UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 4)
FiberNet Telecom Group, Inc.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
315653105
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(CUSIP Number)
Mr. Timothy P. Bradley
Signal Equity Partners, L.P.
10 East 53rd Street, 32nd Floor
New York, NY 10022
212-872-1180
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
November 30, 1999
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 13d-7(b) for other
parties to whom copies of this statement are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 3
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CUSIP NO. 315653105 Page 2 of 3
This Amendment No. 4 amends the Statement on Schedule 13D (the
"Schedule 13D") filed on May 17, 1999, as amended, by and on behalf of Signal
Equity Partners, L.P. (formerly Signal Capital Partners, L.P.), Trident Telecom
Partners LLC and Concordia Telecom Management, L.L.C. with respect to their
ownership of Common Stock, par value $.001 per share, of FiberNet Telecom Group,
Inc. Capitalized terms used and not defined herein have the meanings ascribed
thereto in the Schedule 13D.
ITEM 4. PURPOSE OF TRANSACTION.
The following paragraphs are hereby added after the last paragraph of
Item 4 to the Schedule 13D:
On November 30, 1999, Signal exercised its right as "Majority in
Interest" under the Securities Purchase Agreement and the September Securities
Purchase Agreement (together, the "Securities Purchase Agreements") to convert
its Notes and all other outstanding Notes into shares of the Issuer's Common
Stock. In connection the with conversion, the Issuer agreed to exchange, at the
option of the Former Noteholders (as defined below), shares of newly designated
Series D Preferred Stock (the "Series D Preferred Stock") to the Investing
Persons who held 4% Senior Secured Convertible Notes issued in the May
Transaction, Series E Preferred Stock (the "Series E Preferred Stock") to the
Investing Persons who held 8% Senior Secured Convertible Notes issued in the May
Transaction and Series F Preferred Stock (the "Series F Preferred Stock" and
together with the Series D Preferred Stock and the Series E Preferred Stock, the
"Preferred Stock") to the September Investors who held 8% Senior Secured
Convertible Notes issued in the September Transaction (together, the Investing
Persons and the September Investors are referred to as the "Former Noteholders")
for any and all Common Stock received by the Former Noteholders in such
conversion, pursuant to a Conversion and Exchange Agreement (the "Conversion and
Exchange Agreement") dated as of November 30, 1999 by and among the Issuer and
the Noteholders listed therein.
Pursuant to the Conversion and Exchange Agreement, the Securities
Purchase Agreements (taking into account certain amendments reflecting the
change of the Notes to equity securities), the Stockholders Agreement and the
Registration Rights Agreement remain in full force and effect.
The foregoing descriptions do not purport to be complete and are
qualified in their entirety by reference to the Conversion and Exchange
Agreement and the Certificate of Designation of Series D Preferred Stock, Series
E Preferred Stock and Series F Preferred Stock of FiberNet Telecom Group, Inc.,
which are being filed as Exhibits S and T, respectively, to this Amendment No. 4
to the Schedule 13D and are incorporated herein by reference.
ITEM 7. EXHIBITS.
The following exhibits are added to the Schedule 13D:
Exhibit S - Conversion and Exchange Agreement dated as of November 30,
1999
Exhibit T - Certificate of Designation of Series D Preferred Stock of
FiberNet Telecom Group, Inc.
Exhibit U - Certificate of Designation of Series E Preferred Stock of
FiberNet Telecom Group, Inc.
Exhibit V - Certificate of Designation of Series F Preferred Stock of
FiberNet Telecom Group, Inc.
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CUSIP NO. 315653105 Page 3 of 3
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 2, 1999
SIGNAL EQUITY PARTNERS, L.P.
By: Signal Equity Advisors, L.P.
Its: General Partner
By: Signal Equity Advisors, Inc.
Its: General Partner
By:/s/ Timothy P. Bradley
-----------------------------------
Timothy P. Bradley
Director
TRIDENT TELECOM PARTNERS LLC
By: Trident Telecom Management, L.L.C.
Its: Managing Member
By: Needham Management, Inc.
Its: Managing Member
By:/s/ Donald W. Kuzon
-----------------------------------
Donald W. Kuzon
President
CONCORDIA TELECOM MANAGEMENT, L.L.C.
By:/s/ Michael S. Liss
-----------------------------------
Michael S. Liss
Sole Member
EXHIBIT S
CONVERSION AND EXCHANGE
AGREEMENT dated as of November 30,
1999 ("Agreement") by and among
FIBERNET TELECOM GROUP, INC., a
Nevada corporation (the
"Company"), and certain
noteholders ("Noteholders") of the
Company listed on Annex I hereto.
Recitals
WHEREAS, each Noteholder purchased a 4% Senior Secured Convertible
Note due May 7, 2004 of the Company ("4% May Note") or an 8% Senior Secured
Convertible Note due May 7, 2004 of the Company ("8% May Note" and together with
the 4% May Note, the "May Notes") pursuant to the Securities Purchase Agreement
dated as of May 7, 1999 ("May Purchase Agreement"), as amended, by and among the
Company and the purchasers listed therein, or an 8% Senior Secured Convertible
Note due September 28, 2004 of the Company ("8% September Note" and together
with the May Notes, the "Notes") pursuant to the Securities Purchase Agreement
dated as of September 28, 1999 ("September Purchase Agreement" and together with
the May Purchase Agreement, the "Purchase Agreements"), by and among the Company
and the purchasers listed therein, all in such aggregate principal amounts as
set forth on Annex I hereto.
WHEREAS, the Notes provide that the Notes shall be deemed convertible
into shares of Common Stock, $.001 par value ("Common Stock") of the Company
upon the conversion of the Notes held by the Majority in Interest (as defined
herein), which is currently Signal Equity Partners, L.P. (formerly Signal
Capital Partners, L.P.) ("Signal").
WHEREAS, the Company and the Noteholders wish to provide herein for
the conversion of the Notes into shares of Common Stock and the immediate
exchange of such shares of Common Stock into which the Notes are convertible for
shares of Series D Preferred Stock, $.001 par value ("Series D Preferred") of
the Company in the case of the 4% May Notes, shares of Series E Preferred Stock,
$.001 par value ("Series E Preferred") of the Company in the case of the 8% May
Notes, and shares of Series F Preferred Stock, $.001 par value ("Series F
Preferred" and together with the Series D Preferred and Series E Preferred, the
"Preferred Stock") of the Company in the case of the 8% September Notes.
NOW, THEREFORE, the parties hereby agree as follows:
Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed thereto in the May Purchase Agreement or
the September Purchase Agreement, whichever is applicable and as specified
herein.
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Section 2. Conversion of Notes.
(a) Signal, as the Majority in Interest (as defined in the May
Purchase Agreement and the September Purchase Agreement), hereby converts the
aggregate principal amount of its 4% May Note and 8% September Note into that
number of shares of Common Stock set forth on Annex I hereto as of the date
hereof.
(b) Each of the parties hereby acknowledges that the aggregate
principal amount of such Note or Notes held by each Noteholder shall be
converted into the number of shares of Common Stock set forth on Annex I hereto
in accordance with the terms of the Notes (the "Conversion") simultaneously with
the conversion of the 4% May Note and 8% September Note held by Signal.
Section 3. Agreement to Exchange Common Stock.
(a) Authorization. The Company has authorized the issuance of 500,000
shares of Series D Preferred, 750,000 shares of Series E Preferred and 500,000
shares of Series F Preferred.
(b) Exchange. The parties hereto agree that immediately upon the
Conversion at the Closing (as defined herein), the Company shall issue the
number of shares of: (i) Series D Preferred to those Noteholders who owned 4%
May Notes prior to the Conversion set forth beside such Noteholder's name on
Annex I; (ii) Series E Preferred to those Noteholders who owned 8% May Notes
prior to the Conversion set forth beside such Noteholder's name on Annex I; and
(iii) Series F Preferred to those Noteholders who owned 8% September Notes prior
to the Conversion set forth beside such Noteholder's name on Annex I, all in
exchange for shares of Common Stock received by each such Noteholder in the
Conversion (such transactions referred to as the "Exchange"); provided, that the
Company shall not issue fractional shares of Preferred Stock upon the Exchange
and shall distribute cash in lieu of such fractional shares in an amount equal
to the product of (x) the Fair Market Value Per Share of Common Stock and (y)
the number of shares of Common Stock not exchanged for shares of Preferred
Stock. For purposes of this Agreement, "Fair Market Value Per Share" shall mean
the fair value of each share of Common Stock as determined in good faith by the
Board of Directors of the Company minus ten percent (10%) illiquidity discount.
(c) Delivery. At the Closing, the Company will deliver to each
Noteholder a certificate or certificates registered in the Noteholder's name,
representing the number of shares of Preferred Stock owed to such Noteholder in
exchange for such Noteholder's shares of Common Stock received pursuant to the
Conversion.
(d) Closing. The closing ("Closing") of the Conversion and the
Exchange will take place at the offices of O'Sullivan Graev & Karabell, LLP, 30
Rockefeller Plaza, New York, New York, on or about 10:00 a.m., New York City
time, on November 30, 1999 (the "Closing Date") or at such other time and place
as the Company and the Majority in Interest may mutually agree upon.
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Section 4. Amendments to Certain Agreements.
(a) Pursuant to the terms hereof, each of the Purchase Agreements
will be deemed amended as follows:
(i)All of the terms Article VII ("Events of Default") of
each of the Purchase Agreements shall be deleted in their entirety and
replaced with "[INTENTIONALLY OMITTED]"; and
(ii) All references to the "Notes", "Collateral", "Loan
Parties" or other references applicable to the issuance of Notes but
not applicable to Preferred Stock will be deemed modified to
accurately reflect that the Purchasers (as respectively defined in
each Purchase Agreement) hold equity securities in the form of
Preferred Stock and Common Stock and no longer hold debt securities.
(b) The Company and the Noteholders shall take any and all action
necessary on or after the date hereof, including, without limitation, the
execution of amendments and/or supplemental agreements or instruments, to effect
the intent of this Section 4.
(c) The changes and amendments to each of the Purchase Agreements
contemplated herein shall constitute the only changes and amendments to such
Purchase Agreements as of the date hereof, and the Registration Rights Agreement
and the Stockholders Agreement shall remain in full force and effect.
Section 5. Termination of the Collateral Agreements; Cancellation of
Notes.
(a) It is understood and agreed by the parties hereto that all of the
Collateral Agreements will be automatically terminated and of no further force
or effect immediately upon Closing.
(b) The Company and the Noteholders shall take any and all action
necessary, on or after the date hereof, including, without limitation, the
execution of UCC termination statements or other instruments to effect a release
of liens, to effect the intent of this Section 5 and to ensure, among other
things, that all of the Collateral shall be released and that the Noteholders
shall have no further rights thereto as lenders or secured parties.
(c) It is understood and agreed by the parties hereto that the Notes
shall be cancelled and the Company's obligations thereunder shall terminate upon
the Closing.
Section 6. Representations and Warranties of the Company.
The Company represents and warrants to each Noteholder as of the date
hereof as follows:
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of State of Nevada.
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(b) The Company has the power to execute, deliver and perform its
obligations under this Agreement and to issue the Preferred Stock.
(c) The execution, delivery and performance by the Company of this
Agreement and the issuance of the Preferred Stock of the Company have been duly
authorized by all required corporate or Noteholder action of the Company.
(d) Except the consents required by the Majority in Interest in
accordance with the Purchase Agreements, no filing with or consent or approval
of, by other action by, any Governmental Authority or other Person is or will be
required by any Applicable Law or agreement in connection with the execution,
delivery and performance by the Company of this Agreement.
(e) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms.
(f) The Preferred Stock, when issued and delivered in accordance with
the terms of this Agreement for the consideration provided for herein, will be
duly and validly issued, fully paid and nonassessable, and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement, the Stockholders Agreement and under applicable state and federal
securities laws.
(g) The issuance of the Preferred Stock contemplated hereby is exempt
from registration under the Securities Act of 1933, as amended (the "Act"), and
has been made in compliance with the Act and all applicable state securities or
blue sky laws.
