EXHIBIT 4.22
CERTIFICATE OF DESIGNATION OF RIGHTS AND PREFERENCES
OF
CLASS C CONVERTIBLE PREFERRED STOCK
OF
WAM!NET INC.
The undersigned, Edward J. Driscoll, Jr., hereby certifies that:
A. He is the duly elected and acting Secretary of WAM!NET Inc. (the "Company"),
a Minnesota corporation.
B. The Articles of Incorporation of this Company provide for a class of up to
49,500,000 shares known as Undesignated Stock, which shares may be issued from
time to time in one or more classes or series.
C. The Board of Directors of the Company is authorized, pursuant to Article 6
of the Company's Articles of Incorporation and Minnesota Statutes, Section
302A.401, to fix or alter the rights, preferences, privileges, and restrictions
granted to or imposed upon any wholly unissued series of Undesignated Stock, to
fix the number of shares constituting the series, and to determine the
designation thereof.
D. It is the desire of the Board of Directors of the Company, pursuant to its
authority, to fix the rights, preferences, restrictions and other matters
relating to the Undesignated Stock and the number of shares of Undesignated
Stock.
E. Pursuant to authority given by Article 6 of the Company's Articles of
Incorporation, the Company's Board of Directors has adopted the following
resolutions as of the 4th day of March, 1999;
RESOLVED, that, pursuant to Article 6 of the Articles of Incorporation of
WAM!NET Inc. (the "Company"), the Board of Directors of the Company (the
"Board") hereby creates and designates a series of Convertible Preferred Stock,
par value $0.01 per share, and authorizes the issuance of up to 878,527 of such
shares, and hereby fixes the designations, powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations or restrictions, of such shares, as follows:
1. DESIGNATION AND AMOUNT. The shares of such series shall be designated
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"Class C Convertible Preferred Stock" (the "Class C Preferred Stock") and the
number of shares constituting such series shall be 878,527.
2. RANK. The Class C Preferred Stock shall rank, with respect to dividend
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rights and distribution of assets on any Liquidation of the Company (as defined
herein) (a) junior to any other class or series of the Company's preferred stock
which shall specifically provide that such class or series shall rank senior to
the Class C Preferred Stock (the "Senior Stock"); (b) on parity with (i) the
Company's Class A Preferred Stock, par value $10.00 per share (the "Class A
Preferred Stock") (except with respect to a Liquidation of the Company resulting
from the merger or consolidation of the Company into or with another
corporation, the merger or consolidation of any other corporation into or with
the Company or the sale of all or substantially all the assets of the Company,
which events do not give rise to a right of the holders of the Class A Preferred
Stock to receive distributions),
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(ii) the Company's Class B Convertible Preferred Stock, par value $0.01 per
share (the "Class B Preferred Stock"), (iii) the Company's Class D Convertible
Preferred Stock, par value $0.01 per share (the "Class D Preferred Stock"), and
(iv) any other class or series of the Company's preferred stock which shall
specifically provide that such class or series shall rank on parity with the
Class C Preferred Stock ((i) through (iv) collectively, the "Parity Stock"); and
(c) prior to (i) the Company's common stock, par value $0.01 per share (the
"Common Stock") and (ii) any other class or series of the Company's preferred
stock except for any class or series which are Senior Stock or Parity Stock ((i)
and (ii) together, the "Junior Stock").
3. DIVIDENDS. (a) Payment. The holders of Class C Preferred Stock shall be
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entitled to receive dividends as set forth herein, payable only (i) if, as and
when declared by the Board, out of any funds legally available therefor or (ii)
to the extent declared by the Board, upon the Liquidation of the Company,
subject to and as set forth in Section 4 hereof. All such dividends (X) shall
be cumulative and shall accrue on each share of Class C Preferred Stock from the
date of issuance thereof at the rate of SEVEN PERCENT (7%) per annum of the
Original Purchase Price Per Share (as defined herein) thereof solely in the form
of additional shares of Class C Preferred Stock (Y) shall be payable before any
dividends shall be set apart for or paid upon Junior Stock in any year and (Z)
shall be payable in accordance with Section 2 when any dividends shall be set
apart for or paid upon
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Parity Stock in any year. All such dividends declared upon Class C Preferred
Stock shall be declared pro rata per share.
