CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION OF
PEOPLES TELEPHONE COMPANY, INC.
UNDER SECTION 805 OF
THE BUSINESS CORPORATION LAW
1. The name of the corporation is Peoples Telephone
Company, Inc. (formed under the name of Shirts Unlimited Franchise,
Inc.) (the "Corporation").
2. The Corporation originally filed its Certificate of
Incorporation with the New York Department of State on September 5,
1968.
3. The total number of authorized shares of capital
stock of the Corporation is 30,000,000, of which 25,000,000 shares
are Common Stock, par value $.01 per share, and 5,000,000 shares
are Preferred Stock, par value $01. per share ("Preferred Stock").
As of the date hereof and except as set forth herein, the
Corporation has a total of 4,300,000 shares of Preferred Stock
undesignated as to series, none of which is outstanding. The
Corporation previously authorized and issued 100,000 shares of
Preferred Stock, designated Series A Preferred Stock, par value
$.01 per share, all of which have been retired and may not be
issued, and previously authorized 600,000 shares of Preferred
Stock, designated Series B Preferred Stock, par value $.01 per
share, none of which is outstanding.
4. Pursuant to the authority granted to the Board of
Directors of the Corporation by Section II, Article Fourth, of its
Certificate of Incorporation, the Corporation hereby amends it
Certificate of Incorporation by the addition of a provision stating
the number, designation, relative rights, preferences and
limitations of a series of the Corporation's Preferred Stock as
fixed by the Board of Directors of the Corporation, as follows
(except as otherwise indicated herein, capitalized terms used
herein are defined in Section M herein):
SECTION A. Designation and Amount; Par Value. The
shares of such series shall be designated as "Series C Cumulative
Convertible Preferred Stock" (the "Convertible Preferred Stock")
and the number of authorized shares constituting Convertible
Preferred Stock shall be 160,000. The par value of each share of
such series shall be $.01.
SECTION B. Dividends.
1. General Obligation. When and as declared by the
Corporation's Board of Directors and to the extent permitted under
the New York Business Corporation Law (the "NYBCL"), the
Corporation will pay preferential dividends to the holders of the
Convertible Preferred Stock as provided in this Section B. Except
as otherwise provided herein, dividends on each share of
Convertible Preferred Stock (a "Share") will accrue on a daily
basis at a rate of 7% per annum of the Liquidation Value thereof
(plus all accumulated and unpaid dividends thereon) from and
including the Date of Issuance (as defined below) of such Share to
and including the date on which the Liquidation Value (plus all
accrued and unpaid dividends thereon) of such Share is paid in full
or the date on which such share is converted into shares of
Conversion Stock. Such dividends will accrue whether or not they
have been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of
dividends. The date on which the Corporation initially issues any
Share will be deemed to be its "Date of Issuance" regardless of the
number of times a transfer of such Share is made on the stock
records maintained by or for the Corporation and regardless of the
number of certificates which may be issued to evidence such Share.
The dividends on each Share shall be payable on each Dividend
Reference Date during the first three years following the Date of
Issuance, at the Corporation's election either in cash or
accumulating. Commencing on June 30, 1998 and on each Dividend
Reference Date thereafter, all accrued and unpaid dividends shall
be paid in cash unless and to the extent the Corporation is
prohibited from paying such dividends in cash under the Indenture
or the Credit Agreement and, except to the extent paid in cash,
such dividends will accumulate on each such Dividend Reference
Date. Notwithstanding the foregoing, all dividends otherwise
accruing pursuant to this Section B1 will cease to accrue as of a
Dividend Termination Date, so long as the Corporation has paid in
cash all dividends which have accrued and are unpaid through such
Dividend Termination Date. Further, notwithstanding termination of
the dividend pursuant to the immediately preceding sentence, the
dividend rate is subject to increase (or, if the dividend has
previously terminated, is subject to resume accruing) pursuant to
Section L2(a) (except on account of any Event of Noncompliance
which is described in Section L1(c)(i) which occurs after dividends
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pursuant to this Section have otherwise ceased to accrue on account
of the immediately preceding sentence).
2. Dividend Reference Dates. The accrued dividends
will be payable on June 30 and December 31 of each year commencing
on December 31, 1995 (the "Dividend Reference Dates") to the
holders of record of the Convertible Preferred Stock at the close
of business on the immediately preceding June 15 and December 15.
To the extent that all accrued dividends are not paid on the
Dividend Reference Dates, all dividends which have accrued on each
Share outstanding during the six-month period (or other period in
the case of the initial Dividend Reference Date) ending upon each
such Dividend Reference Date will be accumulated and shall remain
accumulated dividends with respect to such Share until paid.
3. Distribution of Partial Dividend Payments. Except
as otherwise provided herein, if at any time the Corporation elects
to pay dividends in cash and pays less than the total amount of
dividends then accrued with respect to the Convertible Preferred
Stock, such payment will be distributed ratably among the holders
of the Convertible Preferred Stock based upon the aggregate accrued
but unpaid dividends on the Shares of Convertible Preferred Stock
held by each such holder, and any amounts of such dividends
remaining thereafter shall be accumulated and shall remain
accumulated dividends with respect to such Share until paid.
