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Exhibit 3.1
CERTIFICATE OF DESIGNATION
OF
SERIES H PREFERRED STOCK
OF
FIBERNET TELECOM GROUP, INC.
(a Delaware corporation)
The undersigned natural persons of age at least 18 years of age,
Michael S. Liss and Roy (Trey) D. Farmer III, being the President and Secretary,
respectively, of FiberNet Telecom Group, Inc., a corporation organized and
existing under the laws of the State of Delaware, on behalf of said corporation,
hereby certify as follows:
FIRST: The name of the corporation (hereinafter the "Corporation") is
FiberNet Telecom Group, Inc.
SECOND: The Certificate of Designations of the Series H Preferred
Stock, $.001 par value, of the Corporation attached hereto as Exhibit A
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("Certificate of Designation") was duly adopted in accordance with Sections
141(f) and 151 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, we have executed this Certificate of Designation
this 28th day of July, 2000.
/s/ Michael S. Liss
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Michael S. Liss
President
/s/ Roy (Trey) D. Farmer III
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Roy (Trey) D. Farmer III
Secretary
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Exhibit A
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SERIES H PREFERRED STOCK
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1. Authorized Shares.
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750,000 shares of Series H Preferred Stock, $.001 par value ("Series H
Preferred Stock") of the Corporation have been authorized by the Corporation for
issuance.
2. Dividends.
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(a) The holders of Series H Preferred Stock shall be entitled to receive (i)
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; and (ii) if a
dividend (other than a dividend payable in shares of Common Stock) is
declared during such semi-annual period on the Common Stock, (or any class
thereof), subject to the approval or consent of the holders of the Series H
Preferred Stock as provided in Section 4 hereof, an amount per share equal
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to the aggregate amount of dividends declared with respect to that number
of shares of the Common Stock into which the Series H Preferred Stock then
outstanding shall then be convertible pursuant to Section 5 hereof, divided
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by the number of shares of the Series H Preferred Stock then outstanding
(together with the rate contained in Section 2(a)(i), the "Dividend Rate")
The "Base Amount" shall initially be $100.00 per share of the Series H
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 H Preferred
Stock to holders of Series H Preferred Stock; provided, however, that all
accrued but unpaid dividends on the Series H Preferred Stock must be paid,
in arrears, in cash, before payment of any cash dividends on any other
series or class of capital stock of the Corporation.
(b) Dividends on a share of Series H 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 H
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, 2000. In the event that the
full amount of a dividend in respect of any share of Series H 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 H 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 H 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 H Preferred Stock as
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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 Total 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 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, or purchase, redeem, or acquire for
consideration, any shares of Common Stock or any other stock ranking on a
parity with or junior to the Total Preferred Stock as to dividends.
(e) Notwithstanding anything to the contrary in this Certificate of
Designation, in the event any conversion (including into Common Stock),
redemption or liquidation occurs as of a date other than a Dividend
Reference Date, the holder of Series H Preferred Stock shall be paid a pro
rata dividend equal to the dividend payable for that six month period
ending upon the Dividend Reference Date multiplied by a fraction, the
numerator of which is the number of days that have elapsed since the last
payment on a Dividend Reference Date and the denominator of which is the
number of days contained between the applicable Dividend Reference Dates.
(f) The amount of any dividends accrued on any share of the Series H Preferred
Stock on any Dividend Reference Date shall be deemed to be the amount of
any unpaid dividends accumulated thereon to and including such Dividend
Reference Date, whether or not earned or declared. The amount of dividends
accrued on any share of the Series H Preferred Stock on any date other than
a Dividend Reference Date shall be deemed to be the sum of (i) the amount
of any unpaid dividends accumulated thereon to and including the last
preceding Dividend Reference Date, whether or not earned or declared, and
(ii) an amount determined by multiplying (x) the greater of the Dividend
Rates by (y) a fraction, the numerator of which shall be the number of days
from the last preceding Dividend Reference Date to and including the date
on which such calculation is made and the denominator of which shall be the
number of days contained between the applicable Dividend Reference Dates.