Section 7. Representations and Warranties of the Noteholders.
Each Noteholder, severally and only with respect to itself, represents
and warrants to the Company as follows:
(a) Such Noteholder is acquiring the Preferred Stock to be purchased
by it or him and, should such Noteholder acquire other capital stock of the
Company issuable upon conversion of any Preferred Stock, it or he will acquire
such other capital stock, for its or his own account, for investment and not
with a view to the distribution thereof, nor with any present intention of
distributing the same.
(b) Such Noteholder understands that the Preferred Stock has not been,
and any other capital stock of the Company issuable upon conversion of any
Preferred Stock, will not be, registered under the Act, by reason of its
issuance in a transaction exempt from the registration requirements of the Act,
and that they must be held indefinitely unless a subsequent disposition thereof
is registered under the Act or is exempt from registration.
(c) Such Noteholder is an "accredited investor," as defined in Rule
501 (the provisions of which are known to such Noteholder) promulgated under the
Act and has been
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<PAGE>
advised by individuals with such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment in the Company, has the ability to bear the economic risks of its
investment for an indefinite period of time, has been furnished with and has
had access to such information as reasonably requested and has had the
opportunity to ask, and has received satisfactory answers for, questions of
the Company.
(d) Such Noteholder has all requisite power and authority to enter
into this Agreement, to perform its or his obligations hereunder, and to
consummate the transactions contemplated hereby. Such Noteholder has not been
organized, reorganized or recapitalized specifically for the purpose of
investing in the Company.
(e) Such Noteholder has taken all requisite corporate, partnership or
other action necessary to authorize its or his execution and delivery of this
Agreement, its or his performance of its or his obligations hereunder, and its
or his consummation of the transactions contemplated hereby. This Agreement has
been executed and delivered by an officer or duly authorized representative of
each Noteholder in accordance with such authorization. This Agreement
constitutes valid and binding obligations of such Noteholder, enforceable in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, and similar laws affecting creditors' rights generally and to
general principles of equity.
(f) No person or entity acting on behalf or under the authority of
such Noteholder is or will be entitled to any broker's, finder's, or similar fee
or commission in connection with the transactions contemplated hereby which
would become an obligation of the Company.
Section 8. Conditions of Closing.
The obligation of the parties to consummate the Conversion and
Exchange is subject to the following conditions:
(a) Notes. Each Noteholder shall have (i) delivered its Note duly
endorsed for surrender to the Company and (ii) delivered a properly completed
and executed "Information Sheet" (attached as Exhibit C to the Information
Memorandum dated November 19, 1999 and distributed to the Noteholders).
(b) Certificate of Designation. The Company shall have filed the
Certificate of Designation for the Series D Preferred, Series E Preferred and
Series F Preferred with the Secretary of State of Nevada.
(c) The Noteholders shall have received a legal opinion from Thomas
Kimble, Nevada counsel to the Company, in such form and substance reasonably
satisfactory to the Noteholders.
Section 9. Transfer of Securities.
(a) The Preferred Stock shall only be transferable in accordance with
the Stockholders Agreement and applicable state and federal securities laws.
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<PAGE>
(b) Each certificate representing Preferred Stock shall be stamped or
otherwise imprinted with a legend substantially in the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM. IN ADDITION, THE TRANSFER OF
THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE
STOCKHOLDERS AGREEMENT DATED AS OF MAY 7, 1999, AS AMENDED, BY AND
AMONG FIBERNET TELECOM GROUP, INC. AND THE STOCKHOLDERS LISTED THEREIN.
NO TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED."
Section 10. Notices.
Subject to the express provisions of this Agreement, all
communications provided for or permitted hereunder shall be in writing,
personally delivered to an officer or other responsible employee of the
addressee or sent by registered mail, charges prepaid, or by telecopy with
confirmed receipt (with hard copy to follow), telegram or other means of
recorded telecommunication, charges prepaid, to the applicable address set forth
below or to such other address as either party hereto may from time to time
designate to the other in such manner, provided that no communication shall be
sent by mail pending any threatened or during any actual postal strike or other
disruption of postal service in the United States. Any communication so
personally delivered shall be deemed to have been validly and effectively given
on the date of such delivery. Any communication so sent by registered mail shall
be deemed to have been validly and effectively given on the tenth Business Day
next following the day on which it is sent. Any communication so sent by
telecopy, telegram or other means of recorded telecommunication shall be deemed
to have been validly and effectively given on the Business Day next following
the day on which it is sent.
Communications sent to the Company shall be addressed to:
FiberNet Telecom Group, Inc.
570 Lexington Avenue, Third Floor
New York, New York 10022
Attention: President
Telephone: (212) 405-6200
Telecopier: (212) 421-8920
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<PAGE>
With a copy to:
O'SULLIVAN GRAEV & KARABELL, LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: Gordon R. Caplan, Esq.
Telephone: (212) 408-2400
Telecopier: (212) 408-2420
Communications sent to the Noteholders shall be addressed to each such
Noteholder's address in the Company's records.
Section 11. Governing Law. This Agreement shall be governed by the
laws of the State of New York without giving effect to any choice of law or
conflict of law provisions.
Section 12. Successors and Assigns. This Agreement shall bind and inure
to the benefit of the parties and their respective successors and assigns,
transferees, legal representatives and heirs.
Section 13. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto contain the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements and understandings with
respect hereto.
Section 14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed and delivered shall be deemed to be an
original, but all of which when taken together shall constitute but one and the
same instrument; either party may execute this Agreement by signing any
counterpart of it.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
FIBERNET TELECOM GROUP, INC.
By:
--------------------------------------
Name: Michael S. Liss
Title: President and Chief Executive
Officer
NOTEHOLDERS:
-----------
[A signature page for each Noteholder
will follow.]
SIGNAL EQUITY PARTNERS, L.P.
By: Signal Equity Advisors, L.P. Its:
General Partner
By: Signal Equity Advisors, Inc. Its:
General Partner
By:
--------------------------------------
Name:
Title:
BURDEN DIRECT INVESTMENT FUND III
By: William A.M. Burden & Co., L.P.
Its: Managing General Partner
By: Burden Brothers, Inc.,
Its: Sole General Partner
By:
--------------------------------------
Name:
Title:
[Signature Page to Conversion and Exchange Agreement]
<PAGE>
PEQUOT SCOUT FUND, LP
By:
--------------------------------------
Name:
Title:
PENNY LANE PARTNERS, L.P.
By: Penny Lane Associates, L.P.
Its: General Partner
By: Penny Lane, Inc.
Its: General Partner
By:
--------------------------------------
Name:
Title:
ALEXANDER ENTERPRISE HOLDINGS CORP.
By:
--------------------------------------
Name:
Title:
KING STREET CAPITAL LTD.
By:
--------------------------------------
Name:
Title:
KING STREET CAPITAL LP
By:
--------------------------------------
Name:
Title:
[Signature Page to Conversion and Exchange Agreement]
<PAGE>
TAURUS TELECOMMUNICATION, INC.
By:
--------------------------------------
Name:
Title:
EXETER CAPITAL PARTNERS IV, L.P.
By: Exeter IV Advisors, L.P.
Its: General Partner
By: Exeter IV Advisors, Inc.
Its: General Partner
By:
--------------------------------------
Name:
Title:
EXETER EQUITY PARTNERS, L.P.
By: Exeter Equity Advisors, L.P.
Its: General Partner
By: Exeter Equity Advisors, Inc.
Its: General Partner
By:
--------------------------------------
Name:
Title:
WATERVIEW PARTNERS, LP
By: BRCM LLC
Its: General Partner
By:
--------------------------------------
Name:
[Signature Page to Conversion and Exchange Agreement]
<PAGE>
Title:
DELTA OPPORTUNITY FUND, LTD.
By:
--------------------------------------
Name:
Title:
DELTA OPPORTUNITY FUND (INSTITUTIONAL),
LLC
By: Diaz & Altschul Management, LLC
By:
--------------------------------------
Name:
Title:
OVERBROOK FUND I, LLC
By:
--------------------------------------
Name:
Title:
-----------------------------------------
Reinaldo M. Diaz
MADISON INVESTMENT PARTNERS II LP
By: Madison Investment Partners II LLC
Its: General Partner
By:
--------------------------------------
Name:
Title:
[Signature Page to Conversion and Exchange Agreement]
<PAGE>
-----------------------------------------
Howard M. Bergtraum
FIBER ISLAND, LLC
By:
--------------------------------------
Name:
Title:
-----------------------------------------
Robert I. Bodian
-----------------------------------------
Stephen Aiello
-----------------------------------------
Michael Balog
PRISM PARTNERS I, L.P.
By:
--------------------------------------
Name:
Title:
THE RAPTOR GLOBAL PORTFOLIO LTD.
By: Tudor Investment Corp.
Its: Investment Advisor
By:
--------------------------------------
Name:
[Signature Page to Conversion and Exchange Agreement]
<PAGE>
Title:
[Signature Page to Conversion and Exchange Agreement]
<PAGE>
ANNEX I
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Noteholders
-----------
Please see the attached tables.
EXHIBIT T
CERTIFICATE OF DESIGNATION OF
SERIES D PREFERRED STOCK
OF
FIBERNET TELECOM GROUP, INC.
Pursuant to Section 78.1955 of the General Corporation Law of the State
of Nevada, the undersigned, Michael S. Liss, being the President and Chief
Executive Officer of FIBERNET TELECOM GROUP, INC., a corporation organized and
existing under the laws of the State of Nevada (the "Corporation"), hereby
certifies that the following resolution has been hereby adopted by the Board of
Directors of the Corporation.
RESOLVED, that pursuant to the authority expressly granted to, and
vested in, the Board of Directors of the Corporation by the provisions of its
Articles of Incorporation ("Articles of Incorporation"), there is hereby
authorized 500,000 shares of Series D Preferred Stock, $.001 par value ("Series
D Preferred Stock"), 750,000 shares of Series E Preferred Stock, $.001 par value
("Series E Preferred Stock"), and 500,000 shares of Series F Preferred Stock,
$.001 par value ("Series F Preferred Stock"), out of 5,000,000 shares of
Preferred Stock, $.001 par value, of the Corporation, and the rights,
preferences and privileges of the Series D Preferred Stock are set forth in the
Certificate of Designation of the Series D Preferred Stock to be filed with the
Secretary of State of Nevada substantially in the form attached as Exhibit A.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation this 30th day of November, 1999.
----------------------------
Name: Michael S. Liss
Title: President and Chief
Executive Officer
----------------------------
Name: Roy (Trey) Farmer III
Title: Secretary
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EXHIBIT A
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SERIES D PREFERRED STOCK
------------------------
1. Authorized Shares.
500,000 shares of Series D Preferred Stock, $.001 par value
("Series D Preferred Stock") of the Corporation have been authorized by the
Corporation for issuance.
2. Dividends.
(a) The holders of Series D Preferred Stock shall be
entitled to receive dividends at the rate of 4% per annum (payable
semi-annually) of the Base Amount (as adjusted from time to time as provided
below) for each 12-month period (or portion thereof) ending December 31,
calculated on the basis of a year of 360 days comprised of twelve 30-day months.
The "Base Amount" shall initially be $15.00 per share of the Series D Preferred
Stock, in respect of which the dividend is being calculated. Such dividends
shall be payable at the option of the Corporation in cash or in lieu of such
cash payment by issuance of shares of Series D Preferred Stock to holders of
Series D Preferred Stock.
