EXHIBIT 4.4
CERTIFICATE OF DESIGNATION OF SERIES
AND DETERMINATION OF RIGHTS AND PREFERENCES
OF
SERIES F CONVERTIBLE PARTICIPATING PREFERRED STOCK
OF
CAIS INTERNET, INC.
CAIS Internet, Inc., a Delaware corporation (the "Company"), acting
pursuant to Section 151 of the General Corporation Law of Delaware, does hereby
submit the following Certificate of Designation of Series and Determination of
Rights and Preferences of its Series F Convertible Participating Preferred
Stock.
FIRST: The name of the Company is CAIS Internet, Inc.
SECOND: By unanimous consent of the Board of Directors of the Company (the
"Board"), dated as of April 28, 2000, the following resolutions were duly
adopted:
WHEREAS, the Amended and Restated Certificate of Incorporation of the
Company (the "Certificate of Incorporation") authorizes 50,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"), issuable from
time to time in one or more series;
WHEREAS, the Board is authorized, subject to certain limitations prescribed
by law and certain provisions of the Certificate of Incorporation, to establish
and fix the number of shares to be included in any series of Preferred Stock and
the designation, rights, preferences, powers, restrictions and limitations of
the shares of such series; and
WHEREAS, the Board deems it advisable to establish a series of Preferred
Stock, designated as Series F Convertible Participating Preferred Stock, par
value $.01 per share.
NOW, THEREFORE, BE IT RESOLVED, that the series of Preferred Stock
designated as Series F Convertible Participating Preferred Stock is hereby
authorized and established; and
FURTHER, RESOLVED, that the Board does hereby fix and determine the
designation, rights, preferences, powers, restrictions and limitations of the
Series F Convertible Participating Preferred Stock as follows:
Section 1. Designation; Rank.
(a) This series of cumulative convertible participating Preferred Stock
shall be designated and known as the "Series F Preferred Stock." The number of
shares constituting the Series F Preferred Stock shall be 56,617 shares
(including 16,617 shares
of Series F Preferred Stock reserved exclusively for the payment of dividends
pursuant to Section 2).
(b) The Series F Preferred Stock shall, with respect to dividends and
rights upon liquidation dissolution or winding up, whether voluntary or
involuntary, rank (i) senior to the common stock of the Company, par value $.01
per share (the "Common Stock"), and to each other class of capital stock or
series of Preferred Stock or other equity-linked security established after the
date on which the first share of Series F Preferred Stock is issued by the
Company under this Certificate of Designation (the "Original Issuance Date"),
the terms of which do not expressly provide that it ranks senior to or on a
parity with the Series F Preferred Stock as to dividends and rights upon
liquidation, dissolution or winding up, whether voluntary or involuntary
(collectively referred to with the Common Stock as "Junior Securities"); (ii) on
parity with any additional shares of Series F Preferred Stock issued by the
Company in the future, Series G Convertible Preferred Stock ("Series G Shares")
and, subject to the written consent of Microsoft Corporation ("Microsoft") to
the extent required by Section 8.1 of the Series F Convertible Participating
Preferred Stock Purchase Agreement, dated as of April 28, 2000, by and between
Microsoft and the Company (the "Microsoft Consent"), any other class of capital
stock or series of Preferred Stock or other equity-linked security established
after the Original Issuance Date, the terms of which expressly provide that it
will rank on a parity with the Series F Preferred Stock as to dividends and
rights upon liquidation, dissolution or winding up, whether voluntary or
involuntary (collectively referred to as "Parity Securities"); and (iii) junior
to the Company's Series C Convertible Preferred Stock ("Series C Shares"),
Series D Convertible Participating Preferred Stock ("Series D Shares"), Series E
Convertible Participating Preferred Stock ("Series E Shares") and, subject to
the Microsoft Consent, to each other class of capital stock or series of
Preferred Stock or other equity-linked security issued by the Company after the
Original Issuance Date the terms of which expressly provide that it will rank
senior to the Series F Preferred Stock as to dividends and rights upon
liquidation, dissolution or winding up, whether voluntary or involuntary
(collectively referred to as "Senior Securities").
Section 2. Dividends.
(a) The holders of outstanding shares of Series F Preferred Stock shall be
entitled to receive, and the Board of Directors shall declare if assets of the
Company are by law available for such payment, cumulative dividends of $70 per
annum per share, and no more, payable quarterly on the fifteenth day of
December, March, June and September in each year commencing with a payment on
September 15, 2000 of dividends accrued from the date of issuance (the "Payment
Date"), and in preference and priority to any payment of any dividend on Junior
Securities.
