Exhibit 3.1
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
BTI TELECOM CORP.
Pursuant to Section 55-10-07 of the North Carolina General Statutes,
the undersigned corporation hereby submits the following for the purpose of
amending and restating its Articles of Incorporation and does hereby certify as
follows:
1. The name of the corporation is BTI Telecom Corp. The
corporation's original Articles of Incorporation were filed on August 19, 1997
and the corporation's Amended and Restated Articles of Incorporation were filed
on December 16, 1999.
2. The corporation's Amended and Restated Articles of Incorporation
are hereby amended and restated in their entirety, as set forth in the text of
the Second Amended and Restated Articles of Incorporation attached hereto as
Exhibit A.
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3. The Second Amended and Restated Articles of Incorporation of the
corporation were adopted by its shareholders on the 9th day of January 2001, in
the manner prescribed by law.
4. These Second Amended and Restated Articles of Incorporation will
be effective upon filing.
IN WITNESS WHEREOF, the corporation has caused these Articles of
Amendment and Restatement to be signed by R. Michael Newkirk, its President, and
attested by Anthony M. Copeland, its Secretary, this 10th day of January 2001.
BTI TELECOM CORP.
By: /s/ R. Michael Newkirk,
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R. Michael Newkirk, President
Attest:
By: /s/ Anthony M. Copeland,
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Anthony M. Copeland, Secretary
EXHIBIT A
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SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
BTI TELECOM CORP.
ARTICLE I.
The name of the corporation is "BTI Telecom Corp." (the "Corporation").
ARTICLE II.
The current address and county of the registered office of the Corporation
is 4101 Lake Boone Trail, Suite 300, Raleigh, Wake County, North Carolina 27607,
and the name of the registered agent is Larry E. Robbins. The mailing address
of the registered office of the Corporation is the same as its street address.
ARTICLE III.
The purpose for which the Corporation is organized is to engage in any
lawful act or activity for which corporations may be organized under Chapter 55
of the General Statutes of North Carolina.
ARTICLE IV.
The Corporation shall have authority to issue five hundred ten million
(510,000,000) shares. Five hundred million (500,000,000) of such shares shall
be designated Common Stock ("Common Stock"), no par value per share, and ten
million (10,000,000) of such shares shall be designated Preferred Stock
("Preferred Stock"), $0.01 par value per share. Of the authorized shares of
Preferred Stock, two hundred thousand (200,000) shares are designated Series A
Preferred Stock ("Series A Preferred Stock") and sixty thousand (60,000) shares
are designated Series B Preferred Stock ("Series B Preferred Stock").
The Board of Directors is authorized to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock, and within the limitations and restrictions
stated in any resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series, to increase or decrease
(but not below the number of shares of any such series then outstanding) the
number of shares of any such series subsequent to the issue of shares of that
series, to determine the designation of any series and to fix the number of
shares of any series.
The Series A Preferred Stock shall, with respect to dividend rights and
rights on liquidation, dissolution, winding up and Reorganization, rank prior to
the Common Stock and all other series of Preferred Stock (other than the Series
B Preferred Stock), but shall be junior in
right of payment with respect to the Series B Preferred Stock and all
indebtedness incurred by the Corporation. The Series B Preferred Stock shall,
with respect to dividend rights and rights on liquidation, dissolution, winding
up and Reorganization, rank prior to all classes and series of capital stock of
the Corporation, including the Common Stock, the Series A Preferred Stock and
all other series of Preferred Stock, but shall be junior in right of payment
with respect to all indebtedness incurred by the Corporation. The Series A
Preferred Stock and Series B Preferred Stock (collectively, the "Outstanding
Preferred Stock") shall have the rights, preferences, privileges and
restrictions set forth below in this Article IV.
1. Dividends.
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(a) Dividends Payable With Respect to Series A Preferred Stock. The
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holders of the Series A Preferred Stock shall be entitled to receive, out of
funds legally available therefor, cumulative semi-annual dividends equal to the
greater of (i) the amount of dividends calculated at an annual rate per share
equal to six percent (6%) of the original purchase price of $1,000 (as adjusted
as described below, the "Series A Original Price") paid per share for the Series
A Preferred Stock (which amount shall be subject to adjustment whenever there
shall occur a stock split, combination, reclassification or other similar event
involving the Series A Preferred Stock) and (ii) the amount of dividends that
would have been received during such period by the holders of the same number of
shares of Common Stock as the number of shares of Common Stock into which the
Series A Preferred Stock was convertible at such time, such amounts in clause
(i) or (ii) above to be compounded semi-annually such that if the dividend is
not paid on June 30 or December 31, as applicable, for the immediately preceding
six month period (or portion thereof if less than a full six month period), the
unpaid amount shall be added to the Series A Original Price for purposes of
calculating succeeding periods' dividends. Such dividends for any semi-annual
dividend period shall, at the Corporation's option, be payable in cash or added
to the Series A Original Price; provided that if, following its initial public
offering, the Corporation has elected to pay such dividends in cash, but is
prevented from doing so by the terms of any of its outstanding indebtedness, the
Corporation may pay such dividends in shares of registered Common Stock, valued
for purposes of this Section 1(a) at 95% of the Fair Market Value thereof on the
record date relating to such dividend. Such dividends shall be deemed to accrue
on the Series A Preferred Stock and be cumulative, whether or not earned or
declared and whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends. If such cumulative
dividends in respect of any prior or current semi-annual dividend period shall
not have been declared and paid or if there shall not have been a sum sufficient
for the payment thereof set apart in trust for the account of holders of the
Series A Preferred Stock, the deficiency shall first be fully paid before any
dividend or other distribution shall be paid or declared with respect to any
other class of the Corporation's capital stock (other than the Series B
Preferred Stock), now or hereafter outstanding. Upon any conversion of the
Series A Preferred Stock hereunder, all accumulated and unpaid dividends on the
Series A Preferred Stock, whether or not declared, since the date of issue up to
and including the date of conversion thereof shall be added to the Series A
Original Price.
(b) Dividends Payable With Respect to Series B Preferred Stock. The
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holders of the Series B Preferred Stock shall be entitled to receive, out of
funds legally available therefor,
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cumulative semi-annual dividends equal to the greater of (i) the amount of
dividends calculated at an annual rate per share equal to six percent (6%) of
the original purchase price of $1,000 (as adjusted as described below, the
"Series B Original Price") paid per share for the Series B Preferred Stock
(which amount shall be subject to adjustment whenever there shall occur a stock
split, combination, reclassification or other similar event involving the Series
B Preferred Stock) and (ii) the amount of dividends that would have been
received during such period by the holders of the same number of shares of
Common Stock as the number of shares of Common Stock into which the Series B
Preferred Stock was convertible at such time, such amounts in clause (i) or (ii)
above to be compounded semi-annually such that if the dividend is not paid on
June 30 or December 31, as applicable, for the immediately preceding six month
period (or portion thereof if less than a full six month period), the unpaid
amount shall be added to the Series B Original Price for purposes of calculating
succeeding periods' dividends. Such dividends for any semi-annual dividend
period shall, at the Corporation's option, be payable in cash or added to the
Series B Original Price; provided that if, following its initial public
offering, the Corporation has elected to pay such dividends in cash, but is
prevented from doing so by the terms of any of its outstanding indebtedness, the
Corporation may pay such dividends in shares of registered Common Stock, valued
for purposes of this Section 1(b) at 95% of the Fair Market Value thereof on the
record date relating to such dividend. Such dividends shall be deemed to accrue
on the Series B Preferred Stock and be cumulative, whether or not earned or
declared and whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends. If such cumulative
dividends in respect of any prior or current semi-annual dividend period shall
not have been declared and paid or if there shall not have been a sum sufficient
for the payment thereof set apart in trust for the account of holders of the
Series B Preferred Stock, the deficiency shall first be fully paid before any
dividend or other distribution shall be paid or declared with respect to any
other class of the Corporation's capital stock, now or hereafter outstanding.