SECTION C. Liquidation. Upon any liquidation,
dissolution or winding up of the Corporation, the holders of the
Convertible Preferred Stock will be entitled to be paid, before any
distribution or payment is made upon any of the Junior Securities,
an amount in cash equal to the aggregate Liquidation Value (plus
all accrued and unpaid dividends thereon) of all such Convertible
Preferred Stock outstanding, and the holders of Convertible
Preferred Stock will not be entitled to any further payment. If
upon any such liquidation, dissolution or winding up of the
Corporation, the Corporation's assets to be distributed among the
holders of the Convertible Preferred Stock are insufficient to
permit payment to such holders of the aggregate amount which they
are entitled to be paid, then the entire assets to be distributed
shall be distributed ratably among such holders based upon the
aggregate Liquidation Value (plus all accrued and unpaid dividends)
of the Convertible Preferred Stock held by each such holder. Prior
to the time of any liquidation, dissolution or winding up of the
Corporation, the Corporation shall declare for payment all accrued
and unpaid dividends with respect to the Convertible Preferred
Stock. The Corporation will mail written notice of such
liquidation, dissolution or winding up, not less than 10 days prior
to the payment date stated therein, to each record holder of
Convertible Preferred Stock. Neither the consolidation or merger
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of the Corporation into or with any other corporation or
corporations, nor the reduction of the capital stock of the
Corporation, will be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section C.
SECTION D. Redemptions.
1. Scheduled Redemption. On July 19, 2005 (the
"Scheduled Redemption Date"), the Corporation will redeem all
issued and outstanding Shares of Convertible Preferred Stock, at a
price per Share equal to the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon).
2. Optional Redemptions. The Corporation may at any
time and from time to time after the Date of Issuance redeem all or
any portion of the Shares of Convertible Preferred Stock then
outstanding. Upon any such redemption, the Corporation shall pay
a price per Share equal to the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon).
3. Redemption Price. For each Share which is to be
redeemed, the Corporation will be obligated on the Redemption Date
to pay to the holder thereof (upon surrender by such holder at the
Corporation's principal office of the certificate representing such
Share) an amount in immediately available funds equal to the
Liquidation Value thereof (plus all accrued and unpaid dividends
thereon). If the Corporation's funds which are legally available
for redemption of Shares on any Redemption Date are insufficient to
redeem the total number of Shares to be redeemed on such date,
those funds which are legally available will be used to redeem the
maximum possible number of Shares ratably among the holders of the
Shares to be redeemed based upon the aggregate Liquidation Value of
such Shares (plus all accrued and unpaid dividends thereon) held by
each such holder. At any time thereafter when additional funds of
the Corporation are legally available for the redemption of Shares,
such funds will immediately be used to redeem the balance of the
Shares which the Corporation has become obligated to redeem on any
Redemption Date but which it has not redeemed.
4. Notice of Redemption. Except as otherwise provided
herein, the Corporation will mail written notice of each redemption
of Convertible Preferred Stock to each record holder not more than
60 nor less than 30 days prior to the date on which such redemption
is to be made. In case fewer than the total number of Shares
represented by any certificate are redeemed, a new certificate
representing the number of unredeemed Shares will be issued to the
holder thereof without cost to such holder within 3 business days
after surrender of the certificate representing the redeemed
Shares.
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5. Determination of the Number of Each Holder's Shares
to be Redeemed. Except as otherwise provided herein, the number of
Shares of Convertible Preferred Stock to be redeemed from each
holder thereof in redemptions hereunder will be the number of
Shares determined by multiplying the total number of Shares to be
redeemed times a fraction, the numerator of which will be the total
number of Shares then held by such holder and the denominator of
which will be the total number of Shares of Convertible Preferred
Stock then outstanding.
6. Dividends After Redemption Date. No Share is
entitled to any dividends accruing after the date on which the
Liquidation Value (plus all accrued and unpaid dividends thereon)
of such Share is paid in full. On such date all rights of the
holder of such Share will cease, and such Share will not be deemed
to be outstanding.
7. Redeemed or Otherwise Acquired Shares. Any Shares
which are redeemed or otherwise acquired by the Corporation will be
cancelled and will not be reissued, sold or transferred.
8. Special Redemptions.
If a Change of Control (as defined below) has occurred or
the Corporation obtains knowledge that a Change of Control is
proposed to occur, the Corporation shall give prompt written notice
of such Change of Control describing in reasonable detail the
material terms and date of consummation thereof to each holder of
Convertible Preferred Stock, but in any event such notice shall not
be given later than 5 days after the occurrence of such Change of
Control, and the Corporation shall give each holder of Convertible
Preferred Stock prompt written notice of any material change in the
terms or timing of such transaction. Any holder of Convertible
Preferred Stock may require the Corporation to redeem all or any
portion of the Convertible Preferred Stock owned by such holder at
a price per Share equal to the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon) by giving written notice to
the Corporation of such election prior to 21 days after receipt of
the first such notice from the Corporation which confirms that a
Change of Control has occurred (the "Expiration Date"); provided
that in no event shall the Corporation be obligated to redeem
Shares unless (a) all amounts then due and payable under the Credit
Agreement (whether at maturity, by acceleration or otherwise) have
been paid in full and (b)(i) a Change of Control Offer (as defined
in the Indenture, as in effect on the Date of Issuance) has been
made to the holders of the notes outstanding under the Indenture
(if and to the extent that any such Change of Control Offer is
required to be made pursuant to the Indenture as in effect at the
time of the applicable Change of Control) and all such notes which
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have been validly tendered in accordance therewith have been
purchased in accordance with the terms of the Indenture applicable
thereto as in effect on the Date of Issuance (if and to the extent
required pursuant to the Indenture as in effect at the time of the
applicable Change of Control), and (ii) the Corporation shall not,
since the date of such Change of Control Offer, have defaulted in
the payment when due of any amount of principal, interest or
premium owing with respect to any notes outstanding pursuant to the
Indenture (except any such default which shall have been cured or
waived). The Corporation shall give prompt written notice (a
"Second Notice") of each such election to all other holders of
Convertible Preferred Stock within 5 days after the receipt
thereof, and each such holder shall have until the later of (i) the
Expiration Date or (ii) 10 days after receipt of the latest Second
Notice to request redemption hereunder (by giving written notice to
the Corporation) of all or any portion of the Convertible Preferred
Stock owned by such holder.
