1
EXHIBIT 3.13
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, OPTIONAL
AND OTHER SPECIAL RIGHTS OF
7 1/4% CUMULATIVE
CONVERTIBLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Global TeleSystems Group, Inc. (the "Company"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify that (i) pursuant to authority conferred upon the board of
directors of the Company (the "Board of Directors") by its Certificate of
Incorporation, and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, said Board of Directors is authorized
to issue Preferred Stock of the Company in one or more series and has adopted
the resolution set forth below on April 22, 1999 (the "Resolution"):
RESOLVED that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issuance of 7 1/4% Cumulative
Convertible Preferred Stock, par value $0.0001 per share, with a
liquidation preference of $5,000 per share, consisting of up to 100,000
shares having the designation, preferences, relative, participating,
optional and other special rights and the qualifications, limitations and
restrictions thereof that are set forth in the Certificate of Incorporation
and in this Resolution as follows:
1. Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Company a series ofT Preferred Stock
designated as the "7 1/4% Cumulative Convertible Preferred Stock" (the
"Convertible Preferred Stock"). The authorized number of shares constituting the
Convertible Preferred Stock shall be 100,000, and such shares shall be
represented by stock certificates substantially in the form set forth in Exhibit
A hereto. The liquidation preference of the Convertible Preferred Stock shall be
$5,000 per share (the "Liquidation Preference"). The date the Convertible
Preferred Stock is first issued is referred to as the "Issue Date".
2
-2-
2. Rank. The Convertible Preferred Stock will, rank (i) junior in right
of payment to all existing and future debt obligations of the Company upon
liquidation, dissolution or winding up of the Company, including the Company's
9 7/8% Senior Notes due 2005, the Company's 8 3/4% Convertible Senior
Subordinated Debentures due 2000 and the Company's 5 3/4% Senior Subordinated
Debentures due 2010, (ii) junior in right of payment to each class or series of
Capital Stock of the Company, the terms of which expressly provide that such
class or series of Capital Stock will rank senior to the Convertible Preferred
Stock as to dividends and upon liquidation, dissolution or winding up of the
Company ("Senior Capital Stock"); (iii) pari passu in right of payment with each
class of Capital Stock or series of Preferred Stock, established hereafter by
the Company's Board of Directors, the terms of which expressly provide that such
class or series will rank on a parity with the Convertible Preferred Stock as to
dividend rights and upon liquidation, dissolution or winding up of the Company
("Parity Capital Stock") and (iv) senior in right of payment as to dividend
rights and upon liquidation, dissolution or winding up of the Company to the
Common Stock and any Capital Stock of the Company that expressly provides that
it will rank junior to the Convertible Preferred Stock ("Junior Capital Stock").
The Company may not authorize, create (by way of reclassification or otherwise)
or issue any Senior Capital Stock or any obligation or security convertible or
exchangeable into, or evidencing a right to purchase, shares of any class or
series of Senior Capital Stock without the affirmative vote or consent of the
holders of at least 66-2/3% of the outstanding shares of Convertible Preferred
Stock.
3. Dividends. The Holders of shares of the Convertible Preferred Stock
will be entitled to receive, when, as and if dividends are declared by the Board
of Directors out of funds of the Company legally available therefor, cumulative
preferential dividends from the Issue Date of the Convertible Preferred Stock
accruing at the rate of $362.50 per share of Convertible Preferred Stock per
annum, or $90.625 per share of Convertible Preferred Stock per quarter, payable
quarterly in arrears on March 15, June 15, September 15 and December 15 of each
year or, if any such date is not a Business Day, on the next succeeding business
day (each, a "Dividend Payment Date"), to the Holders of record as of the next
preceding March 1, June 1, September 1 and December 1 (each, a "Record Date").
Accrued but unpaid dividends, if any, may be paid on such dates as determined by
the Board of Directors. Dividends payable on the Convertible Preferred Stock
will be computed on the basis of a 360-day year of twelve 30-day months and will
be deemed to ac-
3
-3-
crue on a daily basis. Dividends on the Convertible Preferred Stock will accrue
from the Issue Date. Dividends on the Convertible Preferred Stock may be paid,
at the Company's option, in cash, Common Stock, or a combination thereof;
provided, however, that the Company shall be obligated to make its dividend
payments in cash if the Common Stock paid as a dividend would not, at the time
such dividend payment is made, be freely transferable under the Securities Act.
The Convertible Preferred Stock will not be redeemable unless all dividends
accrued through such redemption date shall have been paid in full.
Notwithstanding anything to the contrary herein contained, the Company shall not
be required to declare or pay a dividend if another person (including, without
limitation, any of its subsidiaries) pays an amount to the Holders equal to the
amount of such dividend on behalf of the Company and, in such event, the
dividend will be deemed paid for all purposes.
Dividends on the Convertible Preferred Stock will accrue whether or not
the Company has earnings or profits, whether or not there are funds legally
available for the payment of such dividends and whether or not dividends are
declared. Dividends will accumulate to the extent they are not paid on the
Dividend Payment Date for the quarter to which they relate. Accumulated unpaid
dividends will accrue and cumulate dividends at a rate of 7 1/4% per annum. The
Company will take all reasonable actions required or permitted under Delaware
law to permit the payment of dividends on the Convertible Preferred Stock.
No dividend whatsoever shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any outstanding share of the
Convertible Preferred Stock with respect to any dividend period unless all
dividends for all preceding dividend periods have been declared and paid upon,
or declared and a sufficient sum set apart for the payment of such dividend
upon, all outstanding shares of Convertible Preferred Stock. Unless full
cumulative dividends on all outstanding shares of Convertible Preferred Stock
due for all past dividend periods shall have been declared and paid, or declared
and a sufficient sum for the payment thereof set apart, then: (i) no dividend
(other than, in the case of Junior Capital Stock, a dividend payable solely in
shares of Junior Capital Stock or options, warrants or rights to purchase Junior
Capital Stock) shall be declared or paid upon, or any sum set apart for the
payment of dividends upon, any shares of Parity Capital Stock or Junior Capital
Stock; (ii) no other distribution shall be declared or made upon, or any sum set
apart for the payment of any distribution upon, any shares of Junior Capital
Stock;
4
-4-
(iii) no shares of Parity Capital Stock or Junior Capital Stock or any warrants,
rights, calls or options exercisable for or convertible into any Parity Capital
Stock or Junior Capital Stock shall be purchased, redeemed or otherwise acquired
or retired for value (excluding an exchange for shares of other Parity Capital
Stock or Junior Capital Stock or a purchase, redemption or other acquisition
from the proceeds of a substantially concurrent sale of Parity Capital Stock or
Junior Capital Stock) by the Company or any of its subsidiaries; and (iv) no
monies shall be paid into or set apart or made available for a sinking or other
like fund for the purchase, redemption or other acquisition or retirement for
value of any shares of Parity Capital or Junior Capital Stock or any warrants,
rights, calls or options exercisable for or convertible into any Parity Capital
Stock or Junior Capital Stock by the Company or any of its subsidiaries. Holders
of the Convertible Preferred Stock shall not be entitled to any dividends,
whether payable in cash, property or stock, in excess of the full cumulative
dividends as herein described.
