dividend Payment Date, to
holders of record on such date, not more than 45 days prior
8
to the payment thereof, as may be fixed by the Board of Directors of the
Company.
(vii) Dividends payable on the Exchangeable Preferred Stock for any
period other than a Dividend Period shall be computed on the basis of a 360-day
consisting year of twelve 30-day months and the actual number of days elapsed in
the period for which payable. Dividends payable on the Exchangeable Preferred
Stock for a full Dividend Period will be computed by dividing the per annum
dividend rate by four.
(d) Liquidation Preference. (i) Upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, holders of
Exchangeable Preferred Stock will be entitled to be paid, out of the assets of
the Company available for distribution to its stockholders, the Liquidation
Preference of the outstanding shares of Exchangeable Preferred Stock, plus,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends (whether or not earned or declared and including Additional Dividends,
if any,) thereon to the date fixed for liquidation, dissolution or winding-up
(including an amount equal to a prorated dividend for the period from the last
Dividend Payment Date to the date fixed for liquidation, dissolution or
winding-up that would have been payable had the Exchangeable Preferred Stock
been the subject of an Optional Redemption on such date) before any distribution
is made on any Junior Stock. If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the amounts payable with respect to
the Exchangeable Preferred Stock and all Parity Stock are not paid in full, the
Exchangeable Preferred Stock and the Parity Stock will share equally and ratably
(in proportion to the respective amounts that would be payable on such shares of
Exchangeable Preferred Stock and the Parity Stock, respectively, if all amounts
payable thereon had been paid in full) in any distribution of assets of the
Company to which each is entitled. After payment of the full amount of the
Liquidation Preference of the outstanding shares of Exchangeable Preferred Stock
(and, if applicable, an amount equal to a prorated dividend), the holders of
shares of Exchangeable Preferred Stock will not be entitled to any
9
further participation in any distribution of assets of the Company.
(ii) For the purposes of this paragraph (d), neither the 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
other entities shall be deemed to be a liquidation, dissolution or winding-up of
the Company.
(e) Redemption. (i) Optional Redemption. (A) Except as set forth in
clause (B) below, the Exchangeable Preferred Stock shall not be redeemable at
the option of the Company prior to August 15, 2002. On or after August 15, 2002,
each share of the Exchangeable Preferred Stock may be redeemed (subject to the
legal availability of funds therefor) at any time, in whole or in part, at the
option of the Company, at the redemption prices (expressed as a percentage of
the Liquidation Preference of such share) set forth below, plus, without
duplication, an amount in cash equal to all accrued and unpaid dividends to the
date fixed for redemption (the "Optional Redemption Date") (including an amount
in cash equal to a prorated dividend for the period from the Dividend Payment
Date immediately prior to the Optional Redemption Date) (the "Optional
Redemption Price"), if redeemed during the 12-month period beginning August 15
of each of the years set forth below:
Year in which redemption
occurs Percentage
------ ----------
2002.................................. 106.250%
2003.................................. 105.000
2004.................................. 103.750
2005.................................. 102.500
2006.................................. 101.250
2007 and thereafter................... 100.000
(B) At any time and from time to time prior to August 15, 2000, the
Company may redeem in the aggregate up to 35% of the outstanding shares of
Exchangeable Preferred
10
Stock with the proceeds of one or more Public Equity Offerings at a redemption
price (expressed as a percentage of the Liquidation Preference thereof) of
112.500% plus accrued and unpaid dividends, if any, to the redemption date
(including an amount in cash equal to a prorated dividend for any partial
dividend period); provided, however, that at least $195 million aggregate
Liquidation Preference of the Exchangeable Preferred Stock remains outstanding
after each such redemption.
(C) In the event of a redemption of only a portion of the then
outstanding shares of Exchangeable Preferred Stock, the Company shall effect
such redemption on a pro rata basis, except that the Company may redeem all of
the shares held by holders of fewer than 100 shares (or all of the shares held
by holders who would hold less than 100 shares as a result of such redemption),
as may be determined by the Company.
(ii) Mandatory Redemption. Each share of the Exchangeable
Preferred Stock (if not earlier redeemed or converted) shall be subject to
mandatory redemption in whole (to the extent of lawfully available funds
therefor) on August 15, 2009 (the "Mandatory Redemption Date") at a price equal
to 100% of the Liquidation Preference of such share, plus, without duplication,
all accrued and unpaid dividends thereon (including an amount equal to a
prorated dividend thereon from the immediately preceding Dividend Payment Date
to the Mandatory Redemption Date), if any, to the Mandatory Redemption Date (the
"Mandatory Redemption Price").
(iii) Procedure for Redemption. (A) On and after the Optional
Redemption Date or the Mandatory Redemption Date, as the case may be (the
"Redemption Date"), unless the Company defaults in the payment of the applicable
redemption price, dividends will cease to accumulate on shares of Exchangeable
Preferred Stock called for redemption and all rights of holders of such shares
will terminate except for the right to receive the Optional Redemption Price or
the Mandatory Redemption Price, as the case may be, without interest; provided,
however, that if a notice of redemption shall have been given as provided in
subparagraph (iii)(B) and the funds necessary for redemption (including an
amount
11
in respect of all dividends that will accrue to the Redemption Date) shall have
been segregated and irrevocably set apart by the Company, in trust for the
benefit of the holders of the shares called for redemption, then dividends shall
cease to accumulate on the Redemption Date on the shares to be redeemed and, at
the close of business on the day on which such funds are segregated and set
apart, the holders of the shares to be redeemed shall, with respect to the
shares to be redeemed, cease to be stockholders of the Company and shall be
entitled only to receive the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be, for such shares without interest from the
Redemption Date.
(B) With respect to a redemption pursuant to paragraph (e)(i) or
(e)(ii), the Company will send a written notice of redemption by first class
mail to each holder of record of shares of Exchangeable Preferred Stock, not
fewer than 30 days nor more than 60 days prior to the Redemption Date at its
registered address (the "Redemption Notice"); provided, however, that no failure
to give such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Exchangeable Preferred Stock to be
redeemed except as to the holder or holders to whom the Company has failed to
give said notice or except as to the holder or holders whose notice was
defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to
paragraph (e)(i) or (e)(ii) hereof;
(2) the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be;
(3) whether all or less than all the outstanding shares of the
Exchangeable Preferred Stock are to be redeemed and the total number of
shares of the Exchangeable Preferred Stock being redeemed;
(4) the Redemption Date;
(5) that the holder is to surrender to the Company, in the
manner, at the place or places and at
12
the price designated, his certificate or certificates representing the
shares of Exchangeable Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Exchangeable Preferred Stock
to be redeemed shall cease to accumulate on such Redemption Date unless
the Company defaults in the payment of the Optional Redemption Price or
the Mandatory Redemption Price, as the case may be.
(C) Each holder of Exchangeable Preferred Stock shall
surrender the certificate or certificates representing such shares of
Exchangeable Preferred Stock to the Company, duly endorsed (or otherwise in
proper form for transfer, as determined by the Company), in the manner and at
the place designated in the Redemption Notice, and on the Redemption Date the
full Optional Redemption Price or Mandatory Redemption Price, as the case may
be, for such shares shall be payable in cash to the person whose name appears on
such certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.
(f) Voting Rights. (i) The holders of Exchangeable Preferred Stock,
except as otherwise required under Delaware law or as set forth in paragraphs
(ii) and (iii) below, shall not be entitled to vote on any matter required or
permitted to be voted upon by the stockholders of the Company.
(ii) (A) If (1) dividends on the Exchangeable Preferred Stock are in
arrears and unpaid for six or more Dividend Periods (whether or not consecutive)
(a "Dividend Default"); (2) the Company fails to redeem the Exchangeable
Preferred Stock on August 15, 2009, or fails to otherwise discharge any
redemption obligation with respect to the Exchangeable Preferred Stock; (3) a
breach or violation of any of the provisions set forth under paragraph (l)
(Certain Additional Provisions) occurs and the breach or violation continues for
a period of 30 days or more after the Company
13
receives notice thereof specifying the default from the holders of at least 25%
of the shares of Exchangeable Preferred Stock then outstanding; or (4) the
Company fails to pay at final maturity (giving effect to any applicable grace
period) the principal amount of any Indebtedness of the Company or any
Significant Subsidiary (other than any Permitted PSINet Non-Recourse Debt) or
the final maturity of any such Indebtedness is accelerated because of a default
and the total amount of such Indebtedness unpaid or accelerated exceeds $5
million, then the number of directors constituting the Board of Directors of the
Company will, subject to paragraph (f)(ii)(E), be increased by two and the
Holders of the then outstanding shares of Exchangeable Preferred Stock (together
with the holders of Parity Stock upon which like rights have been conferred and
are exercisable), voting separately and as a class, shall have the right and
power to elect such two additional directors. Each such event described in
clauses (1),(2),(3) or (4) above is a "Voting Rights Triggering Event".
(B) The voting rights set forth in paragraph (f)(ii)(A) above will
continue until such time as (x) in the case of a Dividend Default, all dividends
in arrears on the Exchangeable Preferred Stock are paid in full in cash or (y)
in all other cases, any failure, breach or default giving rise to such Voting
Rights Triggering Event is remedied or waived by the Holders of at least a
majority of the outstanding shares of Exchangeable Preferred Stock then
outstanding, at which time the term of any directors elected pursuant to the
provisions of paragraph (f)(ii)(A) above (subject to the right of holders of any
other preferred stock to elect directors) shall terminate forthwith and the
number of directors constituting the Board of Directors shall be decreased by
two (until the occurrence of any subsequent Voting Rights Triggering Event). At
any time after voting power to elect directors shall have become vested and be
continuing in the holders of Exchangeable Preferred Stock (together with the
holders of Parity Stock upon which like rights have been conferred and are
exercisable) pursuant to paragraph (f)(ii)(A) hereof, or if vacancies shall
exist in the offices of directors elected by such holders, a proper officer of
the Company may, and upon the written request of the holders of record of at
least 25%
14
of the shares of Exchangeable Preferred Stock then outstanding or the holders of
25% of the shares of Parity Stock then outstanding upon which like rights have
been confirmed and are exercisable addressed to the secretary of the Company
shall, call a special meeting of the Holders of Exchangeable Preferred Stock and
the holders of such Parity Stock for the purpose of electing the directors which
such holders are entitled to elect pursuant to the terms hereof; provided,
however, that no such special meeting shall be called if the next annual meeting
of stockholders of the Company is to be held within 60 days after the voting
power to elect directors shall have become vested, in which case such meeting
shall be deemed to have been called for such next annual meeting. If such
meeting shall not be called by a proper officer of the Company within 20 days
after personal service to the secretary of the Company at its principal
executive offices, then the Holders of record of at least 25% of the outstanding
shares of Exchangeable Preferred Stock or the holders of 25% of the shares of
Parity Stock upon which like rights have been confirmed and are exercisable may
designate in writing one of their members to call such meeting at the expense of
the Company, and such meeting may be called by the person so designated upon the
notice required for the annual meetings of stockholders of the Company and shall
be held at the place for holding the annual meetings of stockholders. Any holder
of Exchangeable Preferred Stock or such Parity Stock so designated shall have,
and the Company shall provide, access to the lists of holders of Exchangeable
Preferred Stock and the holders of such Parity Stock to be called pursuant to
the provisions hereof. If no special meeting of the Holders of Exchangeable
Preferred Stock and the holders of such Parity Stock is called as provided in
this paragraph (f)(ii), then such meeting shall be deemed to have been called
for the next annual meeting of stockholders of the Company or special meeting of
the holders of any other capital stock of the Company.
(C) At any meeting held for the purposes of electing directors at
which the Holders of Exchangeable Preferred Stock (together with the holders of
Parity Stock upon which like rights have been conferred and are exercisable)
shall have the right, voting together as a
15
separate class, to elect directors as aforesaid, the presence in person or by
proxy of the holders of at least a majority in voting power of the outstanding
shares of Exchangeable Preferred Stock (and such Parity Stock) shall be required
to constitute a quorum thereof.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Exchangeable Preferred Stock (and such Parity Stock) may be filled by
the remaining director elected by the Holders of Exchangeable Preferred Stock
(and such Parity Stock) unless and until such vacancy shall be filled by the
Holders of Exchangeable Preferred Stock (and such Parity Stock).
(E) In the event that an event occurs at any time which
results in the holders of any Parity Stock having voting rights to elect
directors to the Board of Directors, holders of Exchangeable Preferred Stock
shall, whether or not such event otherwise constitutes a Voting Rights
Triggering Event pursuant to paragraph (f)(ii)(A), have the voting rights set
forth in paragraphs (f)(ii)(A) and (f)(ii)(B), and such event shall be deemed
(for purposes of this paragraph (f) only) to constitute a Voting Rights
Triggering Event. In addition, in the event that during a time in which
directors elected by the holders of Exchangeable Preferred Stock pursuant to
this paragraph (f)(ii) are serving on the Board of Directors ("Previously-
Elected Directors") an event occurs which results in holders of Parity Stock
having voting rights to elect (voting together with the holders of Exchangeable
Preferred Stock) at least two directors to the Board of Directors, the holders
of Exchangeable Preferred Stock shall vote together with the holders of such
Parity Stock to elect such new directors, and upon the election of the new
directors the Previously-Elected Directors shall (unless such Previously-
Elected Directors are elected as new directors) cease to serve on the Board of
Directors.
(iii) (A) So long as any shares of the Exchangeable Preferred Stock
are outstanding, the Company will not authorize, create or increase the
authorized amount of any class or series of Senior Stock without the affirmative
vote or consent of holders of at least
16
two-thirds of the shares of Exchangeable Preferred Stock then outstanding,
voting or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting (except that no such vote or consent shall be required for the issuance
of additional shares of Series 3 Preferred Stock to be paid as dividends on such
Series 3 Preferred Stock pursuant to the terms of such Series 3 Preferred
Stock).
(B) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Company will not amend this Certificate of Designation so as to
affect adversely the specified rights, preferences, privileges or voting rights
of Holders of shares of Exchangeable Preferred Stock or to authorize the
issuance of any additional shares of Exchangeable Preferred Stock (except to
authorize the issuance of additional shares of Exchangeable Preferred Stock to
be paid as dividends on the Exchangeable Preferred Stock, for which no consent
shall be necessary) without the affirmative vote or consent of Holders of at
least a majority of the issued and outstanding shares of Exchangeable Preferred
Stock, voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting.
(C) Except as set forth in paragraph (f)(iii)(A) or (B) above, (x)
the creation, authorization or issuance of any shares of any Junior Stock,
Parity Stock or Senior Stock, including the designation of a series of
Exchangeable Preferred Stock, or (y) the increase or decrease in the amount of
authorized Capital Stock of any class, including Preferred Stock, shall not
require the consent of Holders of Exchangeable Preferred Stock and shall not be
deemed to affect adversely the rights, preferences, privileges or voting rights
of shares of Exchangeable Preferred Stock.
(D) Prior to the exchange of Exchangeable Preferred Stock for
Exchange Debentures, the Company shall not amend or modify the Exchange
Indenture (except as expressly provided therein in respect of amendments without
the consent of holders of Exchange Debentures) without
17
the affirmative vote or consent of holders of at least a majority of the shares
of Exchangeable Preferred Stock then outstanding, voting or consenting, as the
case may be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(iv) In any case in which the Holders of Exchangeable
Preferred Stock shall be entitled to vote pursuant to this paragraph (f) or
pursuant to Delaware law, each Holder of Exchangeable Preferred Stock entitled
to vote with respect to such matters shall be entitled to one vote for each
share of Exchangeable Preferred Stock held.
(g) Exchange. (i) Exchange for Debentures. (A) The Company may, at
its option, on any scheduled Dividend Payment Date, exchange the Exchangeable
Preferred Stock, in whole but not in part, for the Exchange Debentures; provided
however, that (1) on the date of such exchange there are no accumulated and
unpaid dividends on the Exchangeable Preferred Stock (including the dividends
payable on such date) or other contractual impediment to such exchange; (2)
there shall be funds legally available sufficient therefor; (3) immediately
after giving effect to such exchange, no Default (as defined in the Exchange
Indenture) shall have occurred and be continuing, and (iv) the Company shall
have delivered to the Trustee under the Exchange Indenture an opinion of counsel
with respect to the due authorization and issuance of the Exchange Debentures.
(B) Upon any exchange pursuant to this paragraph (g)(i),
holders of outstanding shares of Exchangeable Preferred Stock will be entitled
to receive $1.00 principal amount of Exchange Debentures for each $1.00 of
liquidation preference of Exchangeable Preferred Stock held by them. Exchange
Debentures issued in exchange for Exchangeable Preferred Stock will be issued in
principal amounts of $1,000 and integral multiples thereof to the extent
possible, and will also be issued in principal amounts less than $1,000 so that
each holder of Exchangeable Preferred Stock will receive certificates
representing the entire amount of Exchange Debentures to which such holder's
shares of Exchangeable Preferred Stock entitle such holder;
18
provided, however, that the Company may pay cash in lieu of issuing an Exchange
Debenture in a principal amount less than $1,000.
(ii) Procedures. (A) The Company will send a written notice of
exchange (the "Exchange Notice") by mail to each holder of record of shares of
Exchangeable Preferred Stock not fewer than 30 days nor more than 60 days before
the date fixed for such exchange (the "Exchange Date"); provided, however, that
no failure to give such notice nor any deficiency therein shall affect the
validity of the procedure for the exchange of any shares of Exchangeable
Preferred Stock to be exchanged except as to the holder or holders to whom the
Company has failed to give said notice or except as to the holder or holders
whose notice was defective. The Exchange Notice shall state:
(1) the Exchange Date;
(2) that the holder is to surrender to the Company, in the manner
and at the place or places designated, his certificate or certificates
representing the shares of Exchangeable Preferred Stock to be exchanged;
(3) that dividends on the shares of Exchangeable Preferred Stock to
be exchanged shall cease to accrue on such Exchange Date whether or not
certificates for shares of Exchangeable Preferred Stock are surrendered
for exchange on such Exchange Date unless the Company shall default in the
delivery of Exchange Debentures; and
(4) that interest on the Exchange Debentures shall accrue from the
Exchange Date whether or not certificates for shares of Exchangeable
Preferred Stock are surrendered for exchange on such Exchange Date.
(B) On and after the Exchange Date, dividends will cease to accrue
on the outstanding shares of Exchangeable Preferred Stock, and all rights of the
holders of Exchangeable Preferred Stock (except the right to receive Exchange
Debentures, an amount in cash, to the extent
19
applicable, equal to the accumulated and unpaid dividends to the Exchange Date
and, if the Company so elects, cash in lieu of any Exchange Debenture that is in
a principal amount that is not an integral multiple of $1,000) will terminate.
The person entitled to receive the Exchange Debentures issuable upon such
exchange will be treated for all purposes as the registered holder of such
Exchange Debentures.
(C) On or before the Exchange Date, each holder of
Exchangeable Preferred Stock shall surrender the certificate or certificates
representing such shares of Exchangeable Preferred Stock, in the manner and at
the place designated in the Exchange Notice. The Company shall cause the
Exchange Debentures to be executed on the Exchange Date and, upon surrender in
accordance with the Exchange Notice of the certificates for any shares of
Exchangeable Preferred Stock so exchanged, duly endorsed (or otherwise in proper
form for transfer, as determined by the Company), such shares shall be exchanged
by the Company into Exchange Debentures. The Company shall pay interest on the
Exchange Debentures at the rate and on the dates specified therein from the
Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the
foregoing provisions of this paragraph (g), the Company shall not be entitled to
exchange the Exchangeable Preferred Stock for Exchange Debentures if such
exchange, or any term or provision of the Exchange Indenture or the Exchange
Debentures, or the performance of the Company's obligations under the Exchange
Indenture or the Exchange Debentures, shall materially violate or conflict with
any applicable law or agreement or instrument then binding on the Company or if,
at the time of such exchange, the Company is insolvent or if it would be
rendered insolvent by such exchange.
(iv) Exchange of Initial Exchangeable Preferred Stock for
Series B Stock. The Series B Stock will be issued by the Company only in
connection with an exchange offer, on a share for share basis, for the Initial
Exchangeable Preferred Stock as required pursuant to the Registration Rights
Agreement. Each share of Series B Stock issued in exchange for a share of
Initial Exchangeable Preferred Stock
20
will be deemed to have the same liquidation preference and accrued and unpaid
dividends as the share of Initial Exchangeable Preferred Stock so exchanged.
(h) Change of Control. (i) Upon the occurrence of a Change of
Control (the date of such occurrence being the "Change of Control Date"), the
Company shall either (1) offer to purchase each holder's Exchangeable Preferred
Stock in cash pursuant to the offer described in paragraph (h)(iii) (the "Change
of Control Offer") at a purchase price equal to 101% of the Liquidation
Preference thereof, plus, without duplication, all accrued and unpaid dividends,
if any, to the Change of Control Payment Date, including an amount in cash equal
to a prorated dividend for the period from the Dividend Payment Date immediately
prior to the Change of Control Payment Date to the Change of Control Payment
Date or (2) notify each holder of the Company's election not to make an offer as
described in clause (1) above, in which case the dividend rate on the
Exchangeable Preferred Stock shall be subject to reset pursuant to paragraph
(c)(ii).
(ii) Prior to the mailing of the notice referred to in
paragraph (h)(iii), but in any event within 30 days following the date on which
the Company knows or reasonably should have known that a Change in Control has
occurred, the Company covenants that it shall promptly determine if the purchase
of the Exchangeable Preferred Stock would violate or constitute a default under
the indebtedness of the Company.