(b) Limit on Junior Dividends and Redemption. For so long as the Class C
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Preferred Stock remains outstanding, the Company shall not pay any dividend upon
the Junior Stock, whether in cash or other property (other than shares of Junior
Stock), or purchase, redeem or otherwise acquire any such Junior Stock;
provided, however, that nothing in this Section 3(b) shall prohibit or otherwise
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limit the ability of the Company to (i) purchase unvested shares of Common Stock
from former employees of the Company at their original purchase price or (ii)
make any purchase, redemption or other acquisition pursuant to arrangements
existing as of the date of the initial issuance of the Class C Preferred Stock
(the "Initial Issuance Date").
4. LIQUIDATION, DISSOLUTION OR WINDING-UP.
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(a) Liquidation Preference. In the event of any Liquidation of the
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Company, the holders of shares of Class C Preferred Stock then outstanding shall
be entitled to be paid out of the assets of the Company available for
distribution to its stockholders, after and subject to the payment in full of
all amounts required to be distributed to the holders of Senior Stock upon such
Liquidation of the Company and before any payment shall be made to the holders
of Junior Stock, the Liquidation Amount (as defined herein) per share of Class C
Preferred Stock. If upon any such Liquidation of the Company, the remaining
assets of the Company available for the distribution to its stockholders after
payment in full of amounts required to be paid or
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distributed to holders of Senior Stock shall be insufficient to pay the holders
of shares of Parity Stock the full amount to which they shall be entitled, the
holders of the Class C Preferred Stock shall share ratably with the holders of
Parity Stock in any distribution of the remaining assets and funds 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 said shares were paid in full. After the payment
of all preferential amounts required to be paid to the holders of Senior Stock
and Parity Stock and any other series of the Company's preferred stock upon any
Liquidation of the Company, the holders of shares of Junior Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Company available for distribution to its stockholders in accordance with the
terms thereof.
(b) Certain Definitions. (i) The term "Liquidation of the Company" shall
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mean any voluntary or involuntary liquidation, dissolution or winding-up of the
affairs of the Company, and the merger or consolidation of the Company into or
with another corporation, the merger or consolidation of any other corporation
into or with the Company or the sale of all or substantially all the assets of
the Company.
(ii) The term "Liquidation Amount" shall mean an amount per share of Class
C Preferred Stock equal to the greater of: (A) the Original Purchase Price Per
Share plus any per share dividends accrued on the Class C Preferred Stock but
not paid and (B) the
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per share amount that holders of the Class C Preferred Stock would have received
had they exercised their right to convert the Class C Preferred Stock to Common
Stock immediately prior to a Liquidation of the Company; provided that for
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purposes of the antidilution provisions of Section 7 hereof and the mandatory
conversion provisions of Section 8 hereof, the term "Liquidation Amount" shall
exclude any dividends accrued on the Class C Preferred Stock but not paid.
5. VOTING. (a) Number of Votes. Each issued and outstanding share of Class C
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Preferred Stock shall be entitled to the number of votes equal to (i) the number
of shares of Common Stock into which each such share of Class C Preferred Stock
is then convertible (as adjusted from time to time) divided by the Number of
Common Shares Deemed Outstanding (as defined herein) at such time, multiplied by
(ii) the aggregate number of shares of Common Stock then outstanding and
entitled to vote (giving effect to the voting power of all of the securities of
the Company convertible into or exchangeable for Common Stock that are entitled
to vote with the Common Stock, but without giving effect to the voting power of
the Class C Preferred Stock), at each meeting of stockholders of the Company (or
any written consent without a meeting in accordance with the Minnesota Business
Corporation Act) with respect to any and all matters presented to the
stockholders of the Company for their action or consideration. Except as
provided by law, by the provisions of this Section 5 or by the provisions
establishing any other series of the Company's preferred stock, holders of Class
C Preferred Stock and of any
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other outstanding preferred stock shall vote together with the holders of Common
Stock as a single class.