No full dividends may be declared or paid or funds set apart for the
payment of dividends on any Parity Capital Stock for any period unless full
cumulative dividends shall have been or contemporaneously are declared and paid
(or are deemed declared and paid) in full or declared and, if payable in cash, a
sum in cash sufficient for such payment is set apart for such payment on the
Convertible Preferred Stock. If full dividends are not so paid, the Convertible
Preferred Stock shall share dividends pro rata with the Parity Capital Stock.
Dividends on account of arrears and dividends in connection with any optional
redemption may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to holders of record on such date, not more than
45 days prior to the payment thereof, as may be fixed by the Board of Directors
of the Company.
4. Liquidation Rights. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company after payment in full of
the outstanding debt obligations of the Company and the Liquidation Preference
(and any accrued and unpaid dividends) on any Senior Capital Stock, each Holder
of shares of the Convertible Preferred Stock shall be entitled to payment out of
the assets of the Company available for distribution of the Liquidation
Preference per share of the Convertible Preferred Stock held by such Holder,
plus an amount equal to the accrued and unpaid dividends on the Convertible
Preferred Stock and Additional Dividends (as defined in the Registration Rights
Agreement) (if any) to the date
5
-5-
fixed for liquidation, dissolution, or winding up before any distribution is
made on any Junior Capital Stock, including, without limitation, Common Stock of
the Company. After payment in full of the Liquidation Preference and an amount
equal to the accrued and unpaid dividends and Additional Dividends (if any), to
which Holders of Convertible Preferred Stock are entitled, such Holders will not
be entitled to any further participation in any distribution of assets of the
Company. However, neither the voluntary sale, conveyance, exchange or transfer
(for cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Company nor the consolidation
or merger of the Company with or into one or more corporations will be deemed to
be a voluntary or involuntary liquidation, dissolution or winding up of the
Company, unless such sale, conveyance, exchange, transfer, consolidation or
merger shall be in connection with a liquidation, dissolution or winding up of
the affairs of the Company.
5. Redemption. The Convertible Preferred Stock may not be redeemed at
the option of the Company prior to March 15, 2002. The Convertible Preferred
Stock may be redeemed, in whole or in part, at the option of the Company after
March 15, 2002, at the redemption prices specified below (expressed as
percentages of the Liquidation Preference thereof), in each case, together with
an amount equal to accrued and unpaid dividends on the Convertible Preferred
Stock and Additional Dividends (if any), to the date of redemption, upon not
less than 15 nor more than 60 days' prior written notice, during the 12-month
period commencing on March 15 of each of the years set forth below:
Redemption
Year Rate
---- ----------
2002............................................................ 105.075%
2003............................................................ 104.350%
2004............................................................ 103.625%
2005............................................................ 102.900%
2006............................................................ 102.175%
2007............................................................ 101.450%
2008............................................................ 100.725%
2009 and thereafter............................................. 100.000%
On and after any date fixed for redemption (the "Redemption Date"),
provided that the Company has made available at the office of the Transfer Agent
a sufficient amount of cash to effect the redemption, dividends will cease to
accrue on the Convertible Preferred Stock called for redemption (except that,
6
-6-
in the case of a Redemption Date after a dividend payment Record Date and prior
to the related Dividend Payment Date, holders of Convertible Preferred Stock on
the dividend payment Record Date will be entitled on such Dividend Payment Date
to receive the dividend payable on such shares), such shares shall no longer be
deemed to be outstanding and all rights of the holders of such shares as holders
of Convertible Preferred Stock shall cease except the right to receive the cash
deliverable upon such redemption, without interest from the Redemption Date.
In the event of a redemption of only a portion of the then outstanding
shares of Convertible Preferred Stock, the Company shall effect such redemption
on a pro rata basis, except that the Company may redeem all of the shares held
by Holders of fewer than 100 shares (or all of the shares held by Holders who
would hold less than 100 shares as a result of such redemption), as may be
determined by the Company.
With respect to a redemption pursuant hereto, the Company will send a
written notice of redemption by first class mail to each holder of record of
shares of Convertible Preferred Stock, not fewer than 15 days nor more than 60
days prior to the Redemption Date at its registered address (the "Redemption
Notice"); provided, however, that no failure to give such notice nor any
deficiency therein shall affect the validity of the procedure for the redemption
of any shares of Convertible Preferred Stock to be redeemed except as to the
holder or holders to whom the Company has failed to give said notice or except
as to the holder or holders whose notice was defective. The Redemption Notice
shall state:
(a) the redemption price;
(b) whether all or less than all the outstanding shares of the
Convertible Preferred Stock are to be redeemed and the total number of
shares of the Convertible Preferred Stock being redeemed;
(c) the Redemption Date;
(d) that the holder is to surrender to the Company, in the manner, at
the place or places and at the price designated, his certificate or
certificates representing the shares of Convertible Preferred Stock to be
redeemed; and
7
-7-
(e) that dividends on the shares of the Convertible Preferred Stock to
be redeemed shall cease to accumulate on such Redemption Date unless the
Company defaults in the payment of the redemption price.
Each holder of Convertible Preferred Stock shall surrender the
certificate or certificates representing such shares of Convertible Preferred
Stock to the Company, duly endorsed (or otherwise in proper form for transfer,
as determined by the Company), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full redemption price for such
shares shall be payable in cash to the person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.
6. Voting Rights. Holders of record of shares of the Convertible
Preferred Stock will have no voting rights, except as required by law and as
provided in this Section 6 and in Sections 2, 9 and 13 hereof. Upon the
accumulation of accrued and unpaid dividends on the outstanding Convertible
Preferred Stock in an amount equal to six full quarterly dividends (whether or
not consecutive) (together with any event with a similar effect pursuant to the
terms of any other series of Preferred Stock upon which like rights have been
conferred, a "Voting Rights Triggering Event"), the number of members of the
Company's Board of Directors will be immediately and automatically increased by
two (unless previously increased pursuant to the terms of any other series of
Preferred Stock upon which like rights have been conferred), and the Holders of
a majority of the outstanding shares of Convertible Preferred Stock, voting
together as a class (pro rata, based on Liquidation Preference) with the holders
of any other series of Preferred Stock upon which like rights have been
conferred and are exercisable, will be entitled to elect two members to the
Board of Directors of the Company. Voting rights arising as a result of a Voting
Rights Triggering Event will continue until such time as all dividends in
arrears on the Convertible Preferred Stock are paid in full. Notwithstanding the
foregoing, however, such voting rights to elect directors will expire when the
number of shares of Convertible Preferred Stock outstanding is reduced to 10,000
or less.