(iii) Within 30 days following the date on which the Company knows
or reasonably should have known that a Change in Control has occurred, the
Company must send, by first-class mail, postage prepaid, a notice to each holder
of Exchangeable Preferred Stock. Such notice shall state whether the Company has
elected to make an offer to purchase shares of Exchangeable Preferred Stock and
if it has so elected, such notice shall contain all instructions and materials
necessary to enable such holders to tender Exchangeable Preferred Stock pursuant
to the Change of
21
Control Offer. If the Company has elected to make a Change of Control Offer,
such notice shall state:
(A) that a Change of Control has occurred, that a Change of Control
Offer is being made pursuant to this paragraph (h) and that all
Exchangeable Preferred Stock validly tendered and not withdrawn will be
accepted for payment;
(B) the purchase price (including the amount of accrued dividends,
if any) and the purchase date (which must be no earlier than 30 days nor
later than 60 days from the date such notice is mailed, other than as may
be required by law) (the "Change of Control Payment Date");
(C) that any shares of Exchangeable Preferred Stock not
tendered will continue to accrue dividends;
(D) that, unless the Company defaults in making payment therefor,
any share of Exchangeable Preferred Stock accepted for payment pursuant to
the Change of Control Offer shall cease to accrue dividends after the
Change of Control Payment Date;
(E) that holders electing to have any shares of Exchangeable
Preferred Stock purchased pursuant to a Change of Control Offer will be
required to surrender stock certificates representing such shares of
Exchangeable Preferred Stock, properly endorsed for transfer, together
with such other customary documents as the Company and the Transfer Agent
may reasonably request to the Transfer Agent and registrar for the
Exchangeable Preferred Stock at the address specified in the notice prior
to the close of business on the Business Day prior to the Change of
Control Payment Date;
(F) that holders will be entitled to withdraw their election if the
Company receives, not later than five Business Days prior to the Change of
Control Payment Date, a telegram, a telex, facsimile transmission or
letter setting forth the name of the
22
holder, the number of shares of Exchangeable Preferred Stock the holder
delivered for purchase and a statement that such holder is withdrawing his
election to have such shares of Exchangeable Preferred Stock purchased;
(G) that holders whose shares of Exchangeable Preferred Stock are
purchased only in part will be issued a new certificate representing the
unpurchased shares of Exchangeable Preferred Stock; and
(H) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical
income, cash flow and capitalization after giving effect to such Change of
Control).
If the Company elects not to make a Change of Control Offer, such
notice shall state that the dividend rate on the Exchangeable Preferred Stock is
subject to adjustment pursuant to paragraph (c)(ii).
(iv) The Company will comply with any tender offer rules under the
Exchange Act which then may be applicable, including Rules 13e-4 and 14e-1, in
connection with any offer made by the Company to repurchase the shares of
Exchangeable Preferred Stock as a result of a Change of Control. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of this Certificate of Designation, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Certificate of Designation by virtue
thereof.
(v) On the Change of Control Payment Date the Company shall (A)
accept for payment the shares of Exchangeable Preferred Stock validly tendered
pursuant to the Change of Control Offer, (B) pay to the holders of shares so
accepted the purchase price therefor in cash and (C) cancel each surrendered
certificate and retire the shares represented thereby. Unless the Company
defaults in the payment for the shares of Exchangeable Preferred Stock tendered
pursuant to the Change of Control Offer, dividends will cease to accrue with
respect to the shares of
23
Exchangeable Preferred Stock tendered and all rights of holders of such tendered
shares will terminate, except for the right to receive payment therefor, on the
Change of Control Payment Date.
(vi) To accept the Change of Control Offer, the holder of a share of
Exchangeable Preferred Stock shall deliver, on or before the 10th day prior to
the Change of Control Payment Date, written notice to the Company (or an agent
designated by the Company for such purpose) of such holder's acceptance,
together with certificates evidencing the shares of Exchangeable Preferred Stock
with respect to which the Change of Control Offer is being accepted, duly
endorsed for transfer.
(i) Conversion or Exchange. Except as otherwise provided
herein, the holders of shares of Exchangeable Preferred Stock shall not have any
rights hereunder to convert such shares into or exchange such shares for shares
of any other class or classes or of any other series of any class or classes of
Capital Stock of the Company.
(j) Reissuance of Exchangeable Preferred Stock. Shares of
Exchangeable Preferred Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed or exchanged, shall not be reissued as
shares of Exchangeable Preferred Stock and shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock; provided,
however, that so long as any shares of Exchangeable Preferred Stock are
outstanding, any issuance of such shares must be in compliance with the terms
hereof.
(k) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
24
(l) Certain Additional Provisions. The Company covenants and
agrees for the benefit of the Holders as follows:
(i) SEC Reports. The Company shall file with the Trustee and provide
Holders, within 15 days after it files them with the SEC, copies of its annual
report and the information, documents and other reports which the Company is
required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall continue to file with the SEC and provide the Trustee and Holders
with such annual reports and such information, documents and other reports as
are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a
U.S. corporation subject to such Sections, such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections.
(ii) Limitation on Indebtedness. (A) The Company shall not Incur,
and shall not permit any Restricted Subsidiary to Incur, directly or indirectly,
any Indebtedness unless, on the date of such Incurrence and after giving pro
forma effect thereto (including pro forma application of the net proceeds
therefrom) and to any other Indebtedness Incurred or repaid since the end of the
period referred to below and the receipt and application of the proceeds
thereof, either (i) the Indebtedness to Operating Cash Flow Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
Indebtedness is Incurred would have been not more than 5.0 to 1.0, or (ii) the
Company's Consolidated Capital Ratio as of the end of the most recent fiscal
quarter for which internal financial statements are available immediately
preceding the date on which such Indebtedness is Incurred is less than 2.0 to
1.0.
25
(B) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred pursuant to one or more Credit Agreements;
provided, however, that, after giving effect to any such Incurrence, the
aggregate principal amount of such Indebtedness then outstanding does not
exceed the greater of (A) $150,000,000 and (B) 85% of the book value of
the Accounts Receivables of the Company and its Restricted Subsidiaries;
(2) Indebtedness owed to and held by the Company or a Restricted
Subsidiary; provided, however, that any subsequent issuance or transfer of
any Capital Stock which results in any Restricted Subsidiary ceasing to be
a Restricted Subsidiary or any subsequent transfer of such Indebtedness
(other than to the Company or another Restricted Subsidiary) shall be
deemed, in each case, to constitute the Incurrence of such Indebtedness by
the issuer thereof;
(3) the Exchange Debentures (including Exchange Debentures issued in
lieu of cash interest payments with respect to Exchange Debentures);
(4) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2) or (3) of this paragraph
(l)(ii)(B));
(5) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (l)(ii)(A) pursuant to clause (3) or (4) of this
paragraph (l)(ii)(B) or this clause (5);
(6) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the Company
and its Restricted Subsidiaries pursuant to this Certificate of
Designation.
(7) Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money
26
obligations, in each case Incurred for the purpose of financing all or any
part of the purchase price or cost of construction or improvement of
property used in the business of the Company or such Restricted
Subsidiary;
(8) In the event that the PSINet Shares are held by the Company or a
Restricted Subsidiary, the Incurrence by the Company or such Restricted
Subsidiary of Permitted PSINet Non-Recourse Debt; and
(9) Indebtedness in an aggregate principal amount at any time
outstanding which, together with the amount of all other Indebtedness of
the Company and its Restricted Subsidiaries outstanding on the date of
such Incurrence (other than Indebtedness permitted by clauses (1) through
(8) of this paragraph (l)(ii)(B) and paragraph (l)(ii)(A)), does not
exceed 5% of Consolidated Tangible Assets.
(C) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to paragraph (l)(ii)(B) if the proceeds thereof are used,
directly or indirectly, to Refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Exchange Debentures to at least the
same extent as such Subordinated Obligations.
(D) For purposes of determining compliance with this paragraph (l)(ii),
(1) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(2) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described above.
(iii) Limitation on Restricted Payments. (A) The Company shall
not, and shall not permit any Restricted
27
Subsidiary, directly or indirectly, to make a Restricted Payment if at the time
the Company or such Restricted Subsidiary makes such Restricted Payment:
(1) a Voting Rights Triggering Event shall have occurred and
be continuing (or would result therefrom);
(2) the Company is not able to Incur an additional $1.00 of
Indebtedness under paragraph (l)(ii)(A); or
(3) the aggregate amount of such Restricted Pay ment and all other
Restricted Payments since the Issue Date would exceed the sum of:
(I) an amount equal to the Cumulative Operating Cash Flor for
the period (taken as one accounting period) from the beginning of
the first full fiscal quarter commencing after the Issue Date to the
end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment less 1.50 times the Company's Cumulative
Consolidated Interest Expense for such period;
(II) the aggregate Net Cash Proceeds received by the Company
from the issuance or sale of its Parity Stock and Junior Stock (in
each case other than Disqualified Stock) subsequent to the Issue
Date (other than an issuance or sale to a Subsidiary of the Company
and other than an issuance or sale to an employee stock ownership
plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees);
(III) the amount by which Indebtedness of the Company is
reduced on the Company's balance sheet upon the conversion or
exchange (other than by a Subsidiary of the Company) subsequent to
the Issue Date of any Indebtedness of the Company convertible or
exchangeable for Parity Stock or Junior
Stock (in each case other than Disqualified
28
Stock) of the Company (less the amount of any cash, or the fair
value of any other property, distributed by the Company upon such
conversion or exchange); and
(IV) an amount equal to the sum of (x) the net reduction in
Investments in any Person resulting from dividends, repayments of
loans or advances or other transfers of assets (but excluding such
interest, dividends, repayments, advances or other transfers of
assets to the extent any such item increases Consolidated Net
Income), in each case to the Company or any Restricted Subsidiary
from any Person (including, without limitation, from Unrestricted
Subsidiaries), and (y) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the
net assets of an Unrestricted Subsidiary at the time such
Unrestricted Subsidiary is designated a Restricted Subsidiary;
provided, however, that the foregoing sum shall not exceed, in the
case of any Person (including any Unrestricted Subsidiary), the
amount of Investments previously made (and treated as a Restricted
Payment) by the Company or any Restricted Subsidiary in such Person.
(B) The provisions of paragraph (l)(iii)(A) shall not prohibit:
(1) any Restricted Payment made out of the proceeds of the
substantially concurrent sale of, or any acquisition of any Parity Stock
or Junior Stock of the Company made by exchange for, other Parity Stock or
Junior Stock, as the case may be, of the Company (in each case other than
Disqualified Stock and other than Parity Stock or Junior Stock issued or
sold to a Subsidiary of the Company or an employee stock ownership plan or
to a trust established by the Company or any of its Subsidiaries for the
benefit of their employees); provided, however, that (I) such Restricted
Payment shall be excluded in the calculation of the amount of Restricted
Payments and (II) the Net Cash Proceeds from such sale shall be excluded
from the
29
calculation of amounts under paragraph (l)(iii)(A)(3)(II);
(2) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with paragraph (l)(iii); provided, however, that at the time of payment of
such dividend, no other Voting Rights Triggering Event shall have occurred
and be continuing (or result therefrom); provided further, however, that
such dividend shall be included in the calculation of the amount of
Restricted Payments; or
(3) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of the Company or any of its Subsidiaries
from employees, former employees, directors or former directors of the
Company or any of its Subsidiaries (or permitted transferees of such
employees, former employees, directors or former directors), pursuant to
the terms of the agreements (including employment agreements) or plans (or
amendments thereto) approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or
sell, shares of such common stock; provided, however, that the aggregate
amount of such repurchases and other acquisitions shall not exceed
$1,000,000 in any calendar year; provided further, however, that such
repurchases and other acquisitions shall be excluded in the calculation of
the amount of Restricted Payments.
(iv) Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (A) pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the
30
Company, (B) make any loans or advances to the Company or (C) transfer any of
its property or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an
agreement in effect at or entered into on the Issue
Date;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or series
of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was acquired by the Company) and
outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (1) or (2) of this paragraph (l)(iv) or this clause
(3) or contained in any amendment to an agreement referred to in clause
(1) or (2) of this paragraph (l)(iv) or this clause (3); provided,
however, that the encumbrances and restrictions with respect to such
Restricted Subsidiary contained in any such refinancing agreement or
amendment are no less favorable to the holders of Exchangeable Preferred
Stock than encumbrances and restrictions with respect to such Restricted
Subsidiary contained in such predecessor agreements;
(4) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease or the property
leased thereunder;
31
(5) in the case of clause (C) above, restrictions contained in IRU
Agreements, security agreements or mortgages securing Indebtedness or
other obligations of a Restricted Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such
security agreements or mortgages;
(6) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition; and
(7) any such encumbrance or restriction contained
in the PSINet Agreement.
(v) Limitation on Affiliate Transactions. (A) The Company
shall not, and shall not permit any Restricted Subsidiary to, enter into or
permit to exist any transaction (including the purchase, sale, lease or exchange
of any property, employee compensation arrangements or the rendering of any
service) with any Affiliate of the Company (an "Affiliate Transaction") unless
(1) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (2) the Company delivers to the Transfer
Agent (I) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $1,000,000 a resolution of the Board of Directors set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (1) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and (II) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $10,000,000, other than transactions with GE Capital
Communication and Excluded PSINet Transactions, an opinion as to the fairness to
the Company or such Restricted Subsidiary of such Affiliate Transaction from a
financial point of view issued by an investment banking firm of national
standing.
32
(B) The provisions of the foregoing paragraph (l)(v)(A) shall not
prohibit (1) any Restricted Payment permitted to be paid pursuant to paragraph
(l)(iii), (2) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board of
Directors, (3) the grant of stock options or similar rights to employees and
directors of the Company pursuant to plans approved by the Board of Directors,
(4) loans or advances to employees in the ordinary course of business in
accordance with the past practices of the Company or its Restricted
Subsidiaries, but in any event not to exceed $500,000 in the aggregate
outstanding at any one time, (5) any employment or consulting arrangement or
agreement entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary, (6) the payment of reasonable fees to
directors of the Company and its Restricted Subsidiaries who are not employees
of the Company or its Restricted Subsidiaries, (7) any Affiliate Transaction
between the Company and a Restricted Subsidiary or between Restricted
Subsidiaries, (8) transactions in connection with Permitted Businesses between
the Company and GE Capital Communication, (9) transactions between the Company
or any Restricted Subsidiary specifically contemplated by the PSINet Agreement
and (10) the issuance or sale of any Capital Stock (other than Disqualified
Stock) of the Company. Notwithstanding the foregoing, Affiliate Transactions
shall not include any transaction involving the sale, purchase, repurchase,
redemption, transfer, exchange or other acquisition or disposition of Senior
Notes, Exchangeable Preferred Stock or Convertible Preferred Stock by or from,
or the payment of principal of, premium, if any, and interest on, or liquidation
preference of and dividend on, any Senior Notes, Exchangeable Preferred Stock or
Convertible Preferred Stock, as the case may be, to any Affiliate of the Company
or any Affiliate of a Restricted Subsidiary of the Company; provided, however,
that such transaction is offered substantially concurrently to all other holders
of Senior Notes, Exchangeable Preferred Stock or Convertible Preferred Stock, as
the case may be, on the same terms and conditions;
33
provided further, however, that such transaction is approved by a majority of
the disinterested members of the Board of Directors, other than transactions in
connection with the payment of principal of, premium, if any, and interest on,
or liquidation preference of and dividends on, Senior Notes, Exchangeable
Preferred Stock or Convertible Preferred Stock, as the case may be, pursuant to
the provisions of the indenture or certificate of designation governing the
payment of interest and principal, dividends and liquidation preference,
optional redemption, repurchases from the proceeds of an asset disposition and
repurchases upon a change of control.
(vi) When Company May Merge or Transfer Assets. The Company shall
not consolidate with or merge with or into, or convey, transfer or lease, in one
transaction or a series of transactions, all or substantially all its assets to,
any Person, unless: (1) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) shall expressly assume all the
obligations of the Company under the Exchangeable Preferred Stock; (2)
immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been Incurred by such
Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing, (3) immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (l)(ii)(A); (4)
immediately after giving effect to such transaction, the Successor Company shall
have Consolidated Net Worth in an amount that is not less than the Consolidated
Net Worth of the Company immediately prior to such transaction; and (5) the
Company shall have delivered to the Trustee an Officers' Certificate, stating
that such consolidation, merger or transfer and such assumption (if any) comply
with this Certificate of Designation.
34
(m) Certificates. (i) Form and Dating. The Exchangeable
Preferred Stock and the Transfer Agent's certificate of authentication shall be
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Certificate of Designation. The Exchangeable
Preferred Stock certificate may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). Each Exchangeable Preferred Stock certificate shall
be dated the date of its authentication. The terms of the Exchangeable Preferred
Stock certificate set forth in Exhibit A are part of the terms of this
Certificate of Designation.
(A) Global Exchangeable Preferred Stock. The Exchangeable
Preferred Stock sold in reliance on Rule 144A shall be issued initially in the
form of one or more fully registered global certificates with the global
securities legend and restricted securities legend set forth in Exhibit A hereto
(the "Global Exchangeable Preferred Stock"), which shall be deposited on behalf
of the purchasers represented thereby with the Transfer Agent, at its New York
office, as custodian for DTC (or with such other custodian as DTC may direct),
and registered in the name of DTC or a nominee of DTC, duly executed by the
Company and authenticated by the Transfer Agent as hereinafter provided. Subject
to the terms hereof and to the requirements of applicable law, the number of
shares of Exchangeable Preferred Stock represented by Global Exchangeable
Preferred Stock may from time to time be increased or decreased by adjustments
made on the records of the Transfer Agent and DTC or its nominee as hereinafter
provided.
(B) Book-Entry Provisions. In the event Global Exchangeable
Preferred Stock is deposited with or on behalf of DTC, the Company shall execute
and the Transfer Agent shall authenticate and deliver initially one or more
Global Exchangeable Preferred Stock certificates that (a) shall be registered in
the name of DTC for such Global Exchangeable Preferred Stock or the nominee of
DTC and (b) shall be delivered by the Transfer Agent to DTC or pursuant to DTC's
35
instructions or held by the Transfer Agent as custodian for DTC.
Members of, or participants in, DTC ("Agent Members") shall have no
rights under this Certificate of Designation with respect to any Global
Exchangeable Preferred Stock held on their behalf by DTC or by the Transfer
Agent as the custodian of DTC or under such Global Exchangeable Preferred Stock,
and DTC may be treated by the Company, the Transfer Agent and any agent of the
Company or the Transfer Agent as the absolute owner of such Global Exchangeable
Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Transfer Agent or any agent of the
Company or the Transfer Agent from giving effect to any written certification,
proxy or other authorization furnished by DTC or impair, as between DTC and its
Agent Members, the operation of customary practices of DTC governing the
exercise of the rights of a holder of a beneficial interest in any Global
Exchangeable Preferred Stock.
(C) Certificated Exchangeable Preferred Stock. Exchangeable
Preferred Stock initially sold in offshore transactions pursuant to Regulation S
under the Securities Act will be issued in fully registered certificated form
("Certificated Exchangeable Preferred Stock").
Except as otherwise provided by applicable law or as provided in
this paragraph (m)(i) or in paragraph (m)(iii), owners of beneficial interests
in Global Exchangeable Preferred Stock will not be entitled to receive physical
delivery of Certificated Exchangeable Preferred Stock.
After a transfer of any Initial Exchangeable Preferred Stock during
the period of the effectiveness of a Shelf Registration Statement with respect
to such Initial Exchangeable Preferred Stock, all requirements pertaining to
legends on such Initial Exchangeable Preferred Stock will cease to apply, the
requirements requiring that any such Initial Exchangeable Preferred Stock issued
to Holders be issued in global form will cease to apply, and Certificated
Exchangeable Preferred Stock without legends will be
36
available to the transferee of the Holder of such Initial Exchangeable Preferred
Stock upon exchange of such transferring Holder's Initial Exchangeable Preferred
Stock or directions to transfer such Holder's interest in the Global
Exchangeable Preferred Stock, as applicable. Upon the consummation of a
Registered Exchange Offer with respect to the Initial Exchangeable Preferred
Stock pursuant to which Holders of such Initial Exchangeable Preferred Stock are
offered Series B Stock in exchange for their Initial Exchangeable Preferred
Stock, all requirements that Initial Exchangeable Preferred Stock be issued in
global form will cease to apply and Certificated Exchangeable Preferred Stock
with the restricted securities legend set forth in Exhibit A hereto will be
available to Holders of such Initial Exchangeable Preferred Stock that do not
exchange their Initial Exchangeable Preferred Stock, and Series B Stock in
certificated form will be available to Holders that exchange such Initial
Exchangeable Preferred Stock in such Registered Exchange Offer.
(ii) Execution and Authentication. Two Officers shall sign the
certificates representing Exchangeable Preferred Stock for the Company by manual
or facsimile signature. The Company's seal shall be impressed, affixed,
imprinted or reproduced on the Exchangeable Preferred Stock and may be in
facsimile form.
If an Officer whose signature is on certificates representing
Exchangeable Preferred Stock no longer holds that office at the time the
Transfer Agent authenticates the Exchangeable Preferred Stock evidenced thereby,
the shares of Exchangeable Preferred Stock evidenced thereby shall be valid
nevertheless.
A certificate representing Exchangeable Preferred Stock shall not be
valid until an authorized signatory of the Transfer Agent manually signs the
certificate of authentication on the Exchangeable Preferred Stock. The signature
shall be conclusive evidence that the Exchangeable Preferred Stock has been
authenticated under this Certificate of Designation.
37
The Transfer Agent shall authenticate and deliver: (1) 300,000
shares of Initial Exchangeable Preferred Stock for original issue and (2)
300,000 shares of Series B Stock for issue only in a Registered Exchange Offer
pursuant to the Registration Rights Agreement, in each case upon a written order
of the Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. In addition, the Transfer
Agent shall authenticate and deliver, from time to time, Additional Shares for
original issue upon order of the Company signed by two Officers or by an Officer
or either an Assistant Treasurer or Assistant Secretary of the Company. Such
orders shall specify the number of shares of Exchangeable Preferred Stock to be
authenticated and the date on which the original issue of Exchangeable Preferred
Stock is to be authenticated and whether the Exchangeable Preferred Stock is to
be Initial Exchangeable Preferred Stock or Series B Stock.
The Transfer Agent may appoint an authenticating agent
reasonably acceptable to the Company to authenticate the Exchangeable Preferred
Stock. Unless limited by the terms of such appointment, an authenticating agent
may authenticate Exchangeable Preferred Stock whenever the Transfer Agent may do
so. Each reference in this Certificate of Designation to authentication by the
Transfer Agent includes authentication by such agent. An authenticating agent
has the same rights as the Transfer Agent or agent for service of notices and
demands.
(iii) Transfer and Exchange. (A) Transfer and Exchange of
Certificated Exchangeable Preferred Stock. When Certificated Exchangeable
Preferred Stock is presented to the Transfer Agent with a request to register
the transfer of such Certificated Exchangeable Preferred Stock or to exchange
such Certificated Exchangeable Preferred Stock for an equal number of shares of
Certificated Exchangeable Preferred Stock of other authorized denominations, the
Transfer Agent shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the
38
Certificated Exchangeable Preferred Stock surrendered for transfer or exchange:
(1) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Transfer
Agent, duly executed by the Holder thereof or its attorney duly authorized
in writing; and
(2) in the case of Transfer Restricted Securities that are
Certificated Exchangeable Preferred Stock, are being transferred or
exchanged pursuant to an effective registration statement under the
Securities Act or pursuant to clause (I) or (II) below, and are
accompanied by the following additional information and documents, as
applicable:
(I) if such Transfer Restricted Securities are being delivered
to the Transfer Agent by a Holder for registration in the name of
such Holder, without transfer, a certification from such Holder to
that effect in substantially the form of Exhibit B hereto; or
(II) if such Transfer Restricted Securities are being
transferred to the Company or to a "qualified institutional buyer"
("QIB") in accordance with Rule 144A under the Securities Act or
pursuant to an exemption from registration in accordance with Rule
144 or Regulation S under the Securities Act, a certification to
that effect (in
substantially the form of Exhibit B hereto).