(b) Dividends on a share of Series D Preferred Stock
shall accrue and be cumulative from and after the Original Issuance Date up to
the first to occur of (i) a Liquidation or (ii) the conversion of such share of
Series D Preferred Stock into Common Stock. Dividends shall be payable
semi-annually when, as and if declared by the Board of Directors of the
Corporation, on June 30 and December 31 of each year (each, a "Dividend
Reference Date"), commencing on December 31, 1999. In the event that the full
amount of a dividend in respect of any share of Series D Preferred Stock is not
paid during any such six-month period or portion thereof, the Base Amount shall
be increased by the amount of the dividend not paid, effective as of the
immediately succeeding July 1 or January 1, as applicable. To the extent not
paid on any such Dividend Reference Date, all dividends which have accrued on
each share of Series D Preferred Stock outstanding during the six-month period
(or other period in the case of the initial Dividend Reference Date) ending upon
such Reference Date shall be accumulated and shall remain accumulated dividends
with respect to such share of Series D Preferred Stock until paid to the holder
thereof. If any Dividend Reference Date occurs on a day other than a Business
Day, any dividends otherwise payable on such Dividend Reference Date shall be
paid on the next Business Day. Dividends shall be paid to the holders of record
of the Series D Preferred Stock as their names shall appear on the share
register of the Corporation on the record date for such dividend.
(c) If the Corporation pays less than the total amount
of dividends then accrued on the Total Preferred Stock, such cash payment or
issuance of shares of Total Preferred Stock shall be made on a pari passu basis
pro rata among the holders of the Preferred Stock based upon the aggregate
accrued but unpaid dividends on the shares of the Total Preferred Stock held by
each such holder. If and when any shares of Total Preferred Stock are issued
under this Section 1(c) for payment of accrued dividends, such shares of Total
Preferred Stock shall be deemed
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to be validly issued and outstanding and fully paid and nonassessable. After
payment of all dividends owing to the holders of Total Preferred Stock, such
holders shall share ratably (on an as if converted basis) in any dividends
thereafter paid on the Common Stock.
(d) In the event the Corporation shall fail to pay in
full all accrued dividends on all shares of the Total Preferred Stock, then the
Corporation shall not thereafter declare or pay or set apart for payment any
dividend or other distribution upon shares of Common Stock, or any other stock
ranking on a parity with or junior to the Total Preferred Stock as to dividends.
3. Liquidation.
Upon a Liquidation, after payment or provision for payment of
the debts and other liabilities of the Corporation, the holders of Series D
Preferred Stock shall be entitled to receive, pro rata on a pari passu basis
with holders of the Series C Preferred Stock, Series E Preferred Stock and
Series F Preferred Stock, out of the remaining assets of the Corporation
available for distribution to its stockholders, with respect to each share of
the Series D Preferred Stock, an amount equal to the Liquidation Amount for each
such share of Series D Preferred Stock before any distribution shall be made to
the holders of the Common Stock or any other class of capital stock of the
Corporation ranking junior to the Total Preferred Stock. If upon any Liquidation
the assets of the Corporation available for distribution to its stockholders
shall be insufficient to pay the holders of Total Preferred Stock the full
Liquidation Amount for each such series of Total Preferred Stock to which they
shall be entitled, the holders of each such series of Total Preferred Stock
shall share in any distribution of assets in accordance with such full
Liquidation Amount (pro rata on a pari passu basis in accordance with the total
Liquidation Amount for each such series of Total Preferred Stock that each such
holder would have received had there been such sufficient assets). After the
payment of the full Liquidation Amount for each such series of Preferred Stock
to the holders of Preferred Stock, such holders of Preferred Stock shall share
ratably (on an as if converted basis) with the holders of Common Stock in all
remaining assets of the Corporation available for distribution to its
stockholders; provided, that in no event will the holders of Preferred Stock
receive upon a Liquidation more than the greater of the Liquidation Amount per
share or the amount per share such holders would have been entitled to receive
if such shares of Preferred Stock had been converted into Common Stock
immediately prior to the Liquidation.
4. Voting Rights.
Prior to the conversion of Series D Preferred Stock, the
Series D Preferred Stock shall not be entitled to any vote and the holders
thereof shall not be entitled to vote as stockholders of the Corporation.
5. Conversion.
(a) Upon the terms set forth in this Section 5, each
holder of each share of Series D Preferred Stock shall have the right, at such
holder's option, at any time and from time to time, to convert such share into
the number of fully paid and nonassessable shares of
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Common Stock equal to the quotient obtained by dividing (A) the Liquidation
Amount for the Series D Preferred Stock by (B) the Conversion Price (as defined
below) for the Series D Preferred Stock, as last adjusted and then in effect, by
surrender of the certificate representing such share. The conversion price per
share at which shares of Common Stock shall be issuable upon conversion of
shares of Series D Preferred Stock shall be $1.50 for the Series D Preferred
Stock, as adjusted pursuant to Section 5(f) below (the "Conversion Price"). The
holder of any shares of Series D Preferred Stock may exercise the conversion
right pursuant to this Section 5(a) by delivering to the Corporation the
certificate for the shares to be converted, duly endorsed or assigned in blank
or to the Corporation (if required by it), accompanied by written notice stating
that the holder elects to convert such shares and stating the name or names
(with address) in which the certificate or certificates for the shares of Common
Stock are to be issued. Conversion shall be deemed to have been effected on the
date when such delivery is made or upon the consummation of a Qualified Public
Offering as provided below, if applicable (in each such case, the "Conversion
Date"). The Corporation shall give holders of Series D Preferred Stock
reasonable prior notice of a Sale of the Corporation, including the price and
material terms and conditions thereof, in order to provide such holders a
reasonable opportunity to consider whether to convert the Series D Preferred
Stock into Common Stock at or prior to such Sale of the Corporation.
(b) Upon written notice of the conversion of shares of
Preferred Stock owned or held by the Majority in Interest in accordance with
this Section 5 to the remaining holders of Preferred Stock, all shares of
Preferred Stock shall be deemed to be converted to that number of fully paid and
nonassessable shares of Common Stock equal to the quotient obtained by dividing
(A) Liquidation Amount for each such series of Preferred Stock for the share
being converted by (B) the applicable Conversion Price, as last adjusted and
then in effect.
(c) Upon the terms set forth in this Section 5, each
share of Series D Preferred Stock shall automatically be converted to that
number of fully paid and nonassessable shares of Common Stock equal to the
quotient obtained by dividing (A) the Liquidation Amount for the Series D
Preferred Stock for the share being converted by (B) the applicable Conversion
Price, as last adjusted and then in effect, upon the consummation of a Qualified
Public Offering.
(d) As promptly as practicable after the conversion of
any shares of Preferred Stock into Common Stock under Section 5(a), 5(b) or 5(c)
above, the Corporation shall issue and deliver upon the written order of such
holder, to the place designated by such holder, a certificate or certificates
for the number of full shares of Common Stock to which such holder is entitled,
and a cash amount in respect of any fractional interest in a share of Common
Stock as provided in Section 5(e) below. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a stockholder of record on the Conversion Date unless the transfer
books of the Corporation are closed on that date, in which event such person
shall be deemed to have become a stockholder of record on the next succeeding
date on which the transfer books are open, but the Conversion Price shall be
that in effect on the Conversion Date, and the rights of the holder of the
shares of Preferred Stock so converted shall cease on the Conversion Date. Upon
conversion of only a portion of the number of shares covered by a certificate
representing shares of Preferred Stock surrendered for conversion, the
Corporation shall issue and deliver, upon the written order of the holder of the
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certificate so surrendered for conversion, to the place designated by such
holder, at the expense of the Corporation, a new certificate covering the number
of shares of Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(e) Upon conversion, the Corporation will not be
obligated to issue fractional shares of its Common Stock and shall distribute
cash in lieu of such fractional shares. The number of full shares of Common
Stock issuable upon conversion of each such the Series D Preferred Stock shall
be computed on the basis of the aggregate number of shares of the Series D
Preferred Stock to be converted. If fractional shares of Common Stock which
would otherwise be issuable upon conversion of any such share are not issued,
the Corporation shall pay a cash adjustment in respect of such fractional
interest in an amount equal to the product of (i) the price of one share of
Common Stock as determined in good faith by the Board and (ii) such fractional
interest. The holders of fractional interests shall not be entitled to any
rights as stockholders of the Corporation in respect of such fractional
interests.
(f) The Conversion Price for each share of Series D
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) If the Corporation shall, at any time or
from time to time after the Original Issuance Date, issue any shares of
Common Stock (or be deemed to have issued shares of Common Stock as
provided herein), other than Excluded Stock, without consideration or for a
consideration per share less than the applicable Conversion Price, in
effect immediately prior to each such issuance, then the Conversion Price,
as in effect immediately prior to each such issuance, shall forthwith be
lowered to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum
of (x) the total number of shares of Common Stock outstanding on a
fully-diluted basis immediately prior to such issuance, multiplied by the
applicable Conversion Price in effect immediately prior to such issuance,
and (y) the consideration received by the Corporation upon such issuance;
by
(B) the total number of shares
of Common Stock outstanding on a fully-diluted basis immediately after the
issuance of such Common Stock.
(ii)For the purposes of any adjustment of
the applicable Conversion Price pursuant to clause (i) above, the following
provisions shall be applicable:
(A) In the case of the issuance
of Common Stock for cash in a public offering or private placement, the
consideration shall be deemed to be the amount of cash paid therefor after
deducting therefrom any discounts, commissions or placement fees payable by
the Corporation to any underwriter or placement agent in connection with
the issuance and sale thereof.
(B) In the case of the issuance
of Common Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the Fair Value Per
Share thereof notwithstanding any accounting treatment.
(C) In the case of the issuance
of options to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock, or
options to purchase or rights to subscribe for such convertible or
exchangeable securities except for options to acquire Excluded Stock:
(1) the aggregate maximum
number of shares of Common Stock deliverable upon exercise of such options
to purchase or rights to subscribe for Common Stock shall be deemed to have
been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided
in Sections 5(f)(ii)(A) and 5(f)(ii)(B) above), if any, received by the
Corporation upon the issuance of such options or rights plus the minimum
purchase price provided in such options or rights for the Common Stock
covered thereby;
(2) the aggregate maximum
number of shares of Common Stock deliverable upon conversion of or in
exchange for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities, options,
or rights were issued and for a consideration equal to the consideration
received by the Corporation for any such securities and related options or
rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be
received by the Corporation upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
Sections 5(f)(ii)(A) and 5(f)(ii)(B) above);
(3) on any change in the
number of shares or exercise price of Common Stock deliverable upon
exercise of any such options or rights or conversions of or exchanges for
such securities, other than a change resulting from the antidilution
provisions thereof, the Conversion Price shall forthwith be readjusted to
the Conversion Price as would have been obtained had the adjustment made
upon the issuance of such options, rights or securities not converted prior
to such change or options or rights related to such securities not
converted prior to such change been made upon the basis of such change; and
(4) on the expiration of
any such options or rights, the termination of any such rights to convert
or exchange or the expiration of any options or rights related to such
convertible or exchangeable securities, the Conversion Price shall
forthwith be readjusted to the Conversion Price as would have been obtained
had the adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities been made upon
the basis of the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities, or upon the exercise of the
options or rights related to such securities and subsequent conversion or
exchange thereof.
(iii) If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, following the
record date for the determination of holders of Common Stock entitled to
receive such stock dividend, subdivision or split-up, the Conversion Price
shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of Preferred Stock shall be
increased in proportion to such increase in outstanding shares.
(iv)If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is
decreased by a combination of the outstanding shares of Common Stock, then,
following the record date for such combination, the Conversion Price shall
be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of Preferred Stock shall be decreased
in proportion to such decrease in outstanding shares.
(v) In the event of any capital
reorganization of the Corporation, any reclassification of the stock of the
Corporation (other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock dividend
or subdivision, split-up or combination of shares), or any consolidation or
merger of the Corporation, each share of Series D Preferred Stock shall
after such reorganization, reclassification, consolidation, or merger be
convertible into the kind and number of shares of stock or other securities
or property of the Corporation or of the corporation resulting from such
consolidation or surviving such merger to which the holder of the number of
shares of Common Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation or merger) upon conversion
of such share of Series D Preferred Stock would have been entitled upon
such reorganization, reclassification, consolidation or merger. The
provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations or mergers.
(vi)No adjustment in the Conversion Price
shall be required unless such adjustment would require an increase or
decrease of at least .1% in such Conversion Price; provided, that any
adjustments not required to be made by virtue of this sentence shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under Sections 5(f)(i) through 5(f)(v) above shall be made to
the nearest one hundredth (1/100) of a cent or the nearest one tenth (1/10)
of a share, as the case may be.
