UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: March 31, 2000
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT FOR THE
TRANSITION PERIOD From ____ to ____
Commission File number 0-25615
Globix Corporation
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
13-3781263
(IRS Employer Identification No.)
139 Centre Street, New York, NY 10013
(Address of principal executive offices)
(212) 334-8500
(Registrant's telephone number)
Indicate by check mark whether the registrant has (1) filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
36,672,000 shares of Common Stock outstanding as of May 12, 2000
<PAGE>
Globix Corporation and Subsidiaries
Index
PART I - FINANCIAL INFORMATION Page
----
Item 1. Consolidated Balance Sheets - As of March 31, 2000 and
September 30,1999 1
Consolidated Statements of Operations - For the Three
Months Ended March 31, 2000 and 1999 2
Consolidated Statements of Operations - For the Six Months
Ended March 31, 2000 and 1999 2
Consolidated Statements of Cash Flows - For the Six Months
Ended March 31, 2000 and 1999 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosure of Market Risk 11
PART II - OTHER INFORMATION 13
Item 1. Legal Proceedings
Item 2. Changes is Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
Globix Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents .................................... $ 498,252 $ 101,471
Short term investments ....................................... 75,325 --
Marketable securities ........................................ 13,033 9,941
Accounts receivable, net of allowance for doubtful accounts of
$1,213 and $707, respectively ............................. 13,963 7,798
Inventories .................................................. 582 1,282
Prepaid expenses and other current assets .................... 3,730 2,649
Restricted cash .............................................. 9,882 8,848
--------- ---------
Total current assets ......................................... 614,767 131,989
Investments, restricted ...................................... 5,781 36,191
Property, plant and equipment, net ........................... 133,705 122,653
Debt issuance costs, net of accumulated amortization of $350
and $1,030, respectively .................................. 21,650 5,583
Other assets ................................................. 6,283 6,102
--------- ---------
Total assets ................................................. $ 782,186 $ 302,518
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Capital Lease obligations and other .......................... $ 2,147 $ 2,088
Accounts payable ............................................. 9,282 10,439
Accrued liabilities .......................................... 9,271 9,579
Accrued interest ............................................. 12,500 8,667
--------- ---------
Total current liabilities .................................... 33,200 30,773
Capital Lease obligations, net of current portion ............ 1,918 2,896
Mortgage Payable ............................................. 20,774 --
Senior Notes, net of unamortized discount of
$1,891 in 1999 ............................................ 600,000 158,109
Other long term liabilities .................................. 4,295 4,335
--------- ---------
Total liabilities ............................................ 662,163 196,113
Redeemable Convertible Preferred Stock ....................... 75,567 --
Stockholders' Equity:
Common stock, $.01 par value; 500,000,000 shares
authorized; 36,359,036 and 33,300,020 shares issued and
outstanding, respectively ................................. 364 333
Additional paid-in capital ................................... 161,091 155,423
Accumulated other comprehensive income ....................... 12,543 10,279
Accumulated deficit .......................................... (127,566) (59,630)
--------- ---------
Total stockholders' equity ................................... 46,432 106,405
--------- ---------
Total liabilities and Stockholders' Equity ................... $ 782,186 $ 302,518
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-1-
<PAGE>
Globix Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31
--------- --------
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue ...................................................... $ 17,913 $ 7,086 $ 34,058 $ 13,015
Operating costs and expenses:
Cost of revenues ........................................... 10,218 4,476 20,274 8,178
Selling, general and administrative ........................ 23,089 7,662 42,784 13,227
Depreciation and amortization .............................. 4,590 705 7,947 1,213
------------ ------------ ------------ ------------
Total operating costs and expenses ........................... 37,897 12,843 71,005 22,618
------------ ------------ ------------ ------------
Loss from operations ......................................... (19,984) (5,757) (36,947) (9,603)
Interest and financing expense ............................. (16,938) (4,331) (22,407) (9,249)
Interest income ............................................ 7,374 438 8,995 1,383
------------ ------------ ------------ ------------
Loss before extraordinary item ............................... (29,548) (9,650) (50,359) (17,469)
Dividends and accretion on preferred stock ................... (1,762) -- (2,292) --
------------ ------------ ------------ ------------
Net loss attributable to common stockholders before
extraordinary loss .......................................... $ (31,310) $ (9,650) $ (52,651) $ (17,469)
Extraordinary loss on early extinguishment of debt - Note 4 (17,577) -- (17,577) --
------------ ------------ ------------ ------------
Net loss attributable to common stockholders ................. $ (48,887) $ (9,650) $ (70,228) $ (17,469)
============ ============ ============ ============
Basic and diluted loss per share attributable to common
stockholders before extraordinary loss ...................... $ (0.90) $ (0.55) $ (1.55) $ (1.03)
Extraordinary loss per share ................................. (0.51) -- (0.51) --
------------ ------------ ------------ ------------
Basic and diluted net loss per share attributable
to common stockholders ...................................... $ (1.41) $ (0.55) $ (2.06) $ (1.03)
============ ============ ============ ============
Weighted average common shares outstanding ................... 34,617,361 17,505,800 34,084,624 17,027,940
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-2-
<PAGE>
Globix Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
---------
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net loss ............................................................. $ (67,936) $ (17,469)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ........................................ 7,947 1,213
Extraordinary loss on early extinguishment of debt ................... 17,577 --
Amortization of debt discount and issuance costs ..................... 653 677
Changes in operating assets and liabilities:
Accounts receivable .................................................. (6,165) (848)
Inventories .......................................................... 700 (335)
Prepaid expenses and other current assets ............................ (1,081) (578)
Other assets ......................................................... (181) (233)
Accounts payable ..................................................... (1,157) 765
Accrued liabilities .................................................. (2,291) 630
Accrued interest ..................................................... 3,833 --
Other ................................................................ (40) 363
--------- ---------
Net cash used in operating activities ................................ (48,141) (15,815)
--------- ---------
Cash flows from investing activities
Investment in short-term restricted investments ...................... (75,325) --
Use of restricted cash ............................................... 10,400 10,793
Use of (investment in restricted investments) ........................ 18,662 (2,600)
Proceeds from sale of marketable securities .......................... -- 13,758
Purchases of property, plant and equipment ........................... (18,998) (45,959)
--------- ---------
Net cash used in investing activities ................................ (65,261) (24,008)
--------- ---------
Cash flows from financing activities
Proceeds from Senior Note offering, net of offering expenses ......... 579,000 --
Proceeds from issuance of redeemable convertible preferred stock, net 75,250 --
Proceeds from exercise of stock options and warrants, net ............ 7,990 1,078
Proceeds from issuance of common stock ............................... -- 136,802
Repayments of Senior Notes ........................................... (170,400) --
Repayment of Note payable ............................................ -- (557)
Proceeds from mortgage payable, net of expenses ...................... 20,000 --
Repayments of mortgage payable and capital lease obligations ......... (1,145) --
--------- ---------
Net cash provided by financing activities ............................ 510,695 137,323
--------- ---------
Effects of exchange rate changes on cash and cash equivalents ........ (512) --
--------- ---------
Net increase (decrease) in cash and cash equivalents ................. 396,781 97,500
Cash and cash equivalents, beginning of period ....................... 101,471 61,473
--------- ---------
Cash and cash equivalents, end of period ............................. 498,252 158,973
========= =========
Supplemental disclosure of cash flow information
Cash paid for interest ............................................... $ 18,574 $ 10,643
========= =========
Non-cash financing activities:
Cumulative dividends and accretion on redeemable
convertible preferred stock ....................................... $ 2,292 $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-3-
<PAGE>
Globix Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the unaudited interim
financial statements furnished herein include all adjustments necessary for a
fair presentation of the Company's financial position at March 31, 2000 and the
results of its operations for the three-month and six-month periods ended March
31, 2000 and 1999 and cash flows for the six-month periods ended March 31, 2000
and 1999. All such adjustments are of a normal recurring nature. Interim
financial statements are prepared on a basis consistent with the Company's
annual financial statements. Results of operations for the three-month and
six-month periods ending March 31, 2000 are not necessarily indicative of the
operating results that may be expected for the year ending September 30, 2000.
The consolidated balance sheet as of September 30, 1999 has been derived from
the audited financial statements at that date but does not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements.
For further information, refer to the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1999 on file with the Securities and Exchange
Commission.
2. Inventories
Inventories consist of computer hardware and software, parts and related items
principally related to the Company's Server Sales and Integration Segment.
Inventories are carried at the lower of cost or market determined by the
first-in, first-out method. The Company's inventories at March 31, 2000 and
September 30, 1999 totaled approximately $ 582 and $ 1,282, respectively.
3. Property, Plant and Equipment
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
---- ----
<S> <C> <C>
Land $ 1,997 $ 1,997
Building and building improvements 55,288 51,828
Leasehold improvements 28,819 25,917
Computer hardware and software and network equipment 56,749 46,384
Furniture and equipment 6,666 5,266
--------- ---------
149,519 131,392
Less: Accumulated depreciation and amortization (15,814) (8,739)
--------- ---------
Property, plant and equipment, net $ 133,705 $ 122,653
========= =========
</TABLE>
Certain computer and network equipment totaling approximately $7,100 is held
under capital lease obligations at March 31, 2000 and September 30, 1999.
-4-
<PAGE>
Globix Corporation and Subsidiaries
Notes to Consolidated Financial Statements -- Continued
(In thousands, except share and per share data)
(Unaudited)
4. Senior Notes
In April 1998, the Company completed a $160,000 debt financing (the "13% Senior
Notes") consisting of 160,000 units, each unit consisting of a note in the
principal amount of one thousand dollars and one warrant to purchase 14.08
shares of common stock (total of 2,252,800 shares of common stock) at a purchase
price of $3.51 per share. The 13% Senior Notes were to mature on May 1, 2005.
Interest on the 13% Senior Notes accrued at a rate of 13.0% per annum and was
payable semi-annually in arrears on May 1 and November 1 of each year,
commencing November 1, 1998. Globix deposited $57,000 with an escrow agent at
closing, which amount, with interest, was sufficient to pay, when due, the first
six interest payments under the 13% Senior Notes. The 13% Senior Notes were
collateralized by a first priority security interest in the escrow account. The
13% Senior Notes were unsecured obligations of the Company and ranked pari passu
in right of payment with all existing and future unsecured and unsubordinated
indebtedness and rank senior in right of payment to any future subordinated
indebtedness. In connection with the warrants issued with the 13% Senior Notes,
the Company had assigned an original issue discount of approximately $2,253.
On January 28, 2000, the Company announced that it had entered into an agreement
to sell $600,000 12.5% senior notes (the "12.5% Senior Notes") due 2010 in a
private placement to a group of initial purchasers and in March 2000 completed a
tender offer to purchase all of the outstanding 13% Senior Notes, $160,000 in
principal amount. The purchase price in the tender offer was 106.5% of the
principal amount, plus accrued and unpaid interest. On February 8, 2000 the
Company closed on its offering for the $600,000 12.5% Senior Notes due 2010,
resulting in net proceeds of approximately $579,000, after underwriting fees and
offering expenses. The tender offer and related redemption of the outstanding
13% Senior Notes resulted in a one time charge of $17,577 or $0.51 per share
which has been recorded as an extraordinary item in the statement of operations
during the period ending March 31, 2000. As a result of the redemption of the
13% Senior Notes all restrictions related to the escrow deposit were released
and such funds are no longer restricted as to use.
The 12.5% Senior Notes mature on February 1, 2010. Interest on the 12.5% Senior
Notes is payable semiannually on February 1 and August 1 of each year,
commencing August 1, 2000. The 12.5% Senior Notes are unsecured obligations of
the Company and rank pari passu in right of payment with all existing and future
unsecured and unsubordinated indebtedness and rank senior in right of payment to
any future subordinated indebtedness. In connection with the offering the
Company incurred costs of approximately $21,000 that are being amortized over
ten years using the effective interest method.
5. Mortgage Payable
On January 25, 2000, the Company borrowed $21,000 from a financial institution
against a mortgage note secured by the Company's property at 139 Centre Street,
New York. Interest is payable at 9.16% (subject to adjustment on February 11,
2010) based on a 25 year amortization schedule. Principal and interest payments
of $178.5 are payable monthly and any balance of the principal and all accrued
and unpaid interest is due and payable in February 2025.
6. Redeemable Convertible Preferred Stock
During November,1999, the Company designated 250,000 shares of its authorized
Preferred Stock, $0.01 par value, as Series A. At March 31, 2000, there were
80,000 Series A Preferred Shares outstanding and 170,000 Series A Preferred
Shares reserved for issuance (see note 11).
On December 3, 1999, the Company issued $80,000 (80,000 shares) in Series A
Redeemable Convertible Preferred Stock (the "Series A Preferred Stock") to
affiliates of Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse") to expand
the build-out of its SuperPOPs and other facilities. The Series A Preferred
Stocks is convertible into common stock at $10.00 per share at any time and may
not be called for redemption by the Company for five years. Under the agreement,
the Series A Preferred Stock is subject to mandatory redemption in 2014 and
yields an annual dividend of 7.5% payable quarterly in cash or additional Series
A Preferred Stock, at the option of the Company. The holders of the Series A
Preferred Stock have a liquidation preference of $1,000 per share and are
entitled to cumulative dividends.
-5-
<PAGE>
Globix Corporation and Subsidiaries
Notes to Consolidated Financial Statements -- Continued
(In thousands, except share and per share data)
(Unaudited)
The Series A Preferred Stock is recorded in the accompanying consolidated
balance sheet outside the stockholders equity section due to its mandatory
redemption feature. The Company incurred approximately $4,750 of issuance costs
in connection with the Series A Preferred Stock transaction. Such costs have
been recorded as a reduction of the carrying amount of the Series A Preferred
Stock and are being accreted through a charge to additional paid in capital over
the five year period to the earliest redemption date. At March 31, 2000, the
Company accrued dividends on the Series A Preferred Stock in the amount of
$1,975. Such dividends are included in accrued liabilities in the accompanying
March 31, 2000 consolidated balance sheets. On April 4, 2000 the Company's Board
of Directors declared payment of cash dividends on the outstanding Series A
Preferred Stock for the periods ending December 31, 1999, March 31, 2000 and
June 30, 2000. In April 2000 the Company paid cash dividends totaling $1,975 to
the holders of the Series A Preferred Stock.