(B) Restrictions on Transfer of Certificated Exchangeable
Preferred Stock for a Beneficial Interest in Global Exchangeable Preferred
Stock. Certificated Exchangeable Preferred Stock may not be exchanged for a
beneficial interest in Global Exchangeable Preferred Stock except upon
satisfaction of the requirements set forth below. Upon receipt by the Transfer
Agent of Certificated Exchangeable Preferred Stock, duly endorsed or accompanied
39
by appropriate instruments of transfer, in form satisfactory to the Transfer
Agent, together with:
(1) if such Certificated Exchangeable Preferred Stock is a Transfer
Restricted Security, certification that such Certificated Exchangeable
Preferred Stock is being transferred to a QIB in accordance with Rule 144A
under the Securities Act; and
(2) whether or not such Certificated Exchangeable Preferred Stock is
a Transfer Restricted Security, written instructions directing the
Transfer Agent to make, or to direct DTC to make, an adjustment on its
books and records with respect to such Global Exchangeable Preferred Stock
to reflect an increase in the number of shares of Exchangeable Preferred
Stock represented by the Global Exchangeable Preferred Stock,
then the Transfer Agent shall cancel such Certificated Exchangeable Preferred
Stock and cause, or direct DTC to cause, in accordance with the standing
instructions and procedures existing between DTC and the Transfer Agent, the
number of shares of Exchangeable Preferred Stock represented by the Global
Exchangeable Preferred Stock to be increased accordingly. If no Global
Exchangeable Preferred Stock is then outstanding, the Company shall issue and
the Transfer Agent shall authenticate, upon written order of the Company in the
form of an Officers' Certificate, a new Global Exchangeable Preferred Stock
representing the appropriate number of shares.
(C) Transfer and Exchange of Global Exchangeable Preferred Stock.
The transfer and exchange of Global Exchangeable Preferred Stock or beneficial
interests therein shall be effected through DTC, in accordance with this
Certificate of Designation (including applicable restrictions on transfer set
forth herein, if any) and the procedures of DTC therefor.
(D) Transfer of a Beneficial Interest in Global Exchangeable
Preferred Stock for a Certificated Exchangeable Preferred Stock.
40
(1) Any person having a beneficial interest in Exchangeable
Preferred Stock that is being transferred or exchanged pursuant to an
effective registration statement under the Securities Act or pursuant to
clause (I) or (II) below may upon request, and if accompanied by the
information specified below, exchange such beneficial interest for
Certificated Exchangeable Preferred Stock representing the same number of
shares of Exchangeable Preferred Stock. Upon receipt by the Transfer Agent
of written instructions or such other form of instructions as is customary
for DTC from DTC or its nominee on behalf of any person having a
beneficial interest in Global Exchangeable Preferred Stock and upon
receipt by the Transfer Agent of a written order or such other form of
instructions as is customary for DTC or the person designated by DTC as
having such a beneficial interest in a Transfer Restricted Security only,
and upon the following additional information and documents (all of which
may be submitted by facsimile):
(I) if such beneficial interest is being transferred to the
person designated by DTC as being the owner of a beneficial interest
in Global Exchangeable Preferred Stock, a certification from such
person to that effect (in substantially the form of Exhibit B
hereto); or
(II) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act or pursuant to
an exemption from registration in accordance with Rule 144 or
Regulation S under the Securities Act, a certification to that
effect (in substantially the form of Exhibit B hereto);
then, the Transfer Agent or DTC, at the direction of the Transfer Agent, will
cause, in accordance with the standing instructions and procedures existing
between DTC and the Transfer Agent, the number of shares of Exchangeable
Preferred Stock represented by Global Exchangeable Preferred Stock to be reduced
on its books and records and, following such reduction, the Company will execute
and the Transfer
41
Agent will authenticate and deliver to the transferee Certificated Exchangeable
Preferred Stock.
(2) Certificated Exchangeable Preferred Stock issued in exchange for
a beneficial interest in a Global Exchangeable Preferred Stock pursuant to
this paragraph (m)(iii)(D) shall be registered in such names and in such
authorized denominations as DTC, pursuant to instructions from its direct
or indirect participants or otherwise, shall instruct the Transfer Agent.
The Transfer Agent shall deliver such Certificated Exchangeable Preferred
Stock to the persons in whose names such Exchangeable Preferred Stock are
so registered in accordance with the instructions of DTC.
(E) Restrictions on Transfer and Exchange of Global
Exchangeable Preferred Stock. Notwithstanding any other provisions of this
Certificate of Designation (other than the provisions set forth in paragraph
(m)(iii)(F)), Global Exchangeable Preferred Stock may not be transferred as a
whole except by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or by DTC or any such nominee to a successor depository or a
nominee of such successor depository.
(F) Authentication of Certificated Exchangeable
Preferred Stock. If at any time:
(1) DTC notifies the Company that DTC is unwilling or unable to
continue as depository for the Global Exchangeable Preferred Stock and a
successor depository for the Global Exchangeable Preferred Stock is not
appointed by the Company within 90 days after delivery of such notice;
(2) DTC ceases to be a clearing agency registered
under the Exchange Act;
(3) there shall have occurred and be continuing a
Voting Rights Triggering Event; or
42
(4) the Company, in its sole discretion, notifies the Transfer Agent
in writing that it elects to cause the issuance of Certificated
Exchangeable Preferred Stock under this Certificate of Designation,
then the Company will execute, and the Transfer Agent, upon receipt of a written
order of the Company signed by two Officers or by an Officer and either an
Assistant Treasurer or an Assistant Secretary of the Company requesting the
authentication and delivery of Certificated Exchangeable Preferred Stock to the
persons designated by the Company, will authenticate and deliver Certificated
Exchangeable Preferred Stock equal to the number of shares of Exchangeable
Preferred Stock represented by the Global Exchangeable Preferred Stock, in
exchange for such Global Exchangeable Preferred Stock.
(G) Legend. (1) Except as permitted by the following paragraph (2),
each certificate evidencing the Global Exchangeable Preferred Stock and the
Certificated Exchangeable Preferred Stock (and all Exchangeable Preferred Stock
issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED
THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER.
"THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A)
THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (i) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) IN AN
43
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (iv) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (v) TO THE
COMPANY, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO
IN (A) ABOVE.
"BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT") OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S.
(2) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by Global
Exchangeable Preferred Stock) pursuant to Rule 144 under the Securities Act or
an effective registration statement under the Securities Act:
(I) in the case of any Transfer Restricted Security that is a
Certificated Exchangeable Preferred Stock, the Transfer Agent shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a Certificated Exchangeable Preferred Stock that does
not bear the legend set forth above and rescind any restriction on
the transfer of such Transfer Restricted Security;
(II) in the case of any Transfer Restricted Security that is
represented by a Global Exchangeable Preferred Stock, the Transfer
Agent shall permit the Holder thereof to exchange such Transfer
Restricted Security for a Certificated Exchangeable Preferred Stock
Security that does not bear the legend set forth above and rescind
any restriction on the transfer of such Transfer Restricted
Security, if the Holder's request for
44
such exchange was made in reliance on Rule 144 and the Holder
certifies to that effect in writing to the Transfer Agent (such
certification to be in the form set forth on the reverse of the
Transfer Restricted Security); and
(III) in the case of any Transfer Restricted Security that is
represented by a Global Exchangeable Preferred Stock, the Transfer
Agent shall permit the Holder thereof to exchange such Transfer
Restricted Security (in connection with the offer to exchange Series
B Stock for Initial Exchangeable Preferred Stock pursuant to the
Registration Rights Agreement) for another Global Exchangeable
Preferred Stock that does not bear the legend set forth above.
(H) Cancelation or Adjustment of Global Exchangeable Preferred
Stock. At such time as all beneficial interests in Global Exchangeable Preferred
Stock have either been exchanged for Certificated Exchangeable Preferred Stock,
redeemed, repurchased or canceled, such Global Exchangeable Preferred Stock
shall be returned to DTC for cancelation or retained and canceled by the
Transfer Agent. At any time prior to such cancelation, if any beneficial
interest in Global Exchangeable Preferred Stock is exchanged for Certificated
Exchangeable Preferred Stock, redeemed, repurchased or canceled, the number of
shares of Exchangeable Preferred Stock represented by such Global Exchangeable
Preferred Stock shall be reduced and an adjustment shall be made on the books
and records of the Transfer Agent with respect to such Global Exchangeable
Preferred Stock, by the Transfer Agent or DTC, to reflect such reduction.
(I) Obligations with Respect to Transfers and Exchanges of
Exchangeable Preferred Stock. (1) To permit registrations of transfers and
exchanges, the Company shall execute and the Transfer Agent shall authenticate
Certificated Exchangeable Preferred Stock and Global Exchangeable Preferred
Stock as required pursuant to the provisions of this paragraph (iii).
45
(2) All Certificated Exchangeable Preferred Stock and Global
Exchangeable Preferred Stock issued upon any registration of transfer or
exchange of Certificated Exchangeable Preferred Stock or Global
Exchangeable Preferred Stock shall be the valid obligations of the
Company, entitled to the same benefits under this Certificate of
Designation as the Certificated Exchangeable Preferred Stock or Global
Exchangeable Preferred Stock surrendered upon such registration of
transfer or exchange.
(3) Prior to due presentment for registration of transfer of any
shares of Exchangeable Preferred Stock, the Transfer Agent and the Company
may deem and treat the person in whose name such shares of Exchangeable
Preferred Stock are registered as the absolute owner of such Exchangeable
Preferred Stock and neither the Transfer Agent nor the Company shall be
affected by notice to the contrary.
(4) No service charge shall be made to a Holder for any registration
of transfer or exchange upon surrender of any Exchangeable Preferred Stock
Certificate at the office of the Transfer Agent maintained for that
purpose. However, the Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Exchangeable
Preferred Stock Certificates.
(5) Upon any sale or transfer of shares of Exchangeable Preferred
Stock (including any Exchangeable Preferred Stock represented by a Global
Exchangeable Preferred Stock Certificate) pursuant to an effective
registration statement under the Securities Act, pursuant to Rule 144
under the Securities Act or pursuant to an opinion of counsel reasonably
satisfactory to the Company that no legend is required:
(A) in the case of any Certificated Exchangeable Preferred Stock,
the Transfer Agent shall permit the holder thereof to exchange
such
46
Exchangeable Preferred Stock for Certificated
Exchangeable Preferred Stock that does not
bear the legend set forth in
paragraph (iii)(G) above and rescind any
restriction on the transfer of such
Exchangeable Preferred Stock; and
(B) in the case of any Global Exchangeable Preferred
Stock, such Exchangeable Preferred Stock shall not be
required to bear the legend set forth in paragraph
(iii)(G) above but shall continue to be subject to
the provisions of paragraph (iii)(D) hereof;
provided, however, that with respect to any request
for an exchange of Exchangeable Preferred Stock that
is represented by Global Exchangeable Preferred Stock
for Certificated Exchangeable Preferred Stock that
does not bear the legend set forth in paragraph
(iii)(G) above in connection with a sale or transfer
thereof pursuant to Rule 144 (and based upon an
opinion of counsel if the Company so requests), the
Holder thereof shall certify in writing to the
Transfer Agent that such request is being made
pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit B hereto).
(iv) Replacement Certificates. If a mutilated Exchangeable Preferred
Stock certificate is surrendered to the Transfer Agent or if the Holder of a
Exchangeable Preferred Stock certificate claims that the Exchangeable Preferred
Stock certificate has been lost, destroyed or wrongfully taken, the Company
shall issue and the Transfer Agent shall countersign a replacement Exchangeable
Preferred Stock certificate if the reasonable requirements of the Transfer Agent
and of Section 8-405 of the Uniform Commercial Code as in effect in the State of
New York are met. If required by the Transfer Agent or the Company, such Holder
shall furnish an indemnity bond sufficient in the judgment of the Company and
the Transfer Agent to protect the Company and the Transfer Agent from any loss
which
47
either of them may suffer if a Exchangeable Preferred Stock certificate is
replaced. The Company and the Transfer Agent may charge the Holder for their
expenses in replacing a Exchangeable Preferred Stock certificate.
(v) Temporary Certificates. Until definitive Exchangeable
Preferred Stock certificates are ready for delivery, the Company may prepare and
the Transfer Agent shall countersign temporary Exchangeable Preferred Stock
certificates. Temporary Exchangeable Preferred Stock certificates shall be
substantially in the form of definitive Exchangeable Preferred Stock
certificates but may have variations that the Company considers appropriate for
temporary Exchangeable Preferred Stock certificates. Without unreasonable delay,
the Company shall prepare and the Transfer Agent shall countersign definitive
Exchangeable Preferred Stock certificates and deliver them in exchange for
temporary Exchangeable Preferred Stock certificates.
(vi) Cancelation. (A) In the event the Company shall purchase or
otherwise acquire Certificated Exchangeable Preferred Stock, the same shall
thereupon be delivered to the Transfer Agent for cancelation.
(B) At such time as all beneficial interests in Global
Exchangeable Preferred Stock have either been exchanged for Certificated
Exchangeable Preferred Stock, redeemed, repurchased or canceled, such Global
Exchangeable Preferred Stock shall thereupon be delivered to the Transfer Agent
for cancelation.
(C) The Transfer Agent and no one else shall cancel and
destroy all Exchangeable Preferred Stock certificates surrendered for transfer,
exchange, replacement or cancelation and deliver a certificate of such
destruction to the Company unless the Company directs the Transfer Agent to
deliver canceled Exchangeable Preferred Stock certificates to the Company. The
Company may not issue new Exchangeable Preferred Stock certificates to replace
Exchangeable Preferred Stock certificates to the extent they evidence
Exchangeable Preferred Stock which the Company has purchased or otherwise
acquired.
48
(m) Additional Rights of Holders. In addition to the rights provided
to Holders under this Certificate of Designation, Holders shall have the rights
set forth in the Registration Rights Agreement.
(n) Certain Definitions. As used in this Certificate of
Designation, the following terms shall have the following meanings (and (1)
terms defined in the singular have comparable meanings when used in the plural
and vice versa, (2) "including" means including without limitation, (3) "or" is
not exclusive and (4) an accounting term not otherwise defined has the meaning
assigned to it in accordance with United States generally accepted accounting
principles as in effect on the Issue Date and all accounting calculations will
be determined in accordance with such principles), unless the content otherwise
requires:
"Accounts Receivable" means, with respect to any Person, all
accounts receivable of such Person net of allowances for uncollectible accounts,
discounts, refunds and all other allowances as determined in accordance with
GAAP.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary; or (iii)
Capital Stock in any Person that at such time is a Restricted Subsidiary;
provided, however, that any such Restricted Subsidiary described in clauses (ii)
or (iii) above is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings
49
correlative to the foregoing. For purposes of paragraphs (l)(iii) and (l)(v)
only, "Affiliate" shall also mean any beneficial owner of Capital Stock
representing 10% or more of the total voting power of the Voting Stock (on a
fully diluted basis) of the Company or of rights or warrants to purchase such
Capital Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Asset Swap" means an exchange of assets by the Company or any of
its Restricted Subsidiaries for one or more Permitted Businesses, assets to be
used in a Permitted Business, or for a controlling equity interest in any Person
whose assets consist primarily of one or more Permitted Businesses.
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
dividend rate borne by the Exchangeable Preferred Stock compounded annually) of
the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale/Leaseback Transaction (including any
period for which such lease has been extended).
"Average Life" means, as of the date of determina tion, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to such Preferred Stock multi
plied by the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
50
"Capital Lease Obligations" means an obligation that is
required to be classified and accounted for as a capital lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into or exchangeable for such
equity.
"Change of Control" means the occurrence of any of the following
events:
(i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that for purposes of this clause (i) such person
shall be deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time, and except that any person
that is deemed to have beneficial ownership of shares solely as a result
of being part of a group pursuant to Rule 13d-5(b)(1) shall not be deemed
to have beneficial ownership of any shares held by a Permitted Holder
forming a part of such group), directly or indirectly, of more than 50% of
the total voting power of the Voting Stock of the Company (for the
purposes of this clause (i), such other person shall be deemed to
beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person is the beneficial owner (as
defined in this clause (i)), directly or indirectly, of more than 35% of
the voting
51
power of the Voting Stock of such parent corporation and the Permitted
Holders beneficially own (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the board of
directors of such parent corporation);
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office
who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors then in
office; provided, however, that any directors elected by holders of
Preferred Stock of the Company pursuant to any voting rights provisions
included in the certificate of designation relating to such Preferred
Stock shall be excluded in making any determination pursuant to this
clause (ii); or
(iii) the merger or consolidation of the Company with or into
another Person or the merger of another Person with or into the Company,
or the sale of all or substantially all the assets of the Company to
another Person (other than a Person that is controlled by the Permitted
Holders), and, in the case of any such merger or consolidation, the
securities of the Company that are outstanding immediately prior to such
transaction and which represent 100% of the aggregate voting power of the
Voting Stock of the Company are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such
securities are changed into or exchanged for, in addition to any other
consideration, securities of the surviving corporation that represent
immediately after such transaction, at
52
least a majority of the aggregate voting power of the Voting Stock of
the surviving corporation.
Notwithstanding the foregoing, a Change of Control shall not be
deemed to have occurred if, after such event that otherwise would constitute a
Change of Control, the Securities are rated Investment Grade by Moody's or
Standard & Poor's on the 30th day following the event that otherwise would
constitute a Change of Control (the "Change of Control Determination Date");
provided, however, that to the extent there is a "rating watch" with respect to
the Exchangeable Preferred Stock or other rating agency review on such 30th day,
then the Change of Control Determination Date shall be the first Business Day
thereafter on which the Exchangeable Preferred Stock is not subject to a "rating
watch" or other rating agency review by either Moody's or Standard & Poor's. The
term "Investment Grade", for such purpose, means a rating of Baa3 or higher in
the case of Moody's, or BBB- or higher in the case of Standard & Poor's.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Certificate of
Designation until a successor replaces it and, thereafter, means the successor.
"Consolidated Capital Ratio" of any Person as of any date
means the ratio of (i) the aggregate consolidated principal amount of
Indebtedness of such Person then outstanding to (ii) the greater of either (a)
the aggregate consolidated paid-in capital of such Person as of such date or (b)
the stockholders' equity as of such date as shown on the consolidated balance
sheet of such Person determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such total interest expense, and to the
extent incurred by the Company or its Restricted Subsidiaries, without
duplication, (i) interest expense attributable to capital leases and the
interest expense
53
attributable to leases constituting part of a Sale/Leaseback Transaction, (ii)
amortization of debt discount and debt issuance cost, (iii) capitalized
interest, (iv) noncash interest expenses, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Hedging Obligations (including
amortization of fees), (vii) Preferred Stock dividends in respect of all (A)
Preferred Stock of Restricted Subsidiaries and (B) Preferred Stock of the
Company that is Disqualified Stock, in each case held by Persons other than the
Company or a Restricted Subsidiary, (viii) interest incurred in connection with
Investments in discontinued operations, (ix) interest accruing on any
Indebtedness of any other Person to the extent such Indebtedness is Guaranteed
by (or secured by the assets of) the Company or any Restricted Subsidiary and
(x) the cash contributions to any employee stock ownership plan or similar trust
to the extent such contributions are used by such plan or trust to pay interest
or fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net
income of the Company and its consolidated Subsidi aries; provided, however,
that there shall not be included in such Consolidated Net Income:
(i) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that subject to the
exclusion contained in clause (iv) below, the net income of any such
Person for such period shall be included in such Consolidated Net Income
up to the aggregate amount of cash actually distributed by such Person
during such period to the Company or a Restricted Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other
distribution paid to a Restricted Subsidiary, to the limitations contained
in clause (iii) below);
(ii) any net income (or loss) of any Person acquired by the Company
or a Subsidiary in a pooling of interests transaction for any period prior
to the date of such acquisition;
54
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that subject to
the exclusion contained in clause (iv) below, the net income of any such
Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution
paid to another Restricted Subsidiary, to the limitation contained in this
clause);
(iv) any gain (but not loss) realized upon the sale or other
disposition of any assets of the Company, its consolidated Subsidiaries or
any other Person (including pursuant to any sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary
course of business and any gain (but not loss) realized upon the sale or
other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and
(vi) the cumulative effect of a change in account
ing principles.
Notwithstanding the foregoing, for the purpose of paragraph (l)(iii) only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from any Person (including any
Unrestricted Subsidiary) to the Company or a Restricted Subsidiary to the extent
such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under paragraph (l)(iii) (A)(3)(IV) thereof.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of: (i) the consolidated
55
equity of the common stockholders of such Person and its consolidated
Subsidiaries as of such date plus (ii) the respective amounts reported on such
Person's balance sheet as of such date with respect to any series of preferred
stock (other than Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and paid only out of
net earnings in respect of the year of such declaration and payment, but only to
the extent of any cash received by such Person upon issuance of such preferred
stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the Issue Date in the book value of any asset owned by such Person
or a consolidated Subsidiary of such Person, (y) all investments as of such date
in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except,
in each case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges as of such date, as determined in
accordance with GAAP.
"Consolidated Tangible Assets" means, with respect to any
Person as of any date, the sum of the consolidated gross book value as reflected
in accounting books and records of such Person of all its property, both real
and personal, less (i) the net book value of all its licenses, patents, patent
applications, copyrights, trademarks, tradenames, goodwill, non-compete
agreements or organizational expenses and other like intangibles, (ii)
unamortized debt discount and expenses, (iii) all reserves for depreciation,
obsolescence, depletion and amortization of its properties and (iv) all other
proper reserves which should be provided in connection with the business
conducted by such Person, all of the foregoing as determined in accordance with
GAAP.
"Convertible Preferred Stock" means the Company's 7 1/4%
Junior Convertible Preferred Stock Due 2007.
"Credit Agreements" means one or more debt facilities or commercial
paper facilities with banks or other institutional lenders providing for
revolving credit
56
loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"Cumulative Consolidated Interest Expense" means, with respect to
any Person, as of any date of determination, Consolidated Interest Expense for
the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the Issue Date to the end of such Person's most
recently ended fiscal quarter for which internal financial statements are
available at such date of determination.