(vii) In any case in which the provisions of
this Section 5(f) shall require that an adjustment shall become effective
immediately after a record date of an event, the Corporation may defer
until the occurrence of such event (A) issuing to the holder of any share
of Series D Preferred Stock converted after such record date and before the
occurrence of such event the shares of capital stock issuable upon such
conversion by reason of the adjustment required by such event in addition
to the shares of capital stock issuable upon such conversion before giving
effect to such adjustments, and (B) if applicable, paying to such holder
any amount in cash in lieu of a fractional share of capital stock pursuant
to Section 5(e) above; provided, however, that the Corporation shall
deliver to such holder an appropriate instrument evidencing such holder's
right to receive such additional shares and such cash.
(viii)Whenever the Conversion Price shall be
adjusted as provided in Section 5(f)(i), the Corporation shall make
available for inspection during regular business hours, at its principal
executive offices or at such other place as may be designated by the
Corporation, a statement, signed by its chief executive officer, showing in
detail the facts requiring such adjustment and the Conversion Price that
shall be in effect after such adjustment. The Corporation shall also cause
a copy of such statement to be sent by first class certified mail, return
receipt requested and postage prepaid, to each holder of Preferred Stock
affected by the adjustment at such holder's address appearing on the
Corporation's records. Where appropriate, such copy may be given in advance
and may be included as part of any notice required to be mailed under the
provisions of Section 5(f)(ix) below.
(ix)If the Corporation shall propose to take
any action of the types described in clauses (iii), (iv) or (v) of this
Section 5(f), the Corporation shall give notice to each holder of shares of
Preferred Stock, which notice shall specify the record date, if any, with
respect to any such action and the date on which such action is to take
place. Such notice shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of shares of
Preferred Stock. In the case of any action which would require the fixing
of a record date, such notice shall be given at least twenty (20) days
prior to the date so fixed, and in case of all other action, such notice
shall be given at least thirty (30) days prior to the taking of such
proposed action. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(x) The Corporation shall at all times keep
reserved, free from preemptive rights, out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion
of the Series D Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding shares of Series D Preferred
Stock.
(xi)Without duplication of any other
adjustment provided for in this Section 5(f), at any time the Corporation
makes or fixes a record date for the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, provision
shall be made so that each holder of Series D Preferred Stock shall receive
upon conversion thereof, in addition to the shares of Common Stock
receivable thereupon, the number of securities of the Corporation which it
would have received had its shares of Series D Preferred Stock been
converted into shares of Common Stock on the date of such event and had
such holder thereafter, during the period from the date of such event to
and including the date of conversion, retained such securities receivable
by it pursuant to this paragraph during such period, subject to the sum of
all other adjustments called for during such period under this Section 5
with respect to the rights of such holder of Series D Preferred Stock.
(xii) In the event that the Majority in
Interest consents in writing to limit, or waive in its entirety, any
anti-dilution adjustment to which the holders of the Series D Preferred
Stock would otherwise be entitled hereunder, the Corporation shall not be
required to make any adjustment whatsoever with respect to any Series D
Preferred Stock in excess of such limit or at all, as the terms of such
consent may dictate.
(xiii)The Corporation will not, by amendment
of its Certificate 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 to be observed or performed hereunder by
the Corporation, but will at all times in good faith assist in the carrying
out of all the provisions of this Section 5(f) and in the taking of all
such action as may be necessary or appropriate in order to protect the
exercise rights of the holders of Series D Preferred Stock against
impairment.
(xiv) The computations of all amounts under
this Section 5(f) shall be made assuming all other anti-dilution or similar
adjustments to be made to the terms of all other securities resulting from
the transaction causing an adjustment pursuant to this Section 5(f) have
previously been made so as to maintain the relative economic interest of
the Series D Preferred Stock vis a vis all other securities issued by the
Corporation.
(xv)The Corporation shall take or cause to
be taken such steps as shall be necessary to ensure that the par value per
share of Common Stock is at all times less than or equal to the Conversion
Price.
6. Definitions.
As used herein, the following terms shall have the following
meanings:
(a) "Affiliate" has the meaning ascribed to it in the
Securities Purchase Agreement.
(b) "Board" shall mean the Board of Directors of the
Corporation.
(c) "Change of Control of the Corporation" shall mean
any transaction or any event as a result of which (i) any one or more Persons
acquires or for the first time controls or is able to vote (directly or through
nominees or beneficial ownership) after the Original Issuance Date 51% or more
of any class of stock of the Corporation outstanding at the time having power
ordinarily to vote for directors of the Corporation or (ii) the control of more
than 51% of the number of shares of Common Stock held by Persons on the Original
Issuance Date has been transferred (excluding transfers by and among such
Persons) since the Original Issuance Date in the aggregate. For purpose of this
paragraph (b), "Common Stock" shall include shares of Common Stock issuable upon
exercise of warrants, options and other rights to acquire Common Stock
outstanding on the Original Issuance Date, whether or not at the time exercised
or exercisable.
(d) "Common Stock" shall mean the Common Stock, par
value $.001, of the Corporation.
(e) "Common Stock Equivalent" shall mean all shares of
Common Stock outstanding and all shares of Common Stock issuable (without regard
to any present restrictions on such issuance) upon the conversion, exchange or
exercise of all securities of the Corporation that are convertible, exchangeable
or exercisable for Common Stock and all Common Stock appreciation rights,
phantom Common Stock rights and other rights to acquire, or to receive or to be
paid amounts of, the Common Stock.
(f) "Excluded Stock" shall mean (A) up to 6,000,000
shares (as adjusted equitably for stock dividends, stock splits, combinations,
etc.) of Common Stock issuable upon exercise of stock options granted to
officers, employees, consultants, vendors or directors of the Corporation or its
subsidiaries, (B) shares of Common Stock issued upon conversion of shares of
Total Preferred Stock, (C) shares of Common Stock issued upon exercise of any
existing warrants, notes or other instruments convertible or exercisable for
Common Stock as of the date hereof, and (D) Common Stock or other equity
securities issued as part of a strategic arrangement or alliance by the
Corporation or its Subsidiaries to building licensors, landlords, carriers,
joint venture partners, vendors, lessors or lenders, and securities or
instruments issued in connection with acquisitions, as each such transaction is
approved by the Board of the Corporation, including in the case of (A), (B), (C)
and (D), any additional shares of Common Stock as may be issued by virtue of
antidilution provisions, if any, applicable to such options, warrants or shares,
as the case may be.
(g) "Fair Value Per Share" shall mean the fair value of
each share of Stock, as determined in good faith by the Board.
(h) "Liquidation" shall mean any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, other than any dissolution, liquidation or winding up in connection
with any reincorporation of the Corporation in Delaware.
(i) "Liquidation Amount" shall mean the Original
Issuance Price as to each share of Preferred Stock plus any accrued but unpaid
dividends.
(j) "Majority in Interest" shall have the meaning
ascribed to such term in the Securities Purchase Agreement.
(k) "Original Issuance Date" shall mean for the Series
D Preferred Stock, the date upon which this Certificate of Designation is filed
with the Secretary of State of Nevada.
(l) "Original Issuance Price" shall mean $15.00 per
share for the Series D Preferred Stock, $15.00 per share for the Series E
Preferred Stock and $30.00 per share for the Series F Preferred Stock.
(m) "Preferred Stock" shall mean the Series D Preferred
Stock, the Series E Preferred Stock and the Series F Preferred Stock.
(n) "Qualified Public Offering" shall have the meaning
ascribed to such term in the Stockholders Agreement.
(o) "Sale of the Corporation" shall mean (i) the sale
of all or substantially all of the Corporation's assets to a Person who is not
an Affiliate of the Corporation, (ii) the sale or transfer of the outstanding
capital stock of the Corporation to one or more Persons who are not Affiliates
of the Corporation, or (iii) the merger or consolidation of the Corporation with
or into another Person who is not an Affiliate of the Corporation, in each case
in clauses (ii) and (iii) above under circumstances in which the holders of a
majority in voting power of the outstanding capital stock of the Corporation,
immediately prior to such transaction, own less than a majority in voting power
of the outstanding capital stock of the Corporation or the surviving or
resulting corporation or acquirer, as the case may be, immediately following
such transaction. A sale (or multiple related sales) of one or more subsidiaries
of the Corporation (whether by way of merger, consolidation, reorganization or
sale of all or substantially all assets or securities) which constitutes all or
substantially all of the consolidated assets of the Corporation shall be deemed
a Sale of the Corporation.
(p) "Securities Purchase Agreement" shall mean that
certain agreement dated as of September 28, 1999 by and among the Corporation
and the purchasers named therein, as the same may be amended, modified or
supplemented from time to time.
(q) "Series C Preferred Stock" shall mean the Series C
Preferred Stock, par value $.001, of the Corporation.
(r) "Series E Preferred Stock" shall mean the Series E
Preferred Stock, par value $.001, of the Corporation.
(s) "Series F Preferred Stock" shall mean the Series F
Preferred Stock, par value, $.001, of the Corporation.
(t) "Stock" shall mean (i) the presently issued and
outstanding shares of Common Stock and Preferred Stock and any options or stock
subscription warrants exercisable therefor (which options and warrants shall be
deemed to be that number of outstanding shares of Stock for which they are
exercisable), (ii) any additional shares of capital stock of the Corporation
hereafter issued and outstanding and (iii) any shares of capital stock of the
Corporation into which such shares may be converted or for which they may be
exchanged or exercised.
(u) "Stockholders Agreement" shall mean that certain
agreement dated as of May 7, 1999 by and among the Corporation and the
stockholders named therein, as the same may be amended, modified or supplemented
from time to time.
(v) "Total Preferred Stock" shall mean the Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, and Series
F Preferred Stock.
EXHIBIT U
CERTIFICATE OF DESIGNATION OF
SERIES E PREFERRED STOCK
OF
FIBERNET TELECOM GROUP, INC.
Pursuant to Section 78.1955 of the General Corporation Law of the State
of Nevada, the undersigned, Michael S. Liss, being the President and Chief
Executive Officer of FIBERNET TELECOM GROUP, INC., a corporation organized and
existing under the laws of the State of Nevada (the "Corporation"), hereby
certifies that the following resolution has been hereby adopted by the Board of
Directors of the Corporation.
RESOLVED, that pursuant to the authority expressly granted to, and
vested in, the Board of Directors of the Corporation by the provisions of its
Articles of Incorporation ("Articles of Incorporation"), there is hereby
authorized 500,000 shares of Series D Preferred Stock, $.001 par value ("Series
D Preferred Stock"), 750,000 shares of Series E Preferred Stock, $.001 par value
("Series E Preferred Stock"), and 500,000 shares of Series F Preferred Stock,
$.001 par value ("Series F Preferred Stock"), out of 5,000,000 shares of
Preferred Stock, $.001 par value, of the Corporation, and the rights,
preferences and privileges of the Series E Preferred Stock are set forth in the
Certificate of Designation of the Series E Preferred Stock to be filed with the
Secretary of State of Nevada substantially in the form attached as Exhibit A.
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IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation this 30th day of November, 1999.
----------------------------
Name: Michael S. Liss
Title: President and Chief
Executive Officer
----------------------------
Name: Roy (Trey) Farmer III
Title: Secretary
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EXHIBIT A
---------
SERIES E PREFERRED STOCK
------------------------
1. Authorized Shares.
750,000 shares of Series E Preferred Stock, $.001 par value
("Series E Preferred Stock") of the Corporation have been authorized by the
Corporation for issuance.
2. Dividends.
(a) The holders of Series E Preferred Stock shall be
entitled to receive dividends at the rate of 8% per annum (payable
semi-annually) of the Base Amount (as adjusted from time to time as provided
below) for each 12-month period (or portion thereof) ending December 31,
calculated on the basis of a year of 360 days comprised of twelve 30-day months.
The "Base Amount" shall initially be $15.00 per share of the Series E Preferred
Stock, in respect of which the dividend is being calculated. Such dividends
shall be payable at the option of the Corporation in cash or in lieu of such
cash payment by issuance of shares of Series E Preferred Stock to holders of
Series E Preferred Stock.