(b) Protective Provisions. In addition to any other rights provided by
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law, the Company shall not (i) without first obtaining the affirmative vote or
written consent of a majority of the holders of the Class C Preferred Stock,
voting separately as a class, amend, alter or repeal any provision of the
Company's Articles of Incorporation or By-Laws in a manner that is adverse to
the holders of the Class C Preferred Stock and (ii) without first obtaining the
affirmative vote or written consent of a majority of the holders the Company's
voting stock other than MCI WORLDCOM, Inc. (together with its majority-owned
subsidiaries and other controlled affiliates, "MCI WCOM"), enter into any merger
or consolidation into or with MCI WCOM or enter into any other contract or
arrangement involving the sale or license of the Company's material assets with
MCI WCOM (excluding contractual arrangements with MCI WCOM existing as of the
Initial Issuance Date).
6. OPTIONAL CONVERSION. Each share of Class C Preferred Stock may be converted
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at any time after 18 months following the Initial Issuance Date, at the option
of the holder thereof, into the number of fully paid and nonassessable shares of
Common Stock obtained by dividing the Original Purchase Price Per Share by the
Conversion Price then in effect (the "Conversion Rate"); provided, however, that
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upon any redemption of the Class C Preferred Stock contemplated by Section 9
hereof or any Liquidation of the Company, the right of conversion shall
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terminate at the close of business on the full business day next preceding the
date fixed for such redemption or for the payment of any amounts distributable
on liquidation to the holders of Class C Preferred Stock.
(a) Initial. The initial Conversion Rate for the Class C Preferred Stock
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shall be one share of Common Stock for each one share of Class C Preferred Stock
surrendered for conversion representing an initial Conversion Price of
$11.3826902 per share of Common Stock (the "Original Purchase Price Per Share").
The applicable Conversion Rate and Conversion Price from time to time in effect
is subject to adjustment as hereinafter provided.
(b) No Fractional Shares. The Company shall not issue fractions of shares
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of Common Stock upon conversion of Class C Preferred Stock or scrip in lieu
thereof. If any fraction of a share of Common Stock would, except for the
provisions of this Section 6(b), be issuable upon conversion of any Class C
Preferred Stock, the Company shall in lieu thereof pay to the person entitled
thereto an amount in cash equal to the current value of such fraction,
calculated to the nearest one hundredth (1/100) of a share, to be computed (i)
if the Common Stock is listed on any national securities exchange on the basis
of the last sales price of the Common Stock on such exchange (or the quoted
closing bid price if there shall have been no sales) on the date of conversion
or (ii) if the Common Stock shall not be listed, on the basis of the mean
between the closing bid and asked prices for the Common Stock on the date of
conversion as reported by Nasdaq, or its successor, and if there are not such
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closing bid and asked prices, on the basis of the fair market value per share as
determined by the Board of Directors of the Company.
(c) Adjustment. Whenever the Conversion Rate and Conversion Price shall
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be adjusted as provided herein, the Company shall forthwith file at each office
designated for the conversion of Class C Preferred Stock, a statement, signed by
the President, any Vice President or Treasurer of the Company, showing in
reasonable detail the facts requiring such adjustment and the Conversion Rate
that will be effective after such adjustment. The Company shall also cause a
notice setting forth any such adjustments to be sent by mail, first class,
postage prepaid, to each record holder of Class C Preferred Stock at his or its
address appearing on the stock register. If such notice relates to an
adjustment resulting from an event referred to in Section 7(g), such notice
shall be included as part of the notice required to be mailed and published
under the provisions of such Section 7(g).
(d) Exercise. In order to exercise the conversion privilege, the holder
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of any Class C Preferred Stock to be converted shall surrender his or its
certificate or certificates therefore to the principal office of the transfer
agent for the Class C Preferred Stock (or if no transfer agent be at the time
appointed, then the Company at its principal office), and shall give written
notice to the Company at such office that the holder elects to convert the Class
C Preferred Stock represented by such certificates, or any number thereof. Such
notice shall also
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state the name or names (with address) in which the certificate or certificates
for shares of Common Stock which shall be issuable on such conversion shall be
issued, subject to any restrictions on transfer relating to shares of the Class
C Preferred Stock or shares of Common Stock upon conversion thereof. If so
required by the Company, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Company, duly authorized in writing. The date of
receipt by the transfer agent (or by the Company if the Company serves as its
own transfer agent) of the certificates and notice shall be the conversion date.