7. Segment Information
Under the provisions of SFAS No. 131 the Company's activities fall within two
operating segments: the Internet Division and the Server Sales and Integration
Division. The following tables set forth the Company's industry segment
information for the three and six month periods ended March 31, 1999 and 2000:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Internet $ 10,312 $ 2,711 $ 17,268 $ 4,992
Server Sales and Integration 7,601 4,375 16,790 8,023
--------- --------- --------- ---------
Consolidated $ 17,913 $ 7,086 $ 34,058 $ 13,015
========= ========= ========= =========
Operating loss:
Internet $ (8,859) $ (959) $ (17,477) $ (1,682)
Server Sales and Integration 813 280 1,856 258
Corporate (11,938) (5,018) (21,326) (8,179)
--------- --------- --------- ---------
Consolidated $ (19,984) $ (5,757) $ (36,947) $ (9,603)
========= ========= ========= =========
Identifiable assets:
Internet $ 97,509 $ 41,936 $ 97,509 $ 41,936
Server Sales and Integration 7,466 4,054 7,466 4,054
Corporate 677,211 273,275 677,211 273,275
--------- --------- --------- ---------
Consolidated $ 782,186 $ 319,265 $ 782,186 $ 319,265
========= ========= ========= =========
</TABLE>
The following tables set forth the Company's geographic segment information for
the three and six month periods ended March 31, 1999 and 2000:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
United States $ 16,849 $ 7,086 $ 32,499 $ 13,015
Europe 1,064 -- 1,559 --
--------- --------- --------- ---------
Consolidated $ 17,913 $ 7,086 $ 34,058 $ 13,015
========= ========= ========= =========
Operating income (loss):
United States $ (15,666) $ (5,757) $ (29,681) $ (9,603)
Europe (4,318) -- (7,266) --
--------- --------- --------- ---------
Consolidated $ (19,984) $ (5,757) $ (36,947) $ (9,602)
========= ========= ========= =========
Identifiable assets:
United States $ 759,863 $ 311,229 $ 759,863 $ 311,229
Europe 22,323 8,036 22,323 8,036
--------- --------- --------- ---------
Consolidated $ 782,186 $ 319,265 $ 782,186 $ 319,265
========= ========= ========= =========
</TABLE>
-6-
<PAGE>
Globix Corporation and Subsidiaries
Notes to Consolidated Financial Statements -- Continued
(In thousands, except share and per share data)
(Unaudited)
8. Comprehensive Loss
The Company reports comprehensive loss under the provisions of SFAS No. 130.
Accumulated other comprehensive loss is reported as a component of stockholders
equity in the consolidated balance sheets. The Company primarily has two
components of comprehensive loss: cumulative translation adjustments from the
Company's operations in foreign countries and unrealized gains and losses on
marketable securities classified as available for sale. The components of other
comprehensive loss were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $(47,125) $ (9,650) $(67,936) $(17,469)
Other comprehensive income (loss):
Unrealized gain on marketable securities available for sale 2,533 189 2,776 527
Foreign currency translation adjustment (300) 55 (512) 67
-------- -------- -------- --------
Comprehensive loss $(44,892) $ (9,406) $(65,672) $(16,875)
======== ======== ======== ========
</TABLE>
9. Loss Per Share
Basic loss per share is calculated by dividing net loss attributable to common
shareholders by the weighted average number of shares of common stock
outstanding during the period. Diluted loss per share is calculated by dividing
net loss attributable to common shareholders by the weighted average number of
common shares outstanding, adjusted for potentially dilutive securities. Diluted
loss per share has not been presented since the inclusion of outstanding stock
options and warrants would be antidilutive.
10. Stock Splits
On December 10, 1999 the Company announced a two-for-one stock split of its
outstanding shares of common stock which was paid on December 30, 1999. On
January 10, 2000, the Company announced an additional two-for-one stock split of
its outstanding shares of common stock, payable on January 31, 2000.
Stockholders' equity has been restated to give retroactive recognition to both
stock splits for all periods presented in the accompanying financial statements
by reclassifying from additional paid-in-capital to common stock the par value
of the additional shares arising from the splits. In addition, all references to
number of shares, per share amounts and stock option data have been restated to
reflect the stock splits.
11. Subsequent Event
On April 4, 2000, the shareholders of the Company voted to amend the Company's
certificate of incorporation to increase the Company's authorized common stock
to 500,000,000 shares and increase the authorized preferred stock to 5,000,000
shares.
-7-
<PAGE>
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Information
This Report on Form 10-Q contains certain forward-looking statements concerning,
among other things, the Company's plans and objectives for future operations,
planned products and services, potential expansion into new markets, and
anticipated customer demand for our existing and future products and services.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements to encourage the inclusion of prospective
information so long as those statements are accompanied by meaningful cautionary
statements identifying factors that could cause actual results to differ
materially. Among the factors that could cause actual results, performance or
achievement to differ materially from those described or implied in the
forward-looking statements are our ability to generate sufficient cash flow,
particularly in light of our expectation that operating losses will continue;
our ability to obtain additional debt or equity financing; our ability to
recruit and retain key personnel; the complexity of managing our expanding
operations; maintaining and expanding the capabilities of our network; forming
relationships with other Internet service providers; expanding into
international markets; our ability to obtain computer and network equipment for
a reasonable cost; the success of our investments or acquisitions; a failure of
the computer or telecommunications systems on which we depend; the continued
growth, use and improvement of the Internet; significant technological changes
rendering our products and services obsolete; and competition from numerous
other businesses. Cautionary statements regarding the risks, uncertainties and
other factors associated with these forward-looking statements are discussed
under "Risk Factors" appearing in our other periodic reports and documents filed
with the Securities and Exchange Commission.
You should read the following discussion in conjunction with our Consolidated
Financial Statements and notes thereto included in Part II, Item 8 of the
Company's Annual Report on Form10-K. The results shown herein are not
necessarily indicative of the results to be expected in any future periods.
Overview
Globix was founded in 1989 as a value-added reseller primarily focused on
providing custom computer hardware and software solutions for desktop
publishing. By 1995, Globix recognized the growing demand by businesses for
electronic information delivery and began to re-shape its corporate strategy to
focus on offering Internet products and services. In early 1996, Globix raised
net proceeds of approximately $7.4 million through an initial public offering of
its common stock and subsequently, began to offer Internet access products and
services to business customers. In 1997, Globix expanded its product and service
offerings beyond Internet access and began to offer a range of end-to-end
Internet solutions designed to enable its customers to more effectively
capitalize on the Internet as a business tool.
In 1998, Globix undertook a major expansion plan in order to more aggressively
pursue opportunities resulting from the tremendous growth of the Internet. In
April 1998, Globix completed a $160.0 million debt financing to fund the
expansion of its physical facilities and the acquisition and build-out of its
network backbone. In 1999, Globix completed construction of the new
state-of-the-art SuperPOP facilities in New York City, London and Santa Clara,
California and began operations at each facility. These new SuperPOP facilities
increased Globix's total Internet Data Center capacity to approximately 63,000
square feet.
In March 1999, Globix completed a public offering of 16,000,000 shares of its
common stock, resulting in net proceeds to Globix of approximately $136.6
million. In December 1999, Globix completed the private placement of 80,000
shares of Series A Preferred Stock to affiliates of Hicks, Muse, Tate & Furst
Incorporated, resulting in net proceeds of $75.3 million. The proceeds from
those offerings are being used to fund the continued expansion of Globix's
facilities and network and for general corporate purposes.
In February 2000, Globix completed a $600.0 million debt financing to fund (a)
the continued expansion of its facilities and network and (b) the tender offer
to purchase all of the outstanding 13% Senior Notes, $160.0 million principal
amount. The purchase price of the tender was 106.5% of principal amount plus all
accrued and unpaid interest.
Globix reports its results of operations in two operating segments: (i) the
"Internet Division" and (ii) the "Server Sales and Integration Division." The
Internet Division provides dedicated Internet access, hosting, co-location,
application services (such as streaming media, electronic commerce, solutions
architecture and system administration and other internet solutions). The Server
Sales and Integration Division provides Internet-related hardware and software
sales and systems and network integration. Revenue from the Internet Division
has grown significantly as a percentage of total revenue from 6% in fiscal year
1996 to over 57% for the three months ended March 31, 2000. Globix expects that
the Internet Division revenues will continue to grow as a percentage of total
revenues due to the continued expansion of SuperPOP facilities and emphasis on
the internet business.
Globix continues to derive a substantial portion of its total revenues from
sales of third-party hardware and software, including workstation web and
database servers, network equipment, and server and application software. Globix
intends to continue to offer higher-margin
-8-
<PAGE>
workstation, server and software components as a complement to its Internet
solutions. Globix maintains a limited inventory of hardware and software and
typically purchases such products from third-party vendors only after receipt of
customer order. The second largest component of Globix's total revenues is
derived from providing dedicated Internet access services to business customers.
Globix's Internet access customers typically sign one or two-year contracts that
provide for fixed, monthly-recurring service fees and a one-time installation
fee. Globix also derives revenues from hosting and co-location services,
including charges for fixed amounts of bandwidth availability and incremental
fees for additional bandwidth use. In addition to fees based on bandwidth,
Globix charges its co-location customer's monthly fees for the use of its
physical facilities. Globix's hosting and co-location contracts typically range
from one to two years. Application services are charged on a fixed price or time
and materials basis.
Cost of revenues for the Server Sales and Integration Division consists of
acquisition costs of third-party hardware and software. Cost of revenues for the
Internet Division consists primarily of telecommunications costs for Internet
access, hosting and co-location customers and direct labor costs for application
services. Telecommunications costs include the cost of providing local telephone
lines into the Globix SuperPOP, costs related to the use of third-party
networks, and costs associated with leased data lines. Cost of revenues for
application services includes the cost of project management, quality control
and project review.
Selling, general and administrative expenses consist of sales and marketing
personnel and related occupancy costs; advertising costs; salaries and occupancy
costs for executives, financial and administrative personnel; and personnel
recruitment and related operating expenses associated with network operations,
customer service and field services. Globix continues to hire a significant
number of additional personnel to staff its three new SuperPOP facilities,
increase senior management and others to expand its sales, corporate and
marketing, network operations, customer service and field services personnel.
Globix has also begun to hire significant staff resources to handle the
build-out and initial occupancy of new and additional SuperPOP facilities
throughout the country. Accordingly, Globix expects selling, general and
administrative expenses to continue to significantly increase for the
foreseeable future.
Depreciation and amortization expense continues to increase significantly due to
the expansion of the SuperPOP facilities. Globix depreciates its capital assets
on a straight-line basis over the useful life of the assets, ranging from 3 to
40 years. Globix began to recognize depreciation expense in the year ended
September 30, 1999 for its new SuperPOP in New York, London and Santa Clara,
California upon commencement of operations at each of these facilities. In
addition, Globix amortizes debt discount and issuance costs associated with its
debt offerings over the life of those obligations using the effective interest
method.
Globix historically has experienced negative cash flow from operations and has
incurred net losses. Globix's ability to generate positive cash flow from
operations and achieve profitability is dependent upon Globix's ability to
continue to grow its revenue base and achieve further operating efficiencies.
For the six months ended March 31, 2000 and 1999 Globix generated negative cash
flows from operations of approximately $44.2 million and $15.8 million,
respectively and incurred net losses of approximately $67.9 million and $17.5
million, respectively. Globix expects to continue to experience negative cash
flow from operations and to incur net losses as a result of its significant
investment in the expansion of its network and facilities, the hiring of
additional personnel and the interest expense related to its debt financing
activities. As of March 31, 2000, Globix had an accumulated deficit of
approximately $127.6 million.
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 2000 AND 1999
REVENUES. Total revenues for the three months ended March 31, 2000 increased
153% to $17.9 million from $7.1 million for the three months ended March 31,
1999, Revenues from the Server Sales and Integration Division for the three
months ended March 31, 2000 increased 74% to $7.6 million from $4.4 million for
the three months ended March 31, 1999. Revenues from the Internet Division
increased 280% to $10.3 million for the three months ended March 31, 2000 from
$2.7 million for the three months ended March 31, 1999. This increase was
primarily attributable to the expansion of our available data center space,
increased marketing efforts and our addition of new sales and technical staff.
The increase in percentage of Internet Division revenues as a percentage of
total revenues reflected the Company's continued shift in product mix toward
Internet related sales.
COST OF REVENUES. Cost of revenues for the three months ended March 31, 2000 was
$10.2 million or 57% of revenues as compared to $4.5 million or 63% of total
revenues for the three months ended March 31, 1999. Cost of revenues for the
Server Sales and Integration Division for the three months ended March 31, 2000
was $6.3 million or 83% of revenues as compared to $3.7 million or 84% of total
revenues for the three months ended March 31, 1999. Cost of revenues for the
Internet Division for the three months ended March 31, 2000 was $3.9 million or
38% of revenues as compared to $0.8 million or 30% of total revenues for the
three months ended March 31, 1999.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the three months ended March 31, 2000 were $23.1 million or 129% of
total revenues as compared to $7.7 million or 94% of total revenues for the
three months ended March 31, 1999. This increase in absolute dollars and as a
percentage of total revenues was primarily attributable to an increase in
employees and marketing costs associated with the opening of new SuperPOP
facilities and related additional personnel. The number of full time
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<PAGE>
employees increased from 211 as of March 31, 1999 to over 590 as of March 31,
2000. Salaries and benefit costs increased from $4.6 million for the three
months ended March 31, 1999 to $14.1 million for the three months ended March
31, 2000. In addition, the Company increased expenditures in advertising from
$0.5 million for the three months ended March 31, 1999 to $3.1 million for the
three months ended March 31, 2000.
DEPRECIATION AND AMORITIZATION. Depreciation and amortization increased to $4.6
million for the three months ended March 31, 2000 as compared to $0.7 million
for the three months ended March 31, 1999. The increase was primarily related to
property and equipment purchased for use in the Internet Division.