Subject to the proviso of the second sentence of the
preceding paragraph, upon receipt of such election(s), the
Corporation shall be obligated to redeem the aggregate number of
Shares specified therein on the later of (i) 90 days following
occurrence of the Change of Control or (ii) 5 days after the
Corporation's receipt of such election(s).
For purposes hereof, "Change of Control" has the meaning
given such term in the Indenture as in effect on the Date of
Issuance, without amendment or modification thereof and whether or
not any notes issued pursuant to the Indenture are outstanding.
Redemptions made pursuant to this Section D8 shall not
relieve the Corporation of its obligation pursuant to Section D1
above to redeem any Convertible Preferred Stock outstanding on the
Scheduled Redemption Date.
SECTION E. Priority of Convertible Preferred Stock on
Dividends and Redemptions. So long as any Convertible Preferred
Stock remains outstanding, without the prior written consent of the
holders of a majority of the outstanding shares of Convertible
Preferred Stock, the Corporation shall not, nor shall it permit any
Subsidiary to, redeem, purchase or otherwise acquire directly or
indirectly any Junior Securities, nor shall the Corporation
directly or indirectly pay or declare any dividend or make any
distribution upon any Junior Securities (other than dividends
payable solely in the securities in respect of which such dividends
are paid).
SECTION F. Election of Directors.
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1. So long as at least 50,000 shares of
Convertible Preferred Stock are outstanding and held of record by
Qualified Convertible Preferred Holders (as defined below), then
the holders of a majority of the Convertible Preferred Stock,
voting separately as a single class in the election of directors of
the Corporation, to the exclusion of all other classes of the
Corporation's capital stock and with each Share of Convertible
Preferred Stock entitled to one vote, shall be entitled to elect
two (2) directors to serve on the Corporation's Board of Directors
until his successor is duly elected by holders of a majority of
the Convertible Preferred Stock or he is removed from office by
holders of a majority of the Convertible Preferred Stock; and so
long as Qualified Convertible Preferred Holders hold of record an
aggregate of less than 50,000 but at least 25,000 shares of
Convertible Preferred Stock, then the holders of a majority of the
Convertible Preferred Stock, voting separately as a single class in
the election of directors of the Corporation, to the exclusion of
all other classes of the Corporation's capital stock and with each
Share of Convertible Preferred Stock entitled to one vote, shall be
entitled to elect one (1) director to serve on the Corporation's
Board of Directors until his successor is duly elected by holders
of a majority of the Convertible Preferred Stock or he is removed
from office by holders of a majority of the Convertible Preferred
Stock. If the holders of a majority of the Convertible Preferred
Stock for any reason fail to elect anyone to fill any such
directorship, such position shall remain vacant until such time as
the holders of a majority of the Convertible Preferred Stock elect
a director to fill such position and shall not be filled by
resolution or vote of the Corporation's Board of Directors or the
Corporation's other stockholders.
2. So long as the holders of a majority of the
Convertible Preferred Stock have the right to elect at least one
director pursuant to Section F1, the Corporation's Board of
Directors will be comprised of no more than six (6) directors, who
shall include the Corporation's Chief Executive Officer and
President. Each director elected by the holders of the Convertible
Preferred Stock will be paid fees not less than the fees paid to
any other member of the Corporation's Board of Directors (excluding
fees payable for services rendered in their capacity other than as
directors) and will be reimbursed for all reasonable expenses
relating to attending each meeting of the Corporation's Board of
Directors. For purposes of this Section F, "Qualified Convertible
Preferred Holders" means and includes, collectively, UBS, any
successor to all or substantially all of the business or assets
thereof and each Affiliate of the foregoing.
SECTION G. Other Voting Rights. The holders of the
Convertible Preferred Stock shall be entitled to notice of all
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stockholders' meetings in accordance with the Corporation's bylaws,
and the holders of the Convertible Preferred Stock shall be
entitled to vote on all matters submitted to the stockholders for
a vote together with the holders of the Common Stock voting
together as a single class with each share of Common Stock entitled
to one vote per share and each Share of Convertible Preferred Stock
entitled to one vote for each share of Common Stock issuable upon
conversion of the Convertible Preferred Stock as of the record date
for such vote or, if no record date is specified, as of the date of
such vote.
SECTION H. Conversion.
1. Conversion Procedure.
(a) At any time and from time to time, any holder
of Convertible Preferred Stock may convert all or any portion of
the Convertible Preferred Stock (including any fraction of a Share)
held by such holder into a number of shares of Conversion Stock
computed by multiplying the number of Shares to be converted by
$100.00 and dividing the result by the Conversion Price then in
effect.
(b) Except as otherwise provided herein, each
conversion of Convertible Preferred Stock shall be deemed to have
been effected as of the close of business on the date on which the
certificate or certificates representing the Convertible Preferred
Stock to be converted have been surrendered for conversion at the
principal office of the Corporation. At the time any such
conversion has been effected, the rights of the holder of the
Shares converted as a holder of Convertible Preferred Stock shall
cease and the Person or Persons in whose name or names any
certificate or certificates for shares of Conversion Stock are to
be issued upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Conversion Stock
represented thereby.
(c) The conversion rights of any Share subject to
redemption hereunder shall terminate on the Redemption Date for
such Share unless the Corporation has failed to pay to the holder
thereof the Liquidation Value of such Share (plus all accrued and
unpaid dividends thereon).