"Cumulative Operating Cash Flow" means, as of any date of
determination, Operating Cash Flow for the Company and its Restricted
Subsidiaries for the period (taken as one accounting period) from the beginning
of the first fiscal quarter commencing after the Issue Date to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at such date of determination.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement designed
to protect such Person against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of
time or both would be, a Voting Rights Triggering Event.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first
57
anniversary of the Stated Maturity of the Exchangeable Preferred Stock;
provided, however, that any Capital Stock that would not constitute Disqualified
Stock but for provisions thereof giving holders thereof the right to require
such Person to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the first anniversary of
the Stated Maturity of the Securities shall not constitute Disqualified Stock if
the "asset sale" or "change of control" provisions applicable to such Capital
Stock are not more favorable to the holders of such Capital Stock than the
comparable provisions of the Exchange Indenture; provided further, however, that
the Company's Convertible Preferred Stock outstanding on the Issue Date (and any
shares of Convertible Preferred Stock issued as payment of a dividend on
Convertible Preferred Stock) shall be deemed not to constitute Disqualified
Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Date" means the date on which the Securities are exchanged
for the Exchangeable Preferred Stock.
"Exchange Debentures" means the debentures issuable pursuant to the
Exchange Indenture.
"Exchange Offer Registration Statement" means a registration
statement filed with the SEC with respect to a Registered Exchange Offer.
"Exchange Indenture" means the Indenture dated as of August 15,
1997, by and between the Company and The Bank of New York, as Trustee, governing
the Exchange Debentures.
"Excluded PSINet Transactions" means any transaction between the
Company or any of its Restricted Subsidiaries with PSINet Inc., so long as at
the time of engaging in, or contracting to engage in, such transaction, the
Company and its Subsidiaries have not acquired shares of PSINet Common Stock
other than the PSINet Shares.
58
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
in (i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC. All ratios and
computations based on GAAP contained in this Certificate of Designation shall be
computed in conformity with GAAP.
"GE Capital Communications" means GE Capital Communications
Services Corporation.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such Person or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" means the Person in whose name a share of Exchangeable
Preferred Stock is registered on the Transfer Agent's books.
59
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall be deemed the Incurrence
of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by securities, debentures,
bonds or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(ii) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered into
by such Person;
(iii) all obligations of such Person issued or assumed as the
deferred purchase price of property, and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i)
through (iii) above) entered into in the ordinary course of business of
such Person to the extent such letters of credit are not drawn upon or, if
and to the extent drawn upon, such drawing is reimbursed no later than the
tenth Business Day following payment on the letter of credit);
60
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, the liquidation preference
with respect to, any Preferred Stock (but excluding, in each case, any
accrued dividends) of such Subsidiary (which will constitute Indebtedness
Incurred by such Subsidiary and not Indebtedness Incurred by such Person);
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee;
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
"Indebtedness to Operating Cash Flow Ratio" means, as of any date of
determination, the ratio of (a) the aggregate principal amount of all
outstanding Indebtedness of a Person and its Restricted Subsidiaries as of such
date on a consolidated basis, plus the aggregate liquidation preference of all
outstanding Preferred Stock of the Restricted Subsidiaries of such Person as of
such date (excluding any such Preferred Stock held by such Person or a Wholly
Owned Restricted Subsidiary of such Person), plus the
61
aggregate liquidation preference or redemption amount of all Disqualified Stock
of such Person (excluding any Disqualified Stock held by such Person or a Wholly
Owned Restricted Subsidiary of such Person) as of such date to (b) Operating
Cash Flow of such Person and its Restricted Subsidiaries for the most recent
four-quarter period for which internal financial statements are available,
determined on a pro forma basis after giving effect to all acquisitions and
dispositions of assets (notwithstanding clause (ii) of the definition of
"Consolidated Net Income" and including Asset Swaps) made by such Person and its
Restricted Subsidiaries since the beginning of such four-quarter period through
such date as if such acquisitions and dispositions had occurred at the beginning
of such four-quarter period through such date as if such acquisitions and
dispositions had occurred at the beginning of such four-quarter period.
"Independent Financial Advisor" means a United States
investment banking firm of national standing in the United States which does
not, and whose directors, officers and employees or affiliates do not, have a
direct or indirect financial interest in the Company.
"Interest Rate Agreement" means in respect of a Person any interest
rate swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect
advance, loan or any other extensions of credit (other than advances, loans or
other extensions of credit to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of the lender and other
than commission, travel, relocation and similar advances to directors, officers
and employees made in the ordinary course of business) (including by way of
Guarantee or similar arrangement) or capital contribution to any Person (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of such Person), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar
62
instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and paragraph
(l)(iii), (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors;
provided further, however, that an acquisition of assets, Capital Stock or other
securities by the Company or any of its Restricted Subsidiaries shall not be
deemed to be an Investment to the extent the consideration for such Capital
Stock or other securities consists of common equity securities of the Company.
"IRU" means an indefeasible right to use fiber or telecommunications
capacity.
"IRU Agreement" means an agreement pursuant to which an interest in
an IRU is sold or leased or otherwise transferred.
"Issue Date" means the date on which the Initial Exchangeable
Preferred Stock is originally issued.
"IXC Internet Capital Contribution" means the contribution by the
Company to IXC Internet, Inc. (so long as IXC Internet, Inc. is a Subsidiary) of
$10 million in cash, an IRU in two excess fibers in the Company's network
(including two fibers in network routes to be built or acquired in the future)
and space in certain points of
63
presence, in each case as contemplated in connection with the transactions
contemplated by the PSINet Agreement.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof).
"Moody's" means Moody's Investors Service, Inc. or its
successor.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Operating Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period, (A) plus (i)
extraordinary net losses, net losses on sales of assets outside the ordinary
course of business during such period and noncash charges relating to
write-downs of property and equipment, to the extent such losses and charges
were deducted in computing such Consolidated Net Income, plus (ii) provision for
taxes based on income or profits, to the extent such provision for taxes was
included in computing such Consolidated Net Income, and any provision for taxes
utilized in computing the net losses under clause (i) hereof, plus (iii)
Consolidated Interest Expense of such Person and its
64
Restricted Subsidiaries for such period, to the extent that any such expense was
deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other noncash charges (excluding any such noncash charge to the
extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, amortization and other noncash charges were
deducted in computing such Consolidated Net Income and (B) less all noncash
income for such period (excluding any such noncash income to the extent it
represents an accrual of cash income in any future period or amortization of
cash income received in a period). Notwithstanding the foregoing, the provision
for taxes on the income or profits of, and the depreciation and amortization and
other noncash charges of, a Restricted Subsidiary of the referent Person shall
be added to Consolidated Net Income to compute Operating Cash Flow only to the
extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of such
Person for such period and only if and to the extent such Restricted Subsidiary
could have paid such amount at the date of determination as a dividend or
similar distribution to the referent Person by such Restricted Subsidiary
without prior governmental approval (that has not been obtained), pursuant to
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Company or the Trustee.
"Permitted Business" means (i) any communications business and (ii)
any business reasonably related or ancillary thereto.
65
"Permitted Holders" means the officers and directors of the Company,
and Trustees of General Electric Pension Trust, Grumman Hill Associates, Inc.
and Grumman Hill Investments, L.P., and each of their respective officers and
directors and their Related Parties.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) the Company, a Restricted Subsidiary or a Person
that will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is a
Related Business; (ii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel, commission and similar advances to cover
matters that are expected at the time of such advances ultimately to be treated
as expenses for accounting purposes and that are made in the ordinary course of
business; (vi) loans or advances to employees made in the ordinary course of
business consistent with past practices of the Company or such Restricted
Subsidiary; (vii) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments; (viii) the IXC Internet
Capital Contribution; (ix) the Investment in PSINet Inc. contemplated by the
PSINet Agreement, including the Investment in shares of PSINet Common Stock
purchased pursuant to the PSINet Agreement and the $240 million value protection
right provided for by the PSINet Agreement; and (x) other Investments in any
Person that in the aggregate do not exceed $30 million (without regard to
increases and decreases in the value of the Investments).
66
"Permitted PSINet Non-Recourse Debt" means Indebtedness where (i)
the holders of such Indebtedness expressly agree that they will look solely to
the shares of PSINet Common Stock held by the issuer of such Indebtedness for
payment on or in respect of such Indebtedness and expressly waive any recourse
they may have on or with respect to such Indebtedness to the Company or any
Restricted Subsidiary, (ii) neither the Company nor any Restricted Subsidiary
(A) provides credit support (whether or not in the form of an undertaking,
agreement or instrument which would constitute Indebtedness), other than the
pledge by the issuer of such Indebtedness of shares of PSINet Common Stock, or
(B) is directly or indirectly liable and (iii) no default with respect to such
Indebtedness (including any rights which the holders thereof may have to take
enforcement action against the shares of PSINet Common Stock securing such
Indebtedness) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of the Company or any Restricted Subsidiary to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any
Person, means Capital Stock of any class or classes (however designated) which
is preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over shares of Capital Stock of any other class of
such Person.
"principal" of any debt security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.
67
"PSINet Agreement" means the IRU and Stock Purchase Agreement dated
as of July 22, 1997, between IXC Internet Services, Inc. and PSINet Inc. and the
related documents executed in connection therewith, in each case as in effect as
of the Issue Date.
"PSINet Common Stock" means the common stock of PSINet, Inc.
"PSINet Shares" means the shares of PSINet Common Stock acquired by
the Company or any Subsidiary pursuant to the terms of the PSINet Agreement.
"Public Equity Offering" means an underwritten primary public
offering of common stock of the Company pursuant to an effective registration
statement under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Certificate of Designation, including
Indebtedness that Refinances Refinancing Indebtedness; provided, however, that
(i) such Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus accrued interest on the principal amount of
Indebtedness Refinanced, and fees and
68
expenses, including any premium and defeasance costs) under the Indebtedness
being Refinanced; provided further, however, that Refinancing Indebtedness shall
not include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of the
Company (unless such Subsidiary was obligated under, or a guarantor of, the
Indebtedness being Refinanced) or (y) Indebtedness of the Company or a
Restricted Subsidiary that Refinances Indebtedness of an Unrestricted
Subsidiary.
"Registered Exchange Offer" means the offer by the Company, pursuant
to the Registration Rights Agreement, to holders of Initial Exchangeable
Preferred Stock to issue and deliver to such holders, in exchange for the
Initial Exchangeable Preferred Stock, a like aggregate liquidation preference of
Series B Stock registered under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement dated August 14, 1997, among the Company and Credit Suisse First
Boston Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Morgan Stanley and Co. Incorporated.
"Related Business" means any Permitted Business, the
businesses conducted by the Company and the Restricted Subsidiaries on the Issue
Date and any business related, ancillary or complementary to such businesses
conducted by the Company and the Restricted Subsidiaries on the Issue Date.
"Related Party" with respect to any Permitted Holder means (i) any
controlling stockholder, 80% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or (ii) any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Permitted Holder or such other
Persons referred to in the immediately preceding clause (i).
69
"Representative" means any trustee, agent or representative (if any)
for an issue of Senior Indebtedness of the Company.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of, in the case of the Company, any Junior Stock or, in the case of
any Restricted Subsidiary, any Capital Stock (including any payment in
connection with any merger or consolidation involving such Person) or similar
payment to the direct or indirect holders of such Stock (other than dividends or
distributions payable solely in Junior Stock (other than Disqualified Stock) and
dividends or distributions to the extent paid to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Restricted Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a Subsidiary
that is an entity other than a corporation)), (ii) the purchase, redemption or
other acquisition or retirement for value of any Junior Stock of the Company or
Capital Stock of any direct or indirect parent of the Company or (iii) the
making of any Investment in any Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is
not an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Restricted
Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Senior Notes" means the Company's 12 1/2% Senior
Notes Due 2005.
70
"Series 3 Preferred Stock" means the Company's 10% Junior Series 3
Cumulative Redeemable Preferred Stock.
"Shelf Registration Statement" means a registration statement filed
with the SEC covering resales of Exchangeable Preferred Stock.
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02
under Regulation S-X promulgated by the SEC.
"Standard & Poor's" means Standard & Poor's Ratings Group, or
its successor.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Indebtedness" means the Exchange Debentures and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Exchange Debentures in right of
payment and is not subordinated by its terms to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness (as defined in the
Exchange Debenture).
"Subordinated Obligation" means any Indebtedness of the
Company (whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Exchange Debentures pursuant to
a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the
71
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
(i) such Person, (ii) such Person and one or more Subsidiaries of such Person or
(iii) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000 (or
the foreign currency equivalent thereof) and has outstanding debt which is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the United States
of America or any foreign country recognized by the United States of America
with a rating at the time as of which any investment therein is made of "P-1"
(or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher)
according to Standard and Poor's Ratings Group, and (v) investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by Standard
72
& Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"Trustee" means the party named as such in the Exchange Indenture
until a successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of
its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien (excluding Liens incurred to secure obligations in respect of an IRU) on
any property of, the Company or any Restricted Subsidiary; provided, however,
that either (A) the Subsidiary to be so designated has total assets of $1,000 or
less or (B) if such Subsidiary has assets greater than $1,000, the Investment
resulting from such designation would be permitted under paragraph (l)(iii). The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
paragraph (l)(iii)(A) and (y) no Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
73
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or
other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"Wholly Owned Restricted Subsidiary" means a Restricted
Subsidiary all the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or one or more Wholly Owned Subsidiaries.
IN WITNESS WHEREOF, said IXC Communications, Inc., has caused this
Certificate of Designation to be signed by James F. Guthrie, its Chief Financial
Officer and Executive Vice President, this 19th day of August, 1997.
IXC COMMUNICATIONS, INC.,
By: /s/ JAMES F. GUTHRIE
Name: James F. Guthrie
Title: Chief Financial Officer and
Executive Vice President
EXHIBIT A
FORM OF EXCHANGEABLE PREFERRED STOCK
FACE OF SECURITY
[THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF
THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) THIS SECURITY MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (II) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (iv) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (v) TO THE
ISSUER, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY
FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.]*
[BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S.]*/
* Subject to removal upon registration under the Securities Act of 1933 or
otherwise when the security shall no longer be a restricted security.
2
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OF PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST HEREIN.]**
[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE CERTIFICATE OF DESIGNATION REFERRED TO BELOW.]**
Certificate Number Number of Shares of Convertible
Preferred Stock
[ ] [ ]
CUSIP NO.: [ ]
12 1/2% Junior Exchangeable Preferred Stock Due 2009
(par value $0.01) (liquidation preference $1000
per share)
of
IXC Communications, Inc.
IXC Communications, Inc., a Delaware corporation (the
"Company"), hereby certifies that [ ] (the
** Subject to removal if not a global security.
3
"Holder") is the registered owner of fully paid and non-assessable preferred
securities of the Company designated the 12 1/2% [Series B] Junior Exchangeable
Preferred Stock Due 2009 (par value $0.01) (liquidation preference $1000 per
share) (the "Exchangeable Preferred Stock"). The shares of Exchangeable
Preferred Stock are transferable on the books and records of the Registrar, in
person or by a duly authorized attorney, upon surrender of this certificate duly
endorsed and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Exchangeable
Preferred Stock represented hereby are issued and shall in all respects be
subject to the provisions of the Certificate of Designation dated August [ ],
1997, as the same may be amended from time to time (the "Certificate of
Designation"). Capitalized terms used herein but not defined shall have the
meaning given them in the Certificate of Designation. The ompany will provide a
copy of the Certificate of Designation to a Holder without charge upon written
request to the Company at its principal place of business.
Reference is hereby made to select provisions of the
Exchangeable Preferred Stock set forth on the reverse hereof, and to the
Certificate of Designation, which select provisions and the Certificate of
Designation shall for all purposes have the same effect as if set forth at this
place.
Upon receipt of this certificate, the Holder is bound by the
Certificate of Designation and is entitled to the benefits thereunder.
Unless the Transfer Agent's Certificate of Authentication
hereon has been properly executed, these shares of Exchangeable Preferred Stock
shall not be entitled to any benefit under the Certificate of Designation or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has executed this certificate
this [ ] day of [ ], [ ].
IXC COMMUNICATIONS, INC.,
4
By:
Name:
Title:
[Seal]
By:
Name:
Title:
5
TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Exchangeable Preferred Stock referred to in the
within mentioned Certificate of Designation.
Dated: [ ], [ ]
THE BANK OF NEW YORK
as Transfer Agent,
By:
Authorized Signatory
6
REVERSE OF SECURITY
Dividends on each share of Exchangeable Preferred Stock shall be
payable at a rate per annum set forth in the face hereof or as provided in the
Certificate of Designation (including Additional Dividends).
The shares of Exchangeable Preferred Stock shall be redeemable as
provided in the Certificate of Designation. The shares of Exchangeable Preferred
Stock shall be exchangeable at the Company's option into the Company's 12-1/2%
Subordinated Exchange Debentures Due 2009 in the manner and according to the
terms set forth in the Certificate of Designation.
As required under Delaware law, the Company shall furnish to any
Holder upon request and without charge, a full summary statement of the
designations, voting rights preferences, limitations and special rights of the
shares of each class or series authorized to be issued by the Company so far as
they have been fixed and determined and the authority of the Board of Directors
to fix and determine the designations, voting rights, preferences, limitations
and special rights of the class and series of shares of the Company.
7
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares
of Exchangeable Preferred Stock evidenced hereby to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints:
agent to transfer the shares of Exchangeable Preferred Stock evidenced hereby on
the books of the Transfer Agent and Registrar. The agent may substitute another
to act for him or her.
Date:
Signature:
(Sign exactly as your name appears on the other side of this Exchangeable
Preferred Stock Certificate)
Signature Guarantee:***
*** (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature
8
guarantee program" as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of
1934, as amended.)
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF EXCHANGEABLE PREFERRED STOCK
Re: 12 1/2% Junior Exchangeable Preferred Stock Due 2009 (the "Exchangeable
Preferred Stock") of IXC Communications, Inc. (the "Company")
This Certificate relates to ____ shares of Exchangeable
Preferred Stock held in [ ] */ book-entry or [ ] */ definitive form by
_______________ (the "Transferor").
The Transferor*:
[ ] has requested the Transfer Agent by written order to deliver in
exchange for its beneficial interest in the Exchangeable Preferred Stock held by
the depository shares of Exchangeable Preferred Stock in definitive, registered
form equal to its beneficial interest in such Exchangeable Preferred Stock (or
the portion thereof indicated above); or
[ ] has requested the Transfer Agent by written order to exchange or
register the transfer of Exchangeable Preferred Stock.
In connection with such request and in respect of such
Exchangeable Preferred Stock, the Transferor does hereby certify that the
Transferor is familiar with the Certificate of Designation relating to the above
captioned Exchangeable Preferred Stock and that the transfer of this
Exchangeable Preferred Stock does not require registration under the Securities
Act of 1933 (the "Securities Act") because */:
[ ] Such Exchangeable Preferred Stock is being acquired for the
Transferor's own account without transfer.
[ ] Such Exchangeable Preferred Stock is being transferred to the Company.
- - -------- * /Please check applicable box.
2
[ ] Such Exchangeable Preferred Stock is being transferred (i) to a
qualified institutional buyer (as defined in Rule 144A under the Securities
Act), in reliance on Rule 144A or (ii) pursuant to an exemption from
registration in accordance with Rule 904 under the Securities Act (and, in the
case of clause (ii), based on an opinion of counsel if the Company so requests
and together with a certification in substantially the form of Exhibit C to the
Certificate of Designation).
[ ] Such Exchangeable Preferred Stock is being transferred in reliance on
and in compliance with another exemption from the registration requirements of
the Securities Act (and based on an opinion of counsel if the Company so
requests).
[INSERT NAME OF TRANSFEROR]
Date: by
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
----------, ----
The Bank of New York
Attention: [ ]
Ladies and Gentlemen:
In connection with our proposed sale of certain 12 1/2% Junior
Exchangeable Preferred Stock Due 2009 (the "Exchangeable Preferred Stock") of
IXC Communications, Inc., a Delaware corporation ("the "Company"), we represent
that:
(i) the offer of the Exchangeable Preferred Stock was not made
to a person in the United States;
(ii) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(iii) no directed selling efforts have been made by us in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S under the Securities Act of 1933 (the "Securities Act"),
as applicable; and
(iv) the transaction is not part of a plan or scheme by us to evade
the registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and you
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with
4
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
(Name of Transferor)
by
Name:
Title:
Address:
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE CERTIFICATE OF DESIGNATION
OF THE POWERS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS
OF 12 1/2% JUNIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
AND 12 1/2% SERIES B JUNIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
THEREOF OF IXC COMMUNICATIONS, INC. FILED IN THE
OFFICE OF THE SECRETARY OF STATE OF DELAWARE ON AUGUST 19, 1997
IXC Communications, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is IXC Communications, Inc.
2. That a Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and other Special Rights of 12 1/2%
Junior Exchangeable Preferred Stock Due 2009 and 12 1/2% Series B Junior
Exchangeable Preferred Stock Due 2009 and Qualifications, Limitations
and Restrictions Thereof was filed by the Secretary of State of Delaware
on August 19, 1997 and that said certificate requires correction as
permitted by subsection (f) of section 103 of the General Corporation
Law of the State of Delaware.
3. The inaccuracy or defect of said certificate to be corrected is as
follows: The first "RESOLVED" paragraph ("RESOLVED Paragraph 1") is to
be corrected.
4. RESOLVED Paragraph 1 of the certificate is corrected to read as follows:
"RESOLVED that, pursuant to the authority vested in the Board of
Directors by its Restated Certificate of Incorporation, and the
authority vested by such Board of Directors in a committee of the Board
(the "Placement Committee"), all the members of which are members of
such Board, the Placement Committee does hereby create, authorize and
provide for the issuance of 12 1/2% Junior Exchangeable Preferred Stock
Due 2009, par value $0.01 per share, with a stated value of $1,000 per
share, initially consisting of up to 450,000 shares and 12 1/2% Series B
Junior Exchangeable Preferred Stock Due 2009, par value $0.01 per share,
with a stated value of $1,000 per share, initially consisting of up to
450,000 shares (collectively, the "Exchangeable Preferred Stock") having
the designation, preferences, relative, participating, optional and
other special rights and the qualifications, limitations and
restrictions thereof
that are set forth in the Restated Certificate of Incorporation and in
this Resolution as follows:"
IN WITNESS WHEREOF, said IXC Communications, Inc. has caused this
certificate to be signed by John J. Willingham, its Senior Vice President this
29th day of August, 1997.