As soon as practicable after receipt of such notice and the surrender of the
certificate or certificates for Class C Preferred Stock as set forth herein, the
Company shall cause to be issued and delivered at such office to such holder, or
on his or its written order, a certificate or certificates for the number of
full shares of Common Stock issuable on such conversion in accordance with the
provisions hereof and cash as provided in Section 6(b) in respect of any
fraction of a share of Common Stock otherwise issuable upon such conversion.
(e) Reservation of Shares of Common Stock. The Company shall at all times
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while any shares of Class C Preferred Stock shall be outstanding, reserve and
keep available out of its authorized but unissued stock, for the purposes of
effecting the conversion of the Class C Preferred Stock, such number of its duly
authorized shares of Common Stock as shall from time to time
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be sufficient to effect the conversion of all outstanding Class C 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 Class C 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 such Common Stock at such adjusted Conversion Price.
(f) No Adjustment for Dividends. Upon any such conversion, no adjustment
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to the Conversion Rate shall be made for accrued and unpaid dividends on the
Class C Preferred Stock surrendered for conversion or on the Common Stock
delivered.
(g) Surrender. All shares of Class C Preferred Stock which shall have
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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 notices and to vote, shall forthwith cease and terminate
except only the right of the holder thereof to receive shares of Common Stock in
exchange therefor and payment of any accrued and unpaid dividends on such shares
of Common Stock. Any shares of Class C Preferred Stock so converted shall be
retired and canceled and shall not be reissued, and the Company may from time to
time take such appropriate action as may be necessary to reduce the authorized
Class C Preferred Stock accordingly.
7. ANTI-DILUTION PROVISIONS. (a) General. In order to prevent dilution of the
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rights granted hereunder, the Conversion Price
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shall be subject to adjustment from time to time in accordance with this Section
7. Upon each adjustment of the Conversion Price pursuant to this Section 7, the
registered holder of shares of Class C Preferred Stock shall thereafter be
entitled to acquire upon conversion, at the Conversion Price resulting from such
adjustment, the number of shares of Common Stock obtainable by multiplying the
Conversion Price in effect immediately prior to such adjustment by the number of
shares of Common Stock acquirable immediately prior to such adjustment and
dividing the product thereof by the Conversion Price resulting from such
adjustment.
(b) Adjustment of Conversion Price. Except as provided in Sections 7(c)
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or 7(f) below, if and whenever on or after the Initial Issuance Date, the
Company shall issue or sell, or shall pursuant to Section 7(b)(1) through (10)
inclusive, be deemed to have issued or sold any shares of its Common Stock for a
consideration per share less than the per share Conversion Price in effect
immediately prior to the time of such issue or sale, then forthwith upon such
issue or sale (the "Triggering Transaction"), the Conversion Price shall,
subject to Section 7(b)(1) through (10) inclusive, be reduced to: (i) if a
Triggering Transaction shall occur within nine months following the Initial
Issuance Date, the lower of (A) the consideration per share that such Common
Stock shall have been issued or sold (or deemed issued or sold) for in such
Triggering Transaction or (B) the "Liquidation Amount of the Class B Preferred
Stock" (as calculated in accordance with the Statement of Rights and
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Preferences of Class B Convertible Preferred Stock of the Company) or (ii) if a
Triggering Transaction shall occur at any time thereafter, the Conversion Price
(calculated to the nearest one-hundredth of a cent) determined by dividing: (A)
an amount equal to the sum of the product derived by multiplying the Number of
Common Shares Deemed Outstanding immediately prior to such Triggering
Transaction by the Conversion Price then in effect, plus the consideration, if
any, received by the Company upon consummation of such Triggering Transaction by
(B) an amount equal to the sum of the Number of Common Shares Deemed Outstanding
immediately prior to such Triggering Transaction plus the number of shares of
Common Stock issued (or deemed to be issued in accordance with Section 7(b)(1)
through (10) inclusive) in connection with the Triggering Transaction. The term
"Number of Common Shares Deemed Outstanding" at any given time shall mean the
sum of (i) the number of shares of Common Stock outstanding at such time, (ii)
the number of shares of Common Stock issuable upon conversion or exchange at
such time of all of the Company's outstanding securities that are then
convertible into, or exchangeable for, Common Stock and (iii) the number of
shares of the Company's Common Stock deemed to be outstanding under Section
7(b)(1) through (10) inclusive, at such time. For purposes of determining the
adjusted Conversion Price under this Section 7(b), the following provisions
shall be applicable:
(1) In case the Company at any time shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any rights to subscribe for
or to purchase, or any
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options for the purchase of, Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (such rights or options being