INTEREST AND FINANCING EXPENSE AND INTEREST INCOME. The increase in interest
expense to $16.9 million for the three months ended March 31, 2000 from $4.3
million for the three months ended March 31, 1999 is a result of increased debt
financing and related costs. Amortization of debt discount and issuance costs
relating to the Company's debt financings totaled $ 0.4 million and $0.3 million
for the three months ended March 31, 2000 and March 31, 1999, respectively. The
increase in interest income to $7.4 million for the three months ended March 31,
2000 reflects the increased cash position derived from the net proceeds of the
February 2000 debt financing and the December 1999 issuance of the Series A
Convertible Preferred Stock.
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS AND EXTRAORDINARY LOSS. As a result
of the above, Globix reported a net loss attributable to common stockholders
before extraordinary item of $31.3 million for the three months ended March 31,
2000 or $0.90 per share, excluding the extraordinary loss of $17.6 million or
$0.51 per share impact from the early extinguishment of the Company's 13% Senior
Notes due in 2005, and a net loss attributable to common stockholders (including
the extraordinary item) of $48.9 million or $1.41 per share as compared to a net
loss attributable to common stockholders of $9.6 million or $0.55 loss per share
for the three months ended March 31, 1999.
RESULTS OF OPERATIONS FOR SIX MONTHS ENDED MARCH 31, 2000 AND 1999
REVENUES. Total revenues for the six months ended March 31, 2000 increased 162%
to $34.1 million from $13.0 million for the six months ended March 31, 1999,
Revenues from the Server Sales and Integration Division for the six months ended
March 31, 2000 increased 109% to $16.8 million from $8.0 million for the six
months ended March 31, 1999. Revenues from the Internet Division increased 246%
to $17.3 million for the six months ended March 31, 2000 from $5.0 million for
the six months ended March 31, 1999. This increase was primarily attributable to
the expansion of our available data center space, increased marketing efforts
and our addition of new sales staff. The increase in percentage of Internet
Division revenues as a percentage of total revenues reflected the Company's
continued shift in product mix toward Internet related sales.
COST OF REVENUES. Cost of revenues for the six months ended March 31, 2000 was
$20.3 million or 60% of revenues as compared to $8.2 million or 63% of total
revenues for the six months ended March 31, 1999. Cost of revenues for the
Server Sales and Integration Division for the six months ended March 31, 2000
was $13.8 million or 82% of revenues as compared to $6.8 million or 85% of total
revenues for the six months ended March 31, 1999. Cost of revenues for the
Internet Division for the six months ended March 31, 2000 was $6.5 million or
37% of revenues as compared to $1.4 million or 27% of total revenues for the six
months ended March 31, 1999.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the six months ended March 31, 2000 were $42.8 million or 126% of
total revenues as compared to $13.2 million or 102% of total revenues for the
six months ended March 31, 1999. This increase in absolute dollars and as a
percentage of total revenues was primarily attributable to an increase in
employees and marketing costs associated with the opening of new SuperPOP
facilities and related additional personnel. The number of full time employees
increased from 211 as of March 31, 1999 to over 590 as of March 31, 2000.
Salaries and benefit costs increased from $7.7 million for the six months ended
March 31, 1999 to $24.5 million for the six months ended March 31, 2000. In
addition, the Company increased expenditures in advertising from $1.6 million
for the six months ended March 31, 1999 to $5.5 million for the six months ended
March 31, 2000.
DEPRECIATION AND AMORITIZATION. Depreciation and amortization increased to $7.9
million for the six months ended March 31, 2000 as compared to $1.2 million for
the six months ended March 31, 1999. The increase was primarily related to
property and equipment purchased for use in the Internet Division.
INTEREST AND FINANCING EXPENSE AND INTEREST INCOME. The increase in interest
expense to $22.4 million for the six months ended March 31, 2000 from $9.2
million for the six months ended March 31, 1999 is a result of increased debt
financing and related costs. Amortization of debt discount and issuance costs
relating to the Company's debt financings totaled $0.7 and $0.7 for the six
months ended March 31, 2000 and March 31, 1999, respectively. The increase in
interest income to $9.0 million for the six months ended March 31, 2000 reflects
the increased cash position derived from the net proceeds of the February 2000
debt financing and the December 1999 issuance of the Series A Convertible
Preferred Stock.
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<PAGE>
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS AND EXTRAORDINARY LOSS. As a result
of the above, Globix reported a net loss attributable to common stockholders
before extraordinary item of $52.7 million for the six months ended March 31,
2000 or $1.55 per share, excluding the extraordinary loss of $17.6 million or
$0.51 per share impact from the early extinguishment of the Company's 13% Senior
Notes due in 2005, and a net loss attributable to common stockholders of $70.2
million or $2.06 per share as compared to a net loss attributable to common
stockholders of $17.5 million or $1.03 per share for the six months ended March
31, 1999.
Liquidity and Capital Resources
Globix has historically had losses from operations, which have been funded
primarily through the issuance of debt and equity securities. In fiscal 1999, we
received net proceeds of approximately $136.6 million from equity financings. On
December 3, 1999 Globix issued $80.0 million in new Series A Convertible
Preferred Stock to affiliates of Hicks, Muse, Tate & Furst Incorporated ("Hicks
Muse") to expand our build-out of SuperPOPs and other facilities. The preferred
stock is convertible into common stock at any time and cannot be called for
redemption for five years. Under the agreement, the Series A Convertible
Preferred Stock is subject to mandatory redemption in 2014 and yields an annual
dividend rate of 7.5% payable quarterly in cash or additional preferred stock at
the option of Globix. On February 8, 2000, the Company closed on its offering
for $600.0 million 12.5% Senior Notes due 2010 in a private placement to a group
of initial purchasers resulting in net proceeds of approximately $579.0 million.
In March 2000 Globix completed its tender offer to purchase for cash all of its
outstanding 13% Senior Notes due 2005, $160.0 million in principal amount. The
purchase price in the tender offer was 106.5% of the principal amount, plus
accrued and unpaid interest.
In addition certain computer and network equipment has been financed through
vendors and financial institutions under capital and operating lease
arrangements. We intend to continue to make significant capital expenditures
during the next twelve months as we expand our internet data centers and
network. We expect to finance such capital expenditures primarily through
existing cash and future financings.
We actively monitor the capital and investing markets in analyzing our capital
raising and investing decisions.
Conversion to the Euro
On January 1, 1999, eleven of the fifteen member countries of the European Union
established a fixed conversion rate between their existing sovereign currencies
and a new currency called the "Euro." These countries have agreed to adopt the
Euro as their common legal currency on that date. The Euro trades on currency
exchanges and is available for non-cash transactions. Thereafter and until
January 1, 2002, the existing sovereign currencies will remain legal tender in
these countries. On January 1, 2002, the Euro is scheduled to replace the
sovereign legal currencies of these countries.
Globix does not anticipate that the implementation of the Euro will have a
material adverse effect on its business operations as the operations of Globix
expands into other European countries. However there are no assurances that the
implementation of the
Euro will not have a material adverse affect on Globix's business, financial
condition and results of operations. In addition, Globix cannot predict the
impact the Euro will have on currency exchange rates or Globix's currency
exchange risk.
Recently Issued Accounting Pronouncement
In December 1999, the SEC issued SAB No. 101 "Revenue Recognition in Financial
Statements". SAB No. 101 expresses the view of the SEC staff in applying
generally accepted accounting principles to certain revenue recognition issues.
Globix is required to adopt SAB 101 in its fiscal quarter beginning October 1,
2000. Globix is currently evaluating the impact this SAB may have on its
consolidated financial position and results of operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Globix believes it has limited exposure to financial market risks, including
changes in interest rates. The fair value of our investment portfolio or related
income would not be significantly impacted by a 100 basis point increase or
decrease in interest rates due mainly to the short-term nature of the major
portion of our investment portfolio. An increase or decrease in interest rates
would not significantly increase or decrease interest expense on debt
obligations due to the fixed nature of our debt obligations.
At March 31, 2000, we had financial instruments consisting of fixed rate debt,
marketable securities, short term investments and other investments. The
majority of our debt obligations consist of the Senior Notes, which bear
interest at 12.5% and mature February 1, 2010.
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<PAGE>
Marketable securities include Globix's strategic investment in Edgar On-Line, a
publicly traded entity, which is recorded at its fair market value. Globix does
not hedge its exposure to fluctuations in the value of its equity securities.
Our short term and other investments are generally fixed rate investment grade
and government securities denominated in U.S. dollars. At March 31, 2000, all of
our investments are due to mature within twelve months except $5.8 million and
the carrying value of such investments approximates fair value. At March 31,
2000, $15.7 million of our investments were restricted in accordance with the
terms of certain collateral obligations.
Globix is also subject to market risk associated with foreign currency exchange
rates. Globix's current business plan includes the expansion of the U.K.
operation and further construction of facilities throughout Europe. To date,
Globix has not utilized financial instruments to minimize its exposure to
foreign currency fluctuations. Globix will continue to analyze risk management
strategies to minimize foreign currency exchange risk in the future.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities and Use of Proceeds
On February 4, 2000, and in connection with the tender offer at $1,065 for each
$1,000 principal amount 13% Senior Notes due 2005, the Company and HSBC Bank
USA, as Trustee, entered into the First Supplemental Indenture supplementing the
Indenture dated as of April 30, 1998, governing the Company's 13% Senior Notes
due 2005. The First Supplemental Indenture amended the Indenture to delete
substantially all of the restrictive covenants governing the 2005 Senior Notes.
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
On January 10, 2000, the Company announced a two-for-one stock split of its
outstanding shares of common stock, which was paid on January 31, 2000 in the
form of a stock dividend.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation of the Company, as amended.
(b) Reports on Form 8-K
Date Filed: 1/13/00 Date of Event: 1/12/00
Subject: Press release announcing intent of Company, subject to market and
other conditions, to raise up to $250.0 million in a private
placement of high yield securities pursuant to Rule 144A.
Date Filed: 2/14/00 Date of Event: 1/28/00
Subject: (1) Company entered into a Purchase Agreement dated January 28,
2000 to privately place $600.0 million principal amount of 12.5%
Senior Notes due 2010.
(2) On February 8, 2000, the Company commenced a tender offer to
purchase any and all of its 13% Senior Notes due 2005 at a
purchase price of $1,065, plus accrued and unpaid interest from
November 1, 1999, per $1,000 principal amount of the 2005 Notes.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Globix Corporation
Date: May 12, 2000 By: /s / Marc H. Bell
----------------------------------------------------
Marc H. Bell, Chairman, President &
Chief Executive Officer
Date: May 12, 2000 By: /s/ Brian L. Reach
----------------------------------------------------
Brian L. Reach, Senior Vice President &
Chief Financial Officer
Date: May 12, 2000 By: /s/ Shawn P. Brosnan
----------------------------------------------------
Shawn P. Brosnan, Vice President, Corporate
Controller and Chief Accounting Officer
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EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
BELL TECHNOLOGY GROUP LTD.
The undersigned, being of legal age, in order to form a corporation under
and pursuant to ss.101 et seq. of the General Corporation Law of the State of
Delaware, does hereby set forth as follows:
FIRST, the name of the corporation is BELL TECHNOLOGY GROUP LTD. (the
"Company").
SECOND, the address of the Company's registered office in the State of
Delaware is c/o United Corporate Services, Inc., 15 East North Street, in the
City of Dover, County of Kent, State of Delaware 19901 and the name of the
registered agent at said address is United Corporate Services, Inc.
THIRD, the purpose of the Company is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH, the Company shall have the authority to issue ten million
(10,000,000) shares of Common Stock having a par value of $.01 per share. The
Company shall also have the authority to issue five hundred thousand (500,000)
shares of Preferred Stock having a par value of $.01 per share (the "Preferred
Shares"). The Board of Directors of the Company (the "Board") shall have the
right to authorize, by resolution of the Board adopted in accordance with the
by-laws of the Company, the issuance of the preferred shares of stock and, in
connection therewith, to (a) cause such shares to be issued in series; (b) the
annual rate of dividends payable with respect to the Preferred Shares or series
thereof; (c) the amounts payable upon redemption of the Preferred Shares; (d)
the amounts payable upon liquidation or dissolution of the Company; (e)
provisions as to voting, if any; and (f) such other rights, powers and
preferences as the Board shall determine.
FIFTH, the name and mailing address of the incorporator of the Company
are:
Marc H. Bell
611 Broadway
New York, NY 10012
SIXTH, the Company shall fully indemnify any director of the Company for
monetary damages resulting from the breach of fiduciary duty as a director, to
the extent permitted by section 102(b)(7) of the Delaware General Corporation
Law; provided, however, that this
<PAGE>
provision shall not in any way eliminate or limit the liability of any
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under ss.
174 of the Delaware General Corporation Law, (iv) for any transaction from which
the director derived an improper personal benefit.
SEVENTH, the Company reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
IN WITNESS WHEREOF, the undersigned sets his name to this Certificate of
Incorporation and affirms that the statements made herein are true under the
penalties of perjury, this 28th day of September, 1995.
/s/ Marc H. Bell
-------------------------------
Marc H. Bell, Incorporator
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<PAGE>
CERTIFICATE OF MERGER
OF
PFM TECHNOLOGIES CORPORATION
INTO
BELL TECHNOLOGY GROUP LTD.
Pursuant to Section 252(c) of the State of Delaware General Corporation
Law
The undersigned, being the Surviving Corporation hereby sets forth as
follows:
FIRST: The name of the Surviving Corporation is Bell Technology Group
Ltd.; its state of incorporation is the State of Delaware. The name of the
Non-Surviving Corporation is PFM Technologies Corporation; its state of
incorporation is the State of New York
SECOND: An Agreement of Merger has been approved, adopted, certified,
executed and acknowledged by each constituent corporation in accordance with
Section 252 of the State of Delaware General Corporation Law.
THIRD: The Certificate of Incorporation of Bell Technology Group Ltd.
shall be the Certificate of Incorporation of the Surviving Corporation.