IXC Communications, Inc.
By: /s/ JOHN J. WILLINGHAM
John J. Willingham
Its: Senior Vice President
FOURTH AMENDMENT TO
RESTATED
CERTIFICATE OF INCORPORATION
OF
IXC COMMUNICATIONS, INC.
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware does hereby certify:
1. That James F. Guthrie is the duly elected and acting Executive Vice
President and Chief Financial Officer of IXC Communications, Inc., a Delaware
corporation (the "Corporation").
2. Section D.1(a) of Article ELEVENTH of the Restated Certificate of
Incorporation of the Corporation is amended to read in full as follows:
"1. Dividends.
(a) The holders of shares of Series 1 Preferred Stock then outstanding
shall be entitled to receive, prior to the payment of any dividend on any
other Preferred Stock of the Corporation or the Common Stock of the
Corporation, when, as and if declared by the Board, out of funds legally
available for the payment of dividends, cumulative dividends in an annual
amount equal to $100 per share, plus an amount determined by applying a
10% annual rate, compounded annually, to any accrued but unpaid dividend
amount from the last day of the period when such dividend accrues to the
actual date of payment of such dividend, and no more. The holders of
shares of Series 3 Preferred Stock then outstanding shall be entitled to
receive, prior to the payment of any dividend on any other Preferred
Stock of the Corporation (other than the Series 1 Preferred Stock) or the
Common Stock of the Corporation, when, as and if declared by the Board,
out of funds legally available for the payment of dividends, cumulative
dividends in an annual amount equal to $100 per share, plus an amount
determined by applying a 10% annual rate, compounded annually, to any
accrued but unpaid dividend amount from the last day of the period when
such dividend accrues to the actual date of payment of such dividend, and
no more; provided, however, that (i) the Corporation may pay dividends on
the Corporation's 7 1/4% Junior Convertible Preferred Stock due 2007
("Convertible Preferred Stock") with additional shares of Convertible
Preferred Stock and (ii) the Corporation may pay dividends on the
Corporation's 12 1/2%
Junior Exchangeable Preferred Stock Due 2009 (the "Initial Exchangeable
Preferred Stock") and 12 1/2% Series B Junior Exchangeable Preferred
Stock Due 2009 (the "Series B Stock") with additional shares of Initial
Exchangeable Preferred Stock and Series B Stock, respectively. Such
dividends on the outstanding shares of Series Preferred Stock shall be
payable on such date as the Board may from time to time determine (each
such date being a "dividend payment date"). The Board may fix a record
date for the determination of holders of shares of Series Preferred Stock
entitled to receive payment of a dividend declared thereon, which record
date shall not be more than sixty (60) days prior to the date fixed for
the payment thereof. Each such annual dividend shall be fully cumulative
and shall accrue from day to day (whether or not declared) from the first
day of each period in which such dividend may be payable as herein
provided, except that the first annual dividend with respect to each
share of Series Preferred Stock shall accrue from the Original Issue Date
of such share or such other date as determined by the Board, except that
dividends with respect to each share of Series 3 Preferred Stock shall
accrue from August 14, 1992. Dividends, when, as and if declared, shall
be payable in cash."
3. This Fourth Amendment to Restated Certificate of Incorporation has been
duly approved by the Board of Directors of the Corporation.
4. This Fourth Amendment to Restated Certificate of Incorporation was duly
adopted and approved by the stockholders in accordance with the applicable
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware by the holders of (i) a majority of the outstanding shares of Common
Stock, par value $.01 per share, and the outstanding shares of 10% Junior Series
3 Cumulative Redeemable Preferred Stock, par value $.01 per share (the "Series 3
Preferred Stock"), of the Corporation, voting class; and (ii) at least
three-fourths (3/4ths) of the outstanding shares of Series 3 Preferred Stock,
voting as a class. Prompt written notice of the adoption of this Fourth
Amendment to Restated Certificate of Incorporation has been given to those
stockholders who have not consented in writing thereto, as provided by Section
228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed
by James F. Guthrie, its Executive Vice President and Chief Financial Officer
this 30th day of October, 1997.
IXC COMMUNICATIONS, INC.
By: /s/ JAMES F. GUTHRIE
James F. Guthrie, Executive Vice
President and Chief Financial
Officer
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE CERTIFICATE OF DESIGNATION
OF THE POWERS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS
OF 12 1/2% JUNIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
AND 12 1/2% SERIES B JUNIOR EXCHANGEABLE PREFERRED STOCK DUE 2009
AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
THEREOF OF IXC COMMUNICATIONS, INC. FILED IN THE OFFICE OF THE
SECRETARY OF STATE OF DELAWARE ON AUGUST 19, 1997
IXC Communications, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware does hereby
certify:
1. The name of the corporation is IXC Communications, Inc.
2. That a Certificate of Designation of the Powers, Preference and Relative,
Participating, Optional and Other Special Rights of 12 1/2% Junior Exchangeable
Preferred Stock Due 2009 and 12 1/2% Series B Junior Exchangeable Preferred
Stock Due 2009 and Qualifications, Limitations and Restrictions Thereof (the
"Certificate") was filed by the Secretary of State of Delaware on August 19,
1997 and that the Certificate requires correction as permitted by subsection (f)
of Section 103 of the General Corporation Law of the State of Delaware.
3. The inaccuracy or defect of the Certificate to be corrected is to correct
the name of IXC Internet Services, Inc. which currently reads IXC Internet, Inc.
in the definition of "IXC Internet Capital Contribution" in paragraph (n)
Certain Definitions. of the Certificate.
4. The paragraph entitled "IXC Internet Capital Contribution" in paragraph
(n) Certain Definitions. of the Certificate is correct to read as follows:
"IXC Internet Capital Contribution" means the contribution by the Company
to IXC Internet Services, Inc. (so long as IXC Internet Services, Inc. is
a Subsidiary) of $10 million in cash, an IRU in two excess fibers in the
Company's network (including two fibers in network routes to be built or
acquired in the future) and space in certain points of presence, in each
case as contemplated in connection with the transactions contemplated by
the PSINet Agreement."
IN WITNESS WHEREOF, IXC Communications, Inc. has caused this certificate to
be signed by its Senior Vice President, General Counsel and Secretary this 21st
day of January, 1998.
IXC COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ JEFFREY C. SMITH
Jeffrey C. Smith
Senior Vice President,
General Counsel and Secretary
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF
6 3/4% CUMULATIVE
CONVERTIBLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
IXC Communications, Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that (i) pursuant to authority conferred upon the
board of directors of the Company (the "Board of Directors") by its Restated
Certificate of Incorporation (hereinafter referred to as the "Restated
Certificate of Incorporation"), and pursuant to the provisions of Sections
141(c)(2) and 151 of the General Corporation Law of the State of Delaware, said
Board of Directors is authorized to issue Preferred Stock of the Company in one
or more series and has authorized a committee of the Board of Directors (the
"Finance Committee") to adopt the resolution set forth below and (ii) the
Finance Committee duly approved and adopted the following resolution on March
25, 1998 (the "Resolution"):
RESOLVED that, pursuant to the authority vested in the Board of
Directors by its Restated Certificate of Incorporation, and the authority
vested by such Board of Directors in a committee of the Board (the
"Finance Committee"), all the members of which are members of such Board,
the Finance Committee does hereby create, authorize and provide for the
issuance of 6 3/4% Cumulative Convertible Preferred Stock, par value $.01
per share, with a stated value of $1000 per share, initially consisting of
up to 155,250 shares having the designation, preferences, relative,
participating, optional and other special rights and the qualifications,
limitations and restrictions thereof that are set forth in the Restated
Certificate of Incorporation and in this Resolution as follows:
1. Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Company a series of Preferred Stock
designated as the "6 3/4% Cumulative Convertible Preferred Stock" (the
"Cumulative Convertible Preferred Stock"). The number of shares constituting the
Cumulative Convertible Preferred Stock shall be 155,250, and such shares shall
be represented by stock certificates substantially in the form set forth in
Exhibit A hereto. The liquidation preference of the Cumulative Convertible
Preferred Stock shall be $1,000
per share (the "Liquidation Preference"). The date the Cumulative Convertible
Preferred Stock is first issued is referred to as the "Issue Date".
2. Rank. The Cumulative Convertible Preferred Stock will, rank (i)
pari passu in right of payment with the Company's 7 1/4% Junior Convertible
Preferred Stock Due 2007 (the "7 1/4% Preferred Stock"), the Company's 12 1/2%
Junior Exchangeable Preferred Stock Due 2009 and 12 1/2% Series B Junior
Exchangeable Preferred Stock Due 2009 (collectively, the "Exchangeable Preferred
Stock") and each other class of Capital Stock or series of Preferred Stock
established hereafter by the Board of Directors, the terms of which expressly
provide that such class or series ranks on a parity with the Cumulative
Convertible Preferred Stock as to dividend rights and rights on liquidation,
dissolution and winding up of the Company (collectively referred to, as "Parity
Securities"); (ii) junior in right of payment to any Senior Securities (as
defined) as to dividends and upon liquidation, dissolution or winding up of the
Company and (iii) senior in right of payment as to dividend rights and upon
liquidation, dissolution or winding up of the Company to the Common Stock and
any Capital Stock of the Company that expressly provides that it will rank
junior to the Cumulative Convertible Preferred Stock as to dividend rights or
rights on liquidation, winding up and dissolution of the Company (collectively
referred to as "Junior Securities"). The Company may not authorize, create (by
way of reclassification or otherwise) or issue any class or series of Capital
Stock of the Company ranking senior in right of payment as to dividend rights or
upon liquidation, dissolution or winding up of the Company to the Cumulative
Convertible Preferred Stock ("Senior Securities") or any obligation or security
convertible or exchangeable into, or evidencing a right to purchase, shares of
any class or series of Senior Securities without the affirmative vote or consent
of the holders of at least 66-2/3% of the outstanding shares of Cumulative
Convertible Preferred Stock.
3. Dividends. The Holders of shares of the Cumulative Convertible
Preferred Stock will 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 preferential dividends from the Issue Date of the
Cumulative Convertible Preferred Stock accruing at the rate of $67.50 per share
of Cumulative Convertible Preferred Stock per annum, or $16.875 per share of
Cumulative Convertible Preferred Stock per quarter, payable quarterly in arrears
on January 1, April 1, July 1, and October 1 of each year or, if any such date
is not a Business Day, on the next succeeding business day (each, a "Dividend
Payment Date"), to the Holders of record as of the next preceding December 15,
March 15, June 15, and September 15 (each, a "Record Date"). Accrued but unpaid
dividends, if any, may be paid on such dates as determined by the Board of
Directors. Dividends will be payable in cash except as set forth below.
Dividends payable on the Cumulative Convertible Preferred Stock will be computed
on the basis of a 360-day year of twelve 30-day months and will be deemed to
accrue on a daily basis. Dividends may, at the option of the Company, be paid in
Common Stock if, and only if, the documents governing the Company's indebtedness
that exists on the Issue Date then prohibit the payment of such dividends in
cash. If the Company elects to pay dividends in shares of Common Stock, the
number of shares of Common Stock to be distributed will be calculated by
dividing the amount of such dividend otherwise payable in cash by 95% of the
arithmetic average of the Closing Price (as defined) for the five Trading Days
(as defined) preceding the Dividend Payment Date. The Cumulative Convertible
Preferred Stock will not be redeemable unless all dividends accrued through such
redemption date shall have been paid in full.
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Notwithstanding anything to the contrary herein contained, the Company shall not
be required to declare or pay a dividend if another person (including, without
limitation, any of its subsidiaries) pays an amount to the Holders equal to the
amount of such dividend on behalf of the Company and, in such event, the
dividend will be deemed paid for all purposes.
Dividends on the Cumulative Convertible Preferred Stock will 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 quarter to which they relate.
Accumulated unpaid dividends will accrue and cumulate at a rate of 6.75% per
annum. The Company will take all reasonable actions required or permitted under
Delaware law to permit the payment of dividends on the Cumulative Convertible
Preferred Stock.
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 Cumulative
Convertible Preferred Stock with respect to any dividend period unless all
dividends for all preceding dividend periods have been declared and paid upon,
or declared and a sufficient sum set apart for the payment of such dividend
upon, all outstanding shares of Cumulative Convertible Preferred Stock. Unless
full cumulative dividends on all outstanding shares of Cumulative Convertible
Preferred Stock due for all past dividend periods shall have been declared and
paid, or declared and a sufficient sum for the payment thereof set apart, then:
(i) no dividend (other than a dividend payable solely in shares of Junior
Securities or options, warrants or rights to purchase Junior Securities) shall
be declared or paid upon, or any sum set apart for the payment of dividends
upon, any shares of Junior Securities; (ii) 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; (iii) 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 or a purchase,
redemption or other acquisition from the proceeds of a substantially concurrent
sale of Junior Securities) by the Company or any of its subsidiaries; and (iv)
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 Cumulative Convertible 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.
4. Liquidation Preference. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company after
payment in full of the liquidation preference (and any accrued and unpaid
dividends) on any Senior Securities, each Holder of shares of the Cumulative
Convertible Preferred Stock shall be entitled, on an equal basis with the
holders of the 7 1/4% Preferred Stock, the Exchangeable Preferred Stock and any
other outstanding Parity Securities, to payment out of the assets of the Company
available for distribution of the Liquidation Preference per share of the
Cumulative Convertible Preferred Stock held by such Holder, plus an amount equal
to the accrued and unpaid dividends on the Cumulative Convertible Preferred
Stock and Liquidated Damages (as defined) (if any) to the date fixed for
liquidation, dissolution, or winding up 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 an amount
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equal to the accrued and unpaid dividends and Liquidated Damages (if any), to
which Holders of Cumulative Convertible Preferred Stock are entitled, such
Holders will not be entitled to any further participation in any distribution of
assets of the Company. 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 corporations
will be deemed to be a voluntary or involuntary liquidation, dissolution or
winding up of the Company, unless such sale, conveyance, exchange, transfer,
consolidation or merger shall be in connection with a liquidation, dissolution
or winding up of the affairs of the Company or reduction or decrease in capital
stock.
5. Redemption. The Cumulative Convertible Preferred Stock may not be
redeemed at the option of the Company on or prior to April 5, 2000. After April
5, 2000 the Company may redeem the Cumulative Convertible Preferred Stock.
Notwithstanding the foregoing, prior to April 1, 2002, the Company shall only
have the option to redeem shares of the Cumulative Convertible Preferred Stock
if, during the period of 30 consecutive Trading Days ending on the Trading Day
immediately preceding the date that the notice of redemption is mailed to
Holders, the Closing Price for the Common Stock exceeded $75 divided by the
Conversion Rate effective on the date of such notice for at least 20 of such
Trading Days. Subject to the immediately preceding sentence, the Cumulative
Convertible Preferred Stock may be redeemed, in whole or in part, at the option
of the Company after April 5, 2000, at the redemption prices specified below
(expressed as percentages of the Liquidation Preference thereof), in each case,
together with an amount equal to accrued and unpaid dividends on the Cumulative
Convertible Preferred Stock (excluding any declared dividends for which the
Record Date has passed) and Liquidated Damages (if any), to the date of
redemption, upon not less than 15 nor more than 60 days' prior written notice,
if redeemed during the period commencing on April 5, 2000 to March 31, 2001 at
105.40%, and thereafter during the 12-month period commencing on April 1 of each
of the years set forth below:
REDEMPTION
YEAR RATE
- - ---- -------
2001................................................ 104.73%
2002................................................ 104.05%
2003................................................ 103.38%
2004................................................ 102.70%
2005................................................ 102.03%
2006................................................ 101.35%
2007................................................ 100.68%
2008 and thereafter................................. 100.00%
Except as provided in the preceding sentence, no payment or
allowance will be made for accrued dividends on any shares of Cumulative
Convertible Preferred Stock called for redemption.
On and after any date fixed for redemption (the "Redemption
Date"), provided that the Company has made available at the office of the
Transfer Agent a sufficient amount of cash to effect the redemption, dividends
will cease to accrue on the Cumulative Convertible
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Preferred Stock called for redemption (except that, in the case of a Redemption
Date after a dividend payment Record Date and prior to the related Dividend
Payment Date, holders of Cumulative Convertible Preferred Stock on the dividend
payment Record Date will be entitled on such Dividend Payment Date to receive
the dividend payable on such shares), such shares shall no longer be deemed to
be outstanding and all rights of the holders of such shares as holders of
Cumulative Convertible Preferred Stock shall cease except the right to receive
the cash deliverable upon such redemption, without interest from the Redemption
Date.
In the event of a redemption of only a portion of the then
outstanding shares of Cumulative Convertible Preferred Stock, the Company shall
effect such redemption on a pro rata basis, except that the Company may redeem
all of the shares held by Holders of fewer than 100 shares (or all of the shares
held by Holders who would hold less than 100 shares as a result of such
redemption), as may be determined by the Company.
With respect to a redemption pursuant hereto, the Company will send a
written notice of redemption by first class mail to each holder of record of
shares of Cumulative Convertible Preferred Stock, not fewer than 15 days nor
more than 60 days prior to the Redemption Date at its registered address (the
"Redemption Notice"); provided, however, that no failure to give such notice nor
any deficiency therein shall affect the validity of the procedure for the
redemption of any shares of Cumulative Convertible Preferred Stock to be
redeemed except as to the holder or holders to whom the Company has failed to
give said notice or except as to the holder or holders whose notice was
defective. The Redemption Notice shall state:
a. the redemption price;
b. whether all or less than all the outstanding shares of the
Cumulative Convertible Preferred Stock are to be redeemed and the total number
of shares of the Cumulative Convertible Preferred Stock being redeemed;
c. the Redemption Date;
d. that the holder is to surrender to the Company, in the manner,
at the place or places and at the price designated, his certificate or
certificates representing the shares of Cumulative Convertible Preferred Stock
to be redeemed; and
e. that dividends on the shares of the Cumulative
Convertible Preferred Stock to be redeemed shall cease to accumulate on such
Redemption Date unless the Company defaults in the payment of the redemption
price.
Each holder of Cumulative Convertible Preferred Stock shall
surrender the certificate or certificates representing such shares of Cumulative
Convertible Preferred Stock to the Company, duly endorsed (or otherwise in
proper form for transfer, as determined by the Company), in the manner and at
the place designated in the Redemption Notice, and on the Redemption Date the
full redemption price for such shares shall be payable in cash to the person
whose name appears on such certificate or certificates as the owner thereof, and
each surrendered certificate shall be canceled and retired. In the event that
less than all of the shares represented by any such certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares.
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6. Voting Rights. Holders of record of shares of the Cumulative
Convertible Preferred Stock will have no voting rights, except as required by
law and as provided in this Section 6 and in Sections 2, 8 and 13 hereof. Upon
the accumulation of accrued and unpaid dividends on the outstanding Cumulative
Convertible Preferred Stock in an amount equal to six full quarterly dividends
(whether or not consecutive) (together with any event with a similar effect
pursuant to the terms of any other series of Preferred Stock upon which like
rights have been conferred, a "Voting Rights Triggering Event"), the number of
members of the Company's Board of Directors will be immediately and
automatically increased by two (unless previously increased pursuant to the
terms of any other series of Preferred Stock upon which like rights have been
conferred), and the Holders of a majority of the outstanding shares of
Cumulative Convertible Preferred Stock, voting together as a class (pro rata,
based on liquidation preference) with the holders of any other series of
Preferred Stock upon which like rights have been conferred and are exercisable,
will be entitled to elect two members to the Board of Directors of the Company.
Voting rights arising as a result of a Voting Rights Triggering Event will
continue until such time as all dividends in arrears on the Cumulative
Convertible Preferred Stock are paid in full. Notwithstanding the foregoing,
however, such voting rights to elect directors will expire when the number of
shares of Cumulative Convertible Preferred Stock outstanding is reduced to
13,500 or less.
In the event such voting rights expire or are no longer
exercisable because dividends in arrears have been paid in full, the term of any
directors elected pursuant to the provisions of this paragraph 6 above shall
terminate forthwith and the number of directors constituting the Board of
Directors shall be immediately and automatically decreased by two (until the
occurrence of any subsequent Voting Rights Triggering Event). At any time after
voting power to elect directors shall have become vested and be continuing in
the holders of Cumulative Convertible Preferred Stock (together with the holders
of any other series of Preferred Stock upon which like rights have been
conferred and are exercisable) pursuant to this paragraph 6, or if vacancies
shall exist in the offices of directors elected by such holders, a proper
officer of the Company may, and upon the written request of the holders of
record of at least 25% of the shares of Cumulative Convertible Preferred Stock
then outstanding or the holders of 25% of the shares of any other series of
Preferred Stock then outstanding upon which like rights have been conferred and
are exercisable addressed to the secretary of the Company shall, call a special
meeting of the Holders of Cumulative Convertible Preferred Stock and the holders
of such other series of Preferred Stock for the purpose of electing the
directors which such holders are entitled to elect pursuant to the terms hereof;
provided, however, that no such special meeting shall be called if the next
annual meeting of stockholders of the Company is to be held within 60 days after
the voting power to elect directors shall have become vested (or such vacancies
arise, as the case may be), in which case such meeting shall be deemed to have
been called for such next annual meeting. If such meeting shall not be called,
pursuant to the provision of the immediately preceding sentence, by a proper
officer of the Company within 20 days after personal service to the secretary of
the Company at its principal executive offices, then the Holders of record of at
least 25% of the outstanding shares of Cumulative Convertible Preferred Stock or
the holders of 25% of the shares of any other series of Preferred Stock upon
which like rights have been conferred and are exercisable may designate in
writing one of their members to call such meeting at the expense of the Company,
and such meeting may be called by the person so designated upon the notice
required for the annual meetings of stockholders of the Company and shall be
held at the place for holding the annual meetings of stockholders. Any Holder of
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Cumulative Convertible Preferred Stock or such other series of Preferred Stock
so designated shall have, and the Company shall provide, access to the lists of
Holders of Cumulative Convertible Preferred Stock and the holders of such other
series of Preferred Stock for any such meeting of the holders thereof to be
called pursuant to the provisions hereof. If no special meeting of the Holders
of Cumulative Convertible Preferred Stock and the holders of such other series
of Preferred Stock is called as provided in this paragraph 6, then such meeting
shall be deemed to have been called for the next meeting of stockholders of the
Company.
