Exhibit 3.1
-----------
MCLEODUSA INCORPORATED
CERTIFICATE OF DESIGNATION OF THE POWERS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL RIGHTS OF
SERIES B PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
------------------------------------------------------------------------------
McLeodUSA Incorporated (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that, pursuant to authority conferred upon
the board of directors of the Corporation (the "Board of Directors") by the
Corporations's Second Amended and Restated Certificate of Incorporation, as
amended (the "Restated Certificate of Incorporation"), and pursuant to
Section 151 of the General Corporation Law of the State of Delaware, said
Board of Directors is authorized to issue Preferred Stock of the
Corporation in one or more series, and the Board of Directors has approved
and adopted the following in connection with the Corporation's Amended Plan
of Reorganization, dated February 28, 2002, as such plan may be amended or
modified from time to time. The Plan of Reorganization was confirmed by
order entered on April 5, 2002, by the United States Bankruptcy Court for
the District of Delaware:
RESOLVED that, the Board of Directors hereby creates,
authorizes and provides for the issuance of a series of the
preferred stock of the Corporation, par value $.01 per share,
designated as the "Series B Preferred Stock," consisting of 10
shares and having the powers, designation, preferences and
relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set
forth in the Restated Certificate of Incorporation and herein as
follows:
1. Number and Designation. 10 shares of the Preferred Stock of the
Corporation shall constitute a series designated as "Series B Preferred
Stock" (the "Series B Preferred Stock").
2. Definitions. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated.
"Board of Directors" means the Board of Directors of the
Corporation.
"Change of Control" shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), other than the Initial
Holders or their affiliates, a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation or a
corporation owned directly or indirectly by the stockholders of the
Corporation in substantially the same proportions as their ownership of
stock of the Corporation, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under said Act), directly or indirectly, of securities of the
Corporation representing 50% or more of the total voting power represented
by the Corporation's then outstanding Voting Securities, or (ii) during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Corporation and any new
director whose election by the Board of Directors or nomination for
election by the Corporation's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Corporation
approve a merger or consolidation of the Corporation with any other
corporation, other than a merger or consolidation which would result in the
Voting Securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 80% of
the total voting power represented by the Voting Securities of the
Corporation or such surviving entity outstanding immediately after such
merger or consolidation, or the stockholders of the Corporation approve a
plan of complete liquidation of the Corporation or an agreement for the
sale or disposition by the Corporation of (in one transaction or a series
of transactions) all or substantially all the Corporation's assets, and
such merger, consolidation, liquidation, sale or disposition is
consummated.
"Class A Common Stock" means any shares of the Corporation's Class
A common stock, par value $.01 per share, now or hereafter authorized to be
issued, any and all securities of any kind whatsoever of the Corporation
which may be exchanged for or converted into Class A Common Stock, and any
and all securities of any kind whatsoever of the Corporation which may be
issued on or after the date hereof in respect of, in exchange for, or upon
conversion of shares of Class A Common Stock pursuant to a merger,
consolidation, stock split, stock dividend, recapitalization of the
Corporation or otherwise.
"Common Stock" means the Corporation's Class A Common Stock, and
any other common stock of the Corporation.
"Initial Holders" means the recipients of the original issuance of
the Series B Preferred Stock on the Issue Date as shown in the stock record
book of the Corporation.
"Issue Date" means the original date of issuance of shares of
Series B Preferred Stock.
"Voting Securities" means any securities of the Corporation which
vote generally in the election of directors.
3. Voting Rights. (a) The Initial Holders shall not be entitled to
any voting rights except as hereinafter provided in this Section 3 or as
otherwise provided by law.
(b) From and after the Issue Date, the Initial Holders shall be
entitled to designate two directors (the "Two Designees," who shall be
designated specifically as the "First Designee" and the "Second Designee,"
respectively) for election to the Board of Directors of the Corporation
and, voting separately as a series, shall have the exclusive right to vote
for the election of such designees to the Board of Directors; provided
that, notwithstanding the foregoing, (A) the Initial Holders shall continue
to be entitled to designate two directors for election to the Board of
Directors and, voting separately as a series, shall continue to have the
exclusive right to vote for the election of such designees to the Board of
Directors, for as long as, and only for as long as, the Initial Holders
beneficially own at least 40% of the shares of Common Stock beneficially
owned by the Initial Holders on the Issue Date; (B) the entitlement of the
Initial Holders to designate two directors for election to the Board of
Directors, and the exclusive right of the Initial Holders to vote,
separately as a series, for the election of such designees to the Board of
Directors, shall cease immediately upon the Initial Holders beneficially
owning less than 40% of the shares of Common Stock beneficially owned by
the Initial Holders on the Issue Date, and the Initial Holders shall be
entitled to designate one director (the "Single Designee") for election to
the Board of Directors and, voting separately as a series, shall have the
exclusive right to vote for the election of such designee to the Board of
Directors, and to designate one Board Observer (as hereinafter defined),
for as long as, and only for so long as, the Initial Holders beneficially