herein called "Options" and such convertible or exchangeable stock or securities
being herein called "Convertible Securities"), whether or not such Options or
the right to convert or exchange any such Convertible Securities are immediately
exercisable and the price per share for which the Common Stock is issuable upon
exercise, conversion or exchange (determined by dividing (Y) the total amount,
if any, received or receivable by the Company as consideration for the granting
of such Options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such Options, plus, in the case
of such Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or sale of
such Convertible Securities and upon the conversion or exchange thereof, by (Z)
the total maximum number of shares of Common Stock issuable upon the exercise of
such Options or the conversion or exchange of such Convertible Securities) shall
be less than the Conversion Price in effect immediately prior to the time of the
granting of such Option, then the total maximum amount of Common Stock issuable
upon the exercise of such Options or in the case of Options for Convertible
Securities, upon the conversion or exchange of such Convertible Securities shall
(as of the date of granting of such Options) be deemed to be outstanding and to
have been issued and sold by the Company for such price per share. No further
adjustment of the Conversion
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Price shall be made upon the actual issue of such shares of Common Stock or such
Convertible Securities upon the exercise of such Options, except as otherwise
provided in Section 7(b)(3).
(2) In case the Company at any time shall in any manner issue (whether
directly or by assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock is
issuable upon such conversion or exchange (determined by dividing (Y) the total
amount received or receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (Z) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Conversion Price in effect immediately prior to the time
of such issue or sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities shall
(as of the date of the issue or sale of such Convertible Securities) be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share. No further adjustment of the Conversion Price shall be made upon the
actual issue of such Common Stock upon exercise of the rights to exchange or
convert under such Convertible Securities, except as otherwise provided in
Section (7)(b)(3).
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(3) If the purchase price provided for in any Options referred to in
Section 7(b)(1), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in Sections
7(b)(1) or (2), or the rate at which any Convertible Securities referred to in
Sections 7(b)(1) or (2) are convertible into or exchangeable for Common Stock
shall change at any time (other than under or by reason of provisions designed
to protect against dilution of the type set forth in Sections 7(b) or 7(d)), the
Conversion Price in effect at the time of such change shall forthwith be
readjusted to the Conversion Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold. If the purchase price
provided for in any Option referred to in Section 7(b)(1) or the rate at which
any Convertible Securities referred to in Sections 7(b)(1) or (2) are
convertible into or exchangeable for Common Stock, shall be reduced at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then in case of the delivery of Common Stock upon the exercise
of any such Option or upon conversion or exchange of any such Convertible
Security, the Conversion Price then in effect hereunder shall forthwith be
adjusted to such respective amount as would have been obtained had such Option
or Convertible Security never been issued as to such Common Stock and had
adjustments been made upon the issuance of the shares of Common Stock delivered
as set forth herein, but
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only if as a result of such adjustment the Conversion Price then in effect
hereunder is hereby reduced.
(4) On the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities, the Conversion Price then in
effect hereunder shall forthwith be increased to the Conversion Price which
would have been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination, never been issued.
(5) In case any Options shall be issued in connection with the issue or
sale of other securities of the Company, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued without
consideration.
(6) In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold or deemed to have been issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Company therefor. In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall be the
fair value of such consideration as determined in good faith by the Board. In
case any shares of Common Stock, Options or Convertible Securities shall be
issued in connection with any merger in which the Company is the surviving
corporation, the amount of
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consideration therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving corporation as shall be
attributable to such Common Stock, Options or Convertible Securities, as the
case may be.
(7) The number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the Company, and
the disposition of any shares so owned or held shall be considered an issue or
sale of Common Stock for the purpose of this Section 7(b).
(8) In case the Company shall declare a dividend or make any other
distribution upon the stock of the Company payable in Options or Convertible
Securities, then in such case any Options or Convertible Securities, as the case
may be, issuable in payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration.
(9) For purposes of this Section 7(b), in case the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right or subscription or
purchase, as the case may be.