(b) At the option of the holder of Series F Preferred Stock, dividends
shall be paid in (a) cash, (b) additional shares of Series F Preferred Stock
("PIK Preferred Shares") or (c) shares of Common Stock, or any combination
thereof as determined by the holder. If all or any portion of any dividend on
the Series F Preferred Stock shall be paid in shares of Common Stock, the number
of shares of Common Stock to be issued
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shall be determined based on the average of the closing price of the Common
Stock on the Nasdaq Stock Market for the twenty-five (25) trading days ending on
the last trading day prior to the related dividend payment date. In the event
the holder determines to receive all or any portion of a dividend on Series F
Preferred Stock in PIK Preferred Shares, the portion of such dividend for such
quarter shall equal 1.75% of the total value of Series F Preferred Stock held at
the time of the dividend by the holder thereof, including all previous PIK
Preferred Shares, as set forth in Schedule 1 hereto.
(c) Notwithstanding any other provision hereof, unless all shares of
Common Stock previously issued as quarterly dividends on Series F Preferred
Stock pursuant to Section 2(b) above are currently subject to an effective
registration statement covering the resale of such shares, no dividend payable
in shares of Common Stock shall be made to holders of Series F Preferred Stock
in any quarter.
(d) Any dividends that accrue shall, when declared, be in the form of PIK
Preferred Shares.
(e) The holders of Series F Preferred Stock shall give the Company ten
(10) days notice prior to a Payment Date as to the form of the quarterly
dividend. Any cash dividends shall be made by wire transfer to an account
specified by the holder of the Series F Preferred Stock by written notice to the
Company at least two (2) business days prior to the Payment Date.
Section 3. Liquidation Preference.
(a) Upon any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, before any distribution or payment shall be
made to the holders of any Junior Securities, the holders of Series F Preferred
Stock shall be entitled to be paid out of the remaining assets of the Company
legally available for distribution with respect to each share of Series F
Preferred Stock an amount equal to the sum of (i) $1,000.00 per share, as
adjusted for any stock dividends, combinations or splits with respect to such
shares (the "Original Series F Issue Price") plus (ii) any accrued but unpaid
dividends thereon (whether or not declared) (such sum, the "Series F Liquidation
Value"). If upon any such liquidation, dissolution or winding up of the Company
the remaining assets of the Company available for distribution to its
stockholders shall be insufficient to pay the holders of shares of Series F
Preferred Stock the full Series F Liquidation Value and the holders of all
Parity Securities the full liquidation preference thereof, the holders of shares
of Series F Preferred Stock and any such other Parity Securities shall share
ratably in any distribution of the remaining assets of the Company in proportion
to the respective amounts which would otherwise be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
(b) After payment in full of the Series F Liquidation Value and the full
liquidation preference amounts with respect to all Parity Securities, the
remaining assets of the Company legally available for distribution, if any,
shall be distributed to the holders of any Junior Securities and to all of the
holders of shares of Series F Preferred Stock (and
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all other holders of Senior Securities and Parity Securities, the terms of which
so require) on an as-converted basis.
(c) The value of any property not consisting of cash which is distributed
by the Company to the holders of the Series F Preferred Stock pursuant to
Section 3(a) or otherwise will equal the Fair Market Value (as defined below)
thereof. For purposes hereof, the "Fair Market Value" of any property shall mean
the fair market value thereof as determined in good faith by the Board;
provided, however, that the value of any securities will be determined as
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follows:
(i) Securities not subject to investment letter or other similar
restrictions on free marketability covered by (ii) below:
(A) If traded on a securities exchange or through the
Nasdaq National Market, the value shall be deemed to be
the average of the closing prices of the securities on
such quotation system over the thirty (30) day period
ending three (3) days prior to the closing;
(B) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale
prices (whichever is applicable) over the thirty (30)
day period ending three (3) days prior to the closing;
and
(C) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined
by the Board and the holders of at least a majority of
the voting power of all then outstanding shares of
Series F Preferred Stock.
(ii) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status
as an affiliate or former affiliate) shall be to make an
appropriate discount from the market value determined as above
in (i)(A), (B) or (C) to reflect the approximate fair market
value thereof, as mutually determined by the Board and the
holders of at least a majority of the voting power of all then
outstanding shares of Series F Preferred Stock.
Section 4. Voting Rights.
Except as set forth in Section 8.1 of the Series F Convertible
Participating Preferred Stock Purchase Agreement dated as of April 28, 2000,
between the Company and Microsoft, each holder of outstanding shares of Series F
Preferred Stock shall be entitled to the number of votes equal to the number of
whole shares of Common Stock into which all of the shares of Series F Preferred
Stock held by such holder are convertible (as adjusted from time to time
pursuant to Section 5 hereof), at each meeting of stockholders of the Company
(and written actions of stockholders in lieu of meetings)
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with respect to any and all matters presented to the stockholders of the Company
for their action or consideration. Except as provided by law or by the express
provisions hereof, holders of Series F Preferred Stock shall vote together with
the holders of Common Stock as a single class.