At any meeting held for the purposes of electing directors at which
the Holders of Cumulative Convertible Preferred Stock (together with the holders
of any other series of Preferred Stock upon which like rights have been
conferred and are exercisable) shall have the right, voting together as a
separate class, to elect directors as aforesaid, the presence in person or by
proxy of the Holders of at least a majority in voting power of the outstanding
shares of Cumulative Convertible Preferred Stock (and such other series of
Preferred Stock) shall be required to constitute a quorum thereof.
Any vacancy occurring in the office of a director elected by the
Holders of Cumulative Convertible Preferred Stock (and such other series of
Preferred Stock) may be filled by the remaining director elected by the Holders
of Cumulative Convertible Preferred Stock (and such other series of Preferred
Stock) unless and until such vacancy shall be filled by the Holders of
Cumulative Convertible Preferred Stock (and such other series of Preferred
Stock).
Except as set forth above and otherwise required by applicable law,
the creation, authorization or issuance of any shares of any Junior Securities,
Parity Securities or Senior Securities, or the increase or decrease in the
amount of authorized Capital Stock of any class, including Preferred Stock,
shall not require the affirmative vote or consent of Holders of Cumulative
Convertible Preferred Stock and shall not be deemed to affect adversely the
rights, preferences, privileges or voting rights of shares of Cumulative
Convertible Preferred Stock.
In any case in which the Holders of Cumulative Convertible
Preferred Stock shall be entitled to vote pursuant hereto or pursuant to
Delaware law, each Holder of Cumulative Convertible Preferred Stock entitled to
vote with respect to such matters shall be entitled to one vote for each share
of Cumulative Convertible Preferred Stock held.
Except as required by law, the Holders of the Cumulative
Convertible Preferred Stock will not be entitled to vote on any merger or
consolidation involving the Company or a sale of all or substantially all the
assets of the Company.
7. Conversion Rights. The Cumulative Convertible Preferred Stock will
be convertible at the option of the Holder, into shares of Common Stock at any
time, unless previously redeemed or repurchased, at a conversion rate of 13.748
shares of Common Stock per share of the Cumulative Convertible Preferred Stock)
(as adjusted pursuant to the provisions hereof, the "Conversion Rate") (subject
to the adjustments described below). The right to convert a share of the
Cumulative Convertible Preferred Stock called for redemption or delivered for
repurchase will
-7-
terminate at the close of business on the Redemption Date for such Cumulative
Convertible Preferred Stock or at the time of the repurchase, as the case may
be.
The right of conversion attaching to any share of Cumulative
Convertible Preferred Stock may be exercised by the Holder thereof by delivering
the share to be converted to the office of the Transfer Agent, or any agency or
office of the Company maintained for that purpose, accompanied by a duly signed
and completed notice of conversion in form reasonably satisfactory to the
Transfer Agent of the Company, such as that which is set forth in Exhibit B
hereto. The conversion date will be the date on which the share and the duly
signed and completed notice of conversion are so delivered. As promptly as
practicable on or after the conversion date, the Company will issue and deliver
to the Transfer Agent a certificate or certificates for the number of full
shares of Common Stock issuable upon conversion, with any fractional shares
rounded up to full shares or, at the Company's option, payment in cash in lieu
of any fraction of a share, based on the Closing Price of the Common Stock on
the Trading Day preceding the conversion date. Such certificate or certificates
will be delivered by the Transfer Agent to the appropriate Holder on a
book-entry basis or by mailing certificates evidencing the additional shares to
the Holders at their respective addresses set forth in the register of Holders
maintained by the Transfer Agent. All shares of Common Stock issuable upon
conversion of the Cumulative Convertible Preferred Stock will be fully paid and
nonassessable and will rank pari passu with the other shares of Common Stock
outstanding from time to time. Any shares of Cumulative Convertible Preferred
Stock surrendered for conversion during the period from the close of business on
any Record Date to the opening of business on the next succeeding Dividend
Payment Date must be accompanied by payment of an amount equal to the dividends
payable on such Dividend Payment Date on the shares of Cumulative Convertible
Preferred Stock being surrendered for conversion. No other payment or adjustment
for dividends, or for any dividends in respect of shares of Common Stock, will
be made upon conversion. Holders of Common Stock issued upon conversion will not
be entitled to receive any dividends payable to holders of Common Stock as of
any record time before the close of business on the conversion date.
The Conversion Rate shall be adjusted from time to time by the Company
as follows:
a. If the Company shall hereafter pay a dividend or make a
distribution in Common Stock to all holders of any outstanding class or series
of Common Stock of the Company, the Conversion Rate in effect at the opening of
business on the date following the date fixed for the determination of
shareholders entitled to receive such dividend or other distribution shall be
increased by multiplying such Conversion Rate by a fraction of which the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date (as defined below) fixed for such
determination and the numerator shall be the sum of such number of outstanding
shares and the total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after the opening of
business on the day following the Record Date. If any dividend or distribution
of the type described in this provision (a) is declared but not so paid or made,
the Conversion Rate shall again be adjusted to the Conversion Rate which would
then be in effect if such dividend or distribution had not been declared.
b. If the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Rate in effect
at the opening of
-8-
business on the day following the day upon which such subdivision becomes
effective shall be proportionately increased and, conversely, if the outstanding
shares of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Rate in effect at the opening of business on the
day following the day upon which such combination becomes effective shall be
proportionately reduced, such increase or reduction, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
c. If the Company shall offer or issue rights, options or
warrants to all holders of its outstanding Common Stock entitling them to
subscribe for or purchase Common Stock at a price per share less than the
Current Market Price (as defined below) on the Record Date fixed for the
determination of shareholders entitled to receive such rights or warrants, the
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect at the opening of
business on the date after such Record Date by a fraction of which the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
subject to such rights, options or warrants would purchase at such Current
Market Price and of which the numerator shall be the number of shares of Common
Stock outstanding at the close of business on the Record Date plus the total
number of additional shares of Common Stock subject to such rights, options or
warrants for subscription or purchase. Such adjustment shall become effective
immediately after the opening of business on the day following the Record Date
fixed for determination of shareholders entitled to purchase or receive such
rights or warrants. To the extent that shares of Common Stock are not delivered
pursuant to such rights, options or warrants, upon the expiration or termination
of such rights or warrants the Conversion Rate shall again be adjusted to be the
Conversion Rate which would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made on the basis of delivery of only
the number of shares of Common Stock actually delivered. If such rights or
warrants are not so issued, the Conversion Rate shall again be adjusted to be
the Conversion Rate which would then be in effect if such date fixed for the
determination of shareholders entitled to receive such rights or warrants had
not been fixed. In determining whether any rights or warrants entitle the
holders to subscribe for or purchase Common Stock at less than such Current
Market Price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received for
such rights or warrants, with the value of such consideration, if other than
cash, to be determined by the Board of Directors.
d. If the Company shall, by dividend or otherwise,
distribute to all holders of its shares of Common Stock shares of any class of
capital stock of the Company (other than any dividends or distributions to which
provision (a) of this Section applies) or evidences of its indebtedness, cash or
other assets (including securities, but excluding any rights or warrants of a
type referred to in paragraph (c) of this Section) (the foregoing hereinafter
called the "Distributed Securities"), then, in each such case, the Conversion
Rate shall be increased so that the same shall be equal to the rate determined
by multiplying the Conversion Rate in effect immediately prior to the close of
business on the Record Date (as defined below) with respect to such distribution
by a fraction of which the denominator shall be the Current Market Price
(determined as provided in provision g(ii) of this Section) of the Common Stock
on such date less the Fair Market Value (as
-9-
defined below) on such date of the portion of the Distributed Securities so
distributed applicable to one share of Common Stock and the numerator shall be
such Current Market Price, such increase to become effective immediately prior
to the opening of business on the day following the Record Date; provided,
however, that, in the event the then Fair Market Value (as so determined) of the
portion of the Distributed Securities so distributed applicable to one share of
Common Stock is equal to or greater than the Current Market Price on the Record
Date, in lieu of the foregoing adjustment, adequate provision shall be made so
that each Holder of Cumulative Convertible Preferred Stock shall have the right
to receive upon conversion of a share of Cumulative Convertible Preferred Stock
(or any portion thereof) the amount of Distributed Securities such holder would
have received had such holder converted such share of Cumulative Convertible
Preferred Stock (or portion thereof) immediately prior to such Record Date. If
such dividend or distribution is not so paid or made, the Conversion Rate shall
again be adjusted to be the Conversion Rate which would then be in effect if
such dividend or distribution had not been declared. If the Board of Directors
determines the Fair Market Value of any distribution for purposes hereof by
reference to the actual or when issued trading market for any securities
comprising all or part of such distribution, it must in doing so consider the
prices in such market over the same period used in computing the Current Market
Price pursuant to provision g(ii) of this section to the extent possible.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's Capital Stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Dilution Trigger Event"): (i) are deemed to be transferred with such Common
Stock; (ii) are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this provision (d) (and no adjustment to the Conversion Rate under
this provision (d) shall be required) until the occurrence of the earliest
Dilution Trigger Event, whereupon such rights and warrants shall be deemed to
have been distributed and an appropriate adjustment to the Conversion Rate under
this provision (d) shall be made. If any such rights or warrants, including any
such existing rights or warrants distributed prior to the date hereof, are
subject to subsequent events, upon the occurrence of each of which such rights
or warrants shall become exercisable to purchase different securities, evidences
of indebtedness or other assets, then the occurrence of each such event shall be
deemed to be such date of issuance and record date with respect to new rights or
warrants (and a termination or expiration of the existing rights or warrants
without exercise by the holder thereof). In addition, in the event of any
distribution (or deemed distribution) of rights or warrants, or any Dilution
Trigger Event with respect thereto, that was counted for purposes of calculating
a distribution amount for which an adjustment to the Conversion Rate under this
provision (d) was made, (1) in the case of any such rights or warrants which
shall all have been redeemed or repurchased without exercise by any holders
thereof, the Conversion Rate shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Dilution Trigger Event, as the
case may be, as though it were a cash distribution, equal to the per share
redemption or repurchase price received by a holder or holders of Common Stock
with respect to such rights or warrants (assuming such holder had retained such
rights or warrants), made to all holders of Common Stock as of the date of such
redemption or repurchase, and (2) in the case of such rights or warrants which
shall have expired or been terminated without exercise by any holders thereof,
the Conversion Rate shall be readjusted as if such rights and warrants had not
been issued.
-10-
Notwithstanding any other provision of this provision (d) to the
contrary, Capital Stock, rights, warrants, evidences of indebtedness, other
securities, cash or other assets (including, without limitation, any rights
distributed pursuant to any shareholder rights plan) shall be deemed not to have
been distributed for purposes of this provision (d) if the Company makes proper
provision so that each Holder of shares of Cumulative Convertible Preferred
Stock who converts a share of Cumulative Convertible Preferred Stock (or any
portion thereof) after the date fixed for determination of shareholders entitled
to receive such distribution shall be entitled to receive upon such conversion,
in addition to the Common Stock issuable upon such conversion, the amount and
kind of such distributions that such holder would have been entitled to receive
if such holder had, immediately prior to such determination date, converted such
share of Cumulative Convertible Preferred Stock into Common Stock.
For purposes of this provision (d), provision (a) and provision (b),
any dividend or distribution to which this provision (d) is applicable that also
includes Common Stock, or rights or warrants to subscribe for or purchase Common
Stock to which provision (b) applies (or both), shall be deemed instead to be
(1) a dividend or distribution of the evidences of indebtedness, cash, assets,
shares of capital stock, rights or warrants other than (A) such shares of Common
Stock or (B) rights or warrants to which provision (b) applies (and any
Conversion Rate increase required by this provision (d) with respect to such
dividend or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such Common Stock or such rights or warrants (and
any further Conversion Rate increase required by provisions (a) and (b) with
respect to such dividend or distribution shall then be made), except that (1)
the Record Date of such dividend or distribution shall be substituted as "the
Record Date fixed for the determination of stockholders entitled to receive such
dividend or other distribution", "Record Date fixed for such determination" and
"Record Date" within the meaning of provision (a) and as "the Record Date fixed
for the determination of shareholders entitled to receive such rights or
warrants", "the date fixed for the determination of the shareholders entitled to
receive such rights or warrants" and "such Record Date" within the meaning of
provision (b), and (2) any share of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of provision (a).
e. If the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash that is
part of a distribution referred to in provision (d)) in an aggregate amount
that, combined together with (1) the aggregate amount of any other such
distributions to all holders of its Common Stock made exclusively in cash within
the 12 months preceding the date of payment of such distribution, and in respect
of which no adjustment pursuant to this provision (e) has been made, and (2) the
aggregate of any cash plus the Fair Market Value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors) of consideration payable in respect of any tender
offer by the Company or a Subsidiary of the Company for all or any portion of
the Common Stock concluded within the 12 months preceding the date of payment of
such distribution, and in respect of which no adjustment pursuant to provision
(d) has been made, exceeds 10% of the product of the Current Market Price
(determined as provided below) on the Record Date with respect to such
distribution times the number of shares of Common Stock outstanding on such
date, then, and in each such case, immediately after the close of business on
such date, the Conversion Rate shall be
-11-
increased so that the same shall equal the price determined by multiplying the
Conversion Rate in effect immediately prior to the close of business on such
Record Date by a fraction (i) the denominator of which shall be equal to the
Current Market Price on the Record Date less an amount equal to the quotient of
(x) the excess of such combined amount over such 10% amount divided by (y) the
number of shares of Common Stock outstanding on the Record Date and (ii) the
numerator of which shall be equal to the Current Market Price on such Record
Date; provided, however, that, if the portion of the cash so distributed
applicable to one share of Common Stock is equal to or greater than the Current
Market Price of the Common Stock on the Record Date, in lieu of the foregoing
adjustment, adequate provision shall be made so that each holder of Cumulative
Convertible Preferred Stock shall have the right to receive upon conversion of a
share of Cumulative Convertible Preferred Stock (or any portion thereof) the
amount of cash such holder would have received had such holder converted such
share of Cumulative Convertible Preferred Stock (or portion thereof) immediately
prior to such Record Date. If such dividend or distribution is not so paid or
made, the Conversion Rate shall again be adjusted to be the Conversion Rate
which would then be in effect if such dividend or distribution had not been
declared.
f. If a tender or exchange offer made by the Company or any of
its subsidiaries for all or any portion of the Common Stock expires and such
tender or exchange offer (as amended upon the expiration thereof) requires the
payment to shareholders (based on the acceptance (up to any maximum specified in
the terms of the tender offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a Fair Market Value that, combined together with
(1) the aggregate of the cash plus the Fair Market Value, as of the expiration
of such tender offer, of consideration payable in respect of any other tender
offers, by the Company or any of its subsidiaries for all or any portion of the
Common Stock expiring within the 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to this provision
(f) has been made and (2) the aggregate amount of any distributions to all
holders of the Common Stock made exclusively in cash within 12 months preceding
the expiration of such tender offer and in respect of which no adjustment
pursuant to provision (e) has been made, exceeds 10% of the product of the
Current Market Price as of the last time (the "Expiration Time") tenders could
have been made pursuant to such tender offer (as it may be amended) times the
number of shares of Common Stock outstanding (including any tendered shares) at
the Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Conversion Rate shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Rate in effect immediately prior to the
close of business on the date of the Expiration Time by a fraction of which the
denominator shall be the number of shares of Common Stock outstanding (including
any tendered shares) at the Expiration Time multiplied by the Current Market
Price of the Common Stock on the Trading Day next succeeding the Expiration Time
and the numerator shall be the sum of (x) the Fair Market Value of the aggregate
consideration payable to shareholders based on the acceptance (up to any maximum
specified in the terms of the tender offer) of all shares validly tendered and
not withdrawn as of the Expiration Time (the shares deemed so accepted, up to
any such maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less any Purchased
Shares) at the Expiration Time and the Current Market Price of the Common Stock
on the Trading Day next succeeding the Expiration Time, such reduction (if any)
to become effective immediately prior to the opening of business on the day
following the Expiration Time. If the Company is obligated to
-12-
purchase shares pursuant to any such tender offer, but the Company is
permanently prevented by applicable law from effecting any such purchases or all
such purchases are rescinded, the Conversion Rate shall again be adjusted to be
the Conversion Rate which would then be in effect if such tender offer had not
been made. If the application of this provision (f) to any tender offer would
result in a decrease in the Conversion Rate, no adjustment shall be made for
such tender offer under this provision (f).
The Company may make voluntary increases in the Conversion Rate in
addition to those required in the foregoing provisions, provided that each such
increase is in effect for at least 20 calendar days.
In addition, in the event that any other transaction or event occurs
as to which the foregoing Conversion Rate adjustment provisions are not strictly
applicable but the failure to make any adjustment would adversely affect the
conversion rights represented by the Cumulative Convertible Preferred Stock in
accordance with the essential intent and principles of such provisions, then, in
each such case, either (i) the Company will appoint an investment banking firm
of recognized national standing, or any other financial expert that does not (or
whose directors, officers, employees, affiliates or stockholders do not) have a
direct or material indirect financial interest in the Company or any of its
subsidiaries, who has not been, and, at the time it is called upon to give
independent financial advice to the Company, is not (and none of its directors,
officers, employees, affiliates or stockholders are) a promoter, director or
officer of the Company or any of its subsidiaries, which will give their opinion
upon or (ii) the Board of Directors shall, in its sole discretion, determine
consistent with the Board of Directors' fiduciary duties to the holders of the
Company's Common Stock, the adjustment, if any, on a basis consistent with the
essential intent and principles established in the foregoing Conversion Rate
adjustment provisions, necessary to preserve, without dilution, the conversion
rights represented by the Cumulative Convertible Preferred Stock. Upon receipt
of such opinion or determination, the Company will promptly mail a copy thereof
to the Holders of the Cumulative Convertible Preferred Stock and will, subject
to the fiduciary duties of the Board of Directors, make the adjustments
described therein.
The Company will provide to Holders of the Cumulative Convertible
Preferred Stock reasonable notice of any event that would result in an
adjustment to the Conversion Rate pursuant to this section so as to permit the
Holders to effect a conversion of Cumulative Convertible Preferred Stock into
shares of Common Stock prior to the occurrence of such event.
g. For purposes of this section, the following terms shall
have the meaning indicated:
i. "Current Market Price" means the average of the daily
closing prices per share of Common Stock for the 10 consecutive trading days
immediately prior to the date in question.
ii. "Fair Market Value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's-length transaction, under
usual and ordinary circumstances and after consideration of all available uses
and purposes without any compulsion
-13-
upon the seller to sell or the buyer to buy, as determined by the Board of
Directors, whose determination shall be made in good faith and shall be
conclusive and described in a resolution of the Board of Directors.
iii. "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
h. No adjustment in the Conversion Rate shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
rate; provided, however, that any adjustments which by reason of this paragraph
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this paragraph shall be made
by the Company and shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. No adjustment need be made for a
change in the par value or no par value of the Common Stock.
i. Whenever the Conversion Rate is adjusted as herein
provided, the Company shall promptly file with the Transfer Agent an Officers'
Certificate setting forth the Conversion Rate after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. Promptly after
delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and
the date on which each adjustment becomes effective and shall mail such notice
of such adjustment of the Conversion Rate to each holder of Cumulative
Convertible Preferred Stock at such holder's last address appearing on the
register of holders maintained for that purpose within 20 days of the effective
date of such adjustment. Failure to deliver such notice shall not affect the
legality or validity of any such adjustment.
j. In any case in which this paragraph provides that an
adjustment shall become effective immediately after a Record Date for an event,
the Company may defer until the occurrence of such event issuing to the holder
of any share of Cumulative Convertible Preferred Stock converted after such
Record Date and before the occurrence of such event the additional Common Stock
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment.
k. For purposes of this paragraph, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of Common Stock. The Company shall not pay any
dividend or make any distribution on Common Stock held in the treasury of the
Company.
-14-
8. Certain Covenants.
a. Transactions with Affiliates
Without the affirmative vote or consent of the holders of a
majority of the outstanding shares of Cumulative Convertible Preferred Stock,
the Company will not, and will not permit any of its subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to the Company or the relevant subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
subsidiary with an unrelated Person and (ii) the Company files in its minute
books with respect to any Affiliate Transaction or series of related Affiliate
Transaction involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the members
of the Board of Directors that are disinterested as to such Affiliate
Transaction.
As used herein, "Affiliate" of any specified Person means any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control.
The provisions of the foregoing paragraph shall not
prohibit (i) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board of
Directors, (ii) the grant of stock options or similar rights to employees and
directors of the Company pursuant to plans approved by the Board of Directors,
(iii) any employment or consulting arrangement or agreement entered into by the
Company or any of its subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such subsidiary, (iv) the
payment of reasonable fees to directors of the Company and its subsidiaries who
are not employees of the Company or its subsidiaries, (v) any Affiliate
Transaction between the Company and a subsidiary thereof or between such
subsidiaries (for purposes of this paragraph, "subsidiary" includes any entity
deemed to be an Affiliate because the Company or any of its subsidiaries own
securities in such entity or controls such entity), or (vi) transactions between
the Company or any subsidiary thereof specifically contemplated by the PSINet
Agreement dated as of July 22, 1997 between a subsidiary of the Company and
PSINet, as amended as of the date hereof.
-15-
b. Payments for Consent
The Company nor any of its subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
dividend or other distribution, fee or otherwise, to any Holder of shares of the
Cumulative Convertible Preferred Stock for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of the Certificate of
Designations or the Cumulative Convertible Preferred Stock unless such
consideration is offered to be paid and is paid to all Holders of the Cumulative
Convertible Preferred Stock that consent, waive or agree to amend in the time
frame set forth in the solicitation documents relating to such consent, waiver
or agreement.
c. Reports
Whether or not required by the rules and regulations of the
Commission, so long as any shares of the Cumulative Convertible Preferred Stock
are outstanding, the Company will furnish to the Holders of the Cumulative
Convertible Preferred Stock (i) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Company were required to file such Forms, including
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all information that
would be required to be contained in a current report on Form 8-K if the Company
were required to file such reports. In the event the Company has filed any such
report with the Commission, it will not be obligated to separately finish the
report to any Holder unless and until such Holder requests a copy of the report.
In addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request.