(g) Immediately prior to authorizing or making any distribution in redemption
or liquidation with respect to the Series H Preferred Stock (other than a
purchase or acquisition of Series H Preferred Stock pursuant to a purchase
or exchange offer made on the same terms to holders of all Total Preferred
Stock), the Board of Directors of the Corporation shall, to the extent of
any funds legally available therefor, declare a dividend in cash on the
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Series H Preferred Stock payable on the distribution date in an amount
equal to any accrued and unpaid dividends on the Series H Preferred Stock
as of such date.
(h) Of the 750,000 authorized shares of Series H Preferred Stock, 250,000
shares may only be issued by the Corporation as in-kind dividends on
previously issued shares of the Series H Preferred Stock in accordance with
Section 2(a) and this subsection (h) and may not be issued for any other
payment or consideration. If the Board of Directors elects (a "Dividend
Election") to pay the dividends in-kind by the issuance of shares of Series
H Preferred Stock (a "Payment-in-Kind"), the Corporation shall promptly
notify the holders of record of the Series H Preferred Stock entitled to
such dividend of the election to make the Payment-in-Kind in lieu of cash
dividends for a Dividend Reference Date. A Dividend Election for any
particular Dividend Reference Date shall operate only for such Dividend
Reference Date. Each Payment-in-Kind shall be equal in amount to that
number of shares of Series H Preferred Stock that is equal in number to the
aggregate cash dividend otherwise payable on any such Dividend Reference
Date divided by $100, and shall be allocated on a pro rata basis to each
holder entitled to receive such dividend. Certificates representing the
shares of Series H Preferred Stock issuable on payment of any Payment-in-
Kind shall be delivered to each holder entitled to receive such Payment-in-
Kind (in appropriate denominations) as soon as practicable after the
Dividend Election is made.
3. Liquidation.
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(a) Upon a Liquidation, after payment or provision for payment of the debts and
other liabilities of the Corporation, the holders of Series H 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, 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 H Preferred Stock, an amount equal to
the Liquidation Amount for each such share of Series H 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 as
adjusted for stock splits, stock dividends, combinations, recapitalizations
and other events) 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
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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.
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(b) Except with respect to holders that elect to convert their shares of Series
H Preferred Stock into Common Stock, for purposes of this Section 3, the
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holders of a majority of the Series H Preferred Stock may elect to treat a
Sale of the Corporation as a Liquidation.
(c) The Corporation shall provide written notice to each holder of Series H
Preferred Stock at least 20 days prior to any event of Liquidation or Sale
of the Corporation. By giving written notice to the Corporation prior to
any Liquidation or Sale of the Corporation, the holders of Series H
Preferred Stock may, at their option, elect to forego their preference for
Liquidation and have their shares of Series H Preferred Stock converted
into Common Stock immediately prior to the event of Liquidation or Sale of
the Corporation.
4. Voting Rights.
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(a) Prior to the conversion of Series H Preferred Stock, the Series H Preferred
Stock shall not be entitled to any vote and the holders thereof shall not
be entitled to vote as stockholders of the Corporation, except as set forth
in paragraph (b) of this Section 4.
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(b) So long as at least twenty-five percent (25%) of the shares of Series H
Preferred Stock are outstanding, the Corporation shall not, without first
obtaining the approval (by vote or written consent) of the holders of at
least a majority of the shares of Series H Preferred Stock then
outstanding, voting as a separate class, take any action to:
(i) be merged with or into any other corporation or entity;
(ii) sell all or substantially all of its assets to any third
party;
(iii) authorize, designate or issue any shares of a new class or
series of equity securities senior to the Series H Preferred
Stock as to liquidation preference, redemption or dividends;
(iv) repurchase, redeem or retire any shares of Series H Preferred
Stock or other stock ranking as to redemption, conversion,
payment of dividends or distribution of assets on a parity
with the Series H Preferred Stock ("Parity Stock"), except
pursuant to any provision of this Certificate of Designation;
(v) repurchase, redeem or retire any shares of Common Stock or any
other shares of stock of any class of the Corporation, whether
or not presently authorized, ranking as to redemption,
conversion, payment of dividends or distribution of assets
junior to the Series H Preferred Stock ("Junior Stock");
(vi) amend the Certificate of Incorporation of the Corporation or
this Certificate of Designation in any manner adverse to the
holders of the Series H Preferred Stock (it being understood
and agreed that the amendment of the Certificate of
Incorporation for the purpose of authorizing or issuing
securities with rights and preferences junior or pari passu
with the rights and preferences of the Preferred Stock shall
not be deemed to be adverse to the Purchaser);
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(vii) increase or decrease the authorized number of shares of Series
H Preferred Stock or any other series of preferred stock; or
(viii) authorize or pay any dividend or other distribution (other
than dividends payable to the holders of Series H Preferred
Stock as contemplated by Section 2) with respect to the
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Preferred Stock or the Common Stock.