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(10) For purposes of this Section 7(b), notwithstanding Section 7(f), in
the event that the "Class B Warrants" issued to MCI WCOM on September 26, 1997
vest and become exercisable for shares of Common Stock, whether or not MCI WCOM
shall exercise such Class B Warrants, the following shall apply: the
consideration per share that the Common Stock shall be deemed to have been
issued or sold at shall be equal to the Original Purchase Price Per Share that
would have been payable by the holder of the Class C Preferred Stock on the
Initial Issuance Date if the vested Class B Warrants had vested and been
exercised (and the exercise price thereon had been paid to the Company) prior to
the Initial Issuance Date.
(c) Liquidating Dividends. In the event the Company shall declare a
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dividend upon the Common Stock (other than a dividend payable in Common Stock)
payable otherwise than out of earnings or earned surplus, determined in
accordance with generally accepted accounting principles, including the making
of appropriate deductions for minority interests, if any, in subsidiaries
(herein referred to as "Liquidating Dividends"), then, as soon as possible after
the conversion of any Class C Preferred Stock, the Company shall pay to the
person converting such Class C Preferred Stock an amount equal to the aggregate
value at the time of such exercise of all Liquidating Dividends (including but
not limited to the Common Stock which would have been issued at the time of such
earlier exercise and all other securities which would have been issued with
respect to such Common Stock by reason of stock splits, stock dividends, mergers
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or reorganizations, or for any other reason). For the purposes of this Section
7(c), a dividend other than in cash shall be considered payable out of earnings
or earned surplus only to the extent that such earnings or earned surplus are
charged an amount equal to the fair value of such dividend as determined in good
faith by the Board.
(d) Subdivisions and Dividends; Combinations. In case the Company shall
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at any time (i) subdivide the outstanding Common Stock or (ii) issue a stock
dividend on its outstanding Common Stock, the number of shares of Common Stock
issuable upon conversion of the Class C Preferred Stock shall be proportionately
increased by the same ratio as the subdivision or dividend (with appropriate
adjustments to the Conversion Price in effect immediately prior to such
subdivision or dividend). In case the Company shall at any time combine its
outstanding Common Stock, the number of shares issuable upon conversion of the
Class C Preferred Stock immediately prior to such combination shall be
proportionately decreased by the same ratio as the combination (with appropriate
adjustments to the Conversion Price in effect immediately prior to such
combination).
(e) Reorganizations, etc. If any capital reorganization or
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reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation, or the sale of all or substantially all
of its assets to another corporation shall be effected in such a way that
holders of Common Stock shall be entitled to receive stock, securities, cash or
other property with respect to or in exchange for Common
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Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provision shall be made
whereby the holders of the Class C Preferred Stock shall have the right to
acquire and receive upon conversion of the Class C Preferred Stock, which right
shall be prior to the rights of the holders of Junior Stock, equal to the rights
of the holders of Parity Stock and after and subject to the rights of holders of
Senior Stock, such shares of stock, securities, cash or other property issuable
or payable (as part of the reorganization, reclassification, consolidation,
merger or sale) with respect to or in exchange for such number of outstanding
shares of Common Stock as would have been received upon conversion of the Class
C Preferred Stock at the Conversion Price then in effect.
(f) Exceptions to Antidilution. The provisions of this Section 7 shall
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not apply to any Common Stock issued, issuable or deemed outstanding under
Section 7(b)(1) through (10) inclusive (and no such transaction shall constitute
a Triggering Transaction): (i) in connection with a public or private debt
financing effected by the Company (other than with an affiliate of the Company,
including MCI WCOM) within nine months after the Initial Issuance Date, (ii)
after the issuance of shares of Common Stock to the public in an underwritten
offering pursuant to a registration statement filed under the Securities Act of
1933, as amended (the "Securities Act") covering the offer and sale of Common
Stock in which the proceeds to the Company are not less than $20 million, (iii)
to any person pursuant to any stock
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option, stock purchase or similar plan or arrangement for the benefit of
employees, consultants or other representatives of the Company or its
subsidiaries in effect on the Initial Issuance Date or thereafter adopted by the
Board, (iv) pursuant to options, warrants and conversion rights in existence on
the Initial Issuance Date (other than as provided for in Section 7(b)(10)) or
(v) on conversion of the Class B Preferred Stock, the Class C Preferred Stock or
the Class D Preferred Stock or the sale of any additional shares of any of the
foregoing at a price not less than the applicable conversion price thereof.