9. Merger, Consolidation or Sale of Assets of the Company
In the event that the Company is party to any Fundamental Change or
transaction (including, without limitation, a merger other than a merger that
does not result in a reclassification, conversion, exchange or cancellation of
Common Stock), consolidation, sale of all or substantially all of the assets of
the Company, recapitalization or reclassification of Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination of Common Stock) or any
compulsory share exchange (each of the foregoing, including any Fundamental
Change, being referred to as a "Transaction"), the Company will be obligated,
subject to applicable provisions of state law and the restrictions of the
Indenture, either to offer (a "Repurchase Offer") to purchase all of the shares
of Cumulative Convertible Preferred Stock on the date (the "Repurchase Date")
that is 75 days after the date the Company gives notice of the Transaction, at a
price (the "Repurchase Price") equal to $1,000.00 per share of Cumulative
Convertible Preferred Stock, together with an amount equal to accrued and unpaid
dividends on the Cumulative Convertible Preferred Stock through the Repurchase
Date or to adjust the Conversion Rate as described below. If a Repurchase Offer
is made, the Company shall deposit, on or prior to the Repurchase Date, with a
paying agent an amount of money sufficient to
-16-
pay the aggregate Repurchase Price of the Cumulative Convertible Preferred Stock
which is to be paid on the Repurchase Date.
On or before the 15th day after the Company knows or reasonably should
know that a Transaction has occurred, the Company will be required to mail to
all Holders a notice of the occurrence of such Transaction and whether or not
the documents governing the Company's indebtedness permit at such time a
Repurchase Offer, and, as applicable, either the new Conversion Rate (as
adjusted at the option of the Company) or the date by which the Repurchase Offer
must be accepted, the Repurchase Price for the Cumulative Convertible Preferred
Stock and the procedures which the holder must follow to accept the Repurchase
Offer. To accept the Repurchase Offer, the Holder of a share of Cumulative
Convertible Preferred Stock will be required to deliver, on or before the 10th
day prior to the Repurchase Date, written notice to the Company (or an agent
designated by the Company for such purpose) of the holder's acceptance, together
with the certificates evidencing the Cumulative Convertible Preferred Stock with
respect to which the offer is being accepted, duly endorsed for transfer.
In the event the Company does not make a Repurchase Offer with respect
to a Transaction and such Transaction results in shares of Common Stock being
converted into the right to receive, or being exchanged for, (i) in the case of
any Transaction other than a Transaction involving a Common Stock Fundamental
Change (as defined below) (and subject to funds being legally available for such
purpose under applicable law at the time of such conversion), securities, cash
or other property, each share of the Cumulative Convertible Preferred Stock
shall thereafter be convertible into the kind and, in the case of a Transaction
which does not involve a Fundamental Change (as defined below), amount of
securities, cash and other property receivable upon the consummation of such
Transaction by a holder of that number of shares of Common Stock into which a
share of the Cumulative Convertible Preferred Stock was convertible immediately
prior to such Transaction, or (ii) in the case of a Transaction involving a
Common Stock Fundamental Change, common stock, each share of the Cumulative
Convertible Preferred Stock shall thereafter be convertible (in the manner
described therein) into common stock of the kind received by holders of Common
Stock (but in each case after giving effect to any adjustment discussed below
relating to a Fundamental Change if such Transaction constitutes a Fundamental
Change), other than as required by Delaware law.
If any Fundamental Change occurs, then the Conversion Rate in effect
will be adjusted immediately after such Fundamental Change as described below.
In addition, in the event of a Common Stock Fundamental Change, each share of
Cumulative Convertible Preferred Stock shall be convertible solely into common
stock of the kind received by holders of Common Stock as a result of such Common
Stock Fundamental Change.
The Conversion Rate in the case of any Transaction involving a
Fundamental Change will be adjusted immediately after such Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change
(as defined below), the Conversion Rate will thereupon become the higher of (A)
the Conversion Rate in effect immediately prior to such Non-Stock Fundamental
Change, but after giving effect to any other prior
-17-
adjustments effected, and (B) a fraction, the numerator of which is (x) the
redemption rate for one share of the Cumulative Convertible Preferred Stock if
the redemption date were the date of such Non-Stock Fundamental Change (or, for
the period commencing on the first date of original issuance of the Cumulative
Convertible Preferred Stock and through April 1, 1999, and the twelve-month
period commencing April 1, 1999, the product of 106.75% and 106.075%,
respectively), multiplied by $1000 plus (y) the amount of any then-accrued and
unpaid dividends on one share of the Cumulative Convertible Preferred Stock, and
the denominator of which is the greater of the Applicable Price or the then
applicable Reference Market Price; and
(ii) in the case of a Common Stock Fundamental
Change, the Conversion Rate in effect immediately prior to such Common Stock
Fundamental Change, but after giving effect to any other prior adjustments
effected, will thereupon be adjusted by multiplying such Conversion Rate by a
fraction of which the denominator will be the Purchaser Stock Price (as defined
below) and the numerator will be the Applicable Price; provided, however, that
in the event of a Common Stock Fundamental Change in which (A) 100% of the value
of the consideration received by a holder of Common Stock is common stock of the
successor, acquirer, or other third party (and cash, if any, is paid only with
respect to any fractional interests in such common stock resulting from such
Common Stock Fundamental Change) and (B) all Common Stock will have been
exchanged for, converted into, or acquired for common stock (and cash with
respect to fractional interests) of the successor, acquirer, or other third
party, the Conversion Rate in effect immediately prior to such Common Stock
Fundamental Change will thereupon be adjusted by multiplying such Conversion
Rate by the number of shares of common stock of the successor, acquirer, or
other third party received by a holder of one share of Common Stock as a result
of such Common Stock Fundamental Change.
The term "Applicable Price" means (i) in the case of a Non-Stock
Fundamental Change in which the holders of Common Stock receive only cash, the
amount of cash received by the holder of one share of Common Stock and (ii) in
the event of any other Non-Stock Fundamental Change or any Common Stock
Fundamental Change, the average of the Closing Price (as defined below) for
Common Stock during the ten Trading Days prior to the record date for the
determination of the holders of Common Stock entitled to receive such
securities, cash, or other property in connection with such Non-Stock
Fundamental Change or Common Stock Fundamental Change or, if there is no such
record date, the date upon which the holders of Common Stock shall have the
right to receive such securities, cash, or other property (such record date or
distribution date being hereinafter referred to as the "Entitlement Date") in
each case as adjusted in good faith by the Company to appropriately reflect any
of the events referred to above.
The term "Common Stock Fundamental Change" means any Fundamental
Change in which more than 50% of the value (as determined in good faith by the
Board of Directors of the Company) of the consideration received by holders of
Common Stock consists of common stock that for each of the ten consecutive
Trading Days prior to the Entitlement Date has been admitted for listing or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on the Nasdaq National Market; provided, however, that a
Fundamental Change shall not be a Common Stock Fundamental Change unless either
(i) the Company continues to exist after the occurrence of such Fundamental
Change and the outstanding Cumulative Convertible Preferred
-18-
Stock continues to exist as outstanding Cumulative Convertible Preferred Stock
or (ii) not later than the occurrence of such Fundamental Change, the
outstanding Cumulative Convertible Preferred Stock is converted into or
exchanged for shares of convertible Preferred Stock of an entity succeeding to
the business of the Company or a subsidiary thereof, which convertible Preferred
Stock has powers, preferences, and relative, participating, optional, or other
rights and qualifications, limitations, and restrictions, substantially similar
to those of the Cumulative Convertible Preferred Stock.
The term "Fundamental Change" means the occurrence of any
Transaction or event in connection with a plan pursuant to which all or
substantially all Common Stock shall be exchanged for, converted into, acquired
for, or constitute solely the right to receive securities, cash, or other
property (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization, or
otherwise), provided, that, in the case of a plan involving more than one such
Transaction or event, for purposes of adjustment of the Conversion Rate, such
Fundamental Change shall be deemed to have occurred when substantially all
Common Stock shall be exchanged for, converted into, or acquired for or
constitute solely the right to receive securities, cash, or other property, but
the adjustment shall be based upon the consideration that a holder of Common
Stock received in such Transaction or event as a result of which more than 50%
of Common Stock shall have been exchanged for, converted into, or acquired for
or constitute solely the right to receive securities, cash, or other property.
The term "Non-Stock Fundamental Change" means any Fundamental Change other than
a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any
Common Stock Fundamental Change, the average of the Closing Prices for the
common stock received in such Common Stock Fundamental Change for the ten
consecutive Trading Days prior to and including the Entitlement Date, as
adjusted in good faith by the Company to appropriately reflect any of the events
referred to above.
The term "Reference Market Price" shall initially mean $38.79 (which
is an amount equal to 66 2/3% of the reported last sales price for Common Stock
on the Nasdaq National Market on March 25, 1998) and in the event of any
adjustment of the Conversion Rate other than as a result of a Non-Stock
Fundamental Change, the Reference Market Price shall also be adjusted so that
the ratio of the Reference Market Price to the Conversion Rate after giving
effect to any such adjustment shall always be the same as the ratio of the
initial Reference Market Price to the initial Conversion Rate.
In case (1) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out of its
earned surplus; (2) the Company shall authorize the granting to all holders of
its Common Stock of rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any other rights; (3) of any
reclassification of the Common Stock of the Company (other than a subdivision or
combination of its outstanding Common Stock); (4) of any consolidation or merger
to which the Company is a party and for which approval of any shareholders of
the Company is required; (5) the sale or transfer of all or substantially all
the assets of the Company; or (6) of the voluntary or involuntary dissolution,
-19-
liquidation or winding up of the Company; then the Company shall cause to be
filed with the Transfer Agent and at each office or agency maintained for the
purpose of conversion of the Cumulative Convertible Preferred Stock, and shall
cause to be mailed to all holders at their last addresses as they shall appear
in the Cumulative Convertible Preferred Stock Register, at least 20 days (or 10
days in any case specified in clause (1) or (2) above) prior to the applicable
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. Failure to give the notice requested by this Section
or any defect therein shall not affect the legality or validity of any dividend,
distribution, right, warrant, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up, or the vote upon any such
action.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued shares of Common Stock (or
out of its authorized shares of Common Stock held in the treasury of the
Company), for the purpose of effecting the conversion of the Cumulative
Convertible Preferred Stock, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding shares of Cumulative Convertible
Preferred Stock.
The Company will pay any and all document, stamp or similar issue or
transfer taxes that may be payable in respect of the issue or delivery of Common
Stock on conversion of the Cumulative Convertible Preferred Stock pursuant
hereto. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of shares
of Common Stock in a name other than that of the Holder of the share of
Cumulative Convertible Preferred Stock or the shares of Cumulative Convertible
Preferred Stock to be converted, and no such issue or delivery shall be made
unless and until the Person requesting such issue has paid to the Company the
amount of any such tax, or has established to the satisfaction of the Company
that such tax has been paid.
10. Reissuance of Cumulative Convertible Preferred Stock. Shares of
Cumulative Convertible Preferred Stock redeemed for or converted into Common
Stock or that have been reacquired in any manner shall not be reissued as shares
of Cumulative Convertible Preferred Stock and shall (upon compliance with any
applicable provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock; provided,
however, that so long as any shares of Cumulative Convertible Preferred Stock
are outstanding, any issuance of such shares must be in compliance with the
terms hereof.
11. Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
-20-
12. Additional Rights of Holders. In addition to the rights
provided to Holders under this Certificate of Designation, Holders shall have
the rights set forth in the Registration Rights Agreement.
13. Amendment, Supplement and Waiver. The Company may amend this
Certificate of Designation with the affirmative vote or consent of the holders
of a majority of the shares of Cumulative Convertible Preferred Stock then
outstanding, (including votes or consents obtained in connection with a tender
offer or exchange offer for the Cumulative Convertible Preferred Stock) and,
except as otherwise provided by applicable law, any past default or failure to
comply with any provision of this Certificate of Designation may also be waived
with the consent of such holders. Notwithstanding the foregoing, however,
without the consent of each Holder affected, an amendment or waiver may not
(with respect to any shares of the Cumulative Convertible Preferred Stock held
by a non-consenting Holder): (i) alter the voting rights with respect to the
Cumulative Convertible Preferred Stock or reduce the number of shares of the
Cumulative Convertible Preferred Stock whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the Liquidation Preference of any
share of the Cumulative Convertible Preferred Stock or adversely alter the
provisions with respect to the redemption of the Cumulative Convertible
Preferred Stock, (iii) reduce the rate of or change the time for payment of
dividends on any share of the Cumulative Convertible Preferred Stock, (iv) waive
a default in the payment of dividends or Liquidated Damages (if any) on the
Cumulative Convertible Preferred Stock, (v) make any share of the Cumulative
Convertible Preferred Stock payable in money other than United States dollars,
(vi) make any change in the provisions of the Certificate of Designation
relating to waivers of the rights of Holders of the Cumulative Convertible
Preferred Stock to receive the Liquidation Preference, dividends or Liquidated
Damages (if any) on the Cumulative Convertible Preferred Stock, or (vii) make
any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
the Cumulative Convertible Preferred Stock, the Company may (to the extent
permitted by, and subject to the requirements of, Delaware law) amend or
supplement this Certificate of Designation to cure any ambiguity, defect or
inconsistency, to provide for uncertificated shares of the Cumulative
Convertible Preferred Stock in addition to or in place of certificated shares of
the Cumulative Convertible Preferred Stock, to make any change that would
provide any additional rights or benefits to the Holders of the Cumulative
Convertible Preferred Stock or to make any change that the Board of Directors
determines, in good faith, is not materially adverse to Holders of the
Cumulative Convertible Preferred Stock.
14. Shelf Registration; Liquidated Damages. Pursuant to the
Registration Rights Agreement, the Company will agree to file a Shelf
Registration Statement with the Commission on the appropriate form under the
Securities Act with respect to the Cumulative Convertible Preferred Stock, any
depositary shares issued in connection with the Cumulative Convertible Preferred
Stock (the "Depositary Shares"), and Common Stock issuable upon conversion
thereof or paid as dividends thereon, to cover resales of the Depositary Shares,
the Cumulative Convertible Preferred Stock or such Common Stock by the Holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Shelf Registration Statement. The Company will use its
best efforts to cause the Shelf Registration Statement to be declared effective
as promptly as possible by
-21-
the Commission. For purposes hereof, "Transfer Restricted Securities" means each
Depositary Share or share of the Cumulative Convertible Preferred Stock or
Common Stock issuable upon conversion thereof or paid as dividends thereon until
the earlier of (i) the date on which such Depositary Share or share of
Cumulative Convertible Preferred Stock or Common Stock has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (ii) the date on which such Depositary Share or share
of Cumulative Convertible Preferred Stock or Common Stock is eligible to be
distributed to the public pursuant to Rule 144(k) under the Securities Act.
The Registration Rights Agreement will provide that the Company will
(i) file the Shelf Registration Statement with the Commission on or prior to 45
days after the Issue Date, (ii) use its best efforts to cause the Shelf
Registration to be declared effective by the Commission on or prior to June 26,
1998 and (iii) use its best efforts to maintain the effectiveness of the Shelf
Registration Statement until all Depositary Shares, shares of Cumulative
Convertible Preferred Stock and shares of Common Stock issued upon conversion
thereof or as dividends thereon that are not held by affiliates of the Company
(A) may be resold without restriction under Rule 144(k) under the Securities Act
or (B) have been sold pursuant to the Shelf Registration Statement (subject to
the Company's right to notify Holders that the Prospectus contained therein
ceases to be accurate and complete as a result of material business developments
for up to 120 days during such three-year period, provided that (A) no single
period may exceed 45 days and (B) such periods in the aggregate may not exceed
60 days in any calendar year). If (a) the Company fails to file the Shelf
Registration Statement required by the Registration Rights Agreement on or
before the date specified for such filing, (b) such Shelf Registration Statement
is not declared effective by the Commission on or prior to the date specified
for such effectiveness (the "Effectiveness Target Date") or (c) the Shelf
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (c) above a "Registration Default"),
then the Company will pay Liquidated Damages as required by the Registration
Rights Agreement to each Holder of shares of the Cumulative Convertible
Preferred Stock which are Transfer Restricted Securities (and the corresponding
Depositary Shares), with respect to the first 45-day period immediately
following the occurrence of such Registration Default in an amount equal to
$0.25 per year per Depositary Share ($5.00 per year per $1,000 in Liquidation
Preference of the Cumulative Convertible Preferred Stock) held by such Holder.
The amount of the Liquidated Damages will increase by an additional $2.50 per
year per $1,000 in Liquidation Preference of the Cumulative Convertible
Preferred Stock with respect to any subsequent period until all Registration
Defaults have been cured. In addition, holders of shares of the Cumulative
Convertible Preferred Stock which are Transfer Restricted Securities may receive
Liquidated Damages with respect to Common Stock which are Transfer Restricted
Securities issued in lieu of paying dividends in cash. The Liquidated Damages
amount per share of Common Stock will be equal to the Liquidated Damages per
share of Cumulative Convertible Preferred Stock, divided by the Conversion Rate.
All accrued Liquidated Damages will be paid by the Company, to the extent
permitted by applicable law, on each Dividend Payment Date and, to the extent
the net dividend payable on such date may be paid through the issuance of Common
Stock, may be paid in Common Stock (valued on the same basis as for the dividend
then payable). Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease. Notwithstanding anything to
-22-
the contrary herein contained, during any period, the Company will not be
required to pay Liquidated Damages with respect to more than one Registration
Default.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
15. Transfer and Exchange. When Cumulative Convertible Preferred Stock
is presented to the Transfer Agent with a request to register the transfer of
such Cumulative Convertible Preferred Stock or to exchange such Cumulative
Convertible Preferred Stock for an equal number of shares of Cumulative
Convertible Preferred Stock of other authorized denominations, the Transfer
Agent shall register the transfer or make the exchange as requested if its
reasonable requirements for such transaction are met and such transfer or
exchange is in compliance with applicable laws or regulations.
16. Certain Definitions. As used in this Certificate of
Designation, the following terms shall have the following meanings (and (1)
terms defined in the singular have comparable meanings when used in the plural
and vice versa, (2) "including" means including without limitation, (3) "or" is
not exclusive and (4) an accounting term not otherwise defined has the meaning
assigned to it in accordance with United States generally accepted accounting
principles as in effect on the Issue Date and all accounting calculations will
be determined in accordance with such principles), unless the content otherwise
requires:
"Board of Directors" mean the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of the Board.
"Business Day" means each day which is not a legal holiday.
"Capital Stock" of any person means any and all shares,
interests, rights to purchase, warrants, options, participation or other
equivalents of or interests in (however designated) equity of such person,
including any Preferred Stock, but excluding any debt securities convertible
into or exchangeable for such equity.
"Closing Price" means on any day the reported last bid price on such
day, or in case no sale takes place on such day, the average of the reported
closing bid and asked prices on the principal national securities exchange on
which such stock is listed or admitted to trading, or if not listed or admitted
to trading on any national securities exchange, the average of the closing bid
and asked prices as furnished by any independent registered broker-dealer firm,
selected by the Company for that purpose, in each case adjusted for any stock
split during the relevant period.
"Commission" means the Securities and Exchange Commission.
"Default" means any event which is, or after notice or passage of time
or both would be, a Voting Rights Triggering Event.
-23-
"Holders" means the registered holders from time to time of the
Cumulative Convertible Preferred Stock.
"Indenture" means the Indenture dated as of October 5, 1995, as
supplemented and amended, between the Company and IBJ Schroder Bank & Trust
Company.
"Liquidated Damages" means, with respect to any share of
Cumulative Convertible Preferred Stock, the additional amounts payable pursuant
to Section 14 hereof.
"Officers' Certificate" means a certificate signed by two officers of
the Company.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Registration Rights Agreement" means the Registration Rights
Agreement among the Company, Goldman, Sachs & Co., Credit Suisse First Boston
Corporation, Merrill Lynch & Company and Morgan Stanley Dean Witter with respect
to the Cumulative Convertible Preferred Stock.
"Securities Act" means the Securities Act of 1933.
"Shelf Registration Statement" means a shelf registration
statement filed with the Commission to cover resales of Transfer Restricted
Securities by holders thereof, as required by the Registration Rights Agreement.
"Subsidiary" means any corporation, association, partnership, limited
liability company or other business entity of which more than 50% of the total
voting power of shares of capital stock or other interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the Company, the Company and one or more Subsidiaries
or one or more Subsidiaries and any partnership the sole general partner or the
managing partner of which the Company or any Subsidiary or the only general
partners of which are the Company and one or more Subsidiaries or one or more
Subsidiaries.
"Trading Day" means, in respect of any securities exchange or
securities market, each Monday, Tuesday, Wednesday, Thursday and Friday, other
than any day on which securities are not traded on the applicable securities
exchange or in the applicable securities market.
-24-
"Transfer Agent" means the transfer agent for the Cumulative
Convertible Preferred Stock appointed by the Company, which initially shall be
BankBoston, N.A.
"Transfer Restricted Securities" means each share of Cumulative
Convertible Preferred Stock (or the shares of Common Stock into which such share
of Cumulative Convertible Preferred Stock is convertible) until (i) the date on
which such security has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (ii) the date
on which such security is distributed to the public pursuant to Rule 144 under
the Securities Act or is saleable pursuant to Rule 144(k) under the Securities
Act (or any successor rule thereof) or would be saleable pursuant to Rule 144(k)
under the Securities Act had it not been held by, or had it never been held by,
an affiliate of the Company.
-25-
IN WITNESS WHEREOF, said IXC Communications, Inc., has caused this
Certificate of Designation to be signed by James F. Guthrie, its Executive Vice
President and Chief Financial Officer, this 30th day of March, 1998.
IXC COMMUNICATIONS, INC.,
by /s/ JAMES F. GUTHRIE
Name: James F. Guthrie
Title: Executive Vice President
and Chief Financial Officer
-26-
EXHIBIT A
FORM OF CONVERTIBLE PREFERRED STOCK
FACE OF SECURITY
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
LAWS OF THE STATES OF THE UNITED STATES.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR AND
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.
-1-
Certificate Number Number of Shares of Convertible
Preferred Stock
[ ] [ ]
CUSIP NO.: 450713870
6 3/4% Cumulative Convertible Preferred Stock (par
value $0.01) (liquidation preference $1,000
per share of Convertible Preferred Stock)
of
IXC Communications, Inc.
IXC Communications, Inc., a Delaware corporation (the "Company"),
hereby certifies that [ ] (the "Holder") is the registered owner of fully paid
and non-assessable preferred securities of the Company designated the 6 3/4%
Cumulative Convertible Preferred Stock (par value $0.01) (liquidation preference
$1,000 per share of Cumulative Convertible Preferred Stock) (the "Cumulative
Convertible Preferred Stock"). The shares of Cumulative Convertible Preferred
Stock are transferable on the books and records of the Registrar, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Cumulative
Convertible Preferred Stock represented hereby are issued and shall in all
respects be subject to the provisions of the Certificate of Designation dated
March [ ], 1998, as the same may be amended from time to time (the "Certificate
of Designation"). Capitalized terms used herein but not defined shall have the
meaning given them in the Certificate of Designation. The Company will provide a
copy of the Certificate of Designation to a Holder without charge upon written
request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Cumulative
Convertible Preferred Stock set forth on the reverse hereof, and to the
Certificate of Designation, which select provisions and the Certificate of
Designation shall for all purposes have the same effect as if set forth at this
place.