FOURTH: The executed Agreement of Merger is on file at the principal place
of business of the Surviving Corporation; the address of said principal place of
business is as follows:
Bell Technology Group Ltd.
611 Broadway, Suite 415
New York. NY 10012
FIFTH: A copy of the Agreement of Merger will be furnished by the
Surviving Corporation, on request and without cost, to any stockholder of any
constituent corporation.
SIXTH: The authorized capital stock of the Non-Surviving Corporation which
is incorporated under the laws of the State of New York is two hundred shares
having no par value.
IN WITNESS WHEREOF, this certificate is hereby executed on this 28th day
of September, 1995.
Bell Technology Group Ltd.
By: /S/ Marc H. Bell
--------------------------
Marc H. Bell, President
ATTEST:
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<PAGE>
/s/ Jennifer Spain
- -------------------------
Jennifer Spain, Secretary
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<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
BELL TECHNOLOGY GROUP LTD.
Under Section 242 of the Delaware General Corporation Law
BELL TECHNOLOGY GROUP LTD., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation") hereby certifies as follows:
1. The name of the Corporation is Bell Technology Group Ltd.
2. The Certificate of Incorporation of the Corporation was filed with the
Secretary of State of Delaware, Division of Corporations on September 29,
1995.
3. The amendment of the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to change the name of the
Corporation and increase the number of shares authorized common stock of
the corporation.
4. To accomplish the foregoing amendment, Article FIRST of the Certificate of
Incorporation of the Corporation, relating to the name of the Corporation,
is hereby amended to read as follows:
"FIRST: The name of the Corporation is Globix Corporation.
5. Article FOURTH is hereby amended to read as follows:
"FOURTH: The Corporation shall have the authority to issue twenty million
(20,000,000) shares of Common Stock having a par value of $.01 per share.
The Corporation shall also have the authority to issue five hundred
thousand (500,000) shares of Preferred Stock having a par value of $.01
per share (the "Preferred Shares"). The Board of Directors of the
Corporation (the "Board") shall have the right to authorize, by resolution
of the Board adopted in accordance with the By-laws of the Corporation,
the issuance of the Preferred Shares and, in connection therewith, to (a)
cause such shares to be issued in series; (b) fix the annual rate of
dividends payable with respect to the Preferred shares or series thereof;
(c) fix the amount payable upon redemption of the Preferred shares; (d)
fix the amount payable upon liquidation or dissolution of the Company; (e)
fix provisions as to voting rights, if any; and (e) fix such other rights,
powers and preferences as the Board shall determine."
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<PAGE>
6. The foregoing amendment of the Certificate of Incorporation of the
Corporation was authorized by a vote of Board of Directors of the
Corporation, followed by a vote of the holders of a majority of shares of
the Corporation present at a meeting and entitled to vote on said
amendment of the Certificate of Incorporation.
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<PAGE>
The effective time of the amendment herein certified shall be June 1,
1998.
IN WITNESS WHEREOF, we have subscribed this document on the date set forth
below and do hereby affirm, under the penalties of perjury, that the statements
contained herein have been examined by us and are true and correct.
May 8, 1998
/s/ Marc H. Bell
-----------------------------
Marc H. Bell, President
Attest:
/s/ Paul Asher
- ----------------------------
Paul Asher, Secretary
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<PAGE>
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
GLOBIX CORPORATION
Under Section 242 of the Delaware General Corporation Law
GLOBIX CORPORATION, a corporation organized and existing under the laws
of the State of Delaware (the "Corporation") hereby certifies as follows:
1. The name of the Corporation is Globix Corporation.
2. The Certificate of Incorporation of the Corporation was filed with the
Secretary of State of Delaware, Division of Corporations on September 29,
1995 under the name Bell Technology Group Ltd.
3. The amendment of the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to increase the number of
shares of authorized common stock of the corporation.
4. To accomplish the foregoing amendment, Article FOURTH of the Certificate
of Incorporation of the Corporation, is hereby amended to read as follows:
"FOURTH: The Corporation shall have the authority to issue
seventy-five million (75,000,000) shares of Common Stock having a
par value of $.01 per share. The Corporation shall also have the
authority to issue five hundred thousand (500,000) shares of
Preferred Stock having a par value of $.01 per share (the "Preferred
Shares"). The Board of Directors of the Corporation (the "Board")
shall have the right to authorize, by resolution of the Board
adopted in accordance with the By-laws of the Corporation, the
issuance of the Preferred Shares and, in connection therewith, to
(a) cause such shares to be issued in series; (b) fix the annual
rate of dividends payable with respect to the Preferred shares or
series thereof; (c) fix the amount payable upon redemption of the
Preferred shares; (d) fix the amount payable upon liquidation or
dissolution of the Company; (e) fix provisions as to voting rights,
if any; and (e) fix such other rights, powers and preferences as the
Board shall determine."
5. The foregoing amendment of the Certificate of Incorporation of the
Corporation was authorized by a vote of the Board of Directors of the
Corporation, followed by a vote of the
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<PAGE>
holders of a majority of all outstanding shares of the Corporation
entitled to vote on said amendment of the Certificate of Incorporation.
IN WITNESS WHEREOF, we have subscribed this document on the date set forth
below and do hereby affirm, under the penalties of perjury, that the statements
contained herein have been examined by us and are true and correct.
April 23, 1999
By: /s/ Marc H. Bell
-----------------------------
Marc H. Bell President
Attest:
By:/s/ Paul Asher
-------------------------
Paul Asher, Secretary
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<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A 7.5% CONVERTIBLE PREFERRED STOCK
of
GLOBIX CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the undersigned, Brian Reach, Chief Financial Officer, and Paul Asher,
Secretary, of Globix Corporation, a Delaware corporation (hereinafter called the
"Corporation"), pursuant to the provisions of Sections 103 and 151 of the
General Corporation Law of the State of Delaware, do hereby make this
Certificate of Designations and do hereby state and certify that pursuant to the
authority expressly vested in the Board of Directors of the Corporation by the
Certificate of Incorporation, the Board of Directors duly adopted the following
resolutions:
RESOLVED, that, pursuant to Article FOURTH of the Certificate of
Incorporation (which authorizes 500,000 shares of preferred stock, $.01 par
value ("Preferred Stock")), the Board of Directors hereby fixes the powers,
designations, preferences and relative, participating, optional and other
special rights, and the qualifications, limitations and restrictions, of a
series of Preferred Stock.
RESOLVED, that each share of such series of Preferred Stock shall rank
equally in all respects and shall be subject to the following provisions:
1. Number and Designation. 250,000 shares of the Preferred Stock of
the Corporation shall be designated as Series A 7.5% Convertible Preferred Stock
(the "Series A Preferred Stock") (including 170,000 shares of Series A Preferred
Stock reserved exclusively for the payment of dividends pursuant to paragraph
4).
2. Definitions. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated.
"Affiliate" means, with respect to any specified person, any other person
which, directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified person. For the purposes of this
definition, "control" when used with respect to any person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "affiliated," "controlling," and "controlled" have meanings
correlative to the foregoing.
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<PAGE>
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in New York
City, New York generally are authorized or required by law or other governmental
actions to close.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting and/or non-voting) of such person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights (other than any evidence of indebtedness), warrants or options
exchangeable for or convertible into such capital stock.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 50% of the total Voting Stock of
the Corporation; or (b) the Corporation consolidates with, or merges with or
into, another person or sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets to any person, or any person
consolidates with, or merges with or into the Corporation, in any such event
pursuant to a transaction in which either (A) the outstanding Voting Stock of
the Corporation is converted into or exchanged for cash, securities or other
property, other than any such transaction where (i) the outstanding Voting Stock
of the Corporation is converted into or exchanged for Voting Stock of the
surviving or transferee corporation or its parent corporation and/or cash,
securities or other property in an amount which could be paid by the Corporation
under the terms of the Corporation's credit and financing agreements and (ii)
immediately after such transaction no "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act), is the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total Voting Stock of the surviving or transferee corporation,
as applicable; or (B) the holders of the outstanding Voting Stock of the
Corporation immediately prior to such transaction hold less than 50% of the
outstanding Voting Stock of the surviving or transferee corporation or its
parent corporation immediately after the transaction or (C) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination for election by the
stockholders of the Corporation was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office.
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"Common Stock" means the Corporation's common stock, par value $.01 per
share.
"Current Market Price" means the average of the daily Market Prices of the
Common Stock for ten consecutive trading days immediately preceding the date for
which such value is to be computed; provided, however, that (A) if the "ex" date
(as hereinafter defined) for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion Ratio
pursuant to paragraph 8(g)(i), (ii), (iii), (iv), (v) or (vi) occurs during such
10 consecutive trading days, the closing price for each trading day prior to the
"ex" date for such other event shall be adjusted by multiplying such closing
price by the same fraction by which the Conversion Ratio is so required to be
adjusted as a result of such other event, (B) if the "ex" date for any event
(other that the issuance or distribution requiring such computation) that
requires an adjustment to the Conversion Ratio pursuant to paragraph 8(g)(i),
(ii), (iii), (iv), (v) or (vi) occurs on or after the "ex" date for the issuance
or distribution requiring such computation and prior to the day in question, the
closing price for each trading day on and after the "ex" date for such other
event shall be adjusted by multiplying such closing price by the reciprocal of
the fraction by which the Conversion Ratio is so required to be adjusted as a
result of such other event and (C) if the "ex" date for the issuance or
distribution requiring such computation is prior to the day in question, after
taking into account any adjustment required pursuant to clause (A) or (B) of
this proviso, the closing price for each trading day on or after such "ex" date
shall be adjusted by adding thereto the amount of any cash and the fair market
value (as determined by the Board of Directors in a manner consistent with any
determination of such value for purposes of paragraph 8(g)(iv) or (v), whose
determination shall be conclusive and described in a resolution of the Board of
Directors) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of any computation under
paragraph 8(g)(vi), the Current Market Price on any date shall be deemed to be
the average of the daily closing prices per share of Common Stock for such day
and the next two succeeding trading days; provided, however, that, if the "ex"
date for any event (other than the tender offer requiring such computation) that
requires an adjustment to the Conversion Ratio pursuant to paragraph 8(g)(i),
(ii), (iii), (iv), (v) or (vi) occurs on or after the Expiration Time for the
tender or exchange offer requiring such computation and prior to the day in
question, the closing price for each trading day on and after the "ex" date for
such other event shall be adjusted by multiplying such closing price by the
reciprocal of the fraction by which the Conversion Ratio is so required to be
adjusted as a result of such other event. For purposes of this paragraph, the
term "ex" date (1) when used with respect to any issuance or distribution, means
the first date on which the shares of Common Stock trade regular way on the
relevant exchange or in the relevant market from which the closing price was
obtained without the right to receive such issuance or distribution, (2) when
used with respect to any subdivision or combination of shares of Common Stock,
means the first date on which the shares of Common Stock trade regular way on
such exchange or in such market after the time at which such subdivision or
combination becomes effective and (3) when used with respect to any tender or
exchange offer means the first date on which the
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shares of Common Stock trade regular way on such exchange or in such market
after the Expiration Time of such offer. Notwithstanding the foregoing, whenever
successive adjustments to the Conversion Ratio are called for pursuant to
paragraph 8(g), such adjustments shall be made to the Current Market Price as
may be necessary or appropriate to effectuate the intent of paragraph 8(g) and
to avoid unjust or inequitable results, as determined in good faith by the Board
of Directors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute, and the rules and regulations promulgated thereunder.
"Issue Date" means the original date of issuance of shares of Series A
Preferred Stock.
"Liquidation Preference" is an amount equal to $1,000.00 per share of
Series A Preferred Stock.
"Market Price" means, with respect to the Common Stock, on any given day,
(i) the price of the last trade, as reported on the Nasdaq National Market, not
identified as having been reported late to such system, or (ii) if the Common
Stock is so traded, but not so quoted, the average of the last bid and ask
prices, as those prices are reported on the Nasdaq National Market, or (iii) if
the Common Stock is not listed or authorized for trading on the Nasdaq National
Market or any comparable system, the average of the closing bid and asked prices
as furnished by two members of the National Association of Securities Dealers,
Inc. selected from time to time by the Corporation for that purpose. If the
Common Stock is not listed and traded in a manner that the quotations referred
to above are available for the period required hereunder, the Market Price per
share of Common Stock shall be deemed to be the fair value per share of such
security as determined in good faith by the Board of Directors of the
Corporation.
"Special Amount" means, with respect of any share of Series A Preferred
Stock, all dividends and other amounts which have become payable in respect of
such share under paragraph 4(a) but which have not been paid. The Special Amount
with respect to any such share shall be reduced by the amount of any such
dividends and other amounts actually paid in respect of such share under
paragraph 4(c) (including any such amounts paid in shares of Series A Preferred
Stock pursuant to paragraph 4(f)).
"Voting Stock" means, with respect to any person, the Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors
or other members of the governing body of such person.
3. Rank. (a) Any class or series of stock of the Corporation,
whether now existing or hereafter created, shall be deemed to rank:
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(i) prior to the Series A Preferred Stock, either as to the
payment of dividends or other amounts or as to distribution of
assets upon liquidation, dissolution (whether voluntary or
involuntary) or winding up, or both, if the holders of such class or
series shall be entitled by the terms thereof to the receipt of
dividends or other amounts and of amounts distributable upon
liquidation, dissolution or winding up, in preference or priority to
the holders of Series A Preferred Stock ("Senior Securities");
(ii) on a parity with the Series A Preferred Stock, either as
to the payment of dividends or other amounts or as to distribution
of assets upon liquidation, dissolution (whether voluntary or
involuntary) or winding up, or both, whether or not the dividend
rates, dividend payment dates or redemption or liquidation prices
per share thereof be different from those of the Series A Preferred
Stock, if the holders of the Series A Preferred Stock and of such
class of stock or series shall be entitled by the terms thereof to
the receipt of dividends or other amounts or of amounts
distributable upon liquidation, dissolution or winding up, or both,
in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences (including, but not
limited to preferences as to payment of dividends or other amounts
distributable upon liquidation), without preference or priority one
over the other and such class of stock or series is not a class of
Senior Securities ("Parity Securities"); and
(iii) junior to the Series A Preferred Stock, either as to the
payment of dividends or as to the distribution of assets upon
liquidation, dissolution (whether voluntary or involuntary) or
winding up, or both, if such stock or series shall be Common Stock
or if the holders of the Series A Preferred Stock shall be entitled
by the terms thereof to receipt of dividends or other amounts, and
of amounts distributable upon liquidation, dissolution or winding
up, or both, in preference or priority to the holders of shares of
such stock or series (including, but not limited to preferences as
to payment of dividends or other amounts distributable upon
liquidation) ("Junior Securities").