(g) Procedures. In the event that (i) the Company shall declare any cash
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dividend upon its Common Stock, (ii) the Company shall declare any dividend upon
its Common Stock payable in stock or make any special dividend or other
distribution to the holders of its Common Stock, (iii) the Company shall offer
for subscription pro rata to the holders of its Common Stock any additional
shares of stock of any class or other rights, (iv) there shall be any capital
reorganization or reclassification of the capital stock of the Company,
including any subdivision or combination of its outstanding shares of Common
Stock, or consolidation or merger of the Company with, or sale of all or
substantially all of its assets to, another corporation, (v) there shall be a
voluntary or involuntary dissolution, liquidation or winding-up of the Company,
then, in connection with any such event, the Company shall give to the holders
of the Class C Preferred Stock (A) at least twenty (20) days prior written
notice of the date on which the books of the Company
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shall close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up; and (B) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, at least twenty (20) days prior written notice of the date when the
same shall take place. Such notice in accordance with the foregoing clause (A)
shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause (B)
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification consolidation, merger,
sale, dissolution, liquidation or winding-up, as the case may be. Each such
written notice shall be given by first class mail, postage prepaid, addressed to
the holders of the Class C Preferred Stock at the address of each such holder as
shown on the books of the Company.
(h) Intended Effect. If any event occurs as to which, in the opinion of
---------------
the Board, the provisions of this Section 7 are not strictly applicable or if
strictly applicable would not fairly protect the rights of the holders of the
Class C Preferred Stock in accordance with the essential intent and principles
of such provisions, then the Board shall make an adjustment in the
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application of such provisions, in accordance with such essential intent and
principles, so as to protect such rights as set forth herein, but in no event
shall any adjustment have the effect of increasing the Conversion Price as
otherwise determined pursuant to any of the provisions of this Section 7 except
in the case of a combination of shares of a type contemplated in Section 7(d)
and then in no event to an amount greater than the Conversion Price as adjusted
pursuant to Section 7(d).
8. MANDATORY CONVERSION.
--------------------
(a) Mandatory Conversion. Each share of Class C Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at the then effective
Conversion Price at any time upon the closing of an underwritten offering
pursuant to an effective registration statement under the Securities Act,
covering the offer and sale of Common Stock to the public at a price per share
of Common Stock that is not less than (i) 110% of the Original Purchase Price
Per Share, if such offering is consummated within two years following the
Initial Issuance Date or (ii) 200% of the Original Purchase Price Per Share, if
such offering is consummated at any time thereafter. In addition, each share of
Class C Preferred Stock shall automatically be converted into shares of Common
Stock at the then effective Conversion Price for such shares (A) upon the vote
to so convert of the holders of at least a majority of the shares of Class C
Preferred Stock then outstanding or (B) at any time after the conversion into
Common Stock of at least a majority of the shares of Class C Preferred Stock
issued on the Initial Issuance Date.
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(b) Procedures. All holders of record of shares of Class C Preferred
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Stock will be given at least twenty (20) days' prior written notice of the date
fixed and the place designated for mandatory conversion of all of such shares of
Class C Preferred Stock pursuant to this Section 8. Such notice will be sent by
mail, first class, postage prepaid, to each record holder of shares of Class C
Preferred Stock at such holder's address appearing on the stock register. On or
before the date fixed for conversion each holder of shares of Class C Preferred
Stock shall surrender his or its certificates or certificates for all such
shares to the Company at the place designated in such notice, and shall
thereafter receive certificates for the number of shares of Common Stock to
which such holder is entitled pursuant to this Section 8. On the date fixed for
conversion, all rights with respect to the Class C Preferred Stock so converted
will terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefore, to receive certificates for the
number of shares of Common Stock into which such Class C Preferred Stock has
been converted and payment of any accrued and unpaid dividends thereon. If so
required by the Company, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Company, duly executed by the registered holder or by
his attorneys duly authorized in writing. All certificates evidencing shares of
Class C Preferred Stock which are required to be surrendered for conversion in
accordance with the provisions hereof shall, from
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and after the date such certificates are so required to be surrendered, be
deemed to have been retired and canceled and the shares of Class C Preferred
Stock represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. As soon as practicable after the date of
such mandatory conversion and the surrender of the certificate or certificates
for Class C Preferred Stock as set forth herein, the Company shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Section 6(b) in respect of any fraction of a share of Common Stock
otherwise issuable upon such conversion.