(d) Notwithstanding any other provision hereof, if
a conversion of Convertible Preferred Stock is to be made in
connection with a Change of Control or other transaction affecting
the Corporation, the conversion of any Shares of Convertible
Preferred Stock may, at the election of the holder thereof, be
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conditioned upon the consummation of such transaction, in which
case such conversion shall not be deemed to be effective until such
transaction has been consummated.
(e) As soon as possible after a conversion has been
effected (but in any event within 5 business days in the case of
subparagraph (i) below), the Corporation shall deliver to the
converting holder:
(i) a certificate or certificates represent-
ing the number of shares of Conversion Stock issuable by reason of
such conversion in such name or names and such denomination or
denominations as the converting holder has specified;
(ii) payment of cash in an amount equal to
all accrued dividends with respect to each Share converted which
have not been paid prior thereto provided that the Corporation will
not be obligated to pay such amount to the extent it is prohibited
from doing so by the NYBCL or by the terms of the Indenture or the
Credit Agreement; provided further that any dividend not paid shall
continue to accumulate, and dividends shall continue to accrue with
respect thereto, and such amount shall be paid in cash as and when,
and to the extent, the Corporation is not prohibited from doing so
by the NYBCL or by the terms of the Indenture and the Credit
Agreement, and in any event all such accrued dividends shall be
paid in cash not later than the tenth anniversary of the Date of
Issuance, to the extent not previously paid in cash, subject to the
last two sentences of Section D2 above; and
(iii) a certificate representing any Shares of
Convertible Preferred Stock which were represented by the
certificate or certificates delivered to the Corporation in
connection with such conversion but which were not converted.
(f) If for any reason the Corporation is unable to
pay any portion of the accrued and unpaid dividends on Convertible
Preferred Stock being converted, the unpaid portion of such
dividends may, at the election of the converting holder made by
giving written notice thereof to the Corporation at any time
thereafter, be converted into an additional number of shares of
Conversion Stock determined by dividing (i) the amount of the
unpaid portion of such dividends, by (ii) 95% of the Market Price
of one share of the Conversion Stock as of the date of such notice.
(g) The issuance of certificates for shares of
Conversion Stock upon conversion of Convertible Preferred Stock
shall be made without charge to the holders of such Convertible
Preferred Stock for any issuance tax in respect thereof or other
cost incurred by the Corporation in connection with such conversion
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and the related issuance of shares of Conversion Stock. Upon
conversion of each Share of Convertible Preferred Stock, the
Corporation shall take all such actions as are necessary in order
to insure that the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid and nonassessable,
free and clear of all taxes, liens, charges and encumbrances with
respect to the issuance thereof.
(h) The Corporation shall not close its books
against the transfer of Convertible Preferred Stock or of
Conversion Stock issued or issuable upon conversion of Convertible
Preferred Stock in any manner which interferes with the timely
conversion of Convertible Preferred Stock. The Corporation shall
assist and cooperate with any holder of Shares required to make any
governmental filings or obtain any governmental approval prior to
or in connection with any conversion of Shares hereunder
(including, without limitation, making any filings required to be
made by the Corporation).
(i) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of
Conversion Stock, solely for the purpose of issuance upon the
conversion of the Convertible Preferred Stock, such number of
shares of Conversion Stock as are issuable upon the conversion of
all outstanding Convertible Preferred Stock. All shares of
Conversion Stock which are so issuable shall, when issued, be duly
and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges. The Corporation shall take all such
actions as may be necessary to assure that all such shares of
Conversion Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of
any domestic securities exchange or the NASDAQ National Market upon
which shares of Conversion Stock may be listed (except for official
notice of issuance which shall be immediately delivered by the
Corporation upon each such issuance). The Corporation shall not
take any action which would cause the number of authorized but
unissued shares of Conversion Stock to be less than the number of
such shares required to be reserved hereunder for issuance upon
conversion of the Convertible Preferred Stock.
(j) If any fractional interest in a share of
Conversion Stock would, except for the provisions of this
subparagraph, be delivered upon any conversion of the Convertible
Preferred Stock, at the request of the holder thereof, the
Corporation, in lieu of delivering the fractional share therefor,
shall pay an amount to the holder thereof equal to the Market Price
of such fractional interest as of the date of conversion.
2. Conversion Price.
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(a) The initial "Conversion Price" shall be $5.25
per share. In order to prevent dilution of the conversion rights
granted under this Section H, the Conversion Price shall be subject
to adjustment from time to time pursuant to this Section H2.
(b) If and whenever on or after the original Date
of Issuance of the Convertible Preferred Stock the Corporation
issues or sells, or in accordance with Section H3 is deemed to have
issued or sold, any shares of its Common Stock for a consideration
per share less than the Conversion Price in effect immediately
prior to the time of such issue or sale, then immediately upon such
issue or sale or deemed issue or sale the Conversion Price shall be
reduced to the Conversion Price determined by dividing (i) the sum
of (1) the product derived by multiplying the Conversion Price in
effect immediately prior to such issue or sale by the number of
shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (2) the consideration, if any, received by the
Corporation upon such issue or sale, by (ii) the number of shares
of Common Stock Deemed Outstanding immediately after such issue or
sale.