Section 5. Conversion Rights.
The holders of the Series F Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series F Preferred Stock shall be
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convertible, at the option of the holder thereof, at any time and from time to
time, into such number of fully paid and nonassessable shares of Common Stock as
is determined by dividing the Original Series F Issue Price by the Conversion
Price (as defined below) in effect at the time of conversion. The Conversion
Price at which shares of Common Stock shall be deliverable upon conversion of
Series F Preferred Stock without the payment of additional consideration by the
holder thereof (the "Conversion Price") shall initially be $24.00. Such initial
Conversion Price and the rate at which shares of Series F Preferred Stock may be
converted into shares of Common Stock, shall be subject to adjustment as
provided below.
In the event of a liquidation of the Company as set forth in Section 3
above, the Conversion Rights shall terminate at the close of business on the
first full day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of Series F Preferred Stock.
(b) Fractional Shares. No fractional shares of Common Stock shall be
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issued upon conversion of the Series F Preferred Stock. In lieu of fractional
shares, the Company shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
(c) Mechanics of Conversion.
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(i) In order to convert shares of Series F Preferred Stock into
shares of Common Stock, the holder shall surrender the
certificate or certificates for such shares of Series F
Preferred Stock at the office of the transfer agent (or at the
principal office of the Company if the Company serves as its
own transfer agent), together with written notice that such
holder elects to convert all or any number of the shares
represented by such certificate or certificates. Such notice
shall state the number of shares of Series F Preferred Stock
which the holder seeks to convert. If required by the Company,
certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer,
in form satisfactory to the Company, duly executed by the
registered holder or his or its attorney duly authorized in
writing. The date of receipt of such certificates and notice by
the transfer agent or the Company shall be the conversion date
("Conversion Date"). As
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soon as practicable after the Conversion Date, the Company
shall promptly issue and deliver at such office to such holder
a certificate or certificates for the number of shares of
Common Stock to which such holder is entitled. Such conversion
shall be deemed to have been made at the close of business on
the date of such surrender of the certificate representing the
shares of Series F Preferred Stock to be converted, and the
person entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock on such date.
(ii) The Company shall at all times during which the Series F
Preferred Stock shall be outstanding, reserve and keep
available out of its authorized but unissued stock, for the
purpose of effecting the conversion of the Series F Preferred
Stock, such number of its duly authorized shares of Common
Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Series F Preferred Stock. Before
taking any action which would cause an adjustment reducing the
Conversion Price below the then par value of the shares of
Common Stock issuable upon conversion of the Series F Preferred
Stock, the Company will take any corporate action which may, in
the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted
Conversion Price.
(iii) Upon any conversion, the Company shall promptly pay in cash or,
to the extent sufficient funds are not then legally available
therefor, in Common Stock (at the Common Stock's Fair Market
Value as of the date of such conversion) or a combination of
cash and Common Stock, any accrued but unpaid dividends
(whether or not declared) on the shares of Series F Preferred
Stock being converted.
(iv) All shares of Series F Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer
be deemed to be outstanding and all rights with respect to such
shares, including the rights, if any, to receive dividends,
notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders
thereof to receive shares of Common Stock in exchange therefor,
and if applicable, cash for any fractional shares of Common
Stock. Any shares of Series F Preferred Stock so converted
shall be retired and cancelled and shall not be reissued, and
the Company may from time to time take such appropriate action
as may be necessary to reduce the number of shares of
authorized Series F Preferred Stock accordingly.
(v) If the conversion is in connection with an underwritten
offering of securities registered pursuant to the Securities
Act of 1933, as amended (the "1933 Act"), the conversion may,
at the option of any
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holder tendering Series F Preferred Stock for conversion, be
conditioned upon the closing with the underwriter of the sale
of securities pursuant to such offering, in which event the
person(s) entitled to receive the Common Stock issuable upon
such conversion of the Series F Preferred Stock shall not be
deemed to have converted such Series F Preferred Stock until
immediately prior to the closing of the sale of securities.
(d) Adjustments to Conversion Price for Diluting Issues.
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(i) Special Definitions. For purposes of this Subsection 5(d), the
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following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common
Stock or Convertible Securities, excluding rights or
options granted to employees, vendors, officers,
directors and executives of, and consultants or
shareholders to, the Company in an amount not exceeding
the number of Reserved Employee Shares.
(B) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or
indirectly convertible into or exchangeable for Common
Stock.