9. REDEMPTION.
----------
(a) Redemption Price. At any time within 18 months from the Initial
----------------
Issuance Date, the Company may redeem all (but not less than all) of the shares
of the Class C Preferred Stock at a per share redemption price of 110% of the
Original Purchase Price Per Share, plus an amount equal to the per share
dividends accrued on the Class C Preferred Stock but not paid (such amount, the
"Redemption Price").
(b) Redemption Notice; Surrender. At least thirty (30) days prior to the
----------------------------
date that the Company elects to redeem the Class C Preferred Stock (the
"Redemption Date"), written notice shall be mailed, postage prepaid, to each
holder of record of
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Class C Preferred Stock to be redeemed, at his or its post office address last
shown on the records of the Company, notifying such holder of the number of
shares so to be redeemed, specifying the Redemption Date and calling upon such
holder to surrender to the Company, in the manner and at the place designated,
his or its certificate or certificates representing the shares to be redeemed
(such notice, the "Redemption Notice"). On or prior to each Redemption Date,
each holder of Class C Preferred Stock to be redeemed shall surrender his or its
certificate or 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. From and after the Redemption
Date, unless there shall have been a default in payment of the Redemption Price,
all rights of the holders of the Class C Preferred Stock designated for
redemption in the Redemption Notice as holders of Class C Preferred Stock of the
Company (except the right to receive the Redemption Price without interest upon
surrender of their certificate or certificates) shall cease with respect to such
shares, and such shares shall not thereafter be transferred on the books of the
Company or be deemed to be outstanding for any purpose whatsoever.
(c) Miscellaneous. Any shares of Class C Preferred Stock so redeemed
-------------
shall be permanently retired, shall no longer be deemed outstanding and shall
not under any circumstances be
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reissued, and the Company may from time to time take such appropriate corporate
action as may be necessary to reduce the authorized Class C Preferred Stock
accordingly. Nothing herein contained shall prevent or restrict the purchase by
the Company, from time to time either at public or private sale, of the whole or
any part of the Class C Preferred Stock at such price or prices as the Company
may determine, subject to the provisions of applicable law.
10. CONVERTED AND REACQUIRED SHARES. Any shares of Series C Preferred Stock
-------------------------------
converted into Common Stock, redeemed, purchased or otherwise acquired by the
Company in any manner whatsoever shall be retired and canceled promptly after
the acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of undesignated stock of the Company and may be
reissued subject to the conditions and restrictions on issuance in the Articles
of Incorporation, in any other Certificate of Designation creating a series of
preferred stock or any similar stock or as otherwise required by law.
11. SUSPENSION OF VOTING RIGHTS PENDING HSR APPROVAL. Notwithstanding anything
------------------------------------------------
to the contrary contained herein, unless and until all filings required under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations of the Federal Trade Commission promulgated thereunder, in
connection with the acquisition of the Class C Preferred Stock shall have been
made and the applicable waiting period thereunder shall have expired or been
terminated, no holder of Class C Preferred Stock shall have any voting rights as
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a stockholder of the Company or any other right to elect, nominate, designate or
vote for any member of the Company's Board of Directors.
RESOLVED FURTHER, that the officers of this company be, and each of them acting
alone is, hereby authorized and instructed to take all steps necessary to
execute, deliver and file, with the establishment and authorization of the
Company's Class D Preferred Stock, including but not limited to filing the
Statement of Rights and Preferences with the Minnesota Secretary of State inn
accordance with Minnesota Statutes, Section 302A.401.
F. The undersigned further declares under penalty of perjury that the matters
set out in the foregoing Certificate are true and correct of his own knowledge.
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IN WITNESS WHEREOF, the undersigned has executed this certificate as of the 4th
day of March, 1999.
/s/ Edward J. Driscoll, Jr.
---------------------------------
Edward J. Driscoll, Jr.
Secretary
30