(c) Notwithstanding the foregoing, there shall be
no adjustment in the Conversion Price as a result of any issue or
sale (or deemed issue or sale) of (i) shares of Common Stock upon
exercise of the Warrants in accordance with the terms thereof as in
effect at the Date of Issuance, (ii) shares of Common Stock
pursuant to stock options, warrants and other rights to acquire
Common Stock described in Schedule 4.3 to the Securities Purchase
Agreement (as such number of shares is proportionately adjusted for
subsequent stock splits, combinations of shares and stock dividends
affecting the Common Stock), in each case pursuant to the terms
thereof as in effect on the date of the Securities Purchase
Agreement or as such terms may thereafter be adjusted as described
in Schedule 4.3, (iii) shares of Common Stock upon exercise of
stock options granted to employees and directors of the Corporation
and its Subsidiaries pursuant to the terms of stock option plans
and stock ownership plans approved by the Corporation's Board of
Directors, and (iv) shares of Common Stock as consideration for the
acquisition of any interest in any business or company from a
Person other than an Affiliate (A) which acquisition is not
prohibited pursuant to the Securities Purchase Agreement, and (B)
so long as the Market Price of the Conversion Stock as of the
closing of such acquisition exceeds $4.50 per share (as such price
is proportionately adjusted for subsequent stock splits, combina-
tions of shares and stock dividends affecting the Conversion Stock)
and so long as the Market Price of the Conversion Stock has not at
any time from the Date of Issuance through such closing time been
equal to or greater than $5.25 per share (as so adjusted).
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3. Effect on Conversion Price of Certain Events. For
purposes of determining the adjusted Conversion Price under
Section H2, the following shall be applicable:
(a) Issuance of Rights or Options. If the
Corporation in any manner grants or sells any Options and the price
per share for which Common Stock is issuable upon the exercise of
such Options, or upon conversion or exchange of any Convertible
Securities issuable upon exercise of such Options, is less than the
Conversion Price in effect immediately prior to the time of the
granting or sale of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options
or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options
shall be deemed to be outstanding and to have been issued and sold
by the Corporation at the time of the granting or sale of such
Options for such price per share. For purposes of this paragraph,
the "price per share for which Common Stock is issuable" shall be
determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the granting or
sale of such Options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon 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 to the Corporation upon
the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (ii) the total maximum number of
shares of Common Stock issuable upon the exercise of such Options
or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further
adjustment of the Conversion Price shall be made when Convertible
Securities are actually issued upon the exercise of such Options or
when Common Stock is actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities.
(b) Issuance of Convertible Securities. If the
Corporation in any manner issues or sells any Convertible
Securities and the price per share for which Common Stock is
issuable upon conversion or exchange thereof is less than the
Conversion Price in effect immediately prior to the time of such
issue or sale, then the maximum number of shares of Common Stock
issuable upon conversion or exchange of such Convertible Securities
shall be deemed to be outstanding and to have been issued and sold
by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes
of this paragraph, the "price per share for which Common Stock is
issuable" shall be determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the
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issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to
the Corporation upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities.
No further adjustment of the Conversion Price shall be made when
Common Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for
which adjustments of the Conversion Price had been or are to be
made pursuant to other provisions of this Section H, no further
adjustment of the Conversion Price shall be made by reason of such
issue or sale.
(c) Change in Option Price or Conversion Rate. If
the purchase price provided for in any Options, the additional
consideration, if any, payable upon the conversion or exchange of
any Convertible Securities or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock
changes at any time, the Conversion Price in effect at the time of
such change shall be immediately adjusted to the Conversion Price
which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. For
purposes of this Section H3, if the terms of any Option or
Convertible Security which was outstanding as of the Date of
Issuance of the Convertible Preferred Stock are changed in the
manner described in the immediately preceding sentence, then such
Option or Convertible Security and the Common Stock deemed issuable
upon exercise, conversion or exchange thereof shall be deemed to
have been issued as of the date of such change; provided that no
such change shall at any time cause the Conversion Price hereunder
to be increased.
(d) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Security without the exercise of any such Option or right, the
Conversion Price then in effect hereunder shall be adjusted
immediately to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior
to such expiration or termination, never been issued. For purposes
of this Section H3, the expiration or termination of any Option or
Convertible Security which was outstanding as of the Date of
Issuance of the Convertible Preferred Stock shall not cause the
conversion Price hereunder to be adjusted unless, and only to the
extent that, a change in the terms of such Option or Convertible
13
Security caused it to be deemed to have been issued after the Date
of Issuance of the Convertible Preferred Stock.
(e) Calculation of Consideration Received. If any
Common Stock, Option or Convertible Security is 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
Corporation therefor (net of discounts, commissions and related
expenses). If any Common Stock, Option or Convertible Security is
issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Corporation shall
be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Corporation shall be the Market Price
thereof as of the date of receipt. If any Common Stock, Option or
Convertible Security is issued to the owners of the non-surviving
entity in connection with any merger in which the Corporation 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 entity as is attributable
to such Common Stock, Option or Convertible Security, as the case
may be. The fair value of any consideration other than cash and
securities shall be determined jointly by the Corporation and the
holders of a majority of the outstanding Convertible Preferred
Stock. If such parties are unable to reach agreement within a
reasonable period of time, the fair value of such consideration
shall be determined by an independent appraiser experienced in
valuing such type of consideration jointly selected by the
Corporation and the holders of a majority of the outstanding
Convertible Preferred Stock. The determination of such appraiser
shall be final and binding upon the parties, and the fees and
expenses of such appraiser shall be borne by the Corporation.
(f) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of
the Corporation, together comprising one integrated transaction in
which no specific consideration is allocated to such Option by the
parties thereto, the Option shall be deemed to have been issued for
a consideration of $.01.
(g) Treasury Shares. 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 Corporation or any
Subsidiary, and the disposition of any shares so owned or held
shall be considered an issue or sale of Common Stock.