own less than 40% but more than 20% of the shares of Common Stock
beneficially owned by the Initial Holders on the Issue Date; (C) the
entitlement of the Initial Holders to designate one director for election
to the Board of Directors, and the exclusive right of the Initial Holders
to vote, separately as a series, for the election of such designee to the
Board of Directors, and the exclusive right of the Initial Holders to
designate one Board Observer, and the rights of such Board Observer, shall
cease immediately upon the Initial Holders beneficially owning 20% or less
of the shares of Common Stock beneficially owned by the Initial Holders on
the Issue Date, and the Initial Holders shall be entitled to designate two
Board Observers for as long as, and only for as long as, the Initial
Holders beneficially own 20% or less but at least 10% of the shares of
Common Stock beneficially owned by the Initial Holders on the Issue Date;
(D) immediately upon the Initial Holders beneficially owning less than 10%
of the shares of Common Stock beneficially owned by the Initial Holders on
the Issue Date, the entitlement of the Initial Holders to designate two
Board Observers, and the rights of such Board Observers, shall cease; (E)
immediately upon the Initial Holders beneficially owning less than 40% but
more than 20% of the shares of Common Stock beneficially owned by the
Initial Holders on the Issue Date, the Board of Directors shall cause the
total number of directors then constituting the whole Board of Directors to
be decreased by one, and the term of office of the applicable designee
shall terminate; and (F) immediately upon the Initial Holders beneficially
owning 20% or less of the shares of Common Stock beneficially owned by the
Initial Holders on the Issue Date, the Board of Directors shall cause the
total number of directors then constituting the whole Board of Directors to
be decreased by one, and the term of office of the Single Designee shall
terminate. The First Designee, the Second Designee and, if applicable, the
Single Designee shall serve in Class III of the Board of Directors. Any or
all of the Two Designees and the Single Designee may be removed with or
without cause by the Initial Holders, who shall have the exclusive right to
fill the vacancy created thereby. "Board Observer" means a person who shall
not be a member of the Board of Directors and who shall have the rights as
agreed to with the Corporation. For purposes of this Certificate of
Designation, the Initial Holders shall not be deemed to beneficially own
the shares of Common Stock underlying any unexercised warrants to purchase
shares of Common Stock.
(c) Without the written consent of the Initial Holders, the
Corporation will not amend, alter or repeal any provision of the Restated
Certificate of Incorporation or this Certificate of Designation so as to
adversely affect the preferences, rights or powers of the Series B
Preferred Stock or to authorize the issuance of, or to issue any,
additional shares of Series B Preferred Stock.
(d) Each share of Series B Preferred Stock shall vote with Common
Stock on all matters submitted to a vote of stockholders of the
Corporation. Except as otherwise provided herein or by law, the holders of
Series B Preferred Stock and the holders of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of
the Corporation.
(e) In exercising the voting rights set forth in this Section 3,
each share of Series B Preferred Stock shall have one vote per share. The
exercise of any voting rights set forth in this Section 3 may be by written
consent in lieu of a meeting.
4. Cancellation. All then outstanding shares of Series B Preferred
Stock shall be deemed to be and shall be cancelled in full and shall no
longer be issued or outstanding and shall no longer constitute an
obligation of the Corporation in any way upon the occurrence of the earlier
of (a) the Initial Holders beneficially owning less than 10% of the shares
of Common Stock beneficially owned by the Initial Holders on the Issue Date
or (b) upon a Change of Control.
5. Liquidation Preference. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, each holder of
Series B Preferred Stock shall be entitled to be paid, out of the assets of
the Corporation available for distribution to its stockholders, an amount
equal to $1.00 per share for each share of Series B Preferred Stock held by
such holder before any distribution is made on any Common Stock. The rights
of the Series B Preferred Stock upon liquidation, dissolution or winding-up
of the Corporation shall be junior to each class of preferred stock of the
Corporation whether outstanding on the Issue Date or issued after the Issue
Date.
6. Other Rights and Powers. Except as set forth herein, the shares
of Series B Preferred Stock shall not have any relative, participating,
optional or other special rights (including, without limitation, any
rights to convert into Common Stock or any rights to dividends) and powers
and the consent of the holders thereof shall not be required for the taking
of any corporate action. Without limiting the foregoing, the increase or
decrease in the amount of authorized shares of any class of capital stock
of the Corporation, including preferred stock (other than the Series B
Preferred Stock), shall not require the consent of holders of Series B
Preferred Stock.
7. Restrictions on Transfer. Notwithstanding anything to the
contrary contained herein or in the Restated Certificate of Incorporation,
any share(s) of Series B Preferred Stock not beneficially owned by the
Initial Holders shall, immediately upon the occurrence of the event which
effected the transfer or other disposition of such share(s), be deemed to
be and shall be cancelled in full and shall no longer be issued or
outstanding and shall no longer constitute an obligation of the Corporation
in any way.
8. General Provisions. (a) The term "person" as used herein means
any corporation, limited liability company, partnership, trust,
organization, association, other entity or individual.
(b) The headings of the sections, paragraphs, subparagraphs,
clauses and subclauses of this Certificate of Designation are for
convenience of reference only and shall not define, limit or affect any of
the provisions hereof.
IN WITNESS WHEREOF, said McLeodUSA Incorporated has caused this
Certificate of Designations to be signed this 12th day of April, 2002.
McLEODUSA INCORPORATED
By: /s/ Stephen C. Gray
----------------------
Name: Stephen C. Gray
Title: President and Chief
Executive Officer