Upon any conversion of the Series B Preferred Stock hereunder, all accumulated
and unpaid dividends on the Series B Preferred Stock, whether or not declared,
since the date of issue up to and including the date of conversion thereof shall
be added to the Series B Original Price.
(c) Dividends Payable With Respect to Common Stock. In the event the
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Corporation shall pay or declare, make or issue, or shall fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution with respect to the Common Stock payable in (i) securities of
the Corporation other than shares of Common Stock or (ii) cash or other assets,
then and in each such event the Corporation shall concurrently pay or declare,
make or issue, or fix a record date for the determination of holders of Series A
Preferred Stock and holders of Series B Preferred Stock entitled to receive, and
such holders shall receive, at the same time such distribution is made with
respect to Common Stock, the number of securities or the amount of cash or other
assets which they would have received had their Series A Preferred Stock or
Series B Preferred Stock, as the case may be (the "Applicable Preferred Stock"),
been converted into Common Stock immediately prior to the record date for
determining holders of Common Stock entitled to receive such distribution.
2. Liquidation, Dissolution, Winding Up or Reorganization.
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(a) Treatment at Liquidation, Dissolution, Winding Up or Reorganization.
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(i) Series A Preferred Stock. In the event of (x) any liquidation,
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dissolution or winding up of the Corporation, whether voluntary or
involuntary, or (y) at the election of the holders of a majority of the
Series A Preferred Stock, any Reorganization (as defined in Section 4(f)),
holders of each share of Series A Preferred Stock shall be entitled to be
paid out of the assets of the Corporation available for distribution to
holders of the Corporation's capital stock of all classes or series,
whether such assets are capital, surplus, or capital earnings, an amount
equal to the greater of (a) the Series A Liquidation Amount and (b) such
amount per share of Series A Preferred Stock as would have been payable had
each such share been converted into Common Stock immediately prior to such
event of liquidation, dissolution, winding up or Reorganization of the
Corporation pursuant to this Section 2. The amounts payable pursuant to the
immediately preceding sentence shall be paid to the holders of Series A
Preferred Stock before any distribution may be made with respect to the
Common Stock or any other class or series of capital stock (other than the
Series B Preferred Stock). If the assets of the Corporation available for
distribution to its shareholders shall be insufficient to pay the holders
of shares of Series A Preferred Stock the full amount of the Series A
Liquidation Amount to which they shall be entitled, the holders of shares
of Series A Preferred Stock shall share ratably in any distribution of
assets according to the amounts which would be payable with respect to the
Series A Preferred Stock held by them upon such distribution if all amounts
payable on or with respect to said shares were paid in full.
With respect to the Series A Preferred Stock, the "Series A
Liquidation Amount" shall equal the Series A Original Price per share of
Series A Preferred Stock plus, without duplication, all accrued and unpaid
dividends thereon (compounded as described in Section 1(a) above), whether
or not earned or declared, since the date of issue up to and including the
date full payment shall be tendered to the holders of the Series A
Preferred Stock with respect to such liquidation, dissolution, winding up
or Reorganization; provided that such Series A Original Price shall be
subject to equitable adjustment whenever there shall occur a stock split,
combination, reclassification or other similar event involving such Series
A Preferred Stock.
After the payment of all amounts due pursuant to the preceding
paragraphs shall have been made in full to the holders of the Series A
Preferred Stock, the holders of the Series A Preferred Stock shall be
entitled to no further participation in the distribution of the assets of
the Corporation.
(ii) Series B Preferred Stock. In the event of (x) any liquidation,
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dissolution or winding up of the Corporation, whether voluntary or
involuntary, or (y) at the election of the holders of a majority of the
Series B Preferred Stock, any Reorganization, holders of each share of
Series B Preferred Stock shall be entitled to be paid out of the assets of
the Corporation available for distribution to holders of the Corporation's
capital stock of all classes or series, whether such assets are capital,
surplus, or capital earnings, an amount equal to the greatest of (a) the
Series B Liquidation Amount, (b) such amount per share of
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Series B Preferred Stock as would have been payable had each such share
been converted into Common Stock immediately prior to such event of
liquidation, dissolution, winding up or Reorganization of the Corporation
pursuant to this Section 2 and (c) the Change in Control Amount in the
event of a Change in Control Transaction. The amounts payable pursuant to
the immediately preceding sentence shall be paid to the holders of Series B
Preferred Stock before any distribution may be made with respect to the
Common Stock, the Series A Preferred Stock or any other class or series of
capital stock. If the assets of the Corporation available for distribution
to its shareholders shall be insufficient to pay the holders of shares of
Series B Preferred Stock the full amount of the Series B Liquidation Amount
to which they shall be entitled, the holders of shares of Series B
Preferred Stock shall share ratably in any distribution of assets according
to the amounts which would be payable with respect to the Series B
Preferred Stock held by them upon such distribution if all amounts payable
on or with respect to said shares were paid in full.
With respect to the Series B Preferred Stock, the "Series B
Liquidation Amount" shall equal the Series B Original Price per share of
Series B Preferred Stock plus, without duplication, all accrued and unpaid
dividends thereon (compounded as described in Section 1(b) above), whether
or not earned or declared, since the date of issue up to and including the
date full payment shall be tendered to the holders of the Series B
Preferred Stock with respect to such liquidation, dissolution, winding up
or Reorganization; provided that such Series B Original Price shall be
subject to equitable adjustment whenever there shall occur a stock split,
combination, reclassification or other similar event involving such Series
B Preferred Stock.
After the payment of all amounts due pursuant to the preceding
paragraphs shall have been made in full to the holders of the Series B
Preferred Stock, the holders of the Series B Preferred Stock shall be
entitled to no further participation in the distribution of the assets of
the Corporation.