In the event such voting rights expire or are no longer exercisable
because dividends in arrears have been paid in full, the term of any directors
elected pursuant to the pro-
8
-8-
visions of this paragraph 6 above shall terminate forthwith and the number of
directors constituting the Board of Directors shall be immediately and
automatically decreased by two (until the occurrence of any subsequent Voting
Rights Triggering Event). At any time after voting power to elect directors
shall have become vested and be continuing in the holders of Convertible
Preferred Stock (together with the holders of any other series of Preferred
Stock upon which like rights have been conferred and are exercisable) pursuant
to this paragraph 6, or if vacancies shall exist in the offices of directors
elected by such holders, a proper officer of the Company may, and upon the
written request of the holders of record of at least 25% of the shares of
Convertible Preferred Stock then outstanding or the holders of 25% of the shares
of any other series of Preferred Stock then outstanding upon which like rights
have been conferred and are exercisable addressed to the secretary of the
Company, shall, call a special meeting of the Holders of Convertible Preferred
Stock and the holders of such other series of Preferred Stock for the purpose of
electing the directors which such holders are entitled to elect pursuant to the
terms hereof; provided, however, that no such special meeting shall be called if
the next annual meeting of stockholders of the Company is to be held within 60
days after the voting power to elect directors shall have become vested (or such
vacancies arise, as the case may be), in which case such meeting shall be deemed
to have been called for such next annual meeting. If such meeting shall not be
called, pursuant to the provision of the immediately preceding sentence, by a
proper officer of the Company within 20 days after personal service to the
secretary of the Company at its principal executive offices, then the Holders of
record of at least 25% of the outstanding shares of Convertible Preferred Stock
or the holders of 25% of the shares of any other series of Preferred Stock upon
which like rights have been conferred and are exercisable may designate in
writing one of their members to call such meeting at the expense of the Company,
and such meeting may be called by the person so designated upon the notice
required for the annual meetings of stockholders of the Company and shall be
held at the place for holding the annual meetings of stockholders. Any Holder of
Convertible Preferred Stock or such other series of Preferred Stock so
designated shall have, and the Company shall provide, access to the lists of
Holders of Convertible Preferred Stock and the holders of such other series of
Preferred Stock for any such meeting of the holders thereof to be called
pursuant to the provisions hereof. If no special meeting of the Holders of
Convertible Preferred Stock and the holders of such other series of Preferred
Stock is called as provided in this paragraph 6, then such meeting shall be
deemed to
9
-9-
have been called for the next meeting of stockholders of the Company.
At any meeting held for the purposes of electing directors at which the
Holders of Convertible Preferred Stock (together with the holders of any other
series of Preferred Stock upon which like rights have been conferred and are
exercisable) shall have the right, voting together as a separate class, to elect
directors as aforesaid, the presence in person or by proxy of the Holders of at
least a majority in voting power of the outstanding shares of Convertible
Preferred Stock (and such other series of Preferred Stock) shall be required to
constitute a quorum thereof.
Any vacancy occurring in the office of a director elected by the
Holders of Convertible Preferred Stock (and such other series of Preferred
Stock) may be filled by the remaining director elected by the Holders of
Convertible Preferred Stock (and such other series of Preferred Stock) unless
and until such vacancy shall be filled by the Holders of Convertible Preferred
Stock (and such other series of Preferred Stock).
Except as set forth above and otherwise required by applicable law, the
creation, authorization or issuance of any shares of any Junior Capital Stock,
Parity Capital Stock or Senior Capital Stock, or the increase or decrease in the
amount of authorized Capital Stock of any class, including Preferred Stock,
shall not require the affirmative vote or consent of Holders of Convertible
Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of shares of Convertible Preferred
Stock.
In any case in which the Holders of Convertible Preferred Stock shall
be entitled to vote pursuant hereto or pursuant to Delaware law, each Holder of
Convertible Preferred Stock entitled to vote with respect to such matters shall
be entitled to one vote for each share of Convertible Preferred Stock held.
Except as required by law, the Holders of the Convertible Preferred
Stock will not be entitled to vote on any merger or consolidation involving the
Company or a sale of all or substantially all the assets of the Company.
7. Change of Control
(a) In the event of a Change of Control, each Holder shall have the
right to require the Company to purchase
10
-10-
all or a portion of such Holder's Convertible Preferred Stock (the "Change
of Control Offer") as of the date that is 30 Business Days after the
occurrence of such Change of Control (the "Change of Control Purchase
Date") for a purchase price equal to 100% of the Liquidation Preference
together with accrued and unpaid dividends to but not including the Change
of Control Purchase Date (the "Change of Control Purchase Price"). No funds
shall be paid by the Company pursuant to a Change of Control Offer prior to
the Company's repurchase of any securities ranking senior to the
Convertible Preferred Stock and requiring repurchase pursuant to the change
of control provisions governing such senior securities.
Within 10 Business Days after the occurrence of a Change of
Control, the Company shall mail to all Holders of record of the Convertible
Preferred Stock a written notice of the Change of Control. The notice shall
include the form of Change of Control Purchase Notice (as defined) to be
completed by the Holder and shall state:
(i) the date of such Change of Control and, briefly, the events
causing such Change of Control;
(ii) the date by which the Change of Control Purchase Notice
pursuant to this Section 7 must be given;
(iii) the Change of Control Purchase Date;
(iv) the Change of Control Purchase Price;
(v) briefly, the conversion rights of the Convertible Preferred
Stock;
(vi) the name and address of the Paying Agent and the Conversion
Agent;
(vii) the then current Conversion Rate;
(viii) that Convertible Preferred Stock as to which a Change of
Control Purchase Notice has been given may be converted into Common
Stock only to the extent that the Change of Control Purchase Notice
has been withdrawn in accordance with the terms of this Certificate of
Designations;
11
-11-
(ix) the procedures that the Holder must follow to exercise
rights under this Section 7;
(x) the procedures for withdrawing a Change of Control Purchase
Notice, including a form of notice of withdrawal; and
(xi) that the Holder must satisfy the requirements set forth in
the Convertible Preferred Stock in order to convert the Convertible
Preferred Stock.
(b) A Holder may exercise its rights specified in subsection (a) of
this Section 7 upon delivery of a written notice of the exercise of such
rights (a "Change of Control Purchase Notice") to the Paying Agent at any
time prior to the close of business on the Business Day next preceding the
Change of Control Purchase Date, stating:
(i) the name of the Holder;
(ii) the certificate numbers of the Convertible Preferred Stock
that the Holder will deliver to be purchased;
(iii) the number of shares of Convertible Preferred Stock that
the Holder will deliver to be purchased; and
(iv) that such Convertible Preferred Stock shall be purchased
pursuant to the terms and conditions specified in this Certificate of
Designations.