(C) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to
Subsection 5(d)(iii) below, deemed to be issued) by the
Company after the Original Issuance Date, other than
Reserved Employee Shares and other than shares of
Common Stock issued or issuable:
(1) as a dividend or distribution on Series F
Preferred Stock, Series C Shares, Series D
Shares, Series E Shares or Series G Shares;
(2) by reason of the issuance of Series D Shares or
Series E Shares pursuant to the Preferred Stock
Purchase Agreement between the Company and CII
Ventures LLC, dated as of December 20, 1999;
(3) by reason of the issuance of Series G Shares
pursuant to the Series G Preferred Stock
Purchase Agreement between the Company and 3
Com Corporation, dated as of March 20, 2000;
(4) by reason of a dividend, stock split, split-up
or other distribution on shares of Common
Stock;
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(5) upon the exercise of Options;
(6) upon conversion of Series C Shares, Series D
Shares, Series E Shares, Series F Preferred
Stock or Series G Shares;
(7) pursuant to warrants issued by the Company
pursuant to (a) the Common Stock Warrant dated
as of October 27, 1999 and the Series C
Preferred Stock Purchase Agreement, dated as of
September 29, 1999, between the Company and
U.S. Telesource, Inc. (the "Qwest Warrant"),
(b) the Warrant Agreement dated as of September
4, 1998 among the Company, Cleartel
Communications, Inc., CAIS, Inc. and ING (U.S.)
Capital Corporation, Inc. (the "ING Warrant
Agreement"), (c) the Series A Preferred Stock
and Warrant Purchase Agreement dated as of
February 19, 1999 among the Company and the
several purchasers set forth therein, (d) the
Warrant to Purchase Common Stock issued
pursuant to the First Amendment to the Master
License Agreement, dated as of April 23, 1999,
among the Company, CAIS, Inc., and Hilton
Hotels Corporation (the "Hilton Warrant"), (e)
the Common Stock Warrants dated as of April 28,
2000, issued to Microsoft (the "Microsoft
Warrant") and (f) the Master Agreement for
Hotel Internet Service dated as of January 1,
2000, between CAIS, inc. and Bass Hotels and
Resorts, Inc.;
(8) to a corporation, partnership or other entity
with which the Company is seeking to establish
a partnership, joint venture or other business
relationship when the total number of shares of
Common Stock so issuable or issued does not
exceed 1,000,000 shares (as appropriately
adjusted for any stock dividends, combinations,
splits or the like with respect to shares of
Common Stock), provided the Company receives at
least 95% of Fair Market Value for such shares;
(9) in connection with any high-yield debt
financing undertaken by the Company, not to
exceed 2,000,000 shares of Common Stock in the
aggregate, provided that the Company receives
at least 95% of Fair Market Value for such
shares (or, in the case of Convertible
Securities, the conversion or exercise price
therefor is at least 95% of the Fair Market
Value of the Common
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Stock on the date of issuance of the
Convertible Securities);
(10) pursuant to the Agreement and Plan of Merger
among the Company, Business Anywhere USA, Inc.,
CIBA Merger Corp., Kim Kao, and Amy Hsiao dated
September 7, 1999, including without
limitation, the conversion of Business Anywhere
options into options to acquire Common Stock
and the issuance of shares of Common Stock upon
the exercise thereof, not to exceed 288,371
shares of Common Stock in the aggregate;
(11) in connection with the acquisition by the
Company of the securities or assets of another
corporation, partnership or other entity,
provided the Company receives at least 95% of
Fair Market Value for such shares; and
(12) pursuant to the Agreement and Plan of Merger
among the Company, CIAM Corp. and Atcom, Inc.
dated August 4, 1999, as amended, including
without limitation, the conversion of Atcom
options into options to acquire Common Stock as
described therein, the issuance of shares of
Common Stock upon the exercise thereof and the
issuance of Common Stock constituting
"Contingent Consideration" as defined therein,
not to exceed 2,654,826 shares of Common Stock
in the aggregate.
(D) "Reserved Employee Shares" shall mean shares of Common
Stock issued to employees, officers, directors,
shareholders and executives of, and consultants or
vendors to, the Company of up to: (i) 5,000,000 shares
(as appropriately adjusted for any stock dividends,
combinations, splits or the like with respect to shares
of Common Stock), plus such additional number of shares
of Common Stock issued or deemed issued for like
purposes as shall be approved by holders of at least a
majority of the voting power of all then outstanding
shares of Series F Preferred Stock, voting together as
a single class; plus (ii) shares reserved, as of the
date hereof, for issuance upon the exercise of
outstanding Options to purchase up to 3,031,495 shares
of Common Stock presently held by certain management
employees of the Company. Such Reserved Employee
Shares shall be issued, at any time, and from time to
time, under such arrangements, contracts or plans as
are recommended by the Company's management and
approved by the Board.
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(E) "Rights to Acquire Common Stock" (or "Rights") shall
mean all rights issued by the Company to acquire
Common Stock whether by exercise of a warrant, option
or similar call, or conversion of any existing
instruments, in either case for consideration fixed,
in amount or by formula, as of the date of issuance.