5. Conversion.
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(a) Upon the terms set forth in this Section 5, each holder of each share of
Series H 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 Stock equal to the quotient
obtained by dividing (A) the Liquidation Amount for the Series H Preferred
Stock by (B) the Conversion Price (as defined below) for the Series H
Preferred Stock, as last adjusted for stock splits, stock dividends,
combinations, recapitalizations and other events, 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 H Preferred Stock shall be $10.00 for the Series H
Preferred Stock, as adjusted pursuant to Section 5(f) below (the
"Conversion Price"). The holder of any shares of Series H 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 H
Preferred Stock reasonable prior notice of a Sale of the Corporation,
including the price and material terms and conditions thereof, in other to
provide such holders a reasonable opportunity to consider whether to
convert the Series H Preferred Stock into Common Stock at or prior to such
Sale of the Corporation.
(b) Upon the consummation of a Qualified Public Offering, each share of Series
H 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 H Preferred
Stock for the share being converted by (B) the applicable Conversion Price,
as last adjusted for stock splits, stock dividends, combinations,
recapitalizations and other events, and then in effect. Notwithstanding
the foregoing, upon a conversion under this subsection (b), the holders of
the Series H Preferred Stock shall not have a right to receive or vote any
shares of Common Stock unless and until the earlier to occur of (i) the
filing of all notices and reports as may be required under the Hart-Scott-
Rodino Antitrust Improvements Act (the "HSR Act") and the expiration or
early termination of the applicable waiting period under the HSR Act, or
(ii) the delivery to the Corporation by the holders of the Series H
Preferred Stock of a certificate stating that no filing under the HSR Act
is required in order for the holders of the Series H Preferred Stock to
receive or vote their shares of Common Stock upon conversion; provided
further, following the earlier to occur of (i) or (ii), such right of the
holders of Series H Preferred Stock to receive shares of Common Stock upon
the conversion
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of their shares of Series H Preferred Stock pursuant to this subsection (b)
shall automatically exist. The Corporation shall hold in escrow, pending
satisfaction of either of the conditions set forth in (i) or (ii), the
shares of Common Stock to which the holders of Series H Preferred Stock are
entitled following the automatic conversion of their shares as a result of
the consummation of a Qualified Public Offering. If required by the HSR
Act, the Corporation shall promptly make any necessary filings under the
HSR Act.
(c) 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 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.
(d) 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 H Preferred Stock shall be computed on
the basis of the aggregate number of shares of the Series H 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.
(e) The Conversion Price for each share of Series H 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 completion of a Qualified Public Offering
(including any shares issued in such Qualified Public
Offering), 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
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applicable, of any such securities so issued and (y) with
respect to any issuance after the completion of a Qualified
Public Offering, the applicable Conversion Price, as in effect
immediately prior to each such issuance, shall forthwith be
lowered in accordance with Section 5(e)(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(e)(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
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options or rights were issued and for a consideration
equal to the consideration (determined in the manner
provided in Sections 5(e)(iii) (A) and 5(e)(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
the exercise of any related options or rights (the
consideration in each case to be determined in the
manner provided in Sections 5(e)(iii)(A) and
5(e)(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 relaxed 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
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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 H 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 H 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 adjustments. All
calculations under Sections 5(e)(i) through 5(e)(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(e)
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 H
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(d) 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(e)(i) and 5(e)(ii), the Corporation shall
make available for
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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 file such statements with its transfer agent or
agents for its Preferred Stock and Common Stock. 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(e)(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(e), 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.
(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 H Preferred Stock, sufficient
shares of Common Stock to provide for the conversion of all
outstanding shares of Series H Preferred Stock.
(xii) Without duplication of any other adjustment provided for in
this Section 5(e), 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 H 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 H 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 H Preferred Stock.