(h) Record Date. If the Corporation takes a record
of the holders of Common Stock for the purpose of entitling them
(i) to receive a dividend or other distribution payable in Common
14
Stock, Options or in Convertible Securities or (ii) 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 upon the making of
such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
4. Subdivision or Combination of Common Stock. If the
Corporation at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and if the
Corporation at any time combines (by reverse stock split or
otherwise) one or more classes of its outstanding shares of Common
Stock into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination shall be
proportionately increased.
5. Reorganization, Reclassification, Consolidation,
Merger or Sale. Any recapitalization, reorganization, reclassifi-
cation, consolidation, merger, sale of all or substantially all of
the Corporation's assets or other transaction, in each case which
is effected in such a manner that the holders of Common Stock are
entitled to receive (either directly or upon subsequent liquida-
tion) stock, securities or assets with respect to or in exchange
for Common Stock, is referred to herein as an "Organic Change".
Prior to the consummation of any Organic Change, the Corporation
shall make appropriate provisions (in form and substance
satisfactory to the holders of a majority of the Convertible
Preferred Stock then outstanding) to insure that each of the
holders of Convertible Preferred Stock shall thereafter have the
right to acquire and receive, in lieu of or in addition to (as the
case may be) the shares of Conversion Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's
Convertible Preferred Stock, such shares of stock, securities or
assets as such holder would have received in connection with such
Organic Change if such holder had converted its Convertible
Preferred Stock immediately prior to such Organic Change. In each
such case, the Corporation shall also make appropriate provisions
(in form and substance satisfactory to the holders of a majority of
the Convertible Preferred Stock then outstanding) to insure that
the provisions of this Section H and Section I hereof shall
thereafter be applicable to the Convertible Preferred Stock
(including, in the case of any such consolidation, merger or sale
in which the successor entity or purchasing entity is other than
the Corporation an immediate adjustment of the Conversion Price to
the value for the Common Stock reflected by the terms of such
15
consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Conversion Stock acquirable
and receivable upon conversion of Convertible Preferred Stock, if
the value so reflected is less than the Conversion Price in effect
immediately prior to such consolidation, merger or sale). The
Corporation shall not effect any such consolidation, merger or
sale, unless prior to the consummation thereof, the successor
entity (if other than the Corporation) resulting from consolidation
or merger or the entity purchasing such assets assumes by written
instrument (in form and substance reasonably satisfactory to the
holders of a majority of the Convertible Preferred Stock then
outstanding), the obligation to deliver to each such holder such
shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
6. Certain Events. If any event occurs of the type
contemplated by the provisions of this Section H but not expressly
provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or
other rights with equity features), then the Corporation's Board of
Directors shall make an appropriate adjustment in the Conversion
Price so as to protect the rights of the holders of Convertible
Preferred Stock; provided that no adjustment shall be made in
connection with any stock appreciation rights or phantom stock
rights granted to employees pursuant to employee benefit plans
approved by the Corporation's Board of Directors; and provided
further that no such adjustment shall increase the Conversion Price
as otherwise determined pursuant to this Section H or decrease the
number of shares of Conversion Stock issuable upon conversion of
each Share of Convertible Preferred Stock.
7. Notices.
(a) Promptly after any adjustment of the Conversion
Price, the Corporation shall give written notice thereof to all
holders of Convertible Preferred Stock, setting forth in reasonable
detail and certifying the calculation of such adjustment.
(b) The Corporation shall give written notice to
all holders of Convertible Preferred Stock at least 20 days prior
to the date on which the Corporation closes its books or takes a
record (a) with respect to any dividend or distribution upon Common
Stock, (b) with respect to any pro rata subscription offer to
holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(c) The Corporation shall also give written notice
to the holders of Convertible Preferred Stock at least 20 days
prior to the date on which any Organic Change shall take place.
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SECTION I. Purchase Rights. To the extent not
prohibited by paragraph EIGHTH of the Corporation's Certificate of
Amendment if at any time the Corporation grants, issues or sells
any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the "Purchase Rights"), then
each holder of Convertible Preferred Stock shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if
such holder had held the number of shares of Conversion Stock
acquirable upon conversion of such holder's Convertible Preferred
Stock immediately before the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights, or if no such
record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
SECTION J. Registration of Transfer. The Corporation
will keep at its principal office a register for the registration
of Convertible Preferred Stock. Upon the surrender of any
certificate representing Convertible Preferred Stock at such place,
the Corporation will, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a
new certificate or certificates in exchange therefor representing
in the aggregate the number of Shares represented by the
surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of Shares as
is requested by the holder of the surrendered certificate and will
be substantially identical in form to the surrendered certificate,
and dividends will accrue on the Convertible Preferred Stock
represented by such new certificate from the date to which
dividends have been fully paid on such Convertible Preferred Stock
represented by the surrendered certificate.
SECTION K. Replacement. Upon receipt of evidence
reasonably satisfactory to the Corporation (an affidavit of the
registered holder will be satisfactory) of the ownership and the
loss, theft, destruction or mutilation of any certificate
evidencing Shares of any class of Convertible Preferred Stock, and
in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that
if the holder is a Purchaser or other institutional investor its
own agreement will be satisfactory), or, in the case of any such
mutilation upon surrender of such certificate, the Corporation will
(at its expense) execute and deliver in lieu of such certificate a
new certificate of like kind representing the number of Shares of
such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate, and dividends will accrue on the Convertible
Preferred Stock represented by such new certificate from the date
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to which dividends have been fully paid on such lost, stolen,
destroyed or mutilated certificate.
SECTION L. Events of Noncompliance.