(b) Dividends on a share of Series E Preferred Stock
shall accrue and be cumulative from and after the Original Issuance Date up to
the first to occur of (i) a Liquidation or (ii) the conversion of such share of
Series E Preferred Stock into Common Stock. Dividends shall be payable
semi-annually when, as and if declared by the Board of Directors of the
Corporation, on June 30 and December 31 of each year (each, a "Dividend
Reference Date"), commencing on December 31, 1999. In the event that the full
amount of a dividend in respect of any share of Series E Preferred Stock is not
paid during any such six-month period or portion thereof, the Base Amount shall
be increased by the amount of the dividend not paid, effective as of the
immediately succeeding July 1 or January 1, as applicable. To the extent not
paid on any such Dividend Reference Date, all dividends which have accrued on
each share of Series E Preferred Stock outstanding during the six-month period
(or other period in the case of the initial Dividend Reference Date) ending upon
such Reference Date shall be accumulated and shall remain accumulated dividends
with respect to such share of Series E Preferred Stock until paid to the holder
thereof. If any Dividend Reference Date occurs on a day other than a Business
Day, any dividends otherwise payable on such Dividend Reference Date shall be
paid on the next Business Day. Dividends shall be paid to the holders of record
of the Series E Preferred Stock as their names shall appear on the share
register of the Corporation on the record date for such dividend.
(c) If the Corporation pays less than the total amount
of dividends then accrued on the Total Preferred Stock, such cash payment or
issuance of shares of Total Preferred Stock shall be made on a pari passu basis
pro rata among the holders of the Preferred Stock based upon the aggregate
accrued but unpaid dividends on the shares of the Total Preferred Stock held by
each such holder. If and when any shares of Total Preferred Stock are issued
under this Section 1(c) for payment of accrued dividends, such shares of Total
Preferred Stock shall be deemed
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to be validly issued and outstanding and fully paid and nonassessable. After
payment of all dividends owing to the holders of Total Preferred Stock, such
holders shall share ratably (on an as if converted basis) in any dividends
thereafter paid on the Common Stock.
(d) In the event the Corporation shall fail to pay in
full all accrued dividends on all shares of the Total Preferred Stock, then the
Corporation shall not thereafter declare or pay or set apart for payment any
dividend or other distribution upon shares of Common Stock, or any other stock
ranking on a parity with or junior to the Total Preferred Stock as to dividends.
3. Liquidation.
Upon a Liquidation, after payment or provision for payment of
the debts and other liabilities of the Corporation, the holders of Series E
Preferred Stock shall be entitled to receive, pro rata on a pari passu basis
with holders of the Series C Preferred Stock, Series D Preferred Stock and
Series F Preferred Stock, out of the remaining assets of the Corporation
available for distribution to its stockholders, with respect to each share of
the Series E Preferred Stock, an amount equal to the Liquidation Amount for each
such share of Series E Preferred Stock before any distribution shall be made to
the holders of the Common Stock or any other class of capital stock of the
Corporation ranking junior to the Total Preferred Stock. If upon any Liquidation
the assets of the Corporation available for distribution to its stockholders
shall be insufficient to pay the holders of Total Preferred Stock the full
Liquidation Amount for each such series of Total Preferred Stock to which they
shall be entitled, the holders of each such series of Total Preferred Stock
shall share in any distribution of assets in accordance with such full
Liquidation Amount (pro rata on a pari passu basis in accordance with the total
Liquidation Amount for each such series of Total Preferred Stock that each such
holder would have received had there been such sufficient assets). After the
payment of the full Liquidation Amount for each such series of Preferred Stock
to the holders of Preferred Stock, such holders of Preferred Stock shall share
ratably (on an as if converted basis) with the holders of Common Stock in all
remaining assets of the Corporation available for distribution to its
stockholders; provided, that in no event will the holders of Preferred Stock
receive upon a Liquidation more than the greater of the Liquidation Amount per
share or the amount per share such holders would have been entitled to receive
if such shares of Preferred Stock had been converted into Common Stock
immediately prior to the Liquidation.
4. Voting Rights.
Prior to the conversion of Series E Preferred Stock, the
Series E Preferred Stock shall not be entitled to any vote and the holders
thereof shall not be entitled to vote as stockholders of the Corporation.
5. Conversion.
(a) Upon the terms set forth in this Section 5, each
holder of each share of Series E Preferred Stock shall have the right, at such
holder's option, at any time and from time to time, to convert such share into
the number of fully paid and nonassessable shares of
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Common Stock equal to the quotient obtained by dividing (A) the Liquidation
Amount for the Series E Preferred Stock by (B) the Conversion Price (as defined
below) for the Series E Preferred Stock, as last adjusted and then in effect, by
surrender of the certificate representing such share. The conversion price per
share at which shares of Common Stock shall be issuable upon conversion of
shares of Series E Preferred Stock shall be $1.50 for the Series E Preferred
Stock, as adjusted pursuant to Section 5(f) below ( the "Conversion Price"). The
holder of any shares of Series E Preferred Stock may exercise the conversion
right pursuant to this Section 5(a) by delivering to the Corporation the
certificate for the shares to be converted, duly endorsed or assigned in blank
or to the Corporation (if required by it), accompanied by written notice stating
that the holder elects to convert such shares and stating the name or names
(with address) in which the certificate or certificates for the shares of Common
Stock are to be issued. Conversion shall be deemed to have been effected on the
date when such delivery is made or upon the consummation of a Qualified Public
Offering as provided below, if applicable (in each such case, the "Conversion
Date"). The Corporation shall give holders of Series E Preferred Stock
reasonable prior notice of a Sale of the Corporation, including the price and
material terms and conditions thereof, in order to provide such holders a
reasonable opportunity to consider whether to convert the Series E Preferred
Stock into Common Stock at or prior to such Sale of the Corporation.
(b) Upon written notice of the conversion of shares of
Preferred Stock owned or held by the Majority in Interest in accordance with
this Section 5 to the remaining holders of Preferred Stock, all shares of
Preferred Stock shall be deemed to be converted to that number of fully paid and
nonassessable shares of Common Stock equal to the quotient obtained by dividing
(A) Liquidation Amount for each such series of Preferred Stock for the share
being converted by (B) the applicable Conversion Price, as last adjusted and
then in effect.
(c) Upon the terms set forth in this Section 5, each
share of Series E Preferred Stock shall automatically be converted to that
number of fully paid and nonassessable shares of Common Stock equal to the
quotient obtained by dividing (A) the Liquidation Amount for the Series E
Preferred Stock for the share being converted by (B) the applicable Conversion
Price, as last adjusted and then in effect, upon the consummation of a Qualified
Public Offering.
(d) As promptly as practicable after the conversion of
any shares of Preferred Stock into Common Stock under Section 5(a), 5(b) or 5(c)
above, the Corporation shall issue and deliver upon the written order of such
holder, to the place designated by such holder, a certificate or certificates
for the number of full shares of Common Stock to which such holder is entitled,
and a cash amount in respect of any fractional interest in a share of Common
Stock as provided in Section 5(e) below. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a stockholder of record on the Conversion Date unless the transfer
books of the Corporation are closed on that date, in which event such person
shall be deemed to have become a stockholder of record on the next succeeding
date on which the transfer books are open, but the Conversion Price shall be
that in effect on the Conversion Date, and the rights of the holder of the
shares of Preferred Stock so converted shall cease on the Conversion Date. Upon
conversion of only a portion of the number of shares covered by a certificate
representing shares of Preferred Stock surrendered for conversion, the
Corporation shall issue and deliver, upon the written order of the holder of the
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certificate so surrendered for conversion, to the place designated by such
holder, at the expense of the Corporation, a new certificate covering the number
of shares of Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(e) Upon conversion, the Corporation will not be
obligated to issue fractional shares of its Common Stock and shall distribute
cash in lieu of such fractional shares. The number of full shares of Common
Stock issuable upon conversion of each such the Series E Preferred Stock shall
be computed on the basis of the aggregate number of shares of the Series E
Preferred Stock to be converted. If fractional shares of Common Stock which
would otherwise be issuable upon conversion of any such share are not issued,
the Corporation shall pay a cash adjustment in respect of such fractional
interest in an amount equal to the product of (i) the price of one share of
Common Stock as determined in good faith by the Board and (ii) such fractional
interest. The holders of fractional interests shall not be entitled to any
rights as stockholders of the Corporation in respect of such fractional
interests.
(f) The Conversion Price for each share of Series E
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) If the Corporation shall, at any time or
from time to time after the Original Issuance Date, issue any shares of
Common Stock (or be deemed to have issued shares of Common Stock as
provided herein), other than Excluded Stock, without consideration or for a
consideration per share less than the applicable Conversion Price, in
effect immediately prior to each such issuance, then the Conversion Price,
as in effect immediately prior to each such issuance, shall forthwith be
lowered to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum
of (x) the total number of shares of Common Stock outstanding on a
fully-diluted basis immediately prior to such issuance, multiplied by the
applicable Conversion Price in effect immediately prior to such issuance,
and (y) the consideration received by the Corporation upon such issuance;
by
(B) the total number of shares
of Common Stock outstanding on a fully-diluted basis immediately after the
issuance of such Common Stock.
(ii)For the purposes of any adjustment of
the applicable Conversion Price pursuant to clause (i) above, the following
provisions shall be applicable:
(A) In the case of the issuance
of Common Stock for cash in a public offering or private placement, the
consideration shall be deemed to be the amount of cash paid therefor after
deducting therefrom any discounts, commissions or placement fees payable by
the Corporation to any underwriter or placement agent in connection with
the issuance and sale thereof.
(B) In the case of the issuance
of Common Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the Fair Value Per
Share thereof notwithstanding any accounting treatment.
(C) In the case of the issuance
of options to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock, or
options to purchase or rights to subscribe for such convertible or
exchangeable securities except for options to acquire Excluded Stock:
(1) the aggregate maximum
number of shares of Common Stock deliverable upon exercise of such options
to purchase or rights to subscribe for Common Stock shall be deemed to have
been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided
in Sections 5(f)(ii)(A) and 5(f)(ii)(B) above), if any, received by the
Corporation upon the issuance of such options or rights plus the minimum
purchase price provided in such options or rights for the Common Stock
covered thereby;
(2) the aggregate maximum
number of shares of Common Stock deliverable upon conversion of or in
exchange for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversion or exchange thereof
shall be deemed to have been issued at the time such securities, options,
or rights were issued and for a consideration equal to the consideration
received by the Corporation for any such securities and related options or
rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be
received by the Corporation upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in
Sections 5(f)(ii)(A) and 5(f)(ii)(B) above);
(3) on any change in the
number of shares or exercise price of Common Stock deliverable upon
exercise of any such options or rights or conversions of or exchanges for
such securities, other than a change resulting from the antidilution
provisions thereof, the Conversion Price shall forthwith be readjusted to
the Conversion Price as would have been obtained had the adjustment made
upon the issuance of such options, rights or securities not converted prior
to such change or options or rights related to such securities not
converted prior to such change been made upon the basis of such change; and
(4) on the expiration of
any such options or rights, the termination of any such rights to convert
or exchange or the expiration of any options or rights related to such
convertible or exchangeable securities, the Conversion Price shall
forthwith be readjusted to the Conversion Price as would have been obtained
had the adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities been made upon
the basis of the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities, or upon the exercise of the
options or rights related to such securities and subsequent conversion or
exchange thereof.
(iii) If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, following the
record date for the determination of holders of Common Stock entitled to
receive such stock dividend, subdivision or split-up, the Conversion Price
shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of Preferred Stock shall be
increased in proportion to such increase in outstanding shares.
(iv)If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is
decreased by a combination of the outstanding shares of Common Stock, then,
following the record date for such combination, the Conversion Price shall
be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of Preferred Stock shall be decreased
in proportion to such decrease in outstanding shares.