(ii) No Adjustment of Conversion Price. No adjustment in the
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number of shares of Common Stock into which the Series F
Preferred Stock is convertible shall be made, by
adjustment in the applicable Conversion Price thereof,
unless the Fair Market Value of the consideration per
share (determined pursuant to Subsection 5(d)(v) below)
received by the Company for an Additional Share of Common
Stock issued or deemed to be issued by the Company is less
than the greater of 95% of the Fair Market Value per share
of the Common Stock or the applicable Conversion Price in
effect on the date of, and immediately prior to, the issue
of such additional shares, or if prior to such issuance,
the Company receives written notice from the holders of at
least a majority of the voting power of all then
outstanding shares of Series F Preferred Stock, voting
together as a single class, agreeing that no such
adjustment shall be made as the result of the issuance of
Additional Shares of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of
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Common Stock. If the Company at any time or from time to
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time after the Original Issuance Date shall issue any
Options or Convertible Securities or Rights to Acquire
Common Stock, then the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the
exercise of such Options, Rights to Acquire Common Stock
or, in the case of Convertible Securities, the conversion
or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as
of the time of such issue; provided, however, that
Additional Shares of Common Stock shall not be deemed to
have been issued unless the Fair Market Value of the
consideration per share (determined pursuant to Subsection
5(d)(v) hereof) received by the Company for such
Additional Shares of Common Stock would be less than the
greater of 95% of the Fair Market Value per share of
Common Stock or the applicable Conversion Price in effect
on the date of and immediately prior to such issue, or
such record date, as the case may be, and provided,
further, that in any such case:
(A) No further adjustment in the Conversion Price shall
be made upon the subsequent issue of shares of Common
Stock upon the exercise of such Options, Rights or
conversion or exchange of such Convertible
Securities;
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(B) Upon the expiration or termination of any
unexercised Option, Right or Convertible Security,
the Conversion Price shall be adjusted immediately
to reflect the applicable Conversion Price which
would have been in effect had such Option, Right
or Convertible Security (to the extent outstanding
immediately prior to such expiration or
termination) never been issued; and
(C) In the event of any change in the number of shares
of Common Stock issuable upon the exercise,
conversion or exchange of any Option, Right or
Convertible Security, including, but not limited
to, a change resulting from the anti-dilution
provisions thereof, the Conversion Price then in
effect shall forthwith be readjusted to such
Conversion Price as would have obtained had the
Conversion Price adjustment that was originally
made upon the issuance of such Option, Right or
Convertible Security which were not exercised or
converted prior to such change been made upon the
basis of such change, but no further adjustment
shall be made for the actual issuance of Common
Stock upon the exercise or conversion of any such
Option, Right or Convertible Security.
(iv) Adjustment of Conversion Price upon Issuance of Additional
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Shares of Common Stock. If the Company shall at any time
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after the Original Issuance Date issue Additional Shares
of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Subsection
5(d)(iii), but excluding shares issued as a dividend or
distribution as provided in Subsection 5(f) or upon a
stock split or combination as provided in Subsection
5(e)), without consideration, or for a consideration per
share less than the greater of 95% of the Fair Market
Value per share of Common Stock or the applicable
Conversion Price in effect on the date of and immediately
prior to such issue, or without the requisite number of
notices contemplated by Subsection 5(d)(ii) hereof, then
and in such event, such Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to
the nearest cent) determined by multiplying such
Conversion Price by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of shares
of Common Stock which the aggregate consideration received
by the Company for the total number of Additional Shares
of Common Stock so issued would purchase at the greater of
95% of the Fair Market Value per share of Common Stock or
such Conversion Price; and the denominator of which shall
be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued.
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Notwithstanding the foregoing, the applicable Conversion
Price shall not be reduced if the amount of such reduction
would be an amount less than $.03, but any such amount
shall be carried forward and reduction with respect
thereto made at the time of and together with any
subsequent reduction which, together with such amount and
any other amount or amounts so carried forward, shall
aggregate $.03 or more.
(v) Determination of Consideration. For purposes of this
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Subsection 5(d), the Fair Market Value of the
consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as
follows:
(A) Cash and Property. Such consideration shall:
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(1) insofar as it consists of cash, be computed
at the aggregate of cash received by the
Company, excluding amounts paid or payable
for accrued interest or accrued dividends;
(2) insofar as it consists of property other
than cash, be computed at the Fair Market
Value thereof at the time of such issue, as
determined in good faith by the Board; and
(3) in the event Additional Shares of Common
Stock are issued together with other shares
or securities or other assets of the
Company for consideration which covers
both, be the proportion of such
consideration so received, computed as
provided in clauses (1) and (2) above, as
determined in good faith by the Board.