1. Definitions. An Event of Noncompliance shall have
occurred if:
(a) the Corporation fails on any Dividend Reference
Date on or after the third anniversary of the Date of Issuance to
pay in cash the full amount of dividends then accrued on the
Convertible Preferred Stock, whether or not legally permissible,
except to the extent prohibited by the Indenture or Credit
Agreement;
(b) the Corporation fails to make any redemption
payment with respect to the Convertible Preferred Stock which it is
required to make hereunder, whether or not such payment is legally
permissible or is prohibited by any agreement to which the
Corporation is subject;
(c) the Corporation (i) breaches any material
representation or warranty, or (ii) otherwise breaches or fails to
perform or observe any material covenant or agreement set forth
herein or in the Definitive Agreements, which breach or failure
continues for 30 days after the Corporation first becomes aware
thereof;
(d) the Corporation fails to pay when due any
amount owing under the Indenture or Credit Agreement, and such
failure continues after any grace period applicable thereunder;
(e) any event described in any of paragraphs (h),
(i) or (j) of Section 5.01 of the Indenture, as in effect on the
Date of Issuance, shall have occurred and be continuing with
respect to the Corporation;
(f) any event described in paragraph (g) of Section
5.01 of the Indenture, as in effect on the Date of Issuance, shall
have occurred and be continuing;
(g) a judgment in excess of $2,500,000 is rendered
against the Corporation or any Subsidiary and, within 60 days after
entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within 60 days after the expiration of
any such stay, such judgment is not discharged; provided that the
Event of Noncompliance will be continuing only to the extent such
amounts remain unpaid; or
18
(h) the Corporation or any Subsidiary becomes in
default of any obligation or agreement evidencing or relating to
indebtedness and the result of such default is that an amount
exceeding $2,500,000 has become due prior to its stated maturity;
provided that the Event of Noncompliance will be continuing only to
the extent such amounts remain unpaid.
2. Consequences of Events of Noncompliance.
(a) If an Event of Noncompliance has occurred, the
dividend rate on the Convertible Preferred Stock shall increase
immediately by an increment of 50 basis points (1/2 percentage
point). Thereafter, until such time as no Event of Noncompliance
exists, the dividend rate shall increase automatically at the end
of each succeeding 90-day period by an additional increment of 50
basis points (1/2 percentage point) up to a maximum of 400 basis
points (4 percentage points). Any increase of the dividend rate
resulting from the operation of this subparagraph shall terminate
as of the close of business on the date on which no Event of
Noncompliance exists, subject to subsequent increases pursuant to
this paragraph.
(b) If an Event of Noncompliance of the type
described in Section L1(e) has occurred, all of the Convertible
Preferred Stock then outstanding shall be subject to immediate
redemption by the Corporation (without any action on the part of
the holders of the Convertible Preferred Stock) at a price per
Share equal to the Liquidation Value thereof (plus all accrued and
unpaid dividends thereon). The Corporation shall immediately
redeem all Convertible Preferred Stock upon the occurrence of such
Event of Noncompliance, and subject, however, to the prior payment
in full of all amounts due and payable under the Credit Agreement
and the Indenture.
(c) If any Event of Noncompliance exists, each
holder of the Convertible Preferred Stock shall also have any other
rights which such holder is entitled to under any contract with the
Corporation or agreement and any other rights which such holder may
have pursuant to applicable law; provided that any payment with
respect to any claim arising from such rights shall be subordinated
to the prior payment in full of all amounts then owing and due
under the Credit Agreement and the Indenture.
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SECTION M. Definitions. Unless defined below or
elsewhere herein, each capitalized term used herein shall have the
meaning given such term in the Securities Purchase Agreement.
"ACP" means Appian Capital Partners, L.L.C., a Delaware
limited liability company.
"Common Stock" means, all shares of the Corporation's
Common Stock, par value $.01 per share, as adjusted for any stock
split, stock dividend, share combination, share exchange,
recapitalization, merger, consolidation or other reorganization.
"Common Stock Deemed Outstanding" means, at any given
time, the number of shares of Common Stock actually outstanding at
such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Sections H3(a) and H3(b) hereof.
"Conversion Stock" means shares of the Common Stock;
provided that if there is a change such that the securities
issuable upon conversion of the Convertible Preferred Stock are
issued by an entity other than the Corporation or there is a change
in the type or class of securities so issuable, then the term
"Conversion Stock" shall mean one share of the security issuable
upon conversion of the Convertible Preferred Stock if such security
is issuable in shares, or shall mean the smallest unit in which
such security is issuable if such security is not issuable in
shares.
"Convertible Securities" means any stock or securities
directly or indirectly convertible into or exchangeable for Common
Stock.
"Credit Agreement" means the Fourth Amended and Restated
Loan and Security Agreement dated as of July 19, 1995, by and among
the Corporation, as borrower, the lenders party thereto from time
to time, and Creditanstalt-Bankverein, as agent for the lenders,
as amended, supplemented or otherwise modified from time to time or
any agreement evidencing a refinancing of such indebtedness,
including any agreement extending the maturity of, refinancing or
restructuring indebtedness thereunder.
"Definitive Agreements" means the Securities Purchase
Agreement, the Warrants and the Registration Rights Agreement, in
each case as amended from time to time in accordance with its
respective terms.
"Dividend Termination Date" means any date following a
period of 45 consecutive trading days (a "Trading Period") during
which the average of the closing prices for the Common Stock on the
20
NASDAQ market exceeded: (x) in the case of any Trading Period of
which the first 23 or more days occur during the fourth year after
the closing, 200% of the conversion price for the Convertible
Preferred Stock in effect as of the end of such Trading Period (the
"First Target"), provided that such closing price for the Common
Stock on each of the final 15 trading days of such Trading Period
shall equal or exceed 90% of the First Target; (y) in the case of
any Trading Period of which the last 23 or more trading days occur
during the fifth year after the closing, 175% of the conversion
price for the Convertible Preferred Stock in effect as of the end
of such Trading Period (the "Second Target"), provided that such
closing price for the Common Stock on each of the final 15 trading
days of such Trading Period shall equal or exceed 90% of the Second
Target; and (z) in the case of any Trading Period of which the last
23 or more trading days occur during the sixth or any subsequent
year after the closing, 150% of the conversion price for the
Convertible Preferred Stock in effect as of the end of such Trading
Period (the "Third Target"), provided that such closing price for
the Common Stock on each of the final 15 trading days of such
Trading Period shall equal or exceed 90% of the Third Target.
