EXHIBIT 4.23
CERTIFICATE OF DESIGNATION OF RIGHTS AND PREFERENCES
OF
CLASS D 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 2,196,317 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 D Convertible Preferred Stock" (the "Class D Preferred Stock") and the
number of shares constituting such series shall be 2,196,317.
2. RANK. The Class D 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 D 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 C Convertible
Preferred Stock, par value $0.01 per share (the "Class C 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 D 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 D 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 D 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 D 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 D Preferred
Stock shall be declared pro rata per share.
(b) Limit on Junior Dividends and Redemption. For so long as the Class D
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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 D 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 D 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 D
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 D 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
D Preferred Stock equal to the greater of: (A) the Original Purchase Price Per
Share plus any per share dividends accrued on the Class D Preferred Stock but
not paid and (B) the
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per share amount that holders of the Class D Preferred Stock would have received
had they exercised their right to convert the Class D 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 D Preferred Stock but not paid.
5. VOTING. (a) Number of Votes. Each issued and outstanding share of Class D
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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 D 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 D 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
D 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 without first obtaining the affirmative vote or
written consent of a majority of the holders of the Class D 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 D Preferred Stock.
6. OPTIONAL CONVERSION. Each share of Class D Preferred Stock may be converted
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at any time, 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 upon any Liquidation of the Company, the right
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of conversion shall 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 D Preferred Stock.
(a) Initial. The initial Conversion Rate for the Class D Preferred Stock
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shall be one share of Common Stock for each one share of Class D 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.
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(b) No Fractional Shares. The Company shall not issue fractions of shares
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of Common Stock upon conversion of Class D 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 D
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
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 D 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
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any such adjustments to be sent by mail, first class, postage prepaid, to each
record holder of Class D 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 D 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 D 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
D Preferred Stock represented by such certificates, or any number thereof. Such
notice shall also 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 D 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
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the conversion date. As soon as practicable after receipt of such notice and the
surrender of the certificate or certificates for Class D 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 D 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 D 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 Class D 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 D 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
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and unpaid dividends on the Class D Preferred Stock surrendered for conversion
or on the Common Stock delivered.
(g) Surrender. All shares of Class D 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 D 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 D 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 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 D 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.
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(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 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
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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 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
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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 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
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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).
(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
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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 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
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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 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
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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.
(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 D 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.
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(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 D Preferred Stock, the Company shall pay to the
person converting such Class D 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
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 D Preferred Stock shall be proportionately
increased by the same ratio as the subdivision or
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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 D 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 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 D Preferred Stock shall have the right to acquire and receive upon
conversion of the Class D 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
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upon conversion of the Class D 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 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
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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 D Preferred Stock (A) at least twenty (20) days prior written
notice of the date on which the books of the Company 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
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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 D 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 D Preferred Stock in accordance with the essential intent and principles
of such provisions, then the Board shall make an adjustment in the 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 D Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at the then effective
Conversion Price at any time upon the
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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 D 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 D 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 D Preferred Stock issued on the Initial Issuance Date.
(b) Procedures. All holders of record of shares of Class D Preferred
----------
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 D 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 D
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 D 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 D 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
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Common Stock into which such Class D 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 D Preferred Stock which are required to be surrendered for conversion in
accordance with the provisions hereof shall, from 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 D 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 D 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
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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. CONVERTED AND REACQUIRED SHARES. Any shares of Series D 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.
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, for and on behalf of this Company and in its name,
any and all documents required in connection 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 in 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
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