(b) Distributions. Amounts payable pursuant to Section 2(a)(i) shall in
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all events be paid in cash; provided that if such amounts are payable in
connection with a Reorganization, then each holder of the Series A Preferred
Stock shall receive payment as follows: (i) if such consideration consists of
either 100% cash or 100% property or other securities, the holders of the Series
A Preferred Stock shall be entitled to receive the same form of consideration as
is payable with respect to the Common Stock and (ii) if such consideration
consists of a combination of cash and securities or other property, the holders
of the Series A Preferred Stock shall receive the same mix of consideration as
the holders of the Common Stock, pro rata with such holders of Common Stock on
the basis described in Section 4(f) below, unless the aggregate Daily Prices of
all outstanding shares of publicly registered common stock of the issuer of such
securities is less than or equal to $200 million, in which case the holders of
the Series A Preferred Stock may elect to receive all or any portion of such
consideration payment in the form of cash (but in no event more than the
aggregate amount of the cash portion of the consideration being offered to all
shareholders of the Corporation). Notwithstanding the foregoing, the accrued
but unpaid dividends on Series A Preferred Stock that are payable in connection
with a Reorganization pursuant to Section 2(a)(i) shall, in all events, be paid
in the manner set forth in
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Section 1(a) above. Whenever a distribution provided for in Section 2(a)(i) is
payable in property other than cash, the value of such distribution shall be the
Fair Market Value of such property.
Amounts payable pursuant to Section 2(a)(ii) shall in all events be paid in
cash, unless otherwise agreed to by holders of a majority of the Series B
Preferred Stock.
3. Voting Power. Except as otherwise expressly provided in Section 6
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hereof, or as required by law, each holder of Series A Preferred Stock and each
holder of Series B Preferred Stock shall be entitled to vote on all matters and
shall be entitled to that number of votes equal to the largest number of shares
(including fractional shares) of Common Stock into which such holder's shares of
Applicable Preferred Stock could be converted, pursuant to the provisions of
Section 4 hereof, at the record date for the determination of shareholders
entitled to vote on such matter or, if no such record date is established, at
the date such vote is taken or any written consent of shareholders is solicited.
Except as otherwise expressly provided herein or as required by law, the holders
of shares of Series A Preferred Stock, Series B Preferred Stock and Common Stock
shall vote together as a single class on all matters.
4. Conversion Rights. The holders of Series A Preferred Stock and the
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holders of Series B Preferred Stock shall have the following rights with respect
to the conversion of the Applicable Preferred Stock into shares of Common Stock.
(a) General. Subject to and in compliance with the provisions of this
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Section 4, any share of the Series A Preferred Stock or Series B Preferred Stock
may, at the option of the holder, be converted at any time into fully paid and
nonassessable shares of Common Stock. The number of shares of Common Stock to
which a holder of Series A Preferred Stock shall be entitled upon conversion
shall be the product obtained by multiplying the Series A Conversion Rate
(determined as provided in Section 4(b) and subject to adjustment as described
below) by the number of shares of Series A Preferred Stock being converted. The
number of shares of Common Stock to which a holder of Series B Preferred Stock
shall be entitled upon conversion shall be the product obtained by multiplying
the Series B Conversion Rate (determined as provided in Section 4(b) and subject
to adjustment as described below) by the number of shares of Series B Preferred
Stock being converted. In addition, each holder of Series A Preferred Stock and
each holder of Series B Preferred Stock shall be entitled to receive upon
conversion all accumulated and unpaid dividends as provided in Section 1(a) or
1(b), as applicable.
(b) Applicable Conversion Rate. The conversion rate for Series A Preferred
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Stock in effect at any time (the "Series A Conversion Rate") shall be the
quotient obtained by dividing the Series A Original Price by the Series A
Conversion Value, calculated as provided in Section 4(c). The conversion rate
for Series B Preferred Stock in effect at any time (the "Series B Conversion
Rate") shall be the quotient obtained by dividing the Series B Original Price by
the Series B Conversion Value, calculated as provided in Section 4(c).
(c) Applicable Conversion Value. The Series A Conversion Value shall be
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$8.55, except that such amount shall be adjusted from time to time in accordance
with this Section 4
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(the "Series A Conversion Value"). The Series B Conversion Value shall be $4.00,
except that such amount shall be adjusted from time to time in accordance with
this Section 4 (the "Series B Conversion Value"). For purposes hereof,
"Applicable Conversion Value" means the Series A Conversion Value (with respect
to the Series A Preferred Stock) or the Series B Conversion Value (with respect
to the Series B Preferred Stock).
(d) Adjustments to the Conversion Value.
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(i) (A) Upon Sale of Common Stock. Except as otherwise provided in
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Section 4(d)(i)(E), if the Corporation shall, while there are any shares of
Applicable Preferred Stock outstanding, issue or sell (or in accordance
with Section 4(d)(i)(B) shall be deemed to have issued or sold) shares of
its Common Stock without consideration or at a price per share less than
the Applicable Conversion Value in effect immediately prior to such
issuance or sale (or deemed issuance or sale), then in each such case the
Applicable Conversion Value, upon each such issuance or sale, except as
hereinafter provided, shall be lowered so as to be equal to the price at
which such shares of Common Stock were issued or sold; provided that if
such shares were issued or sold without consideration, the Applicable
Conversion Value shall be lowered to equal $0.01.
(B) Upon Issuance of Warrants, Options and Rights to Common
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Stock.
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(1) For the purposes of this Section 4(d)(i), the issuance
of any warrants, options, subscriptions, or purchase rights with
respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or the
issuance of any warrants, options or any rights with respect to such
convertible or exchangeable securities) shall be deemed an issuance of
such Common Stock under Section 4(d)(i)(A) at such time if the Net
Consideration Per Share (as hereinafter determined) which may be
received by the Corporation for such Common Stock shall be less than
the Applicable Conversion Value in effect immediately prior to the
time of such issuance. Any obligation, agreement, or undertaking
(including by fixing of a record date) to issue warrants, options,
subscriptions, purchase rights or convertible or exchangeable
securities at any time in the future shall be deemed to be an issuance
at the time such obligation, agreement or undertaking is made or
arises. No adjustment of the Applicable Conversion Value shall be made
under this Section 4(d)(i) upon the issuance of any shares of Common
Stock which are issued pursuant to the exercise of any warrants,
options, subscriptions, or purchase rights or pursuant to the exercise
of any conversion or exchange rights in any convertible or
exchangeable securities if any adjustment shall previously have been
made upon the issuance of any such warrants, options, subscriptions,
or purchase rights or upon the issuance of any convertible or
exchangeable securities (or upon the issuance of any warrants, options
or any rights therefor) as above provided.