(B) Options, Rights and Convertible Securities. The
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consideration per share received by the Company
for Additional Shares of Common Stock deemed to
have been issued pursuant to Subsection 5(d)(iii),
relating to Options, Rights and Convertible
Securities, shall be determined by dividing
(1) the total amount, if any, received or
receivable by the Company as consideration
for the issue of such Options, Rights or
Convertible Securities, plus the minimum
aggregate amount of additional
consideration (as set forth in the
instruments relating thereto, without
regard to any provision contained therein
for a subsequent adjustment of such
consideration) payable to the Company upon
the exercise of such Options, Rights or the
conversion or exchange of such Convertible
Securities, by
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(2) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without
regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the
exercise of such Options, Rights or the conversion or
exchange of such Convertible Securities.
(e) Adjustment for Stock Splits and Combinations. If the Company shall at
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any time or from time to time after the Original Issuance Date effect a
subdivision of the outstanding Common Stock, the Conversion Price then in effect
immediately before that subdivision shall be proportionately decreased. If the
Company shall at any time or from time to time after the Original Issuance Date
combine the outstanding shares of Common Stock, the Conversion Price then in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this paragraph shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the event the
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Company at any time or from time to time after the Original Issuance Date shall
make or issue a dividend or other distribution payable in Additional Shares of
Common Stock, then and in each such event the Conversion Price shall be
decreased as of the time of such issuance, by multiplying the Conversion Price
by a fraction, the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance, and the denominator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance plus the number of shares of Common Stock issuable in payment of such
dividend or distribution.
(g) Adjustments for Other Dividends and Distributions. In the event the
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Company at any time, or from time to time after the Original Issuance Date shall
make or issue, a dividend or other distribution payable in securities of the
Company other than shares of Common Stock, then and in each such event provision
shall be made so that the holders of shares of the Series F Preferred Stock
shall receive upon conversion thereof in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the Company that
they would have received had their Series F Preferred Stock been converted into
Common Stock on the date of such event and had thereafter, during the period
from the date of such event to and including the Conversion Date, retained such
securities receivable by them as aforesaid during such period given application
to all adjustments called for during such period, under this paragraph with
respect to the rights of the holders of the Series F Preferred Stock.
(h) Adjustment for Reclassification, Exchange or Substitution. If the
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Common Stock issuable upon the conversion of the Series F Preferred Stock shall
be changed into the same or a different number of shares of any class or classes
of stock, whether by capital reorganization, reclassification, or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for above), then and in each such event the holder of each share of Series F
Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stock and other securities and
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property receivable upon such reorganization, reclassification, or other change,
by holders of the number of shares of Common Stock into which such shares of
Series F Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further adjustment
as provided herein.
(i) No Impairment. The Company will not, by amendment of its Certificate
-------------
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series F Preferred Stock against impairment to the extent required hereunder.
(j) Certificate as to Adjustments. Upon the occurrence of each adjustment
-----------------------------
or readjustment of the Conversion Price pursuant to this Section 5, the Company
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to each holder, if any, of Series F
Preferred Stock outstanding a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based and shall file a copy of such certificate with its
corporate records. The Company shall, upon the reasonable written request of any
holder of Series F Preferred Stock, furnish or cause to be furnished to such
holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of Series F Preferred Stock. Despite such
adjustment or readjustment, the form of each or all Series F Preferred Stock
certificates, if the same shall reflect the initial or any subsequent Conversion
Price, need not be changed in order for the adjustments or readjustments to be
valid in accordance with the provisions of this Certificate, which shall
control.
(k) Notice of Record Date. In the event
---------------------
(i) that the Company declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or
other securities of the Company;
(ii) that the Company subdivides or combines its outstanding shares
of Common Stock;
(iii) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding
shares of Common Stock or a stock dividend or stock
distribution thereon); or
(iv) of the involuntary or voluntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed at its principal office or at the
office of the transfer agent of the Series F Preferred Stock, and shall cause to
be mailed to the
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holders of the Series F Preferred Stock at their last addresses as shown on the
records of the Company, or such transfer agent, at least 10 days prior to the
record date specified in (A) below or 20 days before the date specified in (B)
below, a notice stating
(A) the record date of such dividend, distribution,
subdivision or combination, 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,
subdivision or combination are to be determined, or
(B) the date on which such reclassification, 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 shares of Common Stock for securities or
other property deliverable upon such reclassification,
dissolution or winding up.
Section 6. Mandatory Redemption.
(a) Upon the fifth anniversary of the Original Issuance Date, the Company
shall redeem, out of assets of the Company which are, by law, available for such
payment, all shares of Series F Preferred Stock (then outstanding and not
previously converted pursuant to Section 5), at a price per share equal to the
Original Series F Issue Price, plus any accrued but unpaid dividends thereon
(whether or not declared).