The delivery of such Convertible Preferred Stock to the Paying Agent
(together with all necessary endorsements) at the office of the Paying Agent
shall be a condition to the receipt by the Holder of the Change of Control
Purchase Price therefor; provided, however, that such Change of Control Purchase
Price shall be so paid pursuant to this Section 7 only if the Convertible
Preferred Stock so delivered to the Paying Agent shall conform in all respects
to the description thereof set forth in the related Change of Control Purchase
Notice.
Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Change of Control Purchase Notice shall have the right
to withdraw such Change of Control Purchase Notice at any time prior to the
close of business on the Business Day next preceding the Change of Control
Purchase Date by delivery of a written notice of withdrawal to
12
-12-
the Paying Agent in accordance with subsection (c) of this Section 7.
The Paying Agent shall promptly notify the Company of the receipt by it
of any Change of Control Purchase Notice or written withdrawal thereof.
(c) Upon receipt by the Paying Agent of the Change of Control Purchase
Notice specified in subsection (b) of this Section 7, the Holder of the
Convertible Preferred Stock in respect of which such Change of Control
Purchase Notice was given shall (unless such Change of Control Purchase
Notice is withdrawn as specified below) thereafter be entitled to receive
solely the Change of Control Purchase Price with respect to such
Convertible Preferred Stock. Such Change of Control Purchase Price shall be
paid to such Holder promptly following the later of (i) the Change of
Control Purchase Date with respect to such Convertible Preferred Stock
(provided the conditions in subsection (b) of this Section 7 have been
satisfied) and (ii) the time of delivery of such Convertible Preferred
Stock to the Paying Agent by the Holder thereof in the manner required by
subsection (b) of this Section 7. Convertible Preferred Stock in respect of
which a Change of Control Purchase Notice has been given by the Holder
thereof may not be converted into shares of Common Stock on or after the
date of the delivery of such Change of Control Purchase Notice unless such
Change of Control Purchase Notice has first been validly withdrawn.
A Change of Control Purchase Notice may be withdrawn by means of a
written notice of withdrawal delivered by the Holder to the office of the Paying
Agent at any time prior to the close of business on the Business Day immediately
preceding the Change of Control Purchase Date, specifying:
(i) the name of the Holder;
(ii) the certificate numbers of the Convertible Preferred Stock in
respect of which such notice of withdrawal is being submitted; and
(iii) the number of shares of Convertible Preferred Stock with
respect to which such notice of withdrawal is being submitted; and
(iv) the number of shares, if any, of such Convertible Preferred
Stock that remains subject to the
13
-13-
original Change of Control Purchase Notice and that has been or will be
delivered for purchase by the Company.
(d) At or before 11:00 a.m., New York City time, on the second Business
Day immediately following a Change of Control Purchase Date, the Company
shall deposit with the Paying Agent an amount of money sufficient to pay
the aggregate Change of Control Purchase Price of all of the shares of
Convertible Preferred Stock that are to be purchased as of such Change of
Control Purchase Date plus accrued and unpaid dividends thereon up to but
not including the Change of Control Purchase Date. The manner in which the
deposit required by this subsection (d) is made by the Company shall be at
the option of the Company, provided that such deposit shall be made in a
manner such that the Paying Agent shall have immediately available funds on
the second Business Day immediately following the Change of Control
Purchase Date.
If a Holder does not exercise the right to require the Company to
purchase such Holder's Convertible Preferred Stock, each share of such
Convertible Preferred Stock shall thereafter be convertible into the right to
receive the consideration receivable as a result of the Change of Control by a
holder of the number of shares of Common Stock into which such Convertible
Preferred Stock was convertible immediately prior to the Change of Control.
A Change of Control shall be deemed to have occurred if any of the
following occurs:
(e) any Person or group, other than the Permitted Holders, is or
becomes owner, directly or indirectly, of shares of capital stock of the
Company representing 50% or more of the total voting power of all shares of
capital stock of the Company or has the power directly or indirectly, to
elect a majority of the members of the Board of Directors of the Company;
(b) the Company consolidates with, or merges with or into, another Person
or the Company sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of the assets of the Company, or any
Person consolidates with, or merges with or into, the Company, in any such
event other than pursuant to a transaction in which the Person or Persons
that "beneficially owned," directly or indirectly, shares of capital stock
of the Company representing a majority of the total voting power of all
classes of capital stock of
14
-14-
the Company immediately prior to such transaction, "beneficially own,"
directly or indirectly, shares of capital stock of the Company representing
a majority of the total voting power of all classes of capital stock of the
surviving or transferee Person; (c) during any consecutive two year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by
the Board of Directors of the Company or whose nomination for election by
the stockholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
so approved) cease for any reason (other than by action of the Permitted
Holders) to constitute a majority of the Board of Directors of the Company
then in office; or (d) there shall occur the liquidation of dissolution of
the Company. For purposes of this definition, (i) "group" has the meaning
under Section 13(d) and 14(d) of the Exchange Act or any successor
provision to either of the foregoing, including any group acting for the
purpose of acquiring, holding or disposing of securities within the meaning
of Rule 13-d5(b)(1) under the Exchange Act and (ii) a "beneficial owner"
shall be determined in accordance with Rule 13d-3 under the Exchange Act
promulgated by the Commission under the Exchange Act, except that the
number of shares of capital stock of the Company entitling the holders
thereof to vote generally in the election of directors shall be deemed to
include, in addition to all outstanding shares of capital stock of the
Company entitling the holders thereof to vote generally in the election of
directors and Unissued Shares deemed to be held by the Person with respect
to which the Change of Control determination is being made, all Unissued
Shares deemed to be held by all other Persons.
"Unissued Shares" means shares of capital stock of the company not
outstanding that are subject to options, warrants, rights to purchase, or
conversion privileges exercisable within 60 days of the date of determination of
a Change of Control and that, upon issuance, will entitle the holders thereof to
vote generally in the election of directors.
For purposes of the definition of "Change of Control," "Permitted
Holders" means (a) Alan B. Slifka and any entity controlled by him, (b) one or
more of George Soros, Soros Fund Management LLC, Purnendu Chatterjee or
Chatterjee Management Company or Affiliates of any of the foregoing, and any
15
-15-
person or entity for which any such person or entity acts as investment advisor
or investment manager and (c) charitable organizations controlled by or
affiliated with any of the Persons names in the foregoing clauses (a) and (b).