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Should the Net Consideration Per Share of any such warrants,
options, subscriptions, or purchase rights or convertible or
exchangeable securities be decreased from time to time (other than as
a result of a stock split, stock dividend or other similar event),
then upon the effectiveness of each such change, the Applicable
Conversion Value shall be adjusted to the Applicable Conversion Value
as would have been obtained (1) had the adjustments made upon the
issuance of such warrants, options, subscriptions, purchase rights, or
convertible or exchangeable securities been made upon the basis of the
decreased Net Consideration Per Share of such securities and (2) had
the adjustments made to the Applicable Conversion Value since the date
of issuance of such securities been made to the Applicable Conversion
Value as adjusted pursuant to (1) above. Any adjustment of the
Applicable Conversion Value with respect to this Section 4(d)(i)(B)
which relates to warrants, options, subscriptions, purchase rights or
convertible or exchangeable securities with respect to shares of
Common Stock shall be disregarded if, as, when and to the extent such
warrants, options, subscriptions, purchase rights or convertible or
exchangeable securities expire or are canceled without being exercised
or converted, so that the Applicable Conversion Value effective
immediately upon such cancellation or expiration shall be equal to the
Applicable Conversion Value in effect at the time of the issuance of
the expired or canceled warrants, options, subscriptions, purchase
rights, or convertible or exchangeable securities with such additional
adjustments as would have been made to the Applicable Conversion Value
had the expired or canceled warrants, options, subscriptions, purchase
rights or convertible or exchangeable securities not been issued.
(2) For purposes of this Section 4(d)(i)(B), the "Net
Consideration Per Share" which may be received by the Corporation
shall be determined as follows.
(a) The "Net Consideration Per Share" shall mean the
amount equal to the total amount of consideration, if any,
received by the Corporation for the issuance of such warrants,
options, subscriptions, or purchase rights or convertible or
exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Corporation upon
exercise, conversion or exchange thereof, divided by the
aggregate number of shares of Common Stock that would be issued
if all such warrants, options, subscriptions, or purchase
rights or convertible or exchangeable securities were
exercised, exchanged, or converted.
(b) The "Net Consideration Per Share" which may be
received by the Corporation shall be determined in each
instance as of the date of issuance of warrants, options,
subscriptions, or purchase rights or convertible or
exchangeable securities without giving effect to any possible
future upward price adjustments or rate adjustments which may
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be applicable with respect to such warrants, options,
subscriptions, or purchase rights or convertible or
exchangeable securities.
(C) Stock Dividends. Except as provided in paragraph (D) of
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this Section 4(d)(i), in the event the Corporation shall make or issue a
dividend or other distribution payable in Common Stock or securities of the
Corporation convertible into or otherwise exchangeable for Common Stock,
then such dividend or distribution shall be treated as an Extraordinary
Common Stock Event (as defined below).
(D) Consideration Other than Cash. For purposes of this Section
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4(d), if a part or all of the consideration received by the Corporation in
connection with the issuance of shares of the Common Stock or the issuance
of any of the securities described in this Section 4(d) consists of
property other than cash, such consideration shall be valued at its Fair
Market Value.
(E) Exceptions. This Section 4(d)(i) shall not apply under any
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of the circumstances which would constitute an Extraordinary Common Stock
Event (as hereinafter defined in Section 4(d)(ii)). Further, the
Corporation shall not be required to make any adjustment of an Applicable
Conversion Value pursuant to the provisions of this Section 4(d):
(1) in the case of (i) the issuance of shares of Series B
Preferred Stock approved pursuant to Section 6(a)(ii) hereof or the
issuance of shares of Common Stock upon conversion of the Series A
Preferred Stock or the Series B Preferred Stock; (ii) the issuance or
sale of shares of Common Stock upon exercise of stock options or
warrants outstanding on the date of filing of these Second Amended and
Restated Articles of Incorporation or granted under the Corporation's
1997 Stock Option Plan; (iii) the issuance or sale of those certain
warrants issued to Welsh, Carson, Anderson & Stowe VIII, L.P. and its
affiliates in connection with the sale and issuance of shares of
Outstanding Preferred Stock of the Corporation and the issuance or
sale of shares of Common Stock upon exercise of such warrants; (iv)
the issuance or sale of shares or options to purchase shares of the
Corporation's capital stock at a price per share less than the
Applicable Conversion Value, to employees or directors of, or
consultants to, the Corporation pursuant to stock plans or
arrangements under the Corporation's 1997 Stock Option Plan or any
other stock option or similar plan approved unanimously by the
Corporation's Board of Directors; (v) shares of blank check preferred
stock issued to the Company's shareholders (including a pro rata
issuance to the holders of Series A Preferred Stock and the holders of
Series B Preferred Stock) in connection with a rights plan in
accordance with these Second Amended and Restated Articles of
Incorporation; or (vi) the issuance of securities pursuant to the
acquisition of another corporation by the Corporation by merger,
purchase of substantially all the assets or other reorganization
unless, in the case of this clause (vi), the Fair Market Value of the
acquisition consideration is less than $25,000,000; or
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(2) if the Corporation receives written notice from the
holders of at least a majority of the then outstanding shares of
Applicable Preferred Stock agreeing that no such adjustment shall be
made as the result of such issuance.
(ii) Upon Extraordinary Common Stock Event. Upon the happening of an
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Extraordinary Common Stock Event (as hereinafter defined), the Series A
Conversion Value and the Series B Conversion Value shall, simultaneously
with the happening of such Extraordinary Common Stock Event, be adjusted by
multiplying the then effective Applicable Conversion Value by a fraction,
the numerator of which shall be the number of shares of Common Stock
(assuming the conversion or exchange of all securities convertible into or
otherwise exchangeable for the Common Stock) outstanding immediately prior
to such Extraordinary Common Stock Event and the denominator of which shall
be the number of shares of Common Stock (assuming the conversion or
exchange of all securities convertible into or otherwise exchangeable for
the Common Stock) outstanding immediately after such Extraordinary Common
Stock Event, and the products so obtained shall thereafter be the
Applicable Conversion Value. For the purposes of this Section 4(d)(ii) and
Section 4(d)(i)(E), "Extraordinary Common Stock Event" shall mean (A) a
subdivision of outstanding shares of Common Stock into a greater number of
shares of Common Stock, (B) a combination of outstanding shares of the
Common Stock into a smaller number of shares of Common Stock or (C) an
event described in Section 4(d)(i)(C).
(iii) Notwithstanding anything else contained herein, if the Second
Closing (as defined in the Series B Preferred Stock Purchase Agreement
dated as of January 2001 among the Corporation, Welsh, Carson, Anderson &
Stowe VIII, L.P., WCAS Information Partners, L.P. and BTI Investors LLC
(collectively, the "Investor")) does not occur by March 15, 2001, the
Series B Conversion Value shall be lowered to $2.00.
(iv) The Applicable Conversion Value shall be readjusted in the
manner described in this Section 4(d) upon the happening of any successive
events described herein that, pursuant to this Section 4(d), would require
an adjustment to the Applicable Conversion Value.
(e) Reclassification. If the Common Stock issuable upon the conversion of
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the Series A Preferred Stock or Series B Preferred Stock shall be changed into
the same or different number of shares of any class or classes of stock by
reclassification (other than a subdivision or combination of shares or stock
dividend or distribution provided for elsewhere in this Section 4 or by a
Reorganization (as defined in Section 4(f) below)), then and in each such event,
the holder of each share of Series A Preferred Stock or Series B Preferred Stock
shall have the right thereafter to convert such share into the kind and amount
of shares of stock and other securities and property receivable upon such
reclassification by holders of the number of shares of Common Stock into which
such shares of Applicable Preferred Stock might have been converted immediately
prior to such reclassification.