(v) In the event of any capital
reorganization of the Corporation, any reclassification of the stock of the
Corporation (other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock dividend
or subdivision, split-up or combination of shares), or any consolidation or
merger of the Corporation, each share of Series E Preferred Stock shall
after such reorganization, reclassification, consolidation, or merger be
convertible into the kind and number of shares of stock or other securities
or property of the Corporation or of the corporation resulting from such
consolidation or surviving such merger to which the holder of the number of
shares of Common Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation or merger) upon conversion
of such share of Series E Preferred Stock would have been entitled upon
such reorganization, reclassification, consolidation or merger. The
provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations or mergers.
(vi)No adjustment in the Conversion Price
shall be required unless such adjustment would require an increase or
decrease of at least .1% in such Conversion Price; provided, that any
adjustments not required to be made by virtue of this sentence shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under Sections 5(f)(i) through 5(f)(v) above shall be made to
the nearest one hundredth (1/100) of a cent or the nearest one tenth (1/10)
of a share, as the case may be.
(vii) In any case in which the provisions of
this Section 5(f) shall require that an adjustment shall become effective
immediately after a record date of an event, the Corporation may defer
until the occurrence of such event (A) issuing to the holder of any share
of Series E Preferred Stock converted after such record date and before the
occurrence of such event the shares of capital stock issuable upon such
conversion by reason of the adjustment required by such event in addition
to the shares of capital stock issuable upon such conversion before giving
effect to such adjustments, and (B) if applicable, paying to such holder
any amount in cash in lieu of a fractional share of capital stock pursuant
to Section 5(e) above; provided, however, that the Corporation shall
deliver to such holder an appropriate instrument evidencing such holder's
right to receive such additional shares and such cash.
(viii)Whenever the Conversion Price shall be
adjusted as provided in Section 5(f)(i), the Corporation shall make
available for inspection during regular business hours, at its principal
executive offices or at such other place as may be designated by the
Corporation, a statement, signed by its chief executive officer, showing in
detail the facts requiring such adjustment and the Conversion Price that
shall be in effect after such adjustment. The Corporation shall also cause
a copy of such statement to be sent by first class certified mail, return
receipt requested and postage prepaid, to each holder of Preferred Stock
affected by the adjustment at such holder's address appearing on the
Corporation's records. Where appropriate, such copy may be given in advance
and may be included as part of any notice required to be mailed under the
provisions of Section 5(f)(ix) below.
(ix)If the Corporation shall propose to take
any action of the types described in clauses (iii), (iv) or (v) of this
Section 5(f), the Corporation shall give notice to each holder of shares of
Preferred Stock, which notice shall specify the record date, if any, with
respect to any such action and the date on which such action is to take
place. Such notice shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of shares of
Preferred Stock. In the case of any action which would require the fixing
of a record date, such notice shall be given at least twenty (20) days
prior to the date so fixed, and in case of all other action, such notice
shall be given at least thirty (30) days prior to the taking of such
proposed action. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(x) The Corporation shall at all times keep
reserved, free from preemptive rights, out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion
of the Series E Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding shares of Series E Preferred
Stock.
(xi)Without duplication of any other
adjustment provided for in this Section 5(f), at any time the Corporation
makes or fixes a record date for the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, provision
shall be made so that each holder of Series E Preferred Stock shall receive
upon conversion thereof, in addition to the shares of Common Stock
receivable thereupon, the number of securities of the Corporation which it
would have received had its shares of Series E Preferred Stock been
converted into shares of Common Stock on the date of such event and had
such holder thereafter, during the period from the date of such event to
and including the date of conversion, retained such securities receivable
by it pursuant to this paragraph during such period, subject to the sum of
all other adjustments called for during such period under this Section 5
with respect to the rights of such holder of Series E Preferred Stock.
(xii) In the event that the Majority in
Interest consents in writing to limit, or waive in its entirety, any
anti-dilution adjustment to which the holders of the Series E Preferred
Stock would otherwise be entitled hereunder, the Corporation shall not be
required to make any adjustment whatsoever with respect to any Series E
Preferred Stock in excess of such limit or at all, as the terms of such
consent may dictate.
(xiii)The Corporation will not, by amendment
of its Certificate 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 to be observed or performed hereunder by
the Corporation, but will at all times in good faith assist in the carrying
out of all the provisions of this Section 5(f) and in the taking of all
such action as may be necessary or appropriate in order to protect the
exercise rights of the holders of Series E Preferred Stock against
impairment.
(xiv) The computations of all amounts under
this Section 5(f) shall be made assuming all other anti-dilution or similar
adjustments to be made to the terms of all other securities resulting from
the transaction causing an adjustment pursuant to this Section 5(f) have
previously been made so as to maintain the relative economic interest of
the Series E Preferred Stock vis a vis all other securities issued by the
Corporation.
(xv)The Corporation shall take or cause to
be taken such steps as shall be necessary to ensure that the par value per
share of Common Stock is at all times less than or equal to the Conversion
Price.
6. Definitions.
As used herein, the following terms shall have the following
meanings:
(a) "Affiliate" has the meaning ascribed to it in the
Securities Purchase Agreement.
(b) "Board" shall mean the Board of Directors of the
Corporation.
(c) "Change of Control of the Corporation" shall mean
any transaction or any event as a result of which (i) any one or more Persons
acquires or for the first time controls or is able to vote (directly or through
nominees or beneficial ownership) after the Original Issuance Date 51% or more
of any class of stock of the Corporation outstanding at the time having power
ordinarily to vote for directors of the Corporation or (ii) the control of more
than 51% of the number of shares of Common Stock held by Persons on the Original
Issuance Date has been transferred (excluding transfers by and among such
Persons) since the Original Issuance Date in the aggregate. For purpose of this
paragraph (b), "Common Stock" shall include shares of Common Stock issuable upon
exercise of warrants, options and other rights to acquire Common Stock
outstanding on the Original Issuance Date, whether or not at the time exercised
or exercisable.
(d) "Common Stock" shall mean the Common Stock, par
value $.001, of the Corporation.
(e) "Common Stock Equivalent" shall mean all shares of
Common Stock outstanding and all shares of Common Stock issuable (without regard
to any present restrictions on such issuance) upon the conversion, exchange or
exercise of all securities of the Corporation that are convertible, exchangeable
or exercisable for Common Stock and all Common Stock appreciation rights,
phantom Common Stock rights and other rights to acquire, or to receive or to be
paid amounts of, the Common Stock.
(f) "Excluded Stock" shall mean (A) up to 6,000,000
shares (as adjusted equitably for stock dividends, stock splits, combinations,
etc.) of Common Stock issuable upon exercise of stock options granted to
officers, employees, consultants, vendors or directors of the Corporation or its
subsidiaries, (B) shares of Common Stock issued upon conversion of shares of
Total Preferred Stock, (C) shares of Common Stock issued upon exercise of any
existing warrants, notes or other instruments convertible or exercisable for
Common Stock as of the date hereof, and (D) Common Stock or other equity
securities issued as part of a strategic arrangement or alliance by the
Corporation or its Subsidiaries to building licensors, landlords, carriers,
joint venture partners, vendors, lessors or lenders, and securities or
instruments issued in connection with acquisitions, as each such transaction is
approved by the Board of the Corporation, including in the case of (A), (B), (C)
and (D), any additional shares of Common Stock as may be issued by virtue of
antidilution provisions, if any, applicable to such options, warrants or shares,
as the case may be.
(g) "Fair Value Per Share" shall mean the fair value of
each share of Stock, as determined in good faith by the Board.
(h) "Liquidation" shall mean any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, other than any dissolution, liquidation or winding up in connection
with any reincorporation of the Corporation in Delaware.
(i) "Liquidation Amount" shall mean the Original
Issuance Price as to each share of Preferred Stock plus any accrued but unpaid
dividends.
(j) "Majority in Interest" shall have the meaning
ascribed to such term in the Securities Purchase Agreement.
(k) "Original Issuance Date" shall mean for the Series
E Preferred Stock, the date upon which this Certificate of Designation is filed
with the Secretary of State of Nevada.
(l) "Original Issuance Price" shall mean $15.00 per
share for the Series D Preferred Stock, $15.00 per share for the Series E
Preferred Stock and $30.00 per share for the Series F Preferred Stock.
(m) "Preferred Stock" shall mean the Series D Preferred
Stock, the Series E Preferred Stock and the Series F Preferred Stock.
(n) "Qualified Public Offering" shall have the meaning
ascribed to such term in the Stockholders Agreement.
(o) "Sale of the Corporation" shall mean (i) the sale
of all or substantially all of the Corporation's assets to a Person who is not
an Affiliate of the Corporation, (ii) the sale or transfer of the outstanding
capital stock of the Corporation to one or more Persons who are not Affiliates
of the Corporation, or (iii) the merger or consolidation of the Corporation with
or into another Person who is not an Affiliate of the Corporation, in each case
in clauses (ii) and (iii) above under circumstances in which the holders of a
majority in voting power of the outstanding capital stock of the Corporation,
immediately prior to such transaction, own less than a majority in voting power
of the outstanding capital stock of the Corporation or the surviving or
resulting corporation or acquirer, as the case may be, immediately following
such transaction. A sale (or multiple related sales) of one or more subsidiaries
of the Corporation (whether by way of merger, consolidation, reorganization or
sale of all or substantially all assets or securities) which constitutes all or
substantially all of the consolidated assets of the Corporation shall be deemed
a Sale of the Corporation.
(p) "Securities Purchase Agreement" shall mean that
certain agreement dated as of September 28, 1999 by and among the Corporation
and the purchasers named therein, as the same may be amended, modified or
supplemented from time to time.
(q) "Series C Preferred Stock" shall mean the Series C
Preferred Stock, par value $.001, of the Corporation.
(r) "Series E Preferred Stock" shall mean the Series E
Preferred Stock, par value $.001, of the Corporation.
(s) "Series F Preferred Stock" shall mean the Series F
Preferred Stock, par value, $.001, of the Corporation.
(t) "Stock" shall mean (i) the presently issued and
outstanding shares of Common Stock and Preferred Stock and any options or stock
subscription warrants exercisable therefor (which options and warrants shall be
deemed to be that number of outstanding shares of Stock for which they are
exercisable), (ii) any additional shares of capital stock of the Corporation
hereafter issued and outstanding and (iii) any shares of capital stock of the
Corporation into which such shares may be converted or for which they may be
exchanged or exercised.
(u) "Stockholders Agreement" shall mean that certain
agreement dated as of May 7, 1999 by and among the Corporation and the
stockholders named therein, as the same may be amended, modified or supplemented
from time to time.
(v) "Total Preferred Stock" shall mean the Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, and Series
F Preferred Stock.
EXHIBIT V
CERTIFICATE OF DESIGNATION OF
SERIES F PREFERRED STOCK
OF
FIBERNET TELECOM GROUP, INC.
Pursuant to Section 78.1955 of the General Corporation Law of
the State of Nevada, the undersigned, Michael S. Liss, being the President and
Chief Executive Officer of FIBERNET TELECOM GROUP, INC., a corporation organized
and existing under the laws of the State of Nevada (the "Corporation"), hereby
certifies that the following resolution has been hereby adopted by the Board of
Directors of the Corporation.
RESOLVED, that pursuant to the authority expressly granted to,
and vested in, the Board of Directors of the Corporation by the provisions of
its Articles of Incorporation ("Articles of Incorporation"), there is hereby
authorized 500,000 shares of Series F Preferred Stock, $.001 par value ("Series
F Preferred Stock"), 750,000 shares of Series F Preferred Stock, $.001 par value
("Series F Preferred Stock"), and 500,000 shares of Series F Preferred Stock,
$.001 par value ("Series F Preferred Stock"), out of 5,000,000 shares of
Preferred Stock, $.001 par value, of the Corporation, and the rights,
preferences and privileges of the Series F Preferred Stock are set forth in the
Certificate of Designation of the Series F Preferred Stock to be filed with the
Secretary of State of Nevada substantially in the form attached as Exhibit A.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation this 30th day of November, 1999.