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(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(e) 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 H Preferred Stock against impairment.
(xiv) The computations of all amounts under this Section 5(e)
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(e) have previously been made so
as to maintain the relative economic interest of the Series
H Preferred Stock vis a vis 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. The Corporation shall pay all issue
taxes, if any, incurred in connection with the issuance of
its Common Stock or other securities or properties on
conversion of any shares of the Series H Preferred Stock,
but the Corporation shall not pay any transfer or other
taxes incurred by reason of the issuance of such Common
Stock or other securities or properties in names other than
those in which the share or shares of the Series H
Preferred Stock surrendered for conversion may stand.
6. Redemption.
-----------
(a) The Corporation shall be obligated to redeem and shall promptly redeem all
of the shares of Series H Preferred Stock, upon written request by the
holders of a majority of the issued and outstanding shares of Series H
Preferred Stock after the occurrence of a Triggering Event, for an amount
per share equal to (i) the Liquidation Amount, plus (ii) on a per share
basis, an amount equal to all dividends, if any, accumulated and unpaid,
whether or not declared or earned (including any dividends thereon
calculated through the date of redemption) (the "Mandatory Redemption
Obligation").
(b) If and so long as the Mandatory Redemption Obligation with respect to the
Series H Preferred Stock shall not fully be discharged, the Corporation
shall not, directly or indirectly, declare or pay any dividend or make any
distributions on , or purchase, redeem or retire, or satisfy any mandatory
or optional redemption, sinking fund or other similar obligation in respect
of, any Parity Stock or Junior Stock or warrants, rights or options
exercisable for any such Parity Stock or Junior Stock (other than dividends
or distributions payable in a particular class or series of such Parity
Stock or Junior Stock, as the case may be, to holders thereof).
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7. Definitions.
-----------
As used herein, the following terms shall have the following meanings:
(a) "Affiliate" shall mean, with respect to any Person, (i) a director or
officer of such Person, (ii) a spouse, parent, sibling or descendant of
such Person (or a spouse, parent, sibling or descendant of any director or
executive officer of such Person), and (iii) any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.
(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 (c), "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 10,000,000 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 ("Strategic Issuances") issued as part of a
strategic arrangement or alliance by the Corporation or its Subsidiaries to
building licensors, landlords, carriers, joint venture partners, vendors
(other than equipment vendors and software vendors), consultants, lessors
or lenders, and securities or instruments issued in connection with
acquisitions, as each such transaction is approved by the Board of the
Corporation, provided, that, such Strategic Issuances do not, in the
-------- ----
aggregate, involve the issuance of securities accounting for in excess of
five percent (5%) of the fully diluted outstanding Common Stock of
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the Company, 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 (including
without limitation a liquidation or reorganization under Chapter 11 of the
United States Bankruptcy Code, as amended and as may hereinafter be
amended), 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) "Original Issuance Date" means the date of original issuance of the first
share of the Series H Preferred Stock.
(k) "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, $30.00
per share for the Series F Preferred Stock and $100.00 per share for the
Series H Preferred Stock.
(l) "Preferred Stock" shall mean the Series D Preferred Stock, the Series E
Preferred Stock, the Series F Preferred Stock and the Series H Preferred
Stock.
(m) "Qualified Public Offering" shall mean fully underwritten public offering
(underwritten by a reputable underwriter of national reputation) of shares
of Common Stock registered pursuant to the Securities Act with proceeds to
the Company of at least $75,000,000 (net of underwriting discounts and
expenses).
(n) "Sale of the Corporation" shall mean (1) 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 maybe, 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.
(o) "Securities Purchase Agreement" shall mean that certain agreement dated as
of July 28, 2000 by and among the Corporation and the purchaser named
therein, as the same may be amended, modified or supplemented from time to
time.
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(p) "Series C Preferred Stock" shall mean the Series C Preferred Stock, par
value $.001, of the Corporation.
(q) "Series D Preferred Stock" shall mean the Series D 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 Total 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) "Total Preferred Stock" shall mean the Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and
Series H Preferred Stock.
(v) "Triggering Event" shall mean the earlier to occur of (i) a Change of
Control, or (ii) the sale of a majority of the assets of the Corporation.
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