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(f) Capital Reorganization; Merger or Sale of Assets. If at any time or
------------------------------------------------
from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section 4) or a merger, consolidation or similar
business combination of the Corporation with or into another entity, or the
sale, assignment, lease or transfer of all or substantially all of the
Corporation's properties and assets to any other person, or the sale of a
majority of the voting securities of the Corporation in one transaction or a
series of related transactions (any of which events is herein referred to as a
"Reorganization"), then, subject to Section 2(a), as a part of such
Reorganization, provision shall be made so that the holders of Series A
Preferred Stock and the holders of Series B Preferred Stock shall thereafter be
entitled to receive, upon conversion of the Applicable Preferred Stock, the
number of shares of stock or other securities or property of the Corporation, or
of the successor corporation resulting from such Reorganization, to which such
holder would have been entitled if such holder had converted all (or, at the
election of such holder in connection with a Reorganization in which the holders
of the Common Stock sell or exchange fewer than 100% of their shares, the same
percentage as is being sold by the holders of the Common Stock) of its shares of
Applicable Preferred Stock immediately prior to such Reorganization. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of Series
A Preferred Stock and holders of Series B Preferred Stock after the
Reorganization, to the end that the provisions of this Section 4 (including
adjustment of the Applicable Conversion Value then in effect and the number of
shares issuable upon conversion of the Applicable Preferred Stock) shall be
applicable after that event in as nearly equivalent a manner as may be
practicable.
(g) Certificate as to Adjustments; Notice by Corporation. In each case of
----------------------------------------------------
an adjustment or readjustment of an Applicable Conversion Value, the Corporation
at its expense will furnish each holder of Applicable Preferred Stock with a
certificate, executed by the president and chief financial officer (or in the
absence of a person designated as the chief financial officer, by the treasurer)
showing such adjustment or readjustment, and stating in detail the facts upon
which such adjustment or readjustment is based.
(h) Exercise of Conversion Privilege. To exercise its conversion
--------------------------------
privilege, a holder of Series A Preferred Stock or Series B Preferred Stock
shall surrender the certificate or certificates representing the shares being
converted to the Corporation at its principal office, and shall give written
notice to the Corporation at that office that such holder elects to convert such
shares. Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. The certificate or certificates
for shares of Applicable Preferred Stock surrendered for conversion shall be
accompanied by proper assignment thereof to the Corporation or in blank. The
date when such written notice is received by the Corporation, together with the
certificate or certificates representing the shares of Applicable Preferred
Stock being converted, shall be the "Conversion Date". As promptly as
practicable after the Conversion Date, the Corporation shall issue and shall
deliver to the holder of the shares of Applicable Preferred Stock being
converted, or on its written order, such certificate or certificates as it may
request for the number of whole shares of Common Stock issuable upon the
conversion of such shares of Applicable Preferred Stock in accordance with the
provisions of this Section 4, and cash, as provided in Section 4(i),
11
in respect of any fraction of a share of Common Stock issuable upon such
conversion, and Sections 1(a) and 1(b). Such conversion shall be deemed to have
been effected immediately prior to the close of business on the Conversion Date,
and at such time the rights of the holder as holder of the converted shares of
Applicable Preferred Stock shall cease (other than the right to receive the
Common Stock and other amounts payable pursuant to this Section 4) and the
person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares of Common Stock
represented thereby. All shares of Common Stock delivered upon conversion of the
Applicable Preferred Stock will upon delivery be duly and validly issued and
fully paid and non-assessable, free of all liens and charges and not subject to
any preemptive rights other than as set forth in the Amended and Restated
Investor Rights Agreement (the "Investor Rights Agreement") among the
Corporation, the Investor and Peter T. Loftin.
From the date of delivery by a holder of shares of Series A Preferred Stock
or Series B Preferred Stock of such notice of election to convert, in lieu of
dividends on such Series A Preferred Stock pursuant to Section 1(a) or dividends
on such Series B Preferred Stock pursuant to Section 1(b), such Applicable
Preferred Stock shall participate equally and ratably with the holders of shares
of Common Stock in all dividends paid on the Common Stock as if such shares of
Applicable Preferred Stock had been converted to shares of Common Stock at the
time of such delivery.
(i) Cash in Lieu of Fractional Shares. The Corporation shall, in lieu of
---------------------------------
issuing fractional shares of Common Stock or scrip representing fractional
shares upon the conversion of shares of Series A Preferred Stock or Series B
Preferred Stock, pay to the holder of the shares of Applicable Preferred Stock
which were converted a cash adjustment in respect of such fractional shares in
an amount equal to the same fraction of the Fair Market Value per share of the
Common Stock at the close of business on the Conversion Date.
(j) Partial Conversion. In the event some but not all of the shares of
------------------
Series A Preferred Stock or Series B Preferred Stock represented by a
certificate or certificates surrendered by a holder are converted, the
Corporation shall execute and deliver to or on the order of the holder, at the
expense of the Corporation, a new certificate representing the number of shares
of Applicable Preferred Stock which were not converted.
(k) Reservation of Common Stock. The Corporation shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of capital
stock, solely for the purpose of effecting the conversion of the shares of the
Outstanding Preferred Stock, such number of its shares of Common Stock (or any
other securities into which the Outstanding Preferred Stock may become
convertible) as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Outstanding Preferred Stock, and if at any time
the number of authorized but unissued shares of Common Stock (or such other
securities) shall not be sufficient to effect the conversion of all then
outstanding shares of the Outstanding Preferred Stock, the Corporation shall
take such corporate action as may be necessary to increase its authorized but
12
unissued shares of Common Stock (or such other securities) to such number of
shares as shall be sufficient for such purpose.
The Corporation will pay any and all documentary, stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of shares of Common
Stock on conversion of the Series A Preferred Stock or Series B Preferred Stock
pursuant hereto; provided that the Corporation shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of the holder of
the Applicable Preferred Stock to be converted and no such issue or delivery
shall be made unless and until the person requesting such issue or delivery has
paid to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(l) Minimum Adjustment. Any provision of this Section 4 to the contrary
------------------
notwithstanding, no adjustment in an Applicable Conversion Value shall be made
if the amount of such adjustment would be less than 1% of such Applicable
Conversion Value then in effect, but any such amount shall be carried forward
and an adjustment with respect thereto shall be made at the time of and together
with any subsequent adjustment which, together with all amounts so carried
forward, aggregates 1% or more of such Applicable Conversion Value then in
effect.
(m) Termination of Preferences.