(b) The respective definitions of Senior Securities, Junior
Securities and Parity Securities shall also include any rights or options
exercisable or exchangeable for or convertible into any of the Senior
Securities, Junior Securities and Parity Securities, as the case may be.
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(c) The Series A Preferred Stock shall be subject to the
creation of Junior Securities.
4. Dividends. (a) The holders of shares of Series A Preferred Stock
shall be entitled to receive with respect to each share of Series A Preferred
Stock, when, as and if declared by the Board of Directors, out of funds legally
available for the payment of dividends, dividends at a rate per annum equal to
seven and one-half percent (7.5%) of the Liquidation Preference per share and
any additional amount at a rate per annum equal to seven and one-half percent
(7.5%) of the Special Amount with respect to any share of Series A Preferred
Stock (an "Additional Amount"), to be paid in accordance with the terms of this
paragraph 4; provided, however, that, upon the failure by the Corporation to
make the Change of Control Offer pursuant to paragraph 11 hereof, the dividend
rate per annum shall increase to fifteen percent (15%) of the Liquidation
Preference per share and any Additional Amount shall accrue at a rate of fifteen
percent (15%) of the Special Amount with respect to a share of Series A
Preferred Stock, each to be effective retroactively as of the date of the Change
of Control; provided, further, that the dividend and Additional Amount rates
shall be subject to further adjustment in accordance with paragraph 12(d)
hereof. Such dividends and Additional Amounts shall be cumulative from the Issue
Date and shall be payable quarterly in arrears on March 31, June 30, September
30 and December 31 of each year (unless such day is not a Business Day, in which
event such dividends and Additional Amounts shall be payable on the next
succeeding Business Day) (each such date being a "Dividend Payment Date" and
each such quarterly period being a "Dividend Period"). Each such dividend and
Additional Amount shall be payable to the holders of record of shares of the
Series A Preferred Stock as they appear on the share register of the Corporation
on the corresponding Record Date. As used herein, the term "Record Date" means,
with respect to the dividend payable on March 31, June 30, September 30 and
December 31, respectively of each year, the preceding March 15, June 15,
September 15 and December 15, or such other record date, not more than 60 days
or less than 10 days preceding the payment dates thereof, as shall be fixed by
the Board of Directors.
(b) The amount of dividends and Additional Amounts payable for
each full Dividend Period for the Series A Preferred Stock shall be computed by
dividing the annual seven and one-half percent (7.5%) rate by four (4);
provided, however, that upon the failure by the Corporation to make the Change
of Control Offer pursuant to paragraph 11 hereof, the amount of dividends and
Additional Amounts payable for each full Dividend Period shall be computed by
dividing the annual fifteen percent (15%) rate by four (4), such rate to be
effective retroactively as of the date of the Change of Control; provided,
further, that the dividend and Additional Amount rates shall be subject to
further adjustment in accordance with paragraph 12(d) hereof. The amount of
dividends and Additional Amounts payable for the initial Dividend Period, or any
other period shorter or longer than a full Dividend Period, on the Series A
Preferred Stock shall be computed on the basis of twelve 30-day months and a
360-day year. Holders of shares of Series A Preferred Stock shall not
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be entitled to any dividends, whether payable in cash, property or stock, in
excess of amounts payable under Section 4(a) hereof (including Special Amounts
and Additional Amounts), on the Series A Preferred Stock. Except as expressly
provided herein, no interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series A Preferred
Stock that may be in arrears.
(c) Special Amounts for any past Dividend Periods may be
declared and paid in shares of Series A Preferred Stock on any subsequent
Dividend Payment Date, to holders of record on the corresponding Record Date.
(d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividend, except any dividend paid to effectuate a stock split
and except as described in the next succeeding sentence, shall be declared or
paid or set apart for payment or other distribution on any Parity Securities,
nor shall any Parity Securities be redeemed, purchased or otherwise acquired for
any consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any shares of any such stock) by the Corporation, directly
or indirectly (except by conversion into or exchange for Parity Securities or
Junior Securities), unless in each case all Special Amounts have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on the Series A Preferred Stock for
all Dividend Periods terminating on or prior to the date of payment of the
dividend on or redemption of such class or series of Parity Securities. When
Special Amounts and Additional Amounts are not paid in full or a sum sufficient
for such payment is not set apart, as aforesaid, all Special Amounts declared
upon shares of the Series A Preferred Stock and all dividends declared upon any
other class or series of Parity Securities shall be declared ratably in
proportion to the respective amounts of Special Amounts and Additional Amounts
accumulated and unpaid on the Series A Preferred Stock and dividends accumulated
and unpaid on such Parity Securities.
(e) So long as any shares of the Series A Preferred Stock are
outstanding, no dividend, (except paid to effectuate a stock split) shall be
declared or paid or set apart for payment or other distribution declared or made
upon Junior Securities (other than under a shareholders' right plan), nor shall
any Junior Securities be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan of the Corporation or any
subsidiary) (any such dividend, distribution, redemption or purchase being
hereinafter referred to as a "Junior Securities Distribution") for any
consideration (or any moneys be paid to or made available for a sinking fund for
the redemption of any shares of any such stock) by the Corporation, directly or
indirectly (except by conversion into or exchange for Junior Securities), unless
in each case (i) all Special Amounts on all outstanding shares of the Series A
Preferred Stock and accrued and unpaid dividends on any other Parity Securities
shall have been paid or set apart for payment for all past
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Dividend Periods with respect to the Series A Preferred Stock and all past
dividend periods with respect to such Parity Securities and (ii) sufficient
funds shall have been paid or set apart for the payment of the dividend and
Additional Amount for the current Dividend Period with respect to the Series A
Preferred Stock and the current dividend period with respect to any Parity
Securities.
(f) The Corporation may pay current dividends, or dividends or
Additional Amounts that have accrued from the last Dividend Payment Date through
the date of payment, at its election, in cash or shares of Series A Preferred
Stock or any combination thereof. The Corporation may pay accrued dividends
(including accrued and unpaid dividends), Additional Amounts (including accrued
and unpaid Additional Amounts) and Special Amounts and any dividends accrued
thereon only in shares of Series A Preferred Stock. The number of shares of
Series A Preferred Stock to be issued in circumstances when dividends,
Additional Amounts or Special Amounts are paid with additional shares of Series
A Preferred Stock will equal the cash amount of the dividend, Additional Amount
or Special Amount, if any, payable (but for the operation of this Section 4(f)),
divided by the Liquidation Preference, rounded to the nearest full share, up or
down, after taking into account all shares of Series A Preferred Stock owned by
the holder thereof, provided that if the resulting fractional share held by such
holder equals one-half or more of a share of Series A Preferred Stock, such
fractional share shall be rounded up to the nearest full share.
5. Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Junior
Securities, the holders of the shares of Series A Preferred Stock shall be
entitled to receive with respect to each share of Series A Preferred Stock an
amount in cash equal to the Liquidation Preference, plus the Special Amount in
respect of such share, plus an amount equal to all dividends and the Additional
Amount accrued and unpaid thereon from the last Dividend Payment Date to the
date of final distribution to such holders, but such holders shall not be
entitled to any further payment. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation, or proceeds
thereof, shall be insufficient to pay in full the preferential amount aforesaid
and liquidating payments on all Parity Securities, then such assets, or the
proceeds thereof, shall be distributed among the holders of shares of Series A
Preferred Stock and all such other Parity Securities ratably in accordance with
the respective amounts that would be payable on such shares of Preferred Stock
and any such other Parity Securities if all amounts payable thereon were paid in
full. For the purposes of this paragraph 5, (i) a consolidation or merger of the
Corporation with one or more corporations, or (ii) a sale or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
(b) Subject to the rights of the holders of any Parity
Securities, after payment shall have been made in full to the holders of the
Series A Preferred Stock, as
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provided in this paragraph 5, any other series or class or classes of
Junior Securities shall, subject to the respective terms and provisions
(if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the holders of the Series A
Preferred Stock and any Parity Securities shall not be entitled to share
therein.
6. Redemption. (a) The Series A Preferred Stock shall be redeemable
by the Corporation on or after November 15, 2004. After such date, to the extent
the Corporation shall have funds legally available for such payment, the
Corporation may redeem at its option shares of Series A Preferred Stock, at any
time in whole or from time to time in part, at a redemption price per share
equal to the Liquidation Preference, plus the Special Amount in respect of such
share, plus an amount equal to all dividends and the Additional Amount accrued
and unpaid thereon from the last Dividend Payment Date to the date fixed for
redemption, without interest.
(b) To the extent the Corporation shall have funds legally
available for such payment, on November 15, 2014, the Corporation shall
redeem all outstanding shares of the Series A Preferred Stock, if any, at
a redemption price per share in cash equal to the Liquidation Preference,
plus the Special Amount in respect of such share, plus an amount equal to
all dividends and the Additional Amount accrued and unpaid thereon from
the last Dividend Payment Date to such date, without interest.
(c) Shares of Series A Preferred Stock which have been issued
and reacquired in any manner, including shares purchased or redeemed,
shall (upon compliance with any applicable provisions of the laws of the
State of Delaware) have the status of authorized and unissued shares of
the class of Preferred Stock undesignated as to series and may be
predesignated and reissued as part of any series of the Preferred Stock;
provided that no such issued and reacquired shares of Series A Preferred
Stock shall be reissued or sold as Series A Preferred Stock.
(d) If the Corporation is unable or shall fail to discharge
its obligation to redeem all outstanding shares of Series A Preferred
Stock pursuant to paragraph 6(b) (the "Mandatory Redemption Obligation"),
the Mandatory Redemption Obligation shall be discharged as soon as the
Corporation is able to discharge such Mandatory Redemption Obligation. If
and so long as any Mandatory Redemption Obligation with respect to the
Series A Preferred Stock shall not be fully discharged, the Corporation
shall not (i) directly or indirectly, redeem, purchase, or otherwise
acquire any Parity Security or discharge any mandatory or optional
redemption, sinking fund or other similar obligation in respect of any
Parity Securities (except in connection with a redemption, sinking fund or
other similar obligation to be satisfied pro rata with the Series A
Preferred Stock) or (ii) declare or make any Junior Securities
Distribution, or, directly or indirectly, discharge any mandatory or
optional redemption, sinking fund or other similar obligation in respect
of any Junior Securities.
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7. Procedure for Redemption. (a) In the event that fewer than all
the outstanding shares of Series A Preferred Stock are to be redeemed, the
number of shares to be redeemed shall be determined by the Board of Directors
and the shares to be redeemed shall be selected pro rata (with any fractional
shares being rounded to the nearest whole share).
(b) In the event the Corporation shall redeem shares of Series A
Preferred Stock, notice of such redemption shall be given by first class
mail, postage prepaid mailed not less than 30 days nor more than 60 days
prior to the redemption date, to each holder of record of the shares to be
redeemed at such holder's address as the same appears on the stock
register of the Corporation; provided that neither the failure to give
such notice nor any defect therein shall affect the validity of the giving
of notice for the redemption of any share of Series A Preferred Stock to
be redeemed except as to the holder to whom the Corporation has failed to
give said notice or except as to the holder whose notice was defective.
Each such notice shall state: (i) the redemption date; (ii) the number of
shares of Series A Preferred Stock to be redeemed and, if fewer than all
the shares held by such holder are to be redeemed, the number of shares to
be redeemed from such holder; (iii) the redemption price; (iv) the place
or places where certificates for such shares are to be surrendered for
payment of the redemption price; (v) the then current Conversion Ratio;
and (vi) that dividends and Additional Amounts on the shares to be
redeemed will cease to accrue on such redemption date.
(c) Notice having been mailed as aforesaid, from and after the
redemption date, dividends and Additional Amounts on the shares of Series
A Preferred Stock so called for redemption shall cease to accrue, said
shares shall no longer be deemed outstanding, and all rights of the
holders thereof as stockholders of the Corporation (except the right to
receive from the Corporation the redemption price) shall cease. Upon
surrender in accordance with said notice of the certificates for any
shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors of the Corporation shall so require and the notice
shall so state), such shares shall be redeemed by the Corporation at the
redemption price aforesaid. In case fewer than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares without cost to the holder thereof. The
Corporation's obligation to provide moneys in accordance with this Section
7(c) shall be deemed fulfilled if, on or before the applicable redemption
date, the Corporation shall deposit with a bank or trust company having an
office or agency in the Borough of Manhattan, City of New York, and having
a combined capital and surplus of at least $1,000,000,000, funds necessary
for such redemption, in trust, with irrevocable instructions that such
funds be applied to the redemption of the shares of Series A Preferred
Stock so called for redemption. Any interest accrued on such funds shall
be paid to the Corporation from time to time. Any funds so deposited to
which holders of Series A Preferred Stock are lawfully entitled but which
are unclaimed at the end of two years from such redemption date shall be
released or repaid to the Corporation, after which, subject to
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any applicable laws relating to escheat or unclaimed property, the holder
or holders of such shares of Series A Preferred Stock so called for
redemption shall look only to the Corporation for payment of the
applicable redemption price. The election by the Corporation to redeem
shares of Series A Preferred Stock shall become irrevocable only on the
redemption date included in the relevant notice.
(d) Notwithstanding anything to the contrary contained herein, if
the Corporation's notice of redemption has been given pursuant to this
Section 7 and any holder of shares of Series A Preferred Stock shall,
prior to the close of business on the third Business Day immediately
preceding the redemption date, give written notice to the Corporation of
the conversion of any and all of the shares to be redeemed held by such
holder (accompanied by a certificate or certificates for such shares, duly
endorsed or assigned to the Corporation), then such shares shall not be
redeemed and the conversion of such shares to be redeemed shall become
effective as provided in Section 8.