Notwithstanding the foregoing, a Change of Control will be deemed not
to have occurred (i) if the last sale price of the Common Stock for any five
Trading Days during the ten Trading days immediately preceding the Change of
Control is at least equal to 105% of the Conversion Price in effect immediately
preceding the Change of Control or (ii) if at least 90% of the consideration
(excluding cash payments for fractional shares or cash payments for appraisal
rights) in the transaction or transactions constituting the Change of Control
consists of shares of Common Stock or securities convertible into shares of
Common Stock that are, or upon issuance will be, traded on a national securities
exchange.
8. Conversion Rates. The Convertible Preferred Stock will be
convertible at the option of the Holder, into shares of Common Stock at any
time, unless previously redeemed or repurchased, at a conversion rate of 72.46
shares of Common Stock per share of the Convertible Preferred Stock) (as
adjusted pursuant to the provisions hereof, the "Conversion Rate") (or
equivalent to a conversion price of $69.00 per share of Common Stock, the
"Conversion Price") (subject to the adjustments described below). The right to
convert a share of the Convertible Preferred Stock called for redemption or
delivered for repurchase will terminate at the close of business on the
Redemption Date for such Convertible Preferred Stock or at the time of the
repurchase, as the case may be. Convertible Preferred Stock for which a Holder
has delivered a Change of Control Purchase Notice exercising the option of such
Holder to require the Company to purchase such Convertible Preferred Stock may
be converted only if such notice is withdrawn by a written notice of withdrawal
delivered by the Holder to the Paying Agent prior to the close of business on
the Business Day prior to the Change of Control Purchase Date in accordance with
Section 7.
The right of conversion attaching to any share of Convertible Preferred
Stock may be exercised by the Holder thereof by delivering the share to be
converted to the office of the Transfer Agent, or any agency or office of the
Company maintained for that purpose, accompanied by a duly signed and completed
notice of conversion in form reasonably satisfactory to the Transfer Agent of
the Company, such as that which is set
16
-16-
forth in Exhibit B hereto. The conversion date will be the date on which the
share and the duly signed and completed notice of conversion are so delivered.
As promptly as practicable on or after the conversion date, the Company will
issue and deliver to the Transfer Agent a certificate or certificates for the
number of full shares of Common Stock issuable upon conversion, with any
fractional shares rounded up to full shares or, at the Company's option, payment
in cash in lieu of any fraction of a share, based on the Closing Price of the
Common Stock on the Trading Day preceding the conversion date. Such certificate
or certificates will be delivered by the Transfer Agent to the appropriate
Holder on a book-entry basis or by mailing certificates evidencing the
additional shares to the Holders at their respective addresses set forth in the
register of Holders maintained by the Transfer Agent. All shares of Common Stock
issuable upon conversion of the Convertible Preferred Stock will be fully paid
and nonassessable and will rank pari passu with the other shares of Common Stock
outstanding from time to time. Any shares of Convertible Preferred Stock
surrendered for conversion during the period from the close of business on any
Record Date to the opening of business on the next succeeding Dividend Payment
Date must be accompanied by payment of an amount equal to the dividends payable
on such Dividend Payment Date on the shares of Convertible Preferred Stock being
surrendered for conversion. No other payment or adjustment for dividends, or for
any dividends in respect of shares of Common Stock, will be made upon
conversion. Except as otherwise provided herein, dividends accrued shall not be
paid on Convertible Preferred Stock converted; provided, however, dividends
accrued through March 15, 2002 shall be paid on any Depositary Shares called
from redemption and converted before March 15, 2002. If any Holder surrenders
shares of Convertible Preferred Stock for conversion between a Record Date and
the related Dividend Payment Date, then notwithstanding such conversion, the
dividend payable on such Dividend Payment Date will be paid to the Holder on
such Record Date. Holders of Common Stock issued upon conversion will not be
entitled to receive any dividends payable to holders of Common Stock as of any
record time before the close of business on the conversion date.
The Conversion Rate shall be adjusted from time to time by the Company
as follows:
(a) In case the Company shall (i) pay a dividend in shares of Common
Stock to all holders of Common Stock, (ii) make a distribution in shares of
Common Stock to all holders of Common Stock, (iii) subdivide its
outstanding
17
-17-
Common Stock into a greater number of shares, or (iv) combine its
outstanding Common Stock into a smaller number of shares, the Conversion
Rate in effect immediately prior thereto shall be adjusted so that the
Holder of any Security thereafter surrendered for conversion shall be
entitled to receive that number of shares of Common Stock which it would
have owned had such Security been converted immediately prior to the
happening of such event. An adjustment made pursuant to this subsection (a)
shall become effective immediately after the record date in the case of a
dividend in shares or distribution and shall become effective immediately
after the effective date in the case of subdivision or combination.
(b) In case the Company shall issue rights or warrants to all or
substantially all holders of its Common Stock entitling them (for a period
commencing no earlier than the record date described below and expiring not
more than 60 days after such record date) to subscribe for or purchase
shares of Common Stock (or securities convertible into Common Stock) at a
price per share less than the current Market Price per share of Common
Stock at the record date for the determination of shareholders entitled to
receive such rights or warrants, the Conversion Rate in effect immediately
prior thereto shall be adjusted so that the same shall equal the rate
determined by multiplying the Conversion Rate in effect immediately prior
to such record date by a fraction, of which the denominator shall be the
number of shares of Common Stock outstanding on such record date, plus the
number of shares which the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current Market
Price, and of which the numerator shall be the number of shares of Common
Stock outstanding on such record date plus the number of additional shares
of Common Stock offered (or into which the convertible securities so
offered are convertible). Such adjustment shall be made successively
whenever any such rights or warrants are issued, and shall become effective
immediately after such record date. If at the end of the period during
which such rights or warrants are exercisable not all rights or warrants
shall have been exercised, the adjusted Conversion Rate shall be
immediately readjusted to what it would have been based upon the number of
additional shares of Common Stock actually issued (or the number of shares
of Common Stock issuable upon conversion of convertible securities actually
issued).
18
-18-
(c) In case the Company shall distribute to all or substantially all
holders of its Common Stock any shares of Capital Stock of the Company
(other than Common Stock), evidences of indebtedness or other non-cash
assets (including securities of any company other than the Company), or
shall distribute to all or substantially all holders of its Common Stock
rights or warrants to subscribe for or purchase any of its securities
(excluding those referred to in subsection (b) above), then in each such
case the Conversion Rate shall be adjusted so that the same shall equal the
rate determined by multiplying the Conversion Rate in effect immediately
prior to the date of such distribution by a fraction, of which the
denominator shall be the current Market Price per share of the Common Stock
on the record date mentioned below less the fair market value on such
record date (as determined by the Board of Directors, whose determination
shall be conclusive evidence of such fair market value) of the portion of
the capital stock, evidences of indebtedness or other non-cash assets so
distributed or of such rights or warrants applicable to one share of Common
Stock (determined on the basis of the number of shares of Common Stock
outstanding on the record date), and of which the numerator shall be the
current Market Price per share of the Common Stock on such record date.