"Indenture" means the Indenture governing $100,000,000 in
aggregate principal amount of any series of the Corporation's 12-1/4%
Senior Notes due 2002, dated as of July 15, 1995 between the
Corporation and First Union National Bank of North Carolina, as
trustee, as amended, supplemented or otherwise modified from time
to time or any agreement evidencing a refinancing of such
indebtedness, including any agreement extending the maturity of,
refinancing or restructuring indebtedness thereunder.
"Junior Securities" means any of the Corporation's Stock,
except for the Convertible Preferred Stock.
"Liquidation Value" of any Share as of any particular
date will be equal to $100.00.
"Market Price" of any security means the average of the
closing prices of such security's sales on all securities exchanges
on which such security may at the time be listed or as reported on
the NASDAQ National Market, or, if there has been no sales on any
such exchange or reported on the NASDAQ National Market on any day,
the average of the highest bid and lowest asked prices on all such
exchanges or reported at the end of such day, or, if on any day
such security is not so listed or included in the NASDAQ National
Market, the average of the representative bid and asked prices
quoted in the NASDAQ Stock Market as of 4:00 P.M., New York time,
or, if on any day such security is not quoted in the NASDAQ Stock
Market, the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported by the
21
National Quotation Bureau, Incorporated, or any similar successor
organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being
determined and the 20 consecutive business days prior to such day.
If at any time such security is not listed on any securities
exchange or quoted in the NASDAQ National Market, the NASDAQ Stock
Market or the over-the-counter market, the "Market Price" shall be
the fair value thereof determined jointly by the Corporation and
the holders of a majority of the Convertible Preferred Stock. If
such parties are unable to reach agreement within a reasonable
period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities jointly
selected by the Corporation and the holders of a majority of the
Convertible Preferred Stock. The determination of such appraiser
shall be final and binding upon the parties, and the Corporation
shall pay the fees and expenses of such appraiser.
"Options" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities
other than rights, warrants or options referred to clauses (i),
(ii) or (iii) of Section H2(c) above.
"Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint
stock corporation, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or
political subdivision thereof.
"Purchaser" means UBS.
"Redemption Date" as to any Share means the date
specified in the notice of any redemption at the Corporation's
option or the applicable date specified herein in the case of any
other redemption; provided, that no such date will be a Redemption
Date unless the applicable Liquidation Value (plus all accrued and
unpaid dividends thereon) is actually paid in cash, and if not so
paid, the Redemption Date will be the date on which such
Liquidation Value (plus all accrued and unpaid dividends thereon)
is fully paid in cash.
"Registration Rights Agreement" means the Registration
Rights Agreement as defined in the Securities Purchase Agreement,
as such Registration Rights Agreement may be amended from time to
time in accordance with its terms.
"Securities Purchase Agreement" means the Securities
Purchase Agreement, dated as of July 3, 1995 among the Corporation,
UBS and ACP, as amended from time to time in accordance with its
terms.
22
"Stock" of any Person means any shares, equity or profits
interests, participations or other equivalents (however designated)
of capital stock, whether voting or nonvoting, including any
securities with profit participation features, and any rights,
warrants, options or other securities convertible into or
exercisable or exchangeable for any such shares, equity or profits
interests, participations or other equivalents, or such other
securities, directly or indirectly (or any equivalent ownership
interests, in the case of a Person which is not a corporation).
"Subsidiary" means any corporation of which the shares of
outstanding capital stock possessing the voting power (under
ordinary circumstances) in electing the board of directors are, at
the time as of which any determination is being made, owned by the
Corporation either directly or indirectly through Subsidiaries.
"UBS" means UBS Capital Corporation, a New York
corporation.
"Warrants" means the Warrants issued pursuant to the
Securities Purchase Agreement, as they may be amended from time to
time in accordance with their terms.
SECTION N. Amendment and Waiver No amendment,
modification or waiver will be binding or effective with respect to
any of the provisions of this amendment to the Corporation's
Certificate of Incorporation stating the number, designation,
relative rights, preferences and limitations of the Convertible
Preferred Stock, without the prior written consent of the holders
of at least 80% of the Shares of Convertible Preferred Stock then
outstanding.
SECTION O. Notices. Except as otherwise expressly
provided herein, all notices referred to herein will be in writing
and will be delivered by registered or certified mail, return
receipt requested, postage prepaid and will be deemed to have been
given when so mailed (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's
address as it appears in the stock records of the Corporation
(unless otherwise indicated by any such holder).
5. The provision amending the Corporation's Certificate
of Incorporation as set forth above was duly adopted at a
telephonic meeting (as permitted by Section 12 of the Bylaws of the
Corporation) of the Board of Directors of the Corporation held on
June 6, 1995, and has not been modified, rescinded or amended and
remains in full force and effect as of this day.
23
IN WITNESS WHEREOF, the undersigned President
and Assistant Secretary of the Corporation have executed this
Certificate as of this 18th day of July, 1995.
PEOPLES TELEPHONE COMPANY, INC.
By:________________________
Name:
Title:
By:________________________
Name:
Title:
NOTARIZED:
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