----------------------------
Name: Michael S. Liss
Title: President and Chief
Executive Officer
----------------------------
Name: Roy (Trey) Farmer III
Title: Secretary
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EXHIBIT A
---------
SERIES F PREFERRED STOCK
-------------------------
1. Authorized Shares.
500,000 shares of Series F Preferred Stock, $.001 par value
("Series F Preferred Stock") of the Corporation have been authorized by the
Corporation for issuance.
2. Dividends.
(a) The holders of Series F Preferred Stock shall be
entitled to receive dividends at the rate of 8% per annum (payable
semi-annually) of the Base Amount (as adjusted from time to time as provided
below) for each 12-month period (or portion thereof) ending December 31,
calculated on the basis of a year of 360 days comprised of twelve 30-day months.
The "Base Amount" shall initially be $30.00 per share of the Series F Preferred
Stock, in respect of which the dividend is being calculated. Such dividends
shall be payable at the option of the Corporation in cash or in lieu of such
cash payment by issuance of shares of Series F Preferred Stock to holders of
Series F Preferred Stock.
(b) Dividends on a share of Series F Preferred Stock shall
accrue and be cumulative from and after the Original Issuance Date up to the
first to occur of (i) a Liquidation or (ii) the conversion of such share of
Series F Preferred Stock into Common Stock. Dividends shall be payable
semi-annually when, as and if declared by the Board of Directors of the
Corporation, on June 30 and December 31 of each year (each, a "Dividend
Reference Date"), commencing on December 31, 1999. In the event that the full
amount of a dividend in respect of any share of Series F Preferred Stock is not
paid during any such six-month period or portion thereof, the Base Amount shall
be increased by the amount of the dividend not paid, effective as of the
immediately succeeding July 1 or January 1, as applicable. To the extent not
paid on any such Dividend Reference Date, all dividends which have accrued on
each share of Series F Preferred Stock outstanding during the six-month period
(or other period in the case of the initial Dividend Reference Date) ending upon
such Reference Date shall be accumulated and shall remain accumulated dividends
with respect to such share of Series F Preferred Stock until paid to the holder
thereof. If any Dividend Reference Date occurs on a day other than a Business
Day, any dividends otherwise payable on such Dividend Reference Date shall be
paid on the next Business Day. Dividends shall be paid to the holders of record
of the Series F Preferred Stock as their names shall appear on the share
register of the Corporation on the record date for such dividend.
(c) If the Corporation pays less than the total amount of
dividends then accrued on the Total Preferred Stock, such cash payment or
issuance of shares of Total Preferred Stock shall be made on a pari passu basis
pro rata among the holders of the Preferred Stock based upon the aggregate
accrued but unpaid dividends on the shares of the Total Preferred Stock held by
each such holder. If and when any shares of Total Preferred Stock are issued
under this Section 1(c) for payment of accrued dividends, such shares of Total
Preferred Stock shall be
<PAGE>
deemed to be validly issued and outstanding and fully paid and nonassessable.
After payment of all dividends owing to the holders of Total Preferred Stock,
such holders shall share ratably (on an as if converted basis) in any dividends
thereafter paid on the Common Stock.
(d) In the event the Corporation shall fail to pay in full
all accrued dividends on all shares of the Total Preferred Stock, then the
Corporation shall not thereafter declare or pay or set apart for payment any
dividend or other distribution upon shares of Common Stock, or any other stock
ranking on a parity with or junior to the Total Preferred Stock as to dividends.
3. Liquidation.
Upon a Liquidation, after payment or provision for payment of the
debts and other liabilities of the Corporation, the holders of Series F
Preferred Stock shall be entitled to receive, pro rata on a pari passu basis
with holders of the Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock, out of the remaining assets of the Corporation
available for distribution to its stockholders, with respect to each share of
the Series F Preferred Stock, an amount equal to the Liquidation Amount for each
such share of Series F Preferred Stock before any distribution shall be made to
the holders of the Common Stock or any other class of capital stock of the
Corporation ranking junior to the Total Preferred Stock. If upon any Liquidation
the assets of the Corporation available for distribution to its stockholders
shall be insufficient to pay the holders of Total Preferred Stock the full
Liquidation Amount for each such series of Total Preferred Stock to which they
shall be entitled, the holders of each such series of Total Preferred Stock
shall share in any distribution of assets in accordance with such full
Liquidation Amount (pro rata on a pari passu basis in accordance with the total
Liquidation Amount for each such series of Total Preferred Stock that each such
holder would have received had there been such sufficient assets). After the
payment of the full Liquidation Amount for each such series of Preferred Stock
to the holders of Preferred Stock, such holders of Preferred Stock shall share
ratably (on an as if converted basis) with the holders of Common Stock in all
remaining assets of the Corporation available for distribution to its
stockholders; provided, that in no event will the holders of Preferred Stock
receive upon a Liquidation more than the greater of the Liquidation Amount per
share or the amount per share such holders would have been entitled to receive
if such shares of Preferred Stock had been converted into Common Stock
immediately prior to the Liquidation.
4. Voting Rights.
Prior to the conversion of Series F Preferred Stock, the Series F
Preferred Stock shall not be entitled to any vote and the holders thereof shall
not be entitled to vote as stockholders of the Corporation.
5. Conversion.
(a) Upon the terms set forth in this Section 5, each holder
of each share of Series F Preferred Stock shall have the right, at such holder's
option, at any time and from time to time, to convert such share into the number
of fully paid and nonassessable shares of Common
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Stock equal to the quotient obtained by dividing (A) the Liquidation Amount for
the Series F Preferred Stock by (B) the Conversion Price (as defined below) for
the Series F Preferred Stock, as last adjusted and then in effect, by surrender
of the certificate representing such share. The conversion price per share at
which shares of Common Stock shall be issuable upon conversion of shares of
Series F Preferred Stock shall be $3.00 for the Series F Preferred Stock, as
adjusted pursuant to Section 5(f) below (the "Conversion Price"). The holder of
any shares of Series F Preferred Stock may exercise the conversion right
pursuant to this Section 5(a) by delivering to the Corporation the certificate
for the shares to be converted, duly endorsed or assigned in blank or to the
Corporation (if required by it), accompanied by written notice stating that the
holder elects to convert such shares and stating the name or names (with
address) in which the certificate or certificates for the shares of Common Stock
are to be issued. Conversion shall be deemed to have been effected on the date
when such delivery is made or upon the consummation of a Qualified Public
Offering as provided below, if applicable (in each such case, the "Conversion
Date"). The Corporation shall give holders of Series F Preferred Stock
reasonable prior notice of a Sale of the Corporation, including the price and
material terms and conditions thereof, in order to provide such holders a
reasonable opportunity to consider whether to convert the Series F Preferred
Stock into Common Stock at or prior to such Sale of the Corporation.
(b) Upon written notice of the conversion of shares of
Preferred Stock owned or held by the Majority in Interest in accordance with
this Section 5 to the remaining holders of Preferred Stock, all shares of
Preferred Stock shall be deemed to be converted to that number of fully paid and
nonassessable shares of Common Stock equal to the quotient obtained by dividing
(A) Liquidation Amount for each such series of Preferred Stock for the share
being converted by (B) the applicable Conversion Price, as last adjusted and
then in effect.
(c) Upon the terms set forth in this Section 5, each share
of Series F Preferred Stock shall automatically be converted to that number of
fully paid and nonassessable shares of Common Stock equal to the quotient
obtained by dividing (A) the Liquidation Amount for the Series F Preferred Stock
for the share being converted by (B) the applicable Conversion Price, as last
adjusted and then in effect, upon the consummation of a Qualified Public
Offering.
(d) As promptly as practicable after the conversion of any
shares of Preferred Stock into Common Stock under Section 5(a), 5(b) or 5(c)
above, the Corporation shall issue and deliver upon the written order of such
holder, to the place designated by such holder, a certificate or certificates
for the number of full shares of Common Stock to which such holder is entitled,
and a cash amount in respect of any fractional interest in a share of Common
Stock as provided in Section 5(e) below. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a stockholder of record on the Conversion Date unless the transfer
books of the Corporation are closed on that date, in which event such person
shall be deemed to have become a stockholder of record on the next succeeding
date on which the transfer books are open, but the Conversion Price shall be
that in effect on the Conversion Date, and the rights of the holder of the
shares of Preferred Stock so converted shall cease on the Conversion Date. Upon
conversion of only a portion of the number of shares covered by a certificate
representing shares of Preferred Stock surrendered for conversion, the
Corporation shall issue and deliver, upon the written order of the holder of the
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certificate so surrendered for conversion, to the place designated by such
holder, at the expense of the Corporation, a new certificate covering the number
of shares of Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(e) Upon conversion, the Corporation will not be obligated
to issue fractional shares of its Common Stock and shall distribute cash in lieu
of such fractional shares. The number of full shares of Common Stock issuable
upon conversion of each such the Series F Preferred Stock shall be computed on
the basis of the aggregate number of shares of the Series F Preferred Stock to
be converted. If fractional shares of Common Stock which would otherwise be
issuable upon conversion of any such share are not issued, the Corporation shall
pay a cash adjustment in respect of such fractional interest in an amount equal
to the product of (i) the price of one share of Common Stock as determined in
good faith by the Board and (ii) such fractional interest. The holders of
fractional interests shall not be entitled to any rights as stockholders of the
Corporation in respect of such fractional interests.
(f) The Conversion Price for each share of Series F
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) if the Corporation shall, at any time or from
time to time after the Original Issuance Date, issue any shares of Common Stock
(or be deemed to have issued shares of Common Stock as provided herein), other
than Excluded Stock, without consideration or for a consideration per share less
than the applicable Conversion Price, then (x) with respect to any such issuance
prior to the earlier of (1) March 28, 2001 or (2) any public and/or private
offering or offerings of Common Stock or debt and/or equity securities that are
convertible, exchangeable or exercisable for Common Stock that in the aggregate
exceeds $30,000,000 (but excluding any such issuance in which the $30,000,000
threshold is first met) (the first to occur of (1) or (2), a "Capital Event"),
the applicable Conversion Price as in effect immediately prior to each such
issuance shall forthwith be lowered to a price equal to the issuance,
conversion, exchange or exercise price, as applicable, of any such securities so
issued and (y) with respect to any issuance after the occurrence of a Capital
Event, the applicable Conversion Price, as in effect immediately prior to each
such issuance, shall forthwith be lowered in accordance with Section 5(f)(ii)
below.
(ii)If the Corporation shall, at any time or from
time to time after the Original Issuance Date, issue any shares of Common Stock
(or be deemed to have issued shares of Common Stock as provided herein), other
than Excluded Stock, without consideration or for a consideration per share less
than the applicable Conversion Price, and in accordance with the provisions in
Section 5(f)(i) above, then the applicable Conversion Price of each such series
of Preferred Stock, as in effect immediately prior to each such issuance, shall
forthwith be lowered to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of (x) the
total number of shares of Common Stock outstanding on a fully-diluted basis
immediately prior to such issuance, multiplied by the applicable Conversion
Price in effect immediately prior to such issuance, and (y) the consideration
received by the Corporation upon such issuance; by
(B) the total number of shares of Common
Stock outstanding on a fully-diluted basis immediately after the issuance of
such Common Stock.
(iii) For the purposes of any adjustment of the
applicable Conversion Price pursuant to clauses (i) and (ii) above, the
following provisions shall be applicable:
(A) In the case of the issuance of Common
Stock for cash in a public offering or private placement, the consideration
shall be deemed to be the amount of cash paid therefor after deducting therefrom
any discounts, commissions or placement fees payable by the Corporation to any
underwriter or placement agent in connection with the issuance and sale thereof.
(B) In the case of the issuance of Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the Fair Value Per Share thereof
notwithstanding any accounting treatment.