Such adjustment shall become effective immediately after the record date
for the determination of shareholders entitled to receive such
distribution. Notwithstanding the foregoing, in the event that the Company
shall distribute rights or warrants (other than those referred to in
subsection (b) above) ("Rights") pro rata to holders of Common Stock, the
Company may, in lieu of making any adjustment pursuant to this Section 8,
make proper provision so that each Holder of a share of Convertible
Preferred Stock who converts such shares of Convertible Preferred Stock (or
any portion thereof) after the record date for such distribution and prior
to the expiration or redemption of the Rights shall be entitled to receive
upon such conversion, in addition to the shares of Common Stock issuable
upon such conversion (the "Conversion Shares"), a number of Rights to be
determined as follows: (i) if such conversion occurs on or prior to the
date for the distribution to the holders of Rights of separate certificates
evidencing such Rights (the "Distribution Date"), the same number of Rights
to which a holder of a number of shares of Common Stock equal to the number
of Conversion Shares is entitled at the time of such conversion in
accordance with the terms and provisions of and applicable to the Rights
and (ii) if such conversion occurs after the
19
-19-
Distribution Date, the same number of Rights to which a holder of the number of
shares of Common Stock into which the principal amount of the shares of
Convertible Preferred Stock so converted was convertible immediately prior to
the Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
(d) In case the Company shall, by dividend or otherwise, at any time
distribute (a "Triggering Distribution") to all or substantially all holders of
its Common Stock cash in an aggregate amount that, together with the aggregate
amount of all cash distributions to all or substantially all holders of its
Common Stock made within the 12 months preceding the date of payment of the
Triggering Distribution and in respect of which no Conversion Rate adjustment
pursuant to this Section 8 has been made, exceeds 12.5% of the product of the
current Market Price per share of Common Stock on the Business Day (the
"Determination Date") immediately preceding the day on which such Triggering
Distribution is declared by the Company multiplied by the number of shares of
Common Stock outstanding on such date (excluding shares held in the Treasury of
the Company), the Conversion Rate shall be increased so that the same shall
equal the rate determined by multiplying such Conversion Rate in effect
immediately prior to the Determination Date by a fraction, of which the
denominator shall be the current Market Price per share of the Common Stock on
the Determination Date less the amount of cash (plus the fair market value of
such other consideration) so distributed within such 12 months (including,
without limitation, the Triggering Distribution) applicable to one share of
Common Stock (determined on the basis of the number of shares of Common Stock
outstanding on the Determination Date) and the numerator shall be such current
Market Price per share of the Common Stock on the Determination Date, such
reduction to become effective immediately prior to the opening of business on
the day following the date on which the Triggering Distribution is paid.
(e) In any case in which this Section 8 shall require that an
adjustment be made following a record date or a Determination Date, as the case
may be, established for purposes of this Section 8, the Company may elect to
defer (but only until five Business Days following the filing by the Company
with the Transfer Agent of the certificate described in subsection (i) of this
Section 8) issuing to the Holder of any Security converted after such
20
-20-
record date or Determination Date the shares of Common Stock and other Capital
Stock of the Company issuable upon such conversion over and above the shares of
Common Stock and other Capital Stock of the Company issuable upon such
conversion only on the basis of the Conversion Rate prior to adjustment; and, in
lieu of the shares the issuance of which is so deferred, the Company shall issue
or cause its transfer agents to issue due bills or other appropriate evidence
prepared by the Company of the right to receive such shares. If any distribution
in respect of which an adjustment to the Conversion Rate is required to be made
as of the record date, effective date or Determination Date therefor is not
thereafter made or paid by the Company for any reason, the Conversion Rate shall
be readjusted to the Conversion Rate which would then be in effect if such
record date had not been fixed or such effective date or Determination Date had
not occurred.
(f) (i) No adjustment in the Conversion Price or the corresponding
Conversion Rate shall be required unless such adjustment would require an
increase or decrease of at least 1% in such rate; provided, however, that any
adjustments which by reason of this paragraph are not required to be made shall
be carried forward and taken into account in any subsequent adjustment. All
calculations under this paragraph shall be made by the Company and shall be made
to the nearest cent or to the nearest one-hundredth of a share, as the case may
be. No adjustment need be made for a change in the par value or no par value of
the Common Stock.
(ii) No adjustment need be made for a transaction referred to in this
Section 8 if all holders of all of the Company's securities are entitled to
participate in the transaction on a basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction. The Company
shall give notice to the Transfer Agent of any such determination.
(iii) No adjustment need to be made for rights to purchase Common Stock
or issuances of Common Stock pursuant to a Company plan for reinvestment of
dividends of interest. No adjustment need be made for a change in the par value
or a change to no par value of the Common Stock. To the extent that the
Convertible Preferred Stock becomes convertible into the right to receive cash,
no adjustment
21
-21-
need be made thereafter as to the cash. Interest will not accrue on the cash.
(g) The Company shall be entitled to make such reductions in the
Conversion Rate, in additional to those required by Section 8, as it in its
discretion shall determine to be advisable in order that any stock dividends,
subdivisions of shares, distributions of rights to purchase stock or securities
or distributions of securities convertible into or exchangeable for stock
hereafter made by the Company to its shareholders shall not be taxable.
(h) The Company may from time to time reduce the Conversion Rate by an
amount for any period of time if the period is at least 20 days or such longer
period as required by law and if the reduction is irrevocable during the period;
provided, however, that in no event may the Conversion Rate be reduced such that
the Conversion Price is less than the par value of a share of Common Stock.
(i) Whenever the Conversion Rate is adjusted, the Company shall
promptly file with the Transfer Agent an Officers' Certificate briefly stating
the facts requiring the adjustment and the manner of computing it.
(j) The Company shall provide to the Holders reasonable notice of any
event that would result in an adjustment to the Conversion Rate so as to permit
the Holders to effect a conversion of Convertible Preferred Stock into shares of
Common Stock prior to the occurrence of such event.
9. Certain Covenants.
(a) Payments for Consent
The Company nor any of its subsidiaries shall, directly or indirectly,
pay or cause to be paid any consideration, whether by way of dividend or other
distribution, fee or otherwise, to any Holder of shares of the Convertible
Preferred Stock for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Certificate of Designations or the
Convertible Preferred Stock unless such consideration is offered to be paid and
is paid to all Holders of the Convertible Preferred Stock that consent, waive or
agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
22
-22-
(b) Reports
Whether or not required by the rules and regulations of the Commission,
so long as any shares of the Convertible Preferred Stock are outstanding, the
Company shall furnish to the Holders of the Convertible Preferred Stock (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such Forms, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all information that would be required to be
contained in a current report on Form 8-K if the Company were required to file
such reports. In the event the Company has filed any such report with the
Commission, it shall not be obligated to separately furnish the report to any
Holder unless and until such Holder requests a copy of the report. In addition,
whether or not required by the rules and regulations of the Commission, the
Company shall file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request.