(b) The following events shall constitute "Mandatory Redemption Events"
for purposes hereof unless the holders of at least a majority of the voting
power of all then outstanding shares of Series F Preferred Stock, voting
together as a single class, vote otherwise:
(i) any merger, consolidation, reorganization or other business
combination of the Company in which the stockholders of the
Company immediately prior to such transaction will, immediately
after such transaction (by virtue of securities issued in the
transaction or otherwise), beneficially own (as determined
pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") capital stock
representing less than 50% of the voting power of the surviving
entity's voting stock immediately after such transaction;
(ii) a sale of all or substantially all of the assets of the Company
to any other entity, where the Company's stockholders
immediately prior to such sale will, immediately after such
sale (by virtue of securities issued as consideration for the
Company's sale or otherwise), beneficially own (as determined
pursuant to Rule 13d-3 under the Exchange Act) capital stock
representing less than 50% of the voting power of the acquiring
entity's voting stock;
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(iii) any acquisition of voting stock of the Company by a person or
"group" (as such term is defined in Section 13(d)(3) of the
Exchange Act) (other than Ulysses G. Auger, Sr., Ulysses G.
Auger, II, William M. Caldwell, IV and/or Evans K. Anderson) in
a purchase or transaction or series of purchases or
transactions if immediately thereafter such person or group
has, or would have, ultimate "beneficial ownership" (as defined
in Rule 13d-3 under the Exchange Act) of more than 50% of the
combined voting power of the Company's then outstanding voting
stock;
(iv) individuals who at the beginning of any period of three
consecutive calendar years constituted the Board of Directors
(together with any directors who are members of the Board on
the Original Issuance Date and any new directors whose election
by the Board of Directors or whose nomination for election by
the Company's stockholders was approved by a vote of at least a
majority of the members of the Board of Directors then still in
office who either were members of the Board of Directors at the
beginning of such period or whose election or nomination for
election was previously so approved) cease to constitute at
least a majority of the members of the Board of Directors then
in office;
(v) (A) an assignment by the Company for the benefit of creditors,
(B) the filing by the Company of a petition to have the Company
adjudged insolvent, bankrupt or seeking a reorganization or
liquidation under any law relating to bankruptcy, insolvency or
receivership, (C) an appointment of a receiver or trustee for
all or substantially all of the assets of the Company, unless
appointed without the Company's consent, in which case if after
sixty (60) days such appointment has not been vacated or
stayed, (D) a public admission in writing of the Company's
inability generally to pay its debts as they come due, or (E)
the adoption of a plan of liquidation or dissolution by the
Board of Directors of the Company; or
(vi) the execution of, or entering into by the Company, an agreement
to do any of the above.
(c) Upon the occurrence of any Mandatory Redemption Event, the Company
shall redeem, out of the assets of the Company which are, by law, available for
such payment, and subject to any obligation in respect of Senior Securities and
any Parity Securities, all of the Series F Preferred Stock then issued and
outstanding, at a price per share equal to the Original Series F Issue Price,
plus any accrued but unpaid dividends thereon (whether or not declared).
(d) In the event of any redemption of Series F Preferred Stock, the
Company may, at its option, pay the Redemption Price in shares of Common Stock
having an aggregate Fair Market Value equal to the Redemption Price.
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(e) At least twenty (20) but not more than sixty (60) days prior to any
date on which the Company must redeem shares of the Series F Preferred Stock
pursuant to Section 6(a) (each a "Redemption Date," together the "Redemption
Dates"), the Company shall send a notice (the "Redemption Notice") to all
holders of the outstanding Series F Preferred Stock of such redemption to be
effected, specifying the number of shares to be redeemed from such holder, the
Redemption Date, the price per share to be paid (the "Redemption Price") and the
place at which payment may be obtained.
(f) On or prior to the Redemption Date, to the extent the Company effects
any such redemption for cash, the Company shall deposit the Redemption Price of
all shares to be redeemed as of such date with a bank or trust company having
aggregate capital and surplus in excess of $50,000,000, as a trust fund, with
irrevocable instructions and authority to the bank or trust company to pay, upon
receipt of notice from the Company that such holder has surrendered the Series F
Preferred Stock share certificates in accordance with Section 6(g), the
Redemption Price of the shares to their respective holders. Any moneys deposited
by the Company pursuant to this Section 6(f) for the redemption of shares
thereafter converted into shares of Common Stock pursuant to Section 5 hereof no
later than the fifth (5th) day preceding the Redemption Date shall be returned
to the Company forthwith upon such conversion. The balance of any funds
deposited by the Company pursuant to this Section 6(f) remaining unclaimed at
the expiration of one (1) year following such Redemption Date shall be returned
to the Company promptly upon its written request.