--------------------------
(i) Series A Preferred Stock. Upon the election of the Corporation,
------------------------
following (i) the effectiveness of the Corporation's registration statement
for the sale of the Corporation's Common Stock in a Series A Qualified
Public Offering (as hereinafter defined) and the date not earlier than
three years from the issuance of the Series A Preferred Stock that the
average (weighted by daily trading volume) Daily Price of the Corporation's
Common Stock is at least 200% of the Series A Conversion Value for the 90
prior consecutive trading days or (ii) the election by holders of the
majority of the then outstanding Series A Preferred Stock to convert some
or all of the Series A Preferred Stock into shares of Common Stock, the
dividend preferences described in Section 1 hereof, the liquidation
preferences described in Section 2 hereof, the voting rights set forth in
Section 3 and Section 6 hereof, in each case with respect to the Series A
Preferred Stock, and the rights for adjustments to the Series A Conversion
Value described in Section 4(d) hereof shall terminate and be of no further
force and effect and the holders of the Series A Preferred Stock shall be
entitled to receive only those dividend and liquidation payments that they
would have received had the Series A Preferred Stock been converted into
shares of Common Stock pursuant to Section 4 and there shall be no further
adjustments to the Series A Conversion Value. For purposes hereof, the term
"Series A Qualified Public Offering" shall mean (i) an underwritten public
offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Act"), covering the offer and sale
of Common Stock for the account of the Corporation in which the aggregate
net proceeds to the Corporation equal at least $100,000,000 or (ii) any
Reorganization or similar transaction, that has been approved by
13
the holders of a majority of the shares of Series A Preferred Stock, in
which the surviving entity has a class of securities registered under the
Act with a market capitalization equal to or greater than $100,000,000. The
Corporation shall provide the holders of Series A Preferred Stock fourteen
(14) days prior written notice of any election to be made at the end of
such fourteen (14) day period pursuant to this Section 4(m)(i).
(ii) Series B Preferred Stock. Upon the election of the Corporation,
------------------------
following (i) the effectiveness of the Corporation's registration statement
for the sale of the Corporation's Common Stock in a Series B Qualified
Public Offering (as hereinafter defined) and the date not earlier than
three years from the date of the initial issuance of the Series B Preferred
Stock that the average (weighted by daily trading volume) Daily Price of
the Corporation's Common Stock is at least 200% of the Series B Conversion
Value for the 90 prior consecutive trading days or (ii) the election by
holders of the majority of the then outstanding Series B Preferred Stock to
convert some or all of the Series B Preferred Stock into shares of Common
Stock, the dividend preferences described in Section 1 hereof, the
liquidation preferences described in Section 2 hereof, the voting rights
set forth in Section 3 and Section 6 hereof, in each case with respect to
the Series B Preferred Stock, and the rights for adjustments to the Series
B Conversion Value described in Section 4(d) hereof shall terminate and be
of no further force and effect and the holders of the Series B Preferred
Stock shall be entitled to receive only those dividend and liquidation
payments that they would have received had the Series B Preferred Stock
been converted into shares of Common Stock pursuant to Section 4 and there
shall be no further adjustments to the Series B Conversion Value. For
purposes hereof, the term "Series B Qualified Public Offering" shall mean
(i) an underwritten public offering pursuant to an effective registration
statement under the Act covering the offer and sale of Common Stock for the
account of the Corporation in which the aggregate net proceeds to the
Corporation equal at least $100,000,000 or (ii) any Reorganization or
similar transaction, that has been approved by the holders of a majority of
the shares of Series B Preferred Stock, in which the surviving entity has a
class of securities registered under the Act with a market capitalization
equal to or greater than $500,000,000. The Corporation shall provide the
holders of Series B Preferred Stock fourteen (14) days prior written notice
of any election to be made at the end of such fourteen (14) day period
pursuant to this Section 4(m)(ii).
5. No Reissuance of Outstanding Preferred Stock. No share or shares of
--------------------------------------------
Series A Preferred Stock or Series B Preferred Stock acquired by the Corporation
by reason of redemption, purchase, conversion or otherwise shall be reissued,
and all such shares shall be canceled, retired and eliminated from the shares
which the Corporation shall be authorized to issue. The Corporation may from
time to time take such appropriate corporate action as may be necessary to
reduce the authorized number of shares of the Applicable Preferred Stock
accordingly.
6. Restrictions and Limitations.
----------------------------
14
(a) Corporate Action. Except as expressly provided herein or as required
----------------
by law, so long as any shares of Applicable Preferred Stock remain outstanding,
the Corporation shall not, and shall not permit any subsidiary (which shall mean
any corporation, association or other business entity which the Corporation
and/or any of its other subsidiaries directly or indirectly owns at the time
more than fifty percent (50%) of the outstanding voting shares of such entity,
other than directors' qualifying shares, or has the power by contract or
otherwise to elect a majority of the board of directors or equivalent governing
body) to, without the approval by vote or written consent by (x) the holders of
at least a majority of the then outstanding shares of Series A Preferred Stock,
consenting or voting separately as a class, and (y) the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock, consenting
or voting separately as a class:
(i) redeem, purchase or otherwise acquire for value (or pay into or
set aside for a sinking fund for such purpose), or declare and pay or set
aside funds for the payment of any dividend with respect to, any share or
shares of capital stock, except as required hereunder with respect to the
Applicable Preferred Stock, except for repurchasing shares of Common Stock
from employees or consultants of the Corporation at the original purchase
price thereof pursuant to vesting agreements unanimously approved by the
Board of Directors and except for any prior S Corporation shareholder tax
liabilities pursuant to arrangements previously disclosed to the holders of
the Applicable Preferred Stock where the Corporation reimburses
shareholders of Business Telecom, Inc. for S Corporation taxes;
(ii) authorize or issue, or obligate itself to authorize or issue,
additional shares of the Applicable Preferred Stock;
(iii) authorize or issue, or obligate itself to authorize or issue,
(y) any equity security on a parity with or having preference or priority
over the Applicable Preferred Stock as to liquidation preferences,
redemption rights, dividend rights, voting rights or otherwise or (z) any
equity security that ranks junior to the Applicable Preferred Stock as to
liquidation preferences, redemption rights, dividend rights, voting rights
or otherwise if such equity security would give rise to deemed periodic
dividend income to the holders of the Applicable Preferred Stock for income
tax purposes;
(iv) authorize or issue, or obligate itself to authorize or issue,
any (y) equity security (or security convertible or exchangeable into an
equity security) that by its terms, obligates the Corporation to redeem
shares of such security while any shares of the Applicable Preferred Stock
are outstanding or (z) any debt security convertible or exchangeable into
an equity security of the Corporation if such equity security would give
rise to deemed periodic dividend income to the holders of the Applicable
Preferred Stock for income tax purposes;
(v) enter into a Change in Control Transaction, or liquidate or
distribute all or substantially all of the assets of the Corporation,
unless (A) in the case of holders of the Series A Preferred Stock, the
proceeds received by the holders of the Series A Preferred
15
Stock have a Fair Market Value equal to or greater than the Minimum Change
in Control Amount and the holders of the Series A Preferred Stock receive
the same form of consideration as the holders of the Corporation's Common
Stock or (B) in the case of holders of Series B Preferred Stock, holders of
Series B Preferred Stock receive cash consideration per share equal to or
greater than the Minimum Change in Control Amount; provided that in each
case, any wholly-owned subsidiary may merge into or consolidate with or
transfer assets to any other wholly-owned subsidiary or the Corporation; or
(vi) amend, restate, modify or alter the Bylaws of the Corporation in
any way which adversely affects the rights of the holders of the Applicable
Preferred Stock.