Upon receipt of this certificate, the Holder is bound by the
Certificate of Designation and is entitled to the benefits thereunder.
Unless the Transfer Agent's Certificate of Authentication hereon has
been properly executed, these shares of Cumulative Convertible Preferred Stock
shall not be entitled to any benefit under the Certificate of Designation or be
valid or obligatory for any purpose.
-2-
IN WITNESS WHEREOF, the Company has executed this certificate
this [ ] day of [ ], [ ].
IXC COMMUNICATIONS, INC.,
By:
Name:
Title:
[Seal]
By:
Name:
Title:
TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Cumulative Convertible Preferred Stock referred to
in the within mentioned Certificate of Designation.
Dated: [ ], [ ]
BankBoston, N.A.
as Transfer Agent,
By:
Authorized Signatory
-3-
REVERSE OF SECURITY
Dividends on each share of Cumulative Convertible Preferred Stock
shall be payable at a rate per annum set forth in the face hereof or as provided
in the Certificate of Designation.
The shares of Cumulative Convertible Preferred Stock shall be
redeemable as provided in the Certificate of Designation. The shares of
Cumulative Convertible Preferred Stock shall be convertible into the Company's
Common Stock in the manner and according to the terms set forth in the
Certificate of Designation.
As required under Delaware law, the Company shall furnish to any
Holder upon request and without charge, a full summary statement of the
designations, voting rights preferences, limitations and special rights of the
shares of each class or series authorized to be issued by the Company so far as
they have been fixed and determined and the authority of the Board of Directors
to fix and determine the designations, voting rights, preferences, limitations
and special rights of the class and series of shares of the Company.
-4-
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares
of Cumulative Convertible Preferred Stock evidenced hereby to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints:
__________agent to transfer the shares of Cumulative Convertible Preferred Stock
evidenced hereby on the books of the Transfer Agent and Registrar. The agent may
substitute another to act for him or her.
Date:
Signature:
(Sign exactly as your name appears on the other side of this Cumulative
Convertible Preferred Stock Certificate)
Signature Guarantee:*
*
----- (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
-5-
EXHIBIT B
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Convertible, Preferred Stock)
The undersigned hereby irrevocably elects to convert (the "Conversion") shares
of [ ]% Cumulative Convertible Preferred Stock (the "Cumulative Convertible
Preferred Stock"), represented by stock certificate No(s). ___ (the "Cumulative
Convertible Preferred Stock Certificates") into shares of common stock ("Common
Stock") of IXC Communications, Inc. (the "Company") according to the conditions
of the Certificate of Designation of the Powers, Preferences and Relative,
Participating, Optional and Other Special Rights of the Cumulative Convertible
Preferred Stock and Qualifications, Limitations and Restrictions Thereof (the
"Certificate of Designation"), as of the date written below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates. No fee will be charged to the holder for any conversion,
except for transfer taxes, if any. A copy of each Cumulative Convertible
Preferred Stock Certificate is attached hereto (or evidence of loss, theft or
destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Cumulative Convertible Preferred Stock shall be made pursuant
to registration of the Common Stock under the Securities Act of 1933 (the
"Act"), or pursuant to any exemption from registration under the Act.
Any holder, upon the exercise of its conversion rights in accordance with the
terms of the Certificate of Designation and the Cumulative Convertible Preferred
Stock, agrees to be bound by the terms of the Registration Rights Agreement.
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Certificate of Designation.
Date of Conversion:
Applicable Conversion Rate:
Number of shares of Convertible Preferred Stock to be Converted:
Number of shares of
-1-
Common Stock to be Issued:
Signature:
Name:
Address:**
Fax No.:
* The Company is not required to issue shares of Common Stock until the
original Cumulative Convertible Preferred Stock Certificate(s) (or
evidence of loss, theft or destruction thereof) to be converted are
received by the Company or its Transfer Agent. The Company shall issue and
deliver shares of Common Stock to an overnight courier not later than
three business days following receipt of the original Cumulative
Convertible Preferred Stock Certificate(s) to be converted.
** Address where shares of Common Stock and any other payments or
certificates shall be sent by the Company.
-1-
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
IXC COMMUNICATIONS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
IXC Communications, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on September 4, 1998 adopted the
following resolution creating a series of 55,000 shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Certificate of Incorporation, a series of Preferred Stock, par value $.01
per share, of the Corporation be and hereby is created, and that the
designation and number of shares thereof and the voting and other powers,
preferences and relative, participating, optional or other rights of the
shares of such series and the qualifications, limitations and restrictions
thereof are as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. There shall be a series of Preferred Stock that
shall be designated as "Series A Junior Participating Preferred Stock," and the
number of shares constituting such series shall be 55,000. Such number of shares
may be increased or decreased by resolution of the Board of Directors; provided,
however, that no decrease shall reduce the number of shares of Series A Junior
Participating Preferred Stock to less than the number of shares then issued and
outstanding plus the number of shares issuable upon exercise of outstanding
rights, options or warrants or upon conversion of outstanding securities issued
by the Corporation.
1
2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the holders of any
shares of any class or series of stock of the Corporation ranking prior and
superior to the shares of Series A Junior Participating Preferred Stock with
respect to dividends, the holders of shares of Series A Junior Participating
Preferred Stock, in preference to the holders of shares of any class or series
of stock of the Corporation ranking junior to the Series A Junior Participating
Preferred Stock in respect thereof, 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 15th day of January, April,
July and October, 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
Series A Junior Participating Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10.00 or (b) the Adjustment
Number (as defined below) times the aggregate per share amount of all cash
dividends, and 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, par value $.01 per share, of the Corporation (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 Series A Junior Participating Preferred
Stock. The "Adjustment Number" shall initially be 1000. In the event the
Corporation shall at any time after September 20, 1998 (i) declare and pay any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock 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
Series A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series A Junior Participating 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 Series A Junior Participating 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
2
Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series A Junior Participating 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 Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 60 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to a number of votes equal to the Adjustment Number
on all matters submitted to a vote of the stockholders of the Corporation.
(B) Except as required by law, by Section 3(C) and by Section 10
hereof, holders of Series A Junior Participating 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.
(C) If, at the time of any annual meeting of stockholders for the
election of directors, the equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of Series A Junior Participating
Preferred Stock are in default, the number of directors constituting the Board
of Directors of the Company shall be increased by two. In addition to voting
together with the holders of Common Stock for the election of other directors of
the Company, the holders of record of the Series A Junior Participating
Preferred Stock, voting separately as a class to the exclusion of the holders of
Common Stock, shall be entitled at said meeting of stockholders (and at each
subsequent annual meeting of stockholders), unless all dividends in arrears on
the Series A Junior Participating Preferred Stock have been paid or declared and
set apart for payment prior thereto, to vote for the election of two directors
of the Company, the holders of any Series A Junior Participating Preferred Stock
being entitled to cast a number of votes per share of Series A Junior
Participating Preferred Stock as is specified in paragraph (A) of this Section
3. Until the default in payments of all dividends which permitted the election
of said directors shall cease to exist, any director who shall have been so
elected pursuant to the next preceding sentence may be removed at any time,
without cause, only by the affirmative vote of the holders of the shares of
Series A Junior Participating Preferred Stock at the time entitled to cast a
majority of the votes entitled to be cast for the election of any such director
at a special meeting of such holders called for that purpose, and any vacancy
thereby created may be filled by the vote of such holders. If and when such
default shall cease to exist, the holders of the Series A Junior Participating
Preferred Stock shall be divested of the foregoing special voting rights,
subject to revesting in the event of each and every subsequent like default in
payments of dividends. Upon the termination of the foregoing special voting
rights, the terms of office of all persons who may have been elected directors
pursuant to said special voting rights shall forthwith terminate, and the number
of directors constituting the Board of Directors shall
3
be reduced by two. The voting rights granted by this Section 3(c) shall be in
addition to any other voting rights granted to the holders of the Series A
Junior Participating Preferred Stock in this Section 3.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating 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 Series
A Junior Participating Preferred Stock outstanding shall have been paid in full,
the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating 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 Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series A
Junior Participating 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; or
(iii) purchase or otherwise acquire for consideration any shares
of Series A Junior Participating Preferred Stock, or any shares of stock ranking
on a parity with the Series A Junior Participating 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 Series A Junior
Participating Preferred Stock, or to such holders and holders of any such shares
ranking on a parity therewith, 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.
5. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired promptly after the acquisition thereof. All such
shares shall upon their retirement become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred
4
Stock to be created by resolution or resolutions of the Board of Directors,
subject to any conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation, dissolution or winding up of the Corporation, voluntary or
otherwise, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received an amount per share (the "Series A Liquidation Preference")
equal to the greater of (i) $10.00 plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, or (ii) the Adjustment Number times the per share amount of all
cash and other property to be distributed in respect of the Common Stock upon
such liquidation, dissolution or winding up of the Corporation.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other classes and series of stock of the
Corporation, if any, that rank on a parity with the Series A Junior
Participating Preferred Stock in respect thereof, then the assets available for
such distribution shall be distributed ratably to the holders of the Series A
Junior Participating Preferred Stock and the holders of such parity shares in
proportion to their respective liquidation preferences.
(C) Neither the merger or consolidation of the Corporation into
or with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6.
7. Consolidation, Merger, Etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
outstanding 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 each share
of Series A Junior Participating Preferred Stock 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.
8. No Redemption. Shares of Series A Junior Participating
Preferred Stock shall not be subject to redemption by the Company.
9. Ranking. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Preferred Stock as to the payment of
dividends and as to the distribution of assets upon liquidation, dissolution or
winding up, unless the terms of any such series shall provide otherwise, and
shall rank senior to the Common Stock as to such matters.
5
10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Certificate of Incorporation
of the Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds of the outstanding shares of
Series A Junior Participating Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Junior Participating Preferred Stock
may be issued in fractions of a share that 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 Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
16th day of September, 1998.
IXC COMMUNICATIONS, INC.
By: /s/ Benjamin L. Scott
Name: Benjamin L. Scott
Title: Chairman of the Board,
President and Chief
Executive Officer
6
FIFTH AMENDMENT TO
RESTATED
CERTIFICATE OF INCORPORATION
OF
IXC COMMUNICATIONS, INC.
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware does hereby certify:
1. That Stuart K. Coppens is the duly elected and acting Vice President of
Finance and Chief Accounting Officer of IXC Communications, Inc., a Delaware
corporation (the "Corporation").
2. Article FOURTH of the Restated Certificate of Incorporation of the
Corporation is amended to read in full as follows:
"FOURTH:
A. Classes of Stock.
The Corporation is authorized to issue three classes of stock to be
designated "Common Stock," "Preferred Stock" and "Class B Preferred
Stock." The total number of shares of stock that the Corporation shall
have authority to issue is 320,000,000 consisting of: (i) 300,000,000
shares of Common Stock, par value $.01 per share; (ii) 3,000,000 shares of
Preferred Stock, par value $.01 per share; and (iii) 17,000,000 shares of
Class B Preferred Stock, par value $.01 per share.
B. Rights, Preferences, Privileges and Restrictions of Preferred Stock.
The Preferred Stock may be issued at any time, and from time to
time, in one or more series pursuant hereto or to a resolution or
resolutions providing for such issue duly adopted by the board of
directors (the "Board") of the Corporation (authority to do so being
hereby expressly vested in the Board), and such resolution or resolutions
shall also set forth the voting powers, full or limited, or none, of each
such series of Preferred Stock and shall fix the designations, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions of each such series of
Preferred Stock.
C. Rights, Preferences, Privileges and Restrictions of Class B
Preferred Stock.
The Class B Preferred Stock may be issued at any time, and from time
to time, in one or more series pursuant hereto or to a resolution or
resolutions
providing for such issue duly adopted by the Board. Such resolution or
resolutions shall set forth the voting powers, full or limited, or none,
of each such series of Class B Preferred Stock and shall fix the number of
shares constituting any such series and the designations, preferences and
relative, participating, optional or other special rights and
qualifications, limitations or restrictions of each such series of Class B
Preferred Stock. Subject to the rights of the holders of any series of
Class B Preferred Stock pursuant to the terms of this Restated Certificate
of Incorporation or any resolution or resolutions providing for the
issuance of such series of stock adopted by the Board, the number of
authorized shares of Class B Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote generally in the election of directors
irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of the State of Delaware."
3. Article ELEVENTH of the Restated Certificate of Incorporation is
deleted in its entirety.
4. This Fifth Amendment to the Restated Certificate of Incorporation has
been duly adopted and approved in accordance with the applicable provisions of
Sections 228 and 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Stuart K. Coppens, its Vice President of Finance and Chief Accounting
Officer this 19th day of July, 1999.
By: /s/ Stuart K. Coppens
Stuart K. Coppens
Vice President of Finance and
Chief Accounting Officer
CERTIFICATE OF MERGER
OF
IXC MERGER SUB, INC.
WITH AND INTO
IXC COMMUNICATIONS, INC.
Pursuant to Section 251 of the General Corporation Law of the State of
Delaware (the "DGCL"), IXC Communications, Inc., a Delaware corporation ("IXC"),
hereby certifies as follows:
FIRST: The name and state of incorporation of each of the constituent
corporations to the merger (the "Constituent Corporations") are as follows:
Name State of Incorporation
---- ----------------------
IXC Merger Sub, Inc. Delaware
IXC Communications, Inc. Delaware
SECOND: An Agreement Governing the IXC Internal Reorganization dated as of
August 16, 1999 (the "Merger Agreement"), between IXC Merger Sub, Inc., a
Delaware corporation and a wholly owned subsidiary of IXC, and IXC, has been
approved, adopted, certified, executed and acknowledged by each of the
Constituent Corporations in accordance with Section 251 of the DGCL.
THIRD: The name of the surviving corporation of the merger is IXC
Communications, Inc. (the "Surviving Corporation").
FOURTH: The Restated Certificate of Incorporation of the Surviving
Corporation, as in effect immediately prior to the Effective Time (as defined
below), shall be amended at the Effective Time as so provided in Exhibit "A"
attached hereto, and, as so amended, such Restated
Certificate of Incorporation shall be the Restated Certificate of Incorporation
of the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
FIFTH: The executed Merger Agreement is on file at an office of the
Surviving Corporation, located at 1122 Capital of Texas Highway South, Austin,
Texas 78746-6426.
SIXTH: A copy of the Merger Agreement will be furnished by the Surviving
Corporation, on request and without cost, to any stockholder of either
Constituent Corporation.
SEVENTH: This Certificate of Merger, and the merger provided for herein,
shall become effective at the time this Certificate of Merger is filed with the
Delaware Secretary of State (the "Effective Time").
IN WITNESS WHEREOF, IXC has caused this Certificate of Merger to be
executed as of November 8, 1999.
IXC COMMUNICATIONS, INC.
By: /s/ JEFFREY C. SMITH
Name: Jeffrey C. Smith
Title: Senior Vice President, General
Counsel and Secretary
Exhibit "A"
The Restated Certificate of Incorporation of IXC Communications, Inc.
shall be amended in the merger as follows:
1. Section (g)(ix)(3) of the Certificate of Designation for the 7
1/4% Junior Convertible Preferred Stock Due 2007 shall be
amended by inserting after the words "business of the Company"
in the definition of "Common Stock Change in Control" the
following: "(which shall include a corporation that is the
direct or indirect owner of all the equity interests of the
surviving corporation in the merger) (hereinafter, a
"successor")".
2. Section (f)(i) of the Certificate of Designation for the 12 1/2%
Junior Exchangeable Preferred Stock Due 2009 shall be amended by
(i) deleting such section (f)(i) in its entirety and (ii)
substituting the following therefor: "The holders of
Exchangeable Preferred Stock, in addition to the voting rights
required under Delaware law and set forth in paragraphs (ii) and
(iii) below, shall be entitled to cast one-tenth of one vote per
share on all matters, voting together with the common stock of
the Company as a single class."
3. Section (f) (iii)(B) of the Certificate of Designation for the 12
1/2% Junior Exchangeable Preferred Stock Due 2009 shall be amended by
deleting the words "a majority" and by substituting the words
"two-thirds" therefor.
4. Section (6) of the Certificate of Designation for the 6 3/4%
Cumulative Convertible Preferred Stock shall be amended by inserting
the following paragraph after paragraph 5 of such section:
"So long as any shares of the Cumulative Convertible Preferred Stock
are outstanding, the Company will not amend this Certificate of
Designation so as to affect adversely the specified rights,
preferences, privileges or voting rights of Holders of shares of
Cumulative Convertible Preferred Stock or to authorize the issuance
of any additional shares of Cumulative Convertible Preferred Stock
without the affirmative vote or consent of Holders of at least
two-thirds of the issued and outstanding shares of Cumulative
Convertible Preferred Stock, voting or consenting, as the case may
be, as one class, given in person or by proxy, either in writing or
by resolution adopted at an annual or special meeting."
CERTIFICATE OF MERGER
OF
IVORY MERGER INC.
WITH AND INTO
IXC COMMUNICATIONS, INC.
Pursuant to Section 251 of the General Corporation Law of the State of
Delaware (the "DGCL"), IXC Communications, Inc., a Delaware corporation ("IXC"),
hereby certifies as follows:
FIRST: The name and state of incorporation of each of the constituent
corporations to the merger (the "Constituent Corporations") are as follows:
Name State of Incorporation
---- ----------------------
Ivory Merger Inc. Delaware
IXC Communications, Inc. Delaware
SECOND: An Agreement and Plan of Merger dated as of July 20, 1999, as
amended by Amendment No. 1 thereto dated as of October 13, 1999 (as so amended,
the "Merger Agreement"), among Cincinnati Bell Inc., an Ohio corporation
("Cincinnati Bell"), Ivory Merger Inc., a Delaware corporation and a wholly
owned subsidiary of Cincinnati Bell ("Ivory"), and IXC, has been approved,
adopted, certified, executed and acknowledged by each of the Constituent
Corporations in accordance with Section 251 of the DGCL.
THIRD: The name of the surviving corporation of the merger is IXC
Communications, Inc. (the "Surviving Corporation").
FOURTH: The Restated Certificate of Incorporation of the Surviving
Corporation, as in effect immediately prior to the Effective Time (as defined
below), shall be amended at the Effective Time so that the first sentence of
Article FOURTH thereof reads in its
entirely as follows: "The total number of shares of stock which the Corporation
shall have authority to issue is 6,000,000 consisting of (i) three million
(3,000,000) shares of common stock, par value $.01 per share and (ii) three
million (3,000,000) share of preferred stock, par value $.01 per share.", and,
as so amended, such Restated Certificate of Incorporation shall be the Restated
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
FIFTH: The executed Merger Agreement is on file at an office of the
Surviving Corporation, located at 1122 Capital of Texas Highway South, Austin,
Texas 78746- 6426.
SIXTH: A copy of the Merger Agreement will be furnished by the Surviving
Corporation, on request and without cost, to any stockholder of either
Constituent Corporation.
SEVENTH: This Certificate of Merger, and the merger provided for herein,
shall become effective at the time this Certificate of Merger is filed with the
Delaware Secretary of State (the "Effective Time").
IN WITNESS WHEREOF, IXC has caused this Certificate of Merger to be
executed as of November 8th, 1999.
IXC COMMUNICATIONS, INC.
by:
/s/ JEFFREY C. SMITH
Name: Jeffrey C. Smith
Title: Senior Vice President,
General Counsel and Secretary
CERTIFICATE OF CORRECTION OF
CERTIFICATE OF MERGER OF
IXC COMMUNICATIONS, INC.
IXC Communications, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. The name of the corporation is IXC Communications, Inc.
2. A Certificate of Merger was filed with the Secretary of State of the State
of Delaware on November 9, 1999 at 11:01 a.m. which contains an inaccurate
record of the corporate action taken therein, and said Certificate of
Merger requires correction as permitted by subsection (f) of Section 103
of the General Corporation Law of the State of Delaware.
3. The inaccuracy in said Certificate of Merger is as follows:
The amendment to the Restated Certificate of Incorporation of IXC
Communications, Inc. provided for in Paragraph Fourth of said Certificate of
Merger (i) refers to an amendment to the first sentence of Article FOURTH of the
Restated Certificate of Incorporation rather than an amendment to the second
sentence of Paragraph A of Article FOURTH of the Restated Certificate of
Incorporation and (ii) fails to delete Paragraph C of said Article FOURTH.
4. Paragraph Fourth of the Certificate of Merger is corrected to read as
follows:
FOURTH: The Restated Certificate of Incorporation of the Surviving Corporation,
as in effect immediately prior to the Effective Time (as defined below), shall
be amended at the Effective Time so that (a) the second sentence of Paragraph A
of Article FOURTH thereof reads in its entirety as follows: "The total number of
shares of stock which the Corporation shall have authority to issue is 6,000,000
consisting of (i) three million (3,000,000) shares of common stock, par value
$.01 per share and (ii) three million (3,000,000) shares of preferred stock, par
value $.01 per share" and (b) Paragraph C of said Article FOURTH is deleted,
and, as so amended, such Restated Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
IXC Communications, Inc. has caused this Certificate of Correction to be signed
by its authorized officer this 19th day of November, 1999.
By: Thomas E. Taylor
Name: Thomas E. Taylor
Title: Vice President of Communications
SIXTH AMENDMENT TO
RESTATED
CERTIFICATE OF INCORPORATION
OF
IXC COMMUNICATIONS, INC.
The undersigned corporation, organized and existing under and by virtue
of the General Corporation Law of the State of Delaware does hereby certify:
1. That Richard G. Ellenberger is the duly elected and acting
Chief Executive Officer of IXC Communications, Inc., a
Delaware corporation (the "Corporation").
2. Article FIRST of the Restated Certificate of Incorporation of
the Corporation is amended to read in full as follows: "FIRST:
The name of the corporation is "Broadwing Communications Inc."
(the "Corporation")."
3. This Sixth Amendment to the Restated Certificate of
Incorporation has been duly adopted and approved in accordance
with the applicable provisions of Sections 228 and 342 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Richard G. Ellenberger, its Chief Executive Officer this 12th day of
January, 2000.
IXC COMMUNICATIONS, INC.
By: /s/ Richard G. Ellenberger
--------------------------
Richard G. Ellenberger,
Chief Executive Officer