(g) On such Redemption Date, each holder of shares of Series F Preferred
Stock to be redeemed shall surrender such holder's certificates representing
such shares to the Company in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of 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
canceled. In the event less than all the shares represented by such certificates
are redeemed, a new certificate shall be issued representing the unredeemed
shares. From and after such Redemption Date, unless there shall have been a
default in payment of the Redemption Price or the Company is unable to pay the
Redemption Price due to not having sufficient legally available funds, all
rights of the holder of such shares as a holder of Series F Preferred Stock
(except the right to receive the Redemption Price without interest upon
surrender of their certificates), shall cease and terminate with respect to such
shares; provided that in the event that shares of Series F Preferred Stock are
not redeemed due to a default in payment by the Company or because the Company
does not have sufficient legally available funds, such shares of Series F
Preferred Stock shall remain outstanding and shall be entitled to all of the
rights and preferences provided herein.
(h) Shares subject to redemption pursuant to this Section 6 shall be
redeemed from each holder of Series F Preferred Stock on a pro rata basis.
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(i) If upon any Redemption Date the assets of the Company available for
redemption are insufficient to pay the redeeming holders of outstanding shares
of Series F Preferred Stock the full amounts to which they are entitled, all
shares of the Series F Preferred Stock will be redeemable for cash upon demand.
The shares of Series F Preferred Stock not redeemed shall remain outstanding and
entitled to all the powers, preferences and rights provided herein. At any
time thereafter when additional funds of the Company are legally available for
the redemption of shares of Series F Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which the Company has
become obligated to redeem on any Redemption Date but which it has not redeemed.
(j) In the event of a call for redemption of any shares of Series F
Preferred Stock, the Conversion Rights (as defined in Section 5) for such Series
F Preferred Stock shall terminate as to the shares designated for redemption at
the close of business on the fifth (5th) day preceding the Redemption Date,
unless default is made in payment of the Redemption Price.
(k) The Company will not enter into any contract or agreement (whether
verbal or written) restricting or impairing its ability to redeem shares of the
Series F Preferred Stock in accordance with this Section 6.
[Signatures appear on the following page]
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IN WITNESS WHEREOF, the Company has caused this Certificate of Designation
to be executed this __ day of March 2000.
CAIS INTERNET, INC
By _________________________________
Name: Ulysses G. Auger, II
Title: Chairman of the Board and
Chief Executive Officer
ATTEST:
___________________________
Michael G. Plantamura
Secretary
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Schedule 1
1.750% Quarterly Dividend Rate
$24.00 Series F Preferred Conversion to Common
Incremental Series F Total Series F Conversion Equivalent
Date Preferred Shares Preferred Shares Ratio Common
---- ---------------- ---------------- ----- ------
Assumed Closing Date 8/2/2000 40,000.00 40,000.00 41.66667 1,666,666.67
9/15/2000 342.22 40,342.22 41.66667 1,680,925.93
12/15/2000 705.99 41,048.21 41.66667 1,710,342.13
3/15/2001 718.34 41,766.55 41.66667 1,740,273.12
6/15/2001 730.91 42,497.47 41.66667 1,770,727.90
9/15/2001 743.71 43,241.18 41.66667 1,801,715.63
12/15/2001 756.72 43,997.90 41.66667 1,833,245.66
3/15/2002 769.96 44,767.86 41.66667 1,865,327.46
6/15/2002 783.44 45,551.30 41.66667 1,897,970.69
9/15/2002 797.15 46,348.44 41.66667 1,931,185.17
12/15/2002 811.10 47,159.54 41.66667 1,964,980.92
3/15/2003 825.29 47,984.83 41.66667 1,999,368.08
6/15/2003 839.73 48,824.57 41.66667 2,034,357.02
9/15/2003 854.43 49,679.00 41.66667 2,069,958.27
12/15/2003 869.38 50,548.38 41.66667 2,106,182.54
3/15/2004 884.60 51,432.98 41.66667 2,143,040.73
6/15/2004 900.08 52,333.05 41.66667 2,180,543.95
9/15/2004 915.83 53,248.88 41.66667 2,218,703.47
12/15/2004 931.86 54,180.74 41.66667 2,257,530.78
3/15/2005 948.16 55,128.90 41.66667 2,297,037.57
6/15/2005 964.76 56,093.66 41.66667 2,337,235.72
8/2/2005 523.54 56,617.20 41.66667 2,359,049.92
Note: Schedule assumes dividends are paid in Series F Preferred shares in each
dividend period. If holder elects to receive dividends in either cash or Common
Stock for any dividend period, this Schedule will not apply because the number
of shares to be issued in dividends will be based on the total Series F
Preferred shares outstanding on the dividend date.
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