8. Conversion. (a) Subject to the provisions of this paragraph 8,
the holders of the shares of Series A Preferred Stock shall have the right, at
any time and from time to time, at such holder's option, to convert any or all
outstanding shares (and fractional shares) of Series A Preferred Stock, in whole
or in part, into fully paid and non-assessable shares of Common Stock. The
number of shares of Common Stock deliverable upon conversion of a share of
Series A Preferred Stock, adjusted as hereinafter provided, is referred to
herein as the "Conversion Ratio." The Conversion Ratio as of any date shall be
an amount equal to the sum of (i) the Liquidation Preference, (ii) the Special
Amount and (iii) an amount equal to all dividends and the Additional Amount
accrued thereon from the last Dividend Payment Date to such date, divided by
$40, subject to adjustment from time to time pursuant to paragraph 8(g) hereof.
Notwithstanding any call for redemption pursuant to paragraph 6, the right to
convert shares so called for redemption shall terminate at the close of business
on the third Business Day immediately preceding the date fixed for such
redemption unless the Corporation shall default in making payment of the amount
payable upon such redemption.
(b) (i) In order to exercise the conversion privilege, the holder of
the shares of Series A Preferred Stock to be converted shall surrender the
certificate representing such shares at the office of the Corporation, with a
written notice of election to convert completed and signed, specifying the
number of shares to be converted. Unless the shares issuable on conversion are
to be issued in the same name as the name in which such shares of Series A
Preferred Stock are registered, each share surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to the Corporation,
duly executed by the holder or the holder's duly authorized attorney, and an
amount sufficient to pay any transfer or similar tax.
(ii) As promptly as practicable after the surrender by the
holder of the certificates for shares of Series A Preferred Stock as
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aforesaid, the Corporation shall issue and shall deliver to such
holder, or on the holder's written order to the holder's transferee,
(y) a certificate or certificates for the whole number of shares of
Common Stock issuable upon the conversion of such shares in
accordance with the provisions of this paragraph 8, any cash
adjustment required pursuant to Section 8(f), and (z) in the event
of a conversion in part, a certificate or certificates for the whole
number of shares of Series A Preferred Stock not being so converted.
(iii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the
certificates for shares of Series A Preferred Stock shall have been
surrendered and such notice received by the Corporation as
aforesaid, and the person in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder of record of
the shares of Common Stock represented thereby at such time on such
date and such conversion shall be into a number of whole shares of
Common Stock equal to the product of the number of shares of Series
A Preferred Stock surrendered times the Conversion Ratio in effect
at such time on such date. All shares of Common Stock delivered upon
conversion of the Series A Preferred Stock will upon delivery be
duly and validly issued and fully paid and non- assessable, free of
all liens and charges and not subject to any preemptive rights. Upon
the surrender of certificates representing the shares of Series A
Preferred Stock to be converted, the shares to be so converted shall
no longer be deemed to be outstanding and all rights of a holder
with respect to such shares surrendered for conversion shall
immediately terminate except the right to receive the Common Stock
and other amounts payable pursuant to this paragraph 8 and a
certificate or certificates representing the shares of Series A
Preferred Stock not converted.
(c) (i) Upon delivery to the Corporation by a holder of shares of
Series A Preferred Stock of a notice of election to convert, the right of the
Corporation to redeem such shares of Series A Preferred Stock shall terminate,
regardless of whether a notice of redemption has been mailed as aforesaid.
(ii) If a holder of Series A Preferred Stock delivers to the
Corporation a notice of election to convert, the Series A Preferred
Stock to be converted shall cease to accrue dividends and Additional
Amounts pursuant to paragraph 4 but shall continue to be entitled to
receive pro rata dividends and Additional Amounts for the period
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from the last Dividend Payment Date to the date of delivery of the
notice of election to convert in preference to and in priority over
any dividends on any Junior Securities.
(iii) Except as provided above and in paragraph 8(g), the
Corporation shall make no payment or adjustment for accrued and
unpaid dividends or Additional Amounts on shares of Series A
Preferred Stock, whether or not in arrears, on conversion of such
shares or for dividends in cash on the shares of Common Stock issued
upon such conversion.
(d) (i) The Corporation covenants that it will at all times reserve
and keep available, free from preemptive rights, such number of its authorized
but unissued shares of Common Stock as shall be required for the purpose of
effecting conversions of the Series A Preferred Stock.
(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the
Series A Preferred Stock, the Corporation shall comply with all
applicable federal and state laws and regulations which require
action to be taken by the Corporation.
(e) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock on conversion of the Series A Preferred Stock pursuant
hereto; provided that the Corporation shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue or delivery of
shares of Common Stock in a name other than that of the holder of the Series A
Preferred Stock to be converted and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery has paid to the
Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid.
(f) In connection with the conversion by a holder of any shares of
Series A Preferred Stock, no fractions of shares of Common Stock shall be
required to be issued to such holder, but in lieu thereof the Corporation shall
pay a cash adjustment in respect of such fractional interest in an amount equal
to such fractional interest multiplied by the Market Price per share of Common
Stock on the Business Day on which such shares of Series A Preferred Stock are
deemed to have been converted.
(g) (i) In case the Corporation shall at any time after the date of
issue of the Series A Preferred Stock (A) declare a dividend or make a
distribution on Common Stock payable in Common Stock, (B) subdivide or split the
outstanding Common
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Stock, (C) combine or reclassify the outstanding Common Stock into a smaller
number of shares, (D) issue any shares of its Capital Stock in a
reclassification of Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Corporation is the
continuing corporation), or (E) consolidate with, or merge with or into, any
other Person, the Conversion Ratio in effect at the time of the record date for
such dividend or distribution or of the effective date of such subdivision,
split, combination, consolidation, merger or reclassification shall be
proportionately adjusted so that the conversion of the Series A Preferred Stock
after such time shall entitle the holder to receive the aggregate number of
shares of Common Stock or other securities of the Corporation (or shares of any
security into which such shares of Common Stock have been combined,
consolidated, merged or reclassified pursuant to clause 8 (g) (i) (C) , 8 (g)
(i) (D) or 8(g) (i) (E) above) which, if this Series A Preferred Stock had been
converted immediately prior to such time, such holder would have owned upon such
conversion and been entitled to receive by virtue of such dividend,
distribution, subdivision, split, combination, consolidation, merger or
reclassification assuming such holder of Common Stock of the Corporation (x) is
not a Person with which the Corporation consolidated or into which the
Corporation merged or which merged into the Corporation or to which such
recapitalization, sale or transfer was made, as the case may be ("constituent
person"), or an affiliate of a constituent person and (y) failed to exercise any
rights of election as to the kind or amount of securities, cash and other
property receivable upon such reclassification, change, consolidation, merger,
recapitalization, sale or transfer (provided, that if the kind or amount of
securities, cash and other property receivable upon such reclassification,
change, consolidation, merger, recapitalization, sale or transfer is not the
same for each share of Common Stock of the Corporation held immediately prior to
such reclassification, change, consolidation, merger, recapitalization, sale or
transfer by other than a constituent person or an affiliate thereof and in
respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this subparagraph 8(g) the kind
and amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, recapitalization, sale or
transfer by each non-electing share shall be deemed to be the kind and amount so
receivable per share by a plurality of the non-electing shares). Such adjustment
shall be made successively whenever any event listed above shall occur.
(ii) In case the Corporation shall issue or sell any Common
Stock (other than Common Stock issued (A) pursuant to the
Corporation's existing or future stock option plans or pursuant to
any other existing or future Common Stock-related director or
employee compensation plan of the Corporation approved by the Board
of Directors, (B) as consideration for the acquisition of a business
or of assets, (C) in a firmly committed underwritten public offering
when either (i) the underwriting discount is less than 5%, or (ii)
the offering price per share is greater than the Conversion Price,
(D) to the Corporation's joint venture partners in exchange for
interests in the
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<PAGE>
relevant joint venture, or (E) upon exercise or conversion of any
security the issuance of which caused an adjustment under paragraph
8(g)(i) or 8(g)(iii) hereof or the issuance of which did not require
adjustment hereunder) without consideration or for a consideration
per share less than the Current Market Price on the date of such
issuance, or shall issue securities convertible into Common Stock
having a conversion price per share less than the Current Market
Price at the date of issuance of such convertible security, the
Conversion Ratio to be in effect after such issuance or sale shall
be determined by multiplying the Conversion Ratio in effect
immediately prior to such issuance or sale by a fraction, (1) the
numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to such issuance or sale
and the number of additional shares of Common Stock to be issued or
sold (or, in the case of convertible securities, issued on
conversion), and (2) the denominator of which shall be the sum of
(x) the number of shares of Common Stock outstanding immediately
prior to such issuance or sale and (y) the number of shares of
Common Stock which the aggregate consideration receivable by the
Corporation for the total number of additional shares of Common
Stock so issued or sold (or issuable on conversion) would purchase
at the Current Market Price in effect immediately prior to such
issuance or sale. In case any portion of the consideration to be
received by the Corporation shall be in a form other than cash, the
fair market value of such noncash consideration shall be utilized in
the foregoing computation. Such fair market value shall be
determined in good faith by the Board of Directors.
(iii) In case the Corporation shall fix a record date for the
issuance of rights, options or warrants (other than rights, options
or warrants issued (A) pursuant to the Corporation's existing or
future stock option plans or pursuant to any other existing or
future Common Stock-related director or employee compensation plan
of the Corporation approved by the Board of Directors, (B) as
consideration for the acquisition of a business or of assets, (C) in
a firmly committed underwritten public offering when either (i) the
underwriting discount is less than 5%, or (ii) the offering price
per share is greater than the Conversion Price, (D) to the
Corporation's joint venture partners in exchange for interests in
the relevant joint venture, or (E) upon exercise or conversion of
any security the issuance of which caused an adjustment under
paragraph 8(g)(i) or 8(g)(ii) hereof or the issuance of which did
not require adjustment
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<PAGE>
hereunder) to the holders of its Common Stock or other securities
entitling such holders to subscribe for or purchase shares of Common
Stock (or securities convertible into shares of Common Stock) at a
price per share of Common Stock (or having a conversion price per
share of Common Stock, if a security convertible into shares of
Common Stock) less than the Current Market Price on such record
date, the maximum number of shares of Common Stock issuable upon
exercise of such rights, options or warrants (or conversion of such
convertible securities) shall be deemed to have been issued and
outstanding as of such record date and the Conversion Ratio shall be
adjusted pursuant to paragraph 8(g)(ii) hereof, as though such
maximum number of shares of Common Stock had been so issued for an
aggregate consideration payable by the holders of such rights,
options, warrants or convertible securities prior to their receipt
of such shares of Common Stock. In case any portion of such
consideration shall be in a form other than cash, the fair market
value of such noncash consideration shall be determined as set forth
in paragraph 8(g)(ii) hereof. Such adjustment shall be made
successively whenever such record date is fixed; and in the event
that such rights, options or warrants are not so issued or expire in
whole or in part unexercised, or in the event of a change in the
number of shares of Common Stock to which the holders of such
rights, options or warrants are entitled (other than pursuant to
adjustment provisions therein comparable to those contained in this
paragraph 8(g)), the Conversion Ratio shall again be adjusted as
follows: (A) in the event that all of such rights, options or
warrants expire unexercised, the Conversion Ratio shall be the
Conversion Ratio that would then be in effect if such record date
had not been fixed; (B) in the event that less than all of such
rights, options or warrants expire unexercised, the Conversion Ratio
shall be adjusted pursuant to paragraph 8(g)(ii) to reverse the
adjustment with respect to rights, options or warrants that have
lapsed or expired unexercised; and (C) in the event of a change in
the number of shares of Common Stock to which the holders of such
rights, options or warrants are entitled, the Conversion Ratio shall
be adjusted to reflect the Conversion Ratio which would then be in
effect if such holder had initially been entitled to such changed
number of shares of Common Stock. Notwithstanding anything herein to
the contrary, no further adjustment to the Conversion Ratio shall be
made upon the issuance or sale of Common Stock upon the exercise of
any rights, options or warrants to subscribe for or purchase Common
Stock, if any adjustment in the Conversion Ratio was made
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<PAGE>
or required to be made upon the record date for the issuance or sale
of such rights, options or warrants under this clause 8(g)(iii).
Rights or warrants distributed by the Corporation to holders
of shares of Common Stock entitling the holders thereof to subscribe
for or purchase shares of the Corporation's capital stock (either
initially or under certain circumstances), which rights or warrants,
until the occurrence of a specified event or events ("Dilution
Trigger Event"): (A) are deemed to be transferred with such shares
of Common Stock; (B) are not exercisable; and (C) are also issued in
respect of future issuances of shares of Common Stock, shall be
deemed not to have been distributed for purposes of this paragraph 8
(g)(iii) (and no adjustment to the Conversion Ratio under this
paragraph 8(g)(iii) shall be required) until the occurrence of the
earliest Dilution Trigger Event, whereupon such rights and warrants
shall be deemed to have been distributed and an appropriate
adjustment to the Conversion Ratio under this paragraph 8 (g)(iii)
shall be made. If any such rights or warrants, including any such
existing rights or warrants distributed prior to the first issuance
of shares of Series A Preferred Stock, are subject to subsequent
events, upon the occurrence of each of which such rights or warrants
shall become exercisable to purchase different securities, evidences
of indebtedness or other assets, then the occurrence of each such
event shall be deemed to be such date of issuance and record date
with respect to new rights or warrants (and a termination or
expiration of the existing rights or warrants, without exercise by
the holder thereof). In addition, in the event of any distribution
(or deemed distribution) of rights or warrants, or any Dilution
Trigger Event with respect thereto, that was counted for purposes of
calculating a distribution amount for which an adjustment to the
Conversion Ratio under this paragraph 8(g)(iii) was made, (1) in the
case of any such rights or warrants which shall have been redeemed
or repurchased without exercise by any holders thereof, the
Conversion Ratio shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Dilution Trigger
Event, as the case may be, as though it were a cash distribution,
equal to the per share redemption or repurchase price received by a
holder or holders of shares of Common Stock with respect to such
rights or warrants (assuming such holder had retained such rights or
warrants), made to all holders of shares of Common Stock as of the
date of such redemption or repurchase, and (2) in the case of such
rights or warrants which shall have expired or been terminated
without
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<PAGE>
exercise by any holders thereof, the Conversion Ratio shall be
readjusted as if such rights and warrants had not been issued.