(C) In the case of the issuance of options
to purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock, or options to purchase or
rights to subscribe for such convertible or exchangeable securities except for
options to acquire Excluded Stock:
(1) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in Sections 5(f)(iii)(A) and
5(f)(iii)(B) above), if any, received by the Corporation upon the issuance of
such options or rights plus the minimum purchase price provided in such options
or rights for the Common Stock covered thereby;
(2) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities, options, or rights were issued and for a
consideration equal to the consideration received by the Corporation for any
such securities and related options or rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Corporation upon the conversion or
exchange of such securities or
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the exercise of any related options or rights(the consideration in each case to
be determined in the manner provided in Sections 5(f)(iii)(A) and 5(f)(iii)(B)
above);
(3) on any change in the number of
shares or exercise price of Common Stock deliverable upon exercise of any such
options or rights or conversions of or exchanges for such securities, other than
a change resulting from the antidilution provisions thereof, the Conversion
Price shall forthwith be readjusted to the Conversion Price as would have been
obtained had the adjustment made upon the issuance of such options, rights or
securities not converted prior to such change or options or rights related to
such securities not converted prior to such change been made upon the basis of
such change; and
(4) on the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price shall forthwith be readjusted to
the Conversion Price as would have been obtained had the adjustment made upon
the issuance of such options, rights, securities or options or rights related to
such securities been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities, or upon the exercise
of the options or rights related to such securities and subsequent conversion or
exchange thereof.
(iv)If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is increased by
a stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date for the
determination of holders of Common Stock entitled to receive such stock
dividend, subdivision or split-up, the Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of Preferred Stock shall be increased in proportion to such increase
in outstanding shares.
(v) If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is decreased by
a combination of the outstanding shares of Common Stock, then, following the
record date for such combination, the Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of Preferred Stock shall be decreased in proportion to such decrease
in outstanding shares.
(vi)In the event of any capital
reorganization of the Corporation, any reclassification of the stock of the
Corporation (other than a change in par value or from par value to no par value
or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or any consolidation or merger
of the Corporation, each share of Series F Preferred Stock shall after such
reorganization, reclassification, consolidation, or merger be convertible into
the kind and number of shares of stock or other securities or property of the
Corporation or of the
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corporation resulting from such consolidation or surviving such merger to which
the holder of the number of shares of Common Stock deliverable (immediately
prior to the time of such reorganization, reclassification, consolidation or
merger) upon conversion of such share of Series F Preferred Stock would have
been entitled upon such reorganization, reclassification, consolidation or
merger. The provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations or mergers.
(vii) No adjustment in the Conversion Price
shall be required unless such adjustment would require an increase or decrease
of at least .1% in such Conversion Price; provided, that any adjustments not
required to be made by virtue of this sentence shall be carried forward and
taken into account in any subsequent adjustment. All calculations under Sections
5(f)(i) through 5(f)(vi) above shall be made to the nearest one hundredth
(1/100) of a cent or the nearest one tenth (1/10) of a share, as the case may
be.
(viii)In any case in which the provisions
of this Section 5(f) shall require that an adjustment shall become effective
immediately after a record date of an event, the Corporation may defer until the
occurrence of such event (A) issuing to the holder of any share of Series F
Preferred Stock converted after such record date and before the occurrence of
such event the shares of capital stock issuable upon such conversion by reason
of the adjustment required by such event in addition to the shares of capital
stock issuable upon such conversion before giving effect to such adjustments,
and (B) if applicable, paying to such holder any amount in cash in lieu of a
fractional share of capital stock pursuant to Section 5(e) above; provided,
however, that the Corporation shall deliver to such holder an appropriate
instrument evidencing such holder's right to receive such additional shares and
such cash.
(ix)Whenever the Conversion Price shall be
adjusted as provided in Sections 5(f)(i) and 5(f)(ii), the Corporation shall
make available for inspection during regular business hours, at its principal
executive offices or at such other place as may be designated by the
Corporation, a statement, signed by its chief executive officer, showing in
detail the facts requiring such adjustment and the Conversion Price that shall
be in effect after such adjustment. The Corporation shall also cause a copy of
such statement to be sent by first class certified mail, return receipt
requested and postage prepaid, to each holder of Preferred Stock affected by the
adjustment at such holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be included as part
of any notice required to be mailed under the provisions of Section 5(f)(x)
below.
(x) If the Corporation shall propose to
take any action of the types described in clauses (iv), (v) or (vi) of this
Section 5(f), the Corporation shall give notice to each holder of shares of
Preferred Stock, which notice shall specify the record date, if any, with
respect to any such action and the date on which such action is to take place.
Such notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent such
effect may be
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known at the date of such notice) on the Conversion Price and the number, kind
or class of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon conversion of
shares of Preferred Stock. In the case of any action which would require the
fixing of a record date, such notice shall be given at least twenty (20) days
prior to the date so fixed, and in case of all other action, such notice shall
be given at least thirty (30) days prior to the taking of such proposed action.
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of any such action.
(xi)The Corporation shall at all times keep
reserved, free from preemptive rights, out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
Series F Preferred Stock, sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Series F Preferred Stock.
(xii) Without duplication of any other
adjustment provided for in this Section 5(f), at any time the Corporation makes
or fixes a record date for the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock, provision shall be made so that
each holder of Series F Preferred Stock shall receive upon conversion thereof,
in addition to the shares of Common Stock receivable thereupon, the number of
securities of the Corporation which it would have received had its shares of
Series F Preferred Stock been converted into shares of Common Stock on the date
of such event and had such holder thereafter, during the period from the date of
such event to and including the date of conversion, retained such securities
receivable by it pursuant to this paragraph during such period, subject to the
sum of all other adjustments called for during such period under this Section 5
with respect to the rights of such holder of Series F Preferred Stock.
(xiii)In the event that the Majority in
Interest consents in writing to limit, or waive in its entirety, any
anti-dilution adjustment to which the holders of the Series F Preferred Stock
would otherwise be entitled hereunder, the Corporation shall not be required to
make any adjustment whatsoever with respect to any Series F Preferred Stock in
excess of such limit or at all, as the terms of such consent may dictate.
(xiv) The Corporation will not, by
amendment of its Certificate 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 to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 5(f) and in the taking of all such action as
may be necessary or appropriate in order to protect the exercise rights of the
holders of Series F Preferred Stock against impairment.
(xv)The computations of all amounts under
this Section 5(f) shall be made assuming all other anti-dilution or similar
adjustments to be made to the terms of all other securities resulting from the
transaction causing an adjustment pursuant to this Section 5(f) have previously
been made so as to maintain the relative economic interest of the Series F
Preferred Stock vis a vis all other securities issued by the Corporation.
(xvi) The Corporation shall take or cause
to be taken such steps as shall be necessary to ensure that the par value per
share of Common Stock is at all times less than or equal to the Conversion
Price.
6. Definitions.
As used herein, the following terms shall have the following
meanings:
(a) "Affiliate" has the meaning ascribed to it in the
Securities Purchase Agreement.
(b) "Board" shall mean the Board of Directors of the
Corporation.
(c) "Change of Control of the Corporation" shall mean any
transaction or any event as a result of which (i) any one or more Persons
acquires or for the first time controls or is able to vote (directly or through
nominees or beneficial ownership) after the Original Issuance Date 51% or more
of any class of stock of the Corporation outstanding at the time having power
ordinarily to vote for directors of the Corporation or (ii) the control of more
than 51% of the number of shares of Common Stock held by Persons on the Original
Issuance Date has been transferred (excluding transfers by and among such
Persons) since the Original Issuance Date in the aggregate. For purpose of this
paragraph (b), "Common Stock" shall include shares of Common Stock issuable upon
exercise of warrants, options and other rights to acquire Common Stock
outstanding on the Original Issuance Date, whether or not at the time exercised
or exercisable.
(d) "Common Stock" shall mean the Common Stock, par value
$.001, of the Corporation.
(e) "Common Stock Equivalent" shall mean all shares of
Common Stock outstanding and all shares of Common Stock issuable (without regard
to any present restrictions on such issuance) upon the conversion, exchange or
exercise of all securities of the Corporation that are convertible, exchangeable
or exercisable for Common Stock and all Common Stock appreciation rights,
phantom Common Stock rights and other rights to acquire, or to receive or to be
paid amounts of, the Common Stock.
(f) "Excluded Stock" shall mean (A) up to 6,000,000 shares
(as adjusted equitably for stock dividends, stock splits, combinations, etc.) of
Common Stock issuable upon exercise of stock options granted to officers,
employees, consultants, vendors or directors of the Corporation or its
subsidiaries, (B) shares of Common Stock issued upon conversion of shares of
Total Preferred Stock, (C) shares of Common Stock issued upon exercise of any
existing warrants, notes or other instruments convertible or exercisable for
Common Stock as of the date hereof, and (D) Common Stock or other equity
securities issued as part of a strategic arrangement or alliance by the
Corporation or its Subsidiaries to building licensors, landlords, carriers,
joint venture partners, vendors, lessors or lenders, and securities or
instruments issued in connection with acquisitions, as each such transaction is
approved by the Board of the Corporation, including in the case of (A), (B), (C)
and (D), any additional shares of Common Stock as may be issued by virtue of
antidilution provisions, if any, applicable to such options, warrants or shares,
as the case may be.
(g) "Fair Value Per Share" shall mean the fair value of
each share of Stock, as determined in good faith by the Board.
(h) "Liquidation" shall mean any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, other
than any dissolution, liquidation or winding up in connection with any
reincorporation of the Corporation in Delaware.
(i) "Liquidation Amount" shall mean the Original Issuance
Price as to each share of Preferred Stock plus any accrued but unpaid dividends.
(j) "Majority in Interest" shall have the meaning ascribed
to such term in the Securities Purchase Agreement.
(k) "Original Issuance Date" shall mean for the Series F
Preferred Stock, the date upon which this Certificate of Designation is filed
with the Secretary of State of Nevada.
(l) "Original Issuance Price" shall mean $15.00 per share
for the Series D Preferred Stock, $15.00 per share for the Series E Preferred
Stock and $30.00 per share for the Series F Preferred Stock.
(m) "Preferred Stock" shall mean the Series D Preferred
Stock, the Series E Preferred Stock and the Series F Preferred Stock.
(n) "Qualified Public Offering" shall have the meaning
ascribed to such term in the Stockholders Agreement.
(o) "Sale of the Corporation" shall mean (i) the sale of
all or substantially all of the Corporation's assets to a Person who is not an
Affiliate of the Corporation, (ii) the sale or transfer of the outstanding
capital stock of the Corporation to one or more Persons who are not Affiliates
of the Corporation, or (iii) the merger or consolidation of the Corporation with
or into another Person who is not an Affiliate of the Corporation, in each case
in clauses (ii) and (iii) above under circumstances in which the holders of a
majority in voting power of the outstanding capital stock of the Corporation,
immediately prior to such transaction, own less than a majority in voting power
of the outstanding capital stock of the Corporation or the surviving or
resulting corporation or acquirer, as the case may be, immediately following
such transaction. A sale (or multiple related sales) of one or more subsidiaries
of the Corporation (whether by way of merger, consolidation, reorganization or
sale of all or substantially all assets or securities) which constitutes all or
substantially all of the consolidated assets of the Corporation shall be deemed
a Sale of the Corporation.
(p) "Securities Purchase Agreement" shall mean that certain
agreement dated as of September 28, 1999 by and among the Corporation and the
purchasers named therein, as the same may be amended, modified or supplemented
from time to time.
(q) "Series C Preferred Stock" shall mean the Series C
Preferred Stock, par value $.001, of the Corporation.
(r) "Series D Preferred Stock" shall mean the Series D
Preferred Stock, par value $.001, of the Corporation.
(s) "Series E Preferred Stock" shall mean the Series E
Preferred Stock, par value, $.001, of the Corporation.
(t) "Stock" shall mean (i) the presently issued and
outstanding shares of Common Stock and Preferred Stock and any options or stock
subscription warrants exercisable therefor (which options and warrants shall be
deemed to be that number of outstanding shares of Stock for which they are
exercisable), (ii) any additional shares of capital stock of the Corporation
hereafter issued and outstanding and (iii) any shares of capital stock of the
Corporation into which such shares may be converted or for which they may be
exchanged or exercised.
(u) "Stockholders Agreement" shall mean that certain
agreement dated as of May 7, 1999 by and among the Corporation and the
stockholders named therein, as the same may be amended, modified or supplemented
from time to time.
(v) "Total Preferred Stock" shall mean the Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, and Series
F Preferred Stock.