(b) Amendments to Charter. (x) The Corporation shall not amend its
---------------------
Articles of Incorporation without the approval, by vote or written consent, by
(A) the holders of at least a majority of the then outstanding shares of Series
A Preferred Stock, consenting or voting separately as a class, and (B) the
holders of at least a majority of the then outstanding shares of Series B
Preferred Stock, consenting or voting separately as a class, if such amendment
would:
(i) materially and adversely amend, alter or change the rights,
preferences, privileges of or limitations provided for herein with respect
to the Applicable Preferred Stock or the holders thereof;
(ii) change the relative seniority rights of the holders of the
Applicable Preferred Stock as to the payment of dividends in relation to
the holders of any other capital stock of the Corporation, or create any
other class or series of capital stock entitled to seniority as to the
payment of dividends in relation to the holders of such Applicable
Preferred Stock; or
(iii) reduce the amount payable to the holders of such Applicable
Preferred Stock upon the voluntary or involuntary liquidation, dissolution,
winding up or Reorganization of the Corporation, or change the relative
seniority of the liquidation preferences of the holders of such Applicable
Preferred Stock to the rights upon liquidation of the holders of other
capital stock of the Corporation, or change the dividend rights of the
holders of such Applicable Preferred Stock.
(y) The Corporation shall not amend Articles VI or VII of its Articles of
Incorporation without the prior written consent of the Investor, for so long as
the Investor has any rights under the applicable sections of the Investor Rights
Agreement or the Shareholders Agreement (as defined below), as the case may be.
7. No Dilution or Impairment. The Corporation will not, by amendment of
-------------------------
its Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Outstanding Preferred Stock set forth herein. Without limiting
the generality of the foregoing, the Corporation (a) will not increase the par
value of any shares of stock receivable on the conversion of the Series A
Preferred Stock or
16
Series B Preferred Stock above the amount payable therefor on such conversion
and (b) will take all such action as may be necessary or appropriate in order
that the Corporation may validly and legally issue fully paid and nonassessable
shares of stock on the conversion of all Outstanding Preferred Stock from time
to time outstanding.
8. Redemption. The Corporation is obligated to redeem (i) the Series A
----------
Preferred Stock pursuant to the terms of an Amended and Restated Shareholders
Agreement by and among the Corporation, Peter T. Loftin and the Investor (as
amended from time to time, the "Shareholders Agreement") and a redemption
agreement dated as of December 28, 1999 among the Corporation and the Investor
and (ii) the Series B Preferred Stock pursuant to the terms of the Shareholders
Agreement and a Series B Redemption Agreement among the Corporation, Welsh,
Carson, Anderson & Stowe VIII, L.P., BTI Investors LLC and Peter T. Loftin.
9. Notices of Record Date. In the event of:
----------------------
(a) any taking by the Corporation of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right,
(b) any capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger of the
Corporation, or any transfer of all or substantially all of the assets of the
Corporation to any other corporation, or any other entity or person,
(c) any voluntary or involuntary dissolution, liquidation or winding up of
the Corporation, or
(d) any event described in Sections 4(e), 4(f) or 6(a)(v), clauses (i) or
(ii) of the first sentence of Section 4(m)(i) or clauses (i) or (ii) of the
first sentence of Section 4(m)(ii), then and in each such event the Corporation
shall mail or cause to be mailed to each holder of the Applicable Preferred
Stock a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right and a description of
such dividend, distribution or right, (ii) the date on which any such
Reorganization, reclassification, recapitalization, transfer, merger,
dissolution, liquidation, winding up, Series A Qualified Public Offering, Series
B Qualified Public Offering, or election is expected to become effective and
(iii) the time, if any, that is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property deliverable
upon such event. Such notice shall be mailed at least fifteen (15) business
days prior to the date specified in such notice on which such action is to be
taken.
10. Definitions. For purposes of this Article IV, the following terms
-----------
shall have the following meanings.
17
"Act" has the meaning set forth in Section 4(m)(i).
"Applicable Conversion Value" has the meaning set forth in Section 4(c).
"Applicable Preferred Stock" has the meaning set forth in Section 1(c).
"Change in Control Amount" means the greater of (i) $2,000 per share of
Series B Preferred Stock, subject to adjustment for stock splits, stock
dividends, reorganizations and the like, and (ii) an amount representing an
Internal Rate of Return on the investment of holders of the Series B Preferred
Stock of at least 30%.
"Change in Control Transaction" means, through one transaction or a series
of transactions, the sale, assignment, lease or transfer of securities
constituting a majority of the voting securities of the Corporation to, or of
all or substantially all of its assets to, or a merger, consolidation or similar
business combination with or into, an entity, a majority of the voting power of
which is not owned or controlled, directly or indirectly, by one or more
shareholders of the Corporation immediately prior to the transaction.
"Common Stock" has the meaning set forth in the first paragraph of Article
IV.
"Conversion Date" has the meaning set forth in Section 4(h).
"Extraordinary Common Stock Event" has the meaning set forth in Section
4(d)(ii).
"Fair Market Value" means, when making a determination for holders of
Series A Preferred Stock or Series B Preferred Stock, as the case may be, (i)
with respect to one share of common stock to be received, if the sum of the
Daily Prices of (x) all of the outstanding shares of common stock that have been
registered pursuant to a public offering and (y) all of the outstanding shares
of common stock that are not held by affiliates of the Corporation and that may
be sold on such date in an open market transaction without registration, is at
least $250 million as of such date, the average (weighted by daily trading
volume) of the Daily Prices, if any, per share of such common stock for the
period of 20 consecutive trading days immediately prior to such date or (ii) in
all other events with respect to such common stock, or with respect to any other
property or consideration, the fair market value of such common stock or other
property or consideration as determined by two appraisers, one selected by the
Board of Directors of the Corporation and one selected by the holders of a
majority of the outstanding shares of the Applicable Preferred Stock. No
Director who is a holder of the Applicable Preferred Stock or who is designated
by or affiliated with a holder of the Applicable Preferred Stock shall vote on
the selection of the appraiser chosen by the Corporation. In the event the
Board of Directors or the holders of the Applicable Preferred Stock fail to
appoint an appraiser within a reasonable period of time, the appraisal shall be
undertaken by the remaining single appraiser. The Fair Market Value shall be
the fair market value (determined in the manner described above) arrived at by
the appraisers within thirty (30) days following the appointment of the last
appraiser to be appointed. In the event that the two appraisers agree in good
faith on such fair market value within such a period of time, such agreed value
shall be used for these purposes. If the appraisers cannot agree but their
valuations are within 10% of each other, the Fair Market Value shall be the mean
of the two valuations. If the appraisers
18
cannot agree and the differences in the valuations are greater than 10%, the
appraisers shall select a third appraiser who will calculate fair market value
independently (provided that such calculation shall not be more than the value
calculated by the appraiser selected by the holders of the Applicable Preferred
Stock or less than the value calculated by the appraiser selected by the Board
of Directors) and, except as provided in the next sentence, the Fair Market
Value of the shares shall be the mean of the two fair market values arrived at
by the appraisers who are closest in amount. If one appraiser's valuation is the
mean of the other two valuations, such mean valuation shall be the Fair Market
Value. In the event that the two original appraisers cannot agree upon a third
appraiser within ten (10) days following the end of the thirty (30) day period
referred to above, then the third appraiser, which appraiser shall be a
nationally recognized investment banking firm, shall be appointed by the
American Arbitration Association in Washington, D.C. If the Board of Directors
proposes a transaction in which the property distributed is described in clause
(ii) of the first sentence of this paragraph and the holders of a majority of
the Applicable Preferred Stock approve the terms of such transaction, then the
Fair Market Value of all such property distributed shall be equal to the value
as initially determined by the Board of Directors and approved by such holders.