(iv) In case the Corporation shall fix a record date for the
making of a distribution to holders of Common Stock (including any
such distribution made in connection with a consolidation or merger
in which the Corporation is the continuing corporation) of evidences
of indebtedness, assets or other property (other than (x) dividends
payable in Common Stock or rights, options or warrants referred to
in paragraph 8(g)(i) or 8(g)(iii) hereof for which an adjustment was
made, (y) exclusive cash dividends, or (z) distributions of stock or
assets having an aggregate fair market value of less than $7.5
million on a cumulative basis), the Conversion Ratio to be in effect
after such record date shall be determined by multiplying the
Conversion Ratio in effect immediately prior to such record date by
a fraction, (A) the numerator of which shall be the Current Market
Price on such record date, and (B) the denominator of which shall be
the Current Market Price on such record date, less the fair market
value (determined as set forth in paragraph 8 (g) (ii) hereof) of
the portion of the assets, other property or evidence of
indebtedness so to be distributed which is applicable to one share
of Common Stock. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such
distribution is not so made, the Conversion Ratio shall again be
adjusted to be the Conversion Ratio which would then be in effect if
such record date had not been fixed.
For purposes of this paragraph 8(g)(iv) and paragraph 8(g)(i)
and 8(g)(iii), any dividend or distribution to which this paragraph
8(g)(iv) is applicable that also includes shares of Common Stock, or
rights or warrants to subscribe for or purchase shares of Common
Stock to which paragraph 8(g)(i) or 8(g)(iii) applies (or both)
shall be deemed instead to be (A) a dividend or distribution of the
evidences of indebtedness, assets, shares of capital stock, rights
or warrants other than such shares of Common Stock or rights or
warrants to which paragraph 8(g)(i) or 8(g)(iii) applies (and any
Conversion Ratio adjustment required by this paragraph 8(g)(iv) with
respect to such dividend or distribution shall then be made)
immediately followed by (B) a dividend or distribution of such
shares of Common Stock or such rights or warrants (and any further
Conversion Ratio adjustment required by paragraph 8(g)(i) or
8(g)(iii) with respect to such dividend or distribution shall then
be made).
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<PAGE>
(v) If the Corporation shall, by dividend or otherwise,
distribute to holders of its shares of Common Stock cash (excluding
any cash that is distributed upon a merger or consolidation to which
paragraph 8(h) applies or as part of a distribution referred to in
paragraph 8(g)(iv)) in an aggregate amount that, combined together
with (A) the aggregate amount of any other such distributions to
holders of its shares of Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such
distribution, and in respect of which no adjustment pursuant to this
paragraph 8(g)(v) has been made, and (B) the aggregate of any cash
plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a
resolution of the Board of Directors) of consideration payable in
respect of any tender offer by the Corporation for all or any
portion of the shares of Common Stock concluded within the 12 months
preceding the date of payment of such distribution, and in respect
of which no adjustment pursuant to paragraph 8(vi) has been made,
exceeds 5% of the Corporation's consolidated net income for the
preceding fiscal year then, and in each such case, immediately after
the close of business on such date, the Conversion Ratio shall be
increased so that the same shall equal the ratio determined by
multiplying the Conversion Ratio in effect immediately prior to the
close of business on such record date by a fraction and (1) the
numerator of which shall be equal to the Current Market Price on
such record date; (2) the denominator of which shall be equal to the
Current Market Price on the record date less an amount equal to the
quotient of (x) the excess of such combined amount over 5% of the
Corporation's consolidated net income for the preceding fiscal year
and (y) the number of shares of Common Stock outstanding on the
record date; provided, however, that, if the portion of the cash so
distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the shares of Common Stock
on the record date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each holder of shares of Series A
Preferred Stock shall have the right to receive upon conversion of a
shares of Series A Preferred Stock (or any portion thereof) the
amount of cash such holder would have received had such holder
converted such share of Series A Preferred Stock (or portion
thereof) immediately prior to such record date. If such dividend or
distribution is not so paid or made, the Conversion Ratio shall
again be adjusted to be the Conversion Ratio which would then be in
effect if such dividend or distribution had not been declared.
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<PAGE>
(vi) If a tender offer made by the Corporation or any of its
Subsidiaries for all or any portion of the Common Stock expires and
such tender offer (as amended upon the expiration thereof) requires
the payment to shareholders (based on the acceptance (up to any
maximum specified in the terms of the tender offer) of Purchased
Shares) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors)
that, combined together with (A) the aggregate of the cash plus the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of
the Board of Directors), as of the expiration of such tender offer,
of consideration payable in respect of any other tender offers, by
the Corporation or any of its Subsidiaries for all or any portion of
the shares of Common Stock expiring within the 12 months preceding
the expiration of such tender offer and in respect of which no
adjustment pursuant to this paragraph 8(g)(vi) has been made and (B)
the aggregate amount of any distributions to all holders of the
Common Stock made exclusively in cash within 12 months preceding the
expiration of such tender offer and in respect of which no
adjustment pursuant to paragraph 8(g)(v) has been made, exceeds 5%
of the Corporation's consolidated net income for the preceding
fiscal year, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration
Time, the Conversion Ratio shall be adjusted so that the same shall
equal the ratio determined by multiplying the Conversion Ratio in
effect immediately prior to the close of business on the date of the
Expiration Time by a fraction of which the numerator shall be the
sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to shareholders based on the
acceptance (up to any maximum specified in the terms of the tender
offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the
product of the number of shares of Common Stock outstanding (less
any Purchased Shares) at the Expiration Time and the Current Market
Price of the shares of Common Stock on the trading day next
succeeding the Expiration Time and the denominator shall be the
number of shares of Common Stock outstanding (including any tendered
shares) at the Expiration Time multiplied by the Current Market
Price of the shares of Common Stock on the trading day next
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<PAGE>
succeeding the Expiration Time, such adjustment (if any) to become
effective immediately prior to the opening of business on the day
following the Expiration Time. If the Corporation is obligated to
purchase shares pursuant to any such tender offer, but the
Corporation is permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded,
the Conversion Ratio shall again be adjusted to be the Conversion
Ratio which would then be in effect if such tender offer had not
been made. If the application of this paragraph 8(g)(vi) to any
tender offer would result in a decrease in the Conversion Ratio, no
adjustment shall be made for such tender offer under this paragraph
8(g)(vi).
(vii) In the event that, at any time as a result of the
provisions of this paragraph 8(g), a holder of Series A Preferred
Stock upon subsequent conversion shall become entitled to receive
any shares of Capital Stock of the Corporation other than Common
Stock, the number of such other shares so receivable upon conversion
of Series A Preferred Stock shall thereafter be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions contained herein.
(h) Subject to paragraph 9 hereof, in case of any consolidation of
the Corporation with, or merger of the Corporation into, any other corporation,
or in case of any merger of another corporation into the Corporation (other than
a merger which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Corporation), or in
case of any sale, conveyance or transfer of 50% or more of the assets of the
Corporation, the holder of each share of Series A Preferred Stock then
outstanding shall have the right thereafter, during the period such share of
Series A Preferred Stock shall be convertible as specified in Paragraph 8(a), to
convert such share of Series A Preferred Stock only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance or transfer by a holder of the number of shares of shares of Common
Stock of the Corporation into which such share of Series A Preferred Stock might
have been converted immediately prior to such consolidation, merger, conveyance
or transfer, assuming such holder of shares of Common Stock of the Corporation
failed to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance or transfer (provided that, if the kind or amount of securities, cash
and other property receivable upon such consolidation, merger, conveyance or
transfer is not the same for each Common Share of the Corporation in respect of
which such rights of election shall not have been exercised ("nonelecting
share"), then for the purpose of this paragraph 8 the kind and amount
securities, cash and other property receivable upon such consolidation, merger,
conveyance or transfer by each nonelecting share shall be deemed to be the kind
and amount
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of so receivable per share by a plurality of the nonelecting shares). Such
securities shall provide for adjustments which, for events subsequent to the
effective date of the triggering event, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this paragraph 8. The above
provisions of this paragraph 8 shall similarly apply to successive
consolidations, mergers, conveyance or transfers.
(i) In case:
(i) the Corporation shall declare a dividend (or any
other distribution) on its Common Stock payable
otherwise than in cash out of its earned surplus; or
(ii) the Corporation shall authorize the granting to
all holders of its shares of Common Stock of rights or
warrants to subscribe for or purchase any shares of
capital stock of any class or of any other rights; or
(iii) of any reclassification of the Common Stock (other
than a subdivision or combination of the Corporation's
outstanding shares of Common Stock), or of any
consolidation or merger to which the Corporation is a
party and for which approval of any shareholders of the
Corporation is required, or the sale, conveyance or
transfer of all or substantially all the assets of the
Corporation; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation;
then the Corporation shall cause to be filed with the Registrar and at each
office or agency maintained for the purpose of conversion of shares of Series A
Preferred Stock, and shall cause to be mailed to all holders at their last
addresses as they shall appear in the shares of a Series A Preferred Stock
Register, at least 20 Business Days (or 10 Business Days in any case specified
in clause (i) or (ii) above) prior to the applicable date hereinafter specified,
a notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of shares of Common Stock of record to
be entitled to such dividend, distribution, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of shares
of Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. Failure to give the notice required by this paragraph
8(i) or any defect therein shall not affect the legality or validity of any
dividend,
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distribution, right, warrant, reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding-up, or the vote upon
any such action.
(j) All adjustments pursuant to this paragraph 8 shall be notified
to the holders of the Series A Preferred Stock and such notice shall be
accompanied by a schedule of computations of the adjustments.
9. Voting Rights. (a) The holders of record of shares of Series A
Preferred Stock shall not be entitled to any voting rights except as hereinafter
provided in this paragraph 9 or as otherwise provided by law.
(b) Each share of Series A Preferred Stock shall entitle the holder
thereof to vote on all matters that the holders of Common Stock are
entitled to vote upon on at a meeting of stockholders of the Corporation,
except that with respect to the election of directors of the Corporation,
except as set forth in clause (c) below, the shares of Series A Preferred
Stock shall automatically be voted in the same proportion as the votes of
the holders of Common Stock. With respect to any such vote, each share of
Series A Preferred Stock shall entitle the holder thereof to cast the
number of votes equal to the number of votes which could be cast by in
such vote by a holder of the shares of Common Stock into which such share
of Series A Preferred Stock is convertible on the record date for such
vote or, if no such record date is established, on the date any written
consent of stockholders is solicited.
(c) For so long as members of the HMTF Group own (A) either (i) 50%
or more of the shares of Series A Preferred Stock issued to members of the
HMTF Group on the Closing Date under the Stock Purchase Agreement dated as
of November 5, 1999 (together with any equity securities into which such
shares are exchanged or converted, the "HMTF Issued Series A Preferred
Shares") (ii) an amount of Common Stock issued upon conversion of 50% or
more of the HMTF Issued Series A Preferred Shares or (iii) any combination
of HMTF Issued Series A Preferred Shares and Common Stock issued upon
conversion of HMTF Issued Series A Preferred Shares that, if taken
together, would represent (if all HMTF Issued Series A Preferred Shares
were converted) an amount of Common Stock issuable upon conversion of 50%
or more of the HMTF Issued Series A Preferred Shares, the number of
directors then constituting the Board of Directors shall be increased by
two and the HMTF Holders, voting as a single class, shall be entitled to
elect the two additional directors (the "Buyer Directors") to serve on the
Board of Directors at any annual meeting of stockholders or special
meeting held in place thereof, or at a special meeting of the HMTF Holders
called as hereinafter provided, or (B) either (i) 25% or more of (but less
than 50% of) the shares of Series A Preferred Stock issued to members of
the HMTF Group on the Closing Date under the Stock Purchase Agreement
dated as of November 4, 1999 (the "HMTF Issued Series A
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Preferred Shares"), (ii) an amount of Common Stock issued upon conversion
of 25% or more of (but less than 50% of) the HMTF Issued Series A
Preferred Shares or (iii) any combination of HMTF Issued Series A
Preferred Shares and Common Stock issued upon conversion of HMTF Issued
Series A Preferred Shares that, if taken together, would represent (if all
HMTF Issued Series A Preferred Shares were converted) an amount of Common
Stock issuable upon conversion of 25% or more of (but less than 50% of)
the HMTF Issued Series A Preferred Shares, the HMTF Holders, voting as a
single class, shall be entitled to elect only one additional Buyer
Director to serve on the Board of Directors at any annual meeting of
stockholders or special meeting held in place thereof, or at a special
meeting of the HMTF Holders called as hereinafter provided. At any time
after voting power to elect a director shall have become vested and be
continuing in the HMTF Holders pursuant to this paragraph, or if a vacancy
shall exist in the office of a director elected by the HMTF Holders, a
proper officer of the Corporation may, upon the written request of the
holders of record of at least fifty percent (50%) of the HMTF Issued
Series A Preferred Shares then outstanding addressed to the Secretary of
the Corporation, call a special meeting of the HMTF Holders for the
purpose of electing the additional Buyer Director that such holders are
entitled to elect. If such meeting shall not be called by a proper officer
of the Corporation within twenty (20) days after personal service of said
written request upon the Secretary of the Corporation, or within twenty
(20) days after mailing the same within the United States by certified
mail, addressed to the Secretary of the Corporation at its principal
executive offices, then the holders of at least twenty-five percent (25%)
of the HMTF Issued Series A Preferred Shares may designate in writing one
of their number to call such meeting at the expense of the Corporation,
and such meeting may be called by the person so designated upon the notice
required for the annual meeting of stockholders of the Corporation and
shall be held at the place for holding the annual meetings of
stockholders. Any holder of HMTF Issued Series A Preferred Shares so
designated shall have, and the Corporation shall provide, access to the
lists of stockholders to be called pursuant to the provisions hereof. In
the event the HMTF Group loses the right to nominate one or more Buyer
Directors pursuant to the first sentence of this paragraph 9(c), then the
HMTF Group shall direct one or more Buyer Directors to tender his
resignation (which resignation need not be accepted by the board of
directors). "HMTF Group" means Hicks, Muse, Tate & Furst Incorporated, a
Texas corporation, and its Affiliates, the Buyer and its Affiliates, and
their respective officers, directors, partners, members, stockholders and
employees (and members, stockholders and employees (and members of their
respective families and trusts for the primary benefit of such family
members), and "HMTF Holders" shall mean the members of the HMTF Group
holding HMTF Issued Series A Preferred Shares or the Common Stock into
which such shares are converted.