10. Reissuance of Convertible Preferred Stock. Shares of Convertible
Preferred Stock redeemed for or converted into Common Stock or that have been
reacquired in any manner shall not be reissued as shares of Convertible
Preferred Stock and shall (upon compliance with any applicable provisions of the
laws of Delaware) have the status of authorized and unissued shares of Preferred
Stock undesignated as to series and may be redesignated and reissued as part of
any series of Preferred Stock; provided, however, that so long as any shares of
Convertible Preferred Stock are outstanding, any issuance of such shares must be
in compliance with the terms hereof.
11. Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
12. Additional Rights of Holders. In addition to the rights provided to
Holders under this Certificate of Designation, Holders shall have the rights set
forth in the Registration Rights Agreement.
23
-23-
13. Amendment, Supplement and Waiver. The Company may amend this
Certificate of Designation with the affirmative vote or consent of the holders
of a majority of the shares of Convertible Preferred Stock then outstanding,
(including votes or consents obtained in connection with a tender offer or
exchange offer for the Convertible Preferred Stock) and, except as otherwise
provided by applicable law, any past default or failure to comply with any
provision of this Certificate of Designation may also be waived with the consent
of such holders. Notwithstanding the foregoing, however, without the consent of
each Holder affected, an amendment or waiver may not (with respect to any shares
of the Convertible Preferred Stock held by a non-consenting Holder): (i) alter
the voting rights with respect to the Convertible Preferred Stock or reduce the
number of shares of the Convertible Preferred Stock whose Holders must consent
to an amendment, supplement or waiver, (ii) reduce the Liquidation Preference of
any share of the Convertible Preferred Stock or adversely alter the provisions
with respect to the redemption of the Convertible Preferred Stock, (iii) reduce
the rate of or change the time for payment of dividends on any share of the
Convertible Preferred Stock, (iv) waive a default in the payment of dividends or
Additional Dividends (if any) on the Convertible Preferred Stock, (v) make any
share of the Convertible Preferred Stock payable in money other than United
States dollars, (vi) make any change in the provisions of the Certificate of
Designation relating to waivers of the rights of Holders of the Convertible
Preferred Stock to receive the Liquidation Preference, dividends or Additional
Dividends (if any) on the Convertible Preferred Stock, or (vii) make any change
in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of the
Convertible Preferred Stock, the Company may (to the extent permitted by, and
subject to the requirements of, Delaware law) amend or supplement this
Certificate of Designation to cure any ambiguity, defect or inconsistency, to
provide for uncertificated shares of the Convertible Preferred Stock in addition
to or in place of certificated shares of the Convertible Preferred Stock, to
make any change that would provide any additional rights or benefits to the
Holders of the Convertible Preferred Stock or to make any change that the Board
of Directors determines, in good faith, is not materially adverse to Holders of
the Convertible Preferred Stock.
14. Transfer and Exchange. When Convertible Preferred Stock is
presented to the Transfer Agent with a request to register the transfer of such
Convertible Preferred Stock or
24
-24-
to exchange such Convertible Preferred Stock for an equal number of shares of
Convertible Preferred Stock of other authorized denominations, the Transfer
Agent shall register the transfer or make the exchange as requested if its
reasonable requirements for such transaction are met and such transfer or
exchange is in compliance with applicable laws or regulations.
15. Certain Definitions. As used in this Certificate of Designation,
the following terms shall have the following meanings (and (1) terms defined in
the singular have comparable meanings when used in the plural and vice versa,
(2) "including" means including without limitation, (3) "or" is not exclusive
and (4) an accounting term not otherwise defined has the meaning assigned to it
in accordance with United States generally accepted accounting principles as in
effect on the Issue Date and all accounting calculations will be determined in
accordance with such principles), unless the content otherwise requires:
"Additional Dividends" means, with respect to any share of Convertible
Preferred Stock, the additional amounts payable pursuant to Section 14 hereof.
"Board of Directors" mean the Board of Directors of the Company or any
committee thereof duty authorized to act on behalf of the Board.
"Business Day" means each day which is not a legal holiday.
"Capital Stock" of any person means any and all shares, interests,
rights to purchase, warrants, options, participation or other equivalents of or
interests in (however designated) equity of such person, including any Preferred
Stock, but excluding any debt securities convertible into or exchangeable for
such equity.
"Closing Price" means on any day the reported last sale price on such
day, or in case no sale takes place on such day, the average of the reported
closing bid and ask prices on the principal national securities exchange (which
shall include the Nasdaq National Market) on which such stock is listed or
admitted to trading (and if the Common Stock is listed or admitted to trading on
more than one U.S. national or non-U.S. securities exchange, the Company shall
determine, in its reasonable discretion, the principal securities exchange on
which such Common Stock is listed or admitted to trading), or if not listed or
admitted to trading on any securities exchange, the
25
-25-
average of the closing bid and ask prices as furnished by any independent
registered broker-dealer firm, selected by the Company for that purpose, in each
case adjusted for any stock split during the relevant period.
"Commission" means the Securities and Exchange Commission.
"Default" means any event which is, or after notice or passage of time
or both would be, a Voting Rights Triggering Event.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holders" means the registered holders from time to time of the
Convertible Preferred Stock.
"Market Price", as of any date, means the average of the daily Closing
Price for the five consecutive trading days ending on such date.
"Officers' Certificate" means a certificate signed by two officers of
the Company.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Registration Rights Agreement" means the Registration Rights Agreement
among the Company and Merrill Lynch, Pierce, Fenner and Smith Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co. Inc.,
BT Alex. Brown Incorporated and Lehman Brothers Inc. with respect to the
Convertible Preferred Stock.
"Securities Act" means the Securities Act of 1933, as amended.
26
-26-
"Shelf Registration Statement" means a shelf registration statement
filed with the Commission to cover resales of Transfer Restricted Securities by
holders thereof, as required by the Registration Rights Agreement.
"Trading Day" means, in respect of any securities exchange or
securities market, each Monday, Tuesday, Wednesday, Thursday and Friday, other
than any day on which securities are not traded on the applicable securities
exchange or in the applicable securities market.
"Transfer Agent" means the transfer agent for the Convertible Preferred
Stock appointed by the Company, which initially shall be The Bank of New York.
"Transfer Restricted Securities" means each share of Convertible
Preferred Stock (or the shares of Common Stock into which such share of
Convertible Preferred Stock is convertible) until (i) the date on which such
security has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (ii) the date on which
such security is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act
(or any successor rule thereof) or would be saleable pursuant to Rule 144(k)
under the Securities Act had it not been held by, or had it never been held by,
an affiliate of the Company.