As used herein, "Daily Price" means (1) if the shares of such common stock then
are listed and traded on the New York Stock Exchange, Inc. ("NYSE"), the closing
price on such day as reported on the NYSE Composite Transactions Tape; (2) if
the shares of common stock then are not listed and traded on the NYSE, the
closing price on such day as reported by the principal national securities
exchange on which the shares are listed and traded; (3) if the shares of common
stock then are not listed and traded on any such securities exchange, the last
reported sale price on such day on the National Market of the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ");
or (4) if the shares of common stock then are not traded on the NASDAQ National
Market, the average of the highest reported bid and lowest reported asked price
on such day as reported by NASDAQ.
"Internal Rate of Return" means the effective annual rate of interest
which, when applied to all cash flows (as determined below) made to, or received
from, the Corporation with respect to the aggregate dollar amount of all equity
capital invested by the holders of Series A Preferred Stock or Series B
Preferred Stock, as the case may be (the "Holders"), in the Applicable Preferred
Stock on or prior to such date (the " Investment"), makes the net present value
of all such cash flows equal to zero. The Investment shall be deemed to be a
cash outflow. Payments made by a new Holder for a purchase of securities from
an existing Holder shall not be deemed to be a cash outflow. Cash dividends or
other cash amounts, if any, paid by the Corporation to the Holders in respect of
the Investment will be deemed to be interim cash inflows with respect to the
Investment. Distributions or proceeds received by the Holders in respect of the
Investment consisting of property other than cash shall be valued at the Fair
Market Value thereof as determined as of the date such distributions or proceeds
were received. The final cash flow with respect to the Investment will be based
on the total net proceeds that will be actually received by the Holders on the
date of the completion of the applicable transaction. Notwithstanding the
foregoing, the Internal Rate of Return will be calculated on a fully diluted
basis. The Internal Rate of Return will be calculated with the timing of cash
flows assumed to be
19
on a quarterly basis (March 31, June 30, September 30 and December 31) and with
all specific cash flows during a quarter deemed to have occurred on the last day
of such quarter.
"Investor" has the meaning set forth in Section 4(d)(iii).
"Investor Rights Agreement" has the meaning set forth in Section 4(h).
"Minimum Change in Control Amount" means an amount that (i) is equal to or
greater than $2,000 per share of Applicable Preferred Stock, subject to
adjustment for stock splits, stock dividends, reorganizations and the like, and
(ii) represents an Internal Rate of Return on the investment of holders of the
Applicable Preferred Stock of at least thirty percent (30%).
"Net Consideration Per Share" has the meaning set forth in Section
4(d)(i)(B)(2)(a).
"Outstanding Preferred Stock" has the meaning set forth in the third
paragraph of Article IV.
"Preferred Stock" has the meaning set forth in the first paragraph of
Article IV.
"Reorganization" has the meaning set forth in Section 4(f).
"Series A Conversion Rate" has the meaning set forth in Section 4(b).
"Series A Conversion Value" has the meaning set forth in Section 4(c).
"Series A Liquidation Amount" has the meaning set forth in Section 2(a)(i).
"Series A Original Price" has the meaning set forth in Section 1(a).
"Series A Preferred Stock" has the meaning set forth in the first paragraph
of Article IV.
"Series A Qualified Public Offering" has the meaning set forth in Section
4(m)(i).
"Series B Conversion Rate" has the meaning set forth in Section 4(b).
"Series B Conversion Value" has the meaning set forth in Section 4(c).
"Series B Liquidation Amount" has the meaning set forth in Section
2(a)(ii).
"Series B Original Price" has the meaning set forth in Section 1(b).
"Series B Preferred Stock" has the meaning set forth in the first paragraph
of Article IV.
"Series B Qualified Public Offering" has the meaning set forth in Section
4(m)(ii).
"Shareholders Agreement" has the meaning set forth in Section 8.
20
ARTICLE V.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its shareholders or any class
thereof, as the case may be, it is further provided that:
1. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors.
2. The number of Directors of the Corporation may be fixed by the Bylaws.
3. Except as otherwise provided in these Second Amended and Restated
Articles of Incorporation, the Board of Directors may from time to time make,
amend, supplement or repeal the Bylaws of the Corporation.
4. Elections of Directors may be, but shall not be required to be, by
written ballot.
5. Except to the extent that the North Carolina General Statutes prohibit
such limitation or elimination of liability of directors for breaches of duty,
no Director of the Corporation shall be liable to the Corporation or to any of
its shareholders for monetary damages for breach of duty as a Director. No
amendment to or repeal of this provision or adoption of a provision inconsistent
herewith shall apply to or have any effect on the liability or alleged liability
of any Director of the Corporation for or with respect to any acts or omissions
of such Director occurring prior to such amendment or repeal or adoption of an
inconsistent provision. The provisions of this Article shall not be deemed to
limit or preclude indemnification of a Director by the Corporation for any
liability that has not been eliminated by the provisions of this Article.
ARTICLE VI.
Certain shareholders of the Corporation shall have preemptive rights to
purchase additional securities of the Corporation pursuant to, and to the extent
set forth in, Article II of the Investor Rights Agreement. Such preemptive
rights, including rights regarding amendment, waiver or termination of such
rights, shall be governed by the Investor Rights Agreement.
ARTICLE VII.
The Corporation shall not, and shall not permit any of its subsidiaries to,
take any of the actions set forth in Section 7 of the Shareholders Agreement,
without the prior written consent of the parties specified in such Section 7.
Election of members of the board of directors of the Corporation and its
subsidiaries shall be subject to the right of the Investor pursuant to Sections
5, 6 and 10 of the Shareholders Agreement to designate the number of directors
to each such board of directors as is specified in Sections 5, 6 and 10. The
amendment, waiver or termination
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of the rights set forth in the Shareholders Agreement shall be governed by the
terms of the Shareholders Agreement.
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