(d) In the event the HMTF Group elects to have the Board of
Directors appoint the Buyer Directors, it shall so notify the Corporation
in writing and the Corporation shall (i) increase the size of the Board of
Directors by two and fill the vacancies created thereby by electing the
Buyer Directors and (ii) in connection with the meeting of shareholders of
the Corporation next following such election, nominate such Buyer
Directors for election as directors by the stockholders and use its best
efforts to cause the Buyer
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Directors to be so elected. If a vacancy shall exist in the office of a
Buyer Director, the HMTF Group shall be entitled to designate a successor
and the Board of Directors shall elect such successor and, in connection
with the meeting of stockholders of the Corporation next following such
election, nominate such successor for election as director by the
stockholders and use its best efforts to cause the successor to be so
elected.
(e) If the Corporation shall have failed to discharge its Mandatory
Redemption Obligation, the number of directors then constituting the Board
of Directors shall be increased by one (in addition to any directors
appointed or elected pursuant to paragraph 9(c) or (d) hereof) and the
HMTF Holders, voting as a single class, shall be entitled to elect the
additional director to serve on the Board of Directors at any annual
meeting of stockholders or special meeting held in place thereof, or at a
special meeting of the HMTF Holders called as hereinafter provided.
Whenever the Corporation shall have fulfilled its Mandatory Redemption
Obligation, then the right of the HMTF Holders to elect such additional
director shall cease and the term of office of any person so elected as
director by the HMTF Holders shall forthwith terminate and the number of
the Board of Directors shall be reduced accordingly.
(f) Without the written consent of holders of a majority of the
outstanding HTMF Issued Series A Preferred Shares or the vote of holders
of a majority of the outstanding HTMF Issued Series A Preferred Shares at
a meeting of the holders of Series A Preferred Stock called for such
purpose, the Corporation will not amend, alter or repeal any provision of
the Certificate of Incorporation or this Certificate of Designations so as
to adversely affect the preferences (including, without limitation,
liquidation preferences, conversion price, dividend rate and preferences
and Optional Redemption provisions), rights or powers of the Series A
Preferred Stock or to authorize the issuance or sale of any additional
shares of Series A Preferred Stock; provided that any such amendment that
changes any dividend or other amount payable on or the liquidation
preference of the Series A Preferred Stock shall require the written
consent of holders of two-thirds of the outstanding HTMF Issued Series A
Preferred Shares or the vote of holders of two-thirds of the outstanding
HTMF Issued Series A Preferred Shares at a meeting of the holders of HTMF
Issued Series A Preferred Shares called for such purpose.
(g) Without the written consent of holders of a majority of
the outstanding HTMF Issued Series A Preferred Shares or the vote of holders
of a majority of the outstanding HTMF Issued Series A Preferred Shares at a
meeting of such holders called for such purpose, the Corporation will not
create, authorize or issue any Senior Securities or Parity Securities.
(h) Without the written consent of holders of a majority of
the outstanding HTMF Issued Series A Preferred Shares or the vote of holders
of a majority of the outstanding HTMF Issued Series A Preferred Shares at a
meeting of the holders of
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HMTF Issued Series A Preferred Shares called for such purpose, the
Corporation shall not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all
of its assets to, any person or adopt a plan of liquidation unless: either
(1) the Corporation is the surviving or continuing person and the Series A
Preferred Stock shall remain outstanding without any amendment that would
adversely affect the preferences, rights or powers of the Series A
Preferred Stock or (2) (i) the person (if other than the Corporation)
formed by such consolidation or into which the Corporation is merged or
the person which acquires by conveyance, transfer or lease the properties
and assets of the Corporation substantially as an entirety or in the case
of a plan of liquidation, the person to which assets of the Corporation
have been transferred, shall be a corporation, partnership or trust
organized and existing under the laws of the United States or any State
thereof or the District of Columbia and (ii) the Series A Preferred Stock
shall be converted into or exchanged for and shall become shares of such
successor, transferee or resulting person, having in respect of such
successor, transferee or resulting person, the same powers, preferences
and relative participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the Series A
Preferred Stock had immediately prior to such transaction. For purposes of
the foregoing, the transfer (by lease, assignment, sale or otherwise, in a
single transaction or series of related transactions) of all or
substantially all of the properties or assets of one or more subsidiaries
of the Corporation, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Corporation, shall
be deemed to be the transfer of all or substantially all of the properties
and assets of the Corporation.
(i) In exercising the voting rights set forth in this paragraph 9,
except as otherwise provided in paragraph 9(b), each share of Series A
Preferred Stock shall have one vote per share, except that when any other
series of preferred stock shall have the right to vote with the Series A
Preferred Stock as a single class on any matter, then the Series A
Preferred Stock shall have with respect to such matters one vote per
$1,000 (or fraction thereof) of the aggregate Liquidation Preference plus
Special Amounts. Except as otherwise required by applicable law or as set
forth herein, the shares of Series A Preferred Stock shall not have any
relative, participating, optional or other special voting rights and
powers and the consent of the holders thereof shall not be required for
the taking of any corporate action.
(j) Upon the occurrence of a Change of Control if the Corporation
shall have failed to make the Change of Control Offer in accordance with
paragraph 11 hereof, thereafter, but subject to the provisions of
paragraph 12(d) hereof, the consent of the holders of a majority of the
shares of the HMTF Issued Series A Preferred Shares, voting as a separate
class, shall also be required to approve (i) any subsequent merger,
consolidation, recapitalization or other business combination involving
the Corporation or any material subsidiary, (ii) a sale of 50% or more of
the assets of the Corporation on a consolidated basis, and (iii) the
payment of any cash dividends to holders of, or the redemption or
repurchase of, Pari Passu Securities or Junior Securities.
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<PAGE>
10. Change of Control Payment. Notwithstanding anything to the
contrary contained in paragraph 4(b) hereof, upon the occurrence of a Change of
Control prior to the fifth anniversary of the Issue Date of the Series A
Preferred Stock, the Corporation shall pay, and the holders of the shares of
Series A Preferred Stock shall be entitled to receive, an amount (the "Change of
Control Payment") payable in shares of Series A Preferred Stock, cash or any
combination thereof, at the option of the Corporation, on each outstanding share
of Series A Preferred Stock, equal to the excess of (1) the amount that the
Liquidation Preference on one share of Series A Preferred Stock would be if (i)
such share had been outstanding from the date of original issuance of the Series
A Preferred Stock to the fifth anniversary of the date of original issuance of
the Series A Preferred Stock and no dividends had been declared and paid on such
share and (ii) such fifth anniversary was a Dividend Payment Date (such that the
accumulated dividends thereon would have been added to the Liquidation
Preference thereof) over (2) the amount of the actual Liquidation Preference of
such outstanding share of Series A Preferred Stock on the Change of Control date
plus the amount of any dividends previously received (i.e. declared and paid)
thereon. The Change of Control Payment shall not affect (i) the right of the
holders of shares of Series A Preferred Stock to convert such shares pursuant to
paragraph 8 hereof, (ii) the continued accrual of dividends pursuant to
paragraph 4(a) on the outstanding shares of Series A Preferred Stock during such
five-year period or thereafter, (iii) except as expressly set forth in this
subparagraph 10, any other provision hereof relating to the payment of dividends
or (iv) the provisions of paragraph 11 or paragraph 12 hereof. Notwithstanding
the foregoing, the Change of Control Payment payable pursuant to this paragraph
10 shall be subject to the following limitations:
(1) Upon a Change of Control on or prior to the second anniversary
of the date of the initial issuance of the Series A Preferred
Stock, the aggregate Change of Control Payment shall not
exceed the amount of shares or cash necessary to ensure that
if all of the shares of Series A Preferred Stock then
outstanding were converted or redeemed for cash on such date,
the holders of such Series A Preferred Stock would receive
aggregate consideration with a fair market value determined as
set forth in paragraph 8(g)(ii) hereof of no less than the
product of (i) three (3), multiplied by (ii) the aggregate
Liquidation Preference on the date of the Change of Control of
all outstanding shares of Series A Preferred Stock.
(2) Upon a Change of Control after the second anniversary, but on
or prior to the third anniversary, of the date of the initial
issuance of the Series A Preferred Stock, the aggregate Change
of Control Payment shall not exceed the amount of
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<PAGE>
shares or cash necessary to ensure that if all of the shares
of Series A Preferred Stock then outstanding were converted or
redeemed for cash on such date, the holders of such Series A
Preferred Stock would receive aggregate consideration with a
fair market value determined as set forth in paragraph 8(g)
(ii) hereof of no less than the product of (i) four (4),
multiplied by (ii) the aggregate Liquidation Preference on the
date of the Change of Control of all outstanding shares of
Series A Preferred Stock.
(3) Upon a Change of Control after the third anniversary, but on
or prior to the fourth anniversary of, the date of the initial
issuance of the Series A Preferred Stock, the aggregate Change
of Control Payment shall not exceed the amount of shares or
cash necessary to ensure that if all of the shares of Series A
Preferred Stock then outstanding were converted or redeemed
for cash on such date, the holders of such Series A Preferred
Stock would receive aggregate consideration with a fair market
value determined as set forth in paragraph 8(g) (ii) hereof of
no less than the product of (i) five (5), multiplied by (ii)
the aggregate Liquidation Preference on the date of the Change
of Control of all outstanding shares of Series A Preferred
Stock.
(4) Upon a Change of Control after the fourth anniversary, but
prior to the fifth anniversary of, the date of the initial
issuance of the Series A Preferred Stock, the aggregate Change
of Control Payment shall not exceed the amount of shares or
cash necessary to ensure that if all of the shares of Series A
Preferred Stock then outstanding were converted or redeemed
for cash on such date, the holders of such Series A Preferred
Stock would receive aggregate consideration with a fair market
value determined as set forth in paragraph 8(g)(ii) hereof of
no less than the product of (i) six (6), multiplied by (ii)
the aggregate Liquidation Preference on the date of the Change
of Control of all outstanding shares of Series A Preferred
Stock.
11. Change of Control Offer.
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<PAGE>
(a) Upon the occurrence of a Change of Control, the Corporation
shall have the right, but not the obligation, to offer (the "Change of
Control Offer") to repurchase the shares of Series A Preferred Stock at a
purchase price per share in cash equal to 101% of the Liquidation
Preference of each share of Series A Preferred Stock repurchased, plus
101% of the Special Amount in respect of such share, plus an amount equal
to 101% of all dividends and the Additional Amount accrued and unpaid
thereon from the last Dividend Payment Date to the date fixed for
repurchase (the "Change of Control Purchase Amount"). Within 20 days
following any Change of Control, the Corporation shall mail a notice to
each holder of shares of Series A Preferred Stock (with a copy to the
Registrar) describing the transaction or transactions that constitute the
Change of Control and, if the Corporation so elects, offering to
repurchase shares of Series A Preferred Stock on a date specified in such
notice (the "Change of Control Purchase Date"), which date shall be no
earlier than 90 days and no later than 120 days from the date such notice
is mailed, pursuant to the procedures required by Section 6 and described
in such notice. The failure of the Corporation to make such Change of
Control Offer within such 20-day period shall constitute an irrevocable
waiver of the Corporation's right to make such Change of Control Offer
solely with the respect to the relevant Change of Control and shall result
in the increased dividend rate referred to in paragraph 4 (a) hereof and
the special voting rights referred to in 9(j) hereof becoming applicable
effective as of the date of the Change of Control. The Corporation shall
comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations to the extent such laws and
regulations are applicable in connection with the repurchase of the Series
A Preferred Stock as a result of a Change of Control.
(b) On the Change of Control Purchase Date, the Corporation shall,
to the extent lawful:
(1) accept for payment all shares of Series A Preferred Stock
properly tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Purchase Amount in respect of all shares of Series A
Preferred Stock so tendered; and
(3) deliver or cause to be delivered to the Registrar all
certificates for shares of Series A Preferred Stock so accepted
together with an officer's certificate stating the aggregate
number of shares being purchased by the Corporation.
(c) The paying agent shall promptly mail to each holder of shares of
Series A Preferred Stock so tendered the Change of Control Purchase Amount
for
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<PAGE>
such shares of Series A Preferred Stock, and the Registrar shall promptly
authenticate and mail (or cause to be transferred by book entry) to each
holder a new certificate for any shares of Series A Preferred Stock not
tendered that are represented by the surrendered certificate. The
Corporation shall notify each holder of Series A Preferred Stock the
results of the Change of Control Offer on or as soon as practicable after
the Change of Control Purchase Date.
(d) The provisions of this paragraph that permit the Corporation to
make a Change of Control Offer shall be applicable regardless of whether
any other provisions of this certificate are applicable. Except as set
forth in this paragraph, no holder of shares of Series A Preferred Stock
shall have any right to require the Corporation to repurchase or redeem
the shares of Series A Preferred Stock in the event of a takeover,
recapitalization or other similar transaction.
12. Purchase Offer.
(a) If the Corporation shall elect not to make, or shall fail to
make, the Change of Control Offer following the occurrence of a Change of
Control pursuant to paragraph 11 hereof within the 20-day period specified
therein, then in addition to the redemption rights that