27
-27-
IN WITNESS WHEREOF, said Global TeleSystems Group, Inc., has caused
this Certificate of Designation to be signed by Grier C. Raclin, its Senior Vice
President -- External Affairs, General Counsel and Corporate Secretary, this
23rd day of April, 1999.
GLOBAL TELESYSTEMS GROUP, INC.
By: /s/ GRIER C. RACLIN
----------------------------------------
Name: Grier C. Raclin
Title: Senior Vice President -- External
Affairs, General Counsel and
Corporate Secretary
28
EXHIBIT A
FORM OF CONVERTIBLE PREFERRED STOCK
FACE OF SECURITY
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3)
OR (7) UNDER THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND IN EACH CASE, IN ACCORDANCE WITH All APPLICABLE SECURITIES
LAWS OF THE STATES OF THE UNITED STATES.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
REGISTRAR AND TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS.
A-1
29
Certificate Number Number of Shares of Convertible
Preferred Stock
CUSIP NO.: 37936U 401
7 1/4% Cumulative Convertible Preferred Stock (par
value $0.0001) (Liquidation Preference $5,000
per share of Convertible Preferred Stock)
of
Global TeleSystems Group, Inc.
Global TeleSystems Group, Inc., a Delaware corporation (the "Company"),
hereby certifies that (the "Holder") is the registered owner of fully paid and
non-assessable preferred securities of the Company designated the 7 1/4%
Cumulative Convertible Preferred Stock (par value $0.0001) (liquidation
preference $5,000 per share of Cumulative Convertible Preferred Stock) (the
"Convertible Preferred Stock"). The shares of Convertible Preferred Stock are
transferable on the books and records of the Registrar, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Convertible Preferred Stock
represented hereby are issued and shall in all respects be subject to the
provisions of the Certificate of Designations dated April , 1999, as the same
may be amended from time to time (the "Certificate of Designations").
Capitalized terms used herein but not defined shall have the meaning given them
in the Certificate of Designations. The Company will provide a copy of the
Certificate of Designations to a Holder without charge upon written request to
the Company at its principal place of business.
Reference is hereby made to select provisions of the Convertible
Preferred Stock set forth on the reverse hereof, and to the Certificate of
Designations, which select provisions and the Certificate of Designations shall
for all purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the
Certificate of Designations and is entitled to the benefits thereunder.
Unless the Transfer Agent's Certificate of Authentication hereon has
been properly executed, these shares of
A-2
30
Convertible Preferred Stock shall not be entitled to any benefit under the
Certificate of Designations or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has executed this certificate this 23rd
day of April, 1999.
GLOBAL TELESYSTEMS GROUP, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
A-3
31
TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Preferred Stock referred to in the
within mentioned Certificate of Designations.
Dated: April 23, 1999
The Bank of New York, N.A.
as Transfer Agent,
By:
-------------------------
Authorized Signatory
A-4
32
REVERSE OF SECURITY
Dividends on each share of Convertible Preferred Stock shall be payable
at a rate per annum set forth in the face hereof or as provided in the
Certificate of Designations.
The shares of Convertible Preferred Stock shall be redeemable as
provided in the Certificate of Designations. The shares of Convertible Preferred
Stock shall be convertible into the Company's Common Stock in the manner and
according to the terms set forth in the Certificate of Designations.
As required under Delaware law, the Company shall furnish to any Holder
upon request and without charge, a full summary statement of the designations,
voting rights preferences, limitations and special rights of the shares of each
class or series authorized to be issued by the Company so far as they have been
fixed and determined and the authority of the Board of Directors to fix and
determine the designations, voting rights, preferences, limitations and special
rights of the class and series of shares of the Company.
A-5
33
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the
shares of Convertible Preferred Stock evidenced hereby to:
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints:______________________________________________________
agent to transfer the shares of Convertible Preferred Stock evidenced hereby on
the books of the Transfer Agent and Registrar. The agent may substitute another
to act for him or her.
Date:
--------------------
Signature:
------------------------------
(Sign exactly as your name
appears on the other side of
this Convertible Preferred
Stock Certificate)
Signature Guarantee:(1)
-----------------------------------------------------
- --------
(1) (Signature must be guaranteed by an "eligible guarantor institution"
that is, a bank, stockbroker, savings and Loan association or credit
union meeting the requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange
Act of 1934, as amended.)
A-6
34
EXHIBIT B
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Convertible, Preferred Stock)
The undersigned hereby irrevocably elects to convert (the "Conversion")
shares of 7 1/4% Cumulative Convertible Preferred Stock (the "Convertible
Preferred Stock"), represented by stock certificate No(s). _______ (the
"Convertible Preferred Stock Certificates") into shares of common stock ("Common
Stock") of Global TeleSystems Group, Inc. (the "Company") according to the
conditions of the Certificate of Designations of the Powers, Preferences and
Relative, Optional and Other Special Rights of the Convertible Preferred Stock
and Qualifications, Limitations and Restrictions Thereof (the "Certificate of
Designations"), as of the date written below. If shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates. No fee will be charged to the holder for any conversion, except
for transfer taxes, if any. A copy of each Convertible Preferred Stock
Certificate is attached hereto (or evidence of loss, theft or destruction
thereof).
The undersigned represents and warrants that all offers and sales by
the undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Convertible Preferred Stock shall be made pursuant to
registration of the Common Stock under the Securities Act of 1933 (the "Act"),
or pursuant to any exemption from registration under the Act.
Any holder, upon the exercise of its Conversion Rates in accordance
with the terms of the Certificate of Designations and the Convertible Preferred
Stock, agrees to be bound by the terms of the Registration Rights Agreement.
Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in or pursuant to the Certificate of Designations.
Date of Conversion:
-----------------------------------------------
Applicable Conversion Rate:
---------------------------------------
B-1
35
Number of shares of Convertible
Preferred Stock to be Converted:
-----------------------------------------
Number of shares of Common Stock
to be Issued: (2)
---------------------------------------------------------
Signature:
----------------------------------------------------------------
Name:
--------------------------------------------------------------------
Address:(3)
---------------------------------------------------------------
Fax No.:
-----------------------------------------------------------------
- --------
(2) The Company is not required to issue shares of Common Stock until the
original Convertible Preferred Stock Certificate(s) (or evidence of
loss, theft or destruction thereof) to be converted are received by the
Company or its Transfer Agent. The Company shall issue and deliver
shares of Common Stock to an overnight courier not later than three
business days following receipt of the original Convertible Preferred
Stock Certificate(s) to be converted.
(3) Address where shares of Common Stock and any other payments or
certificates shall be sent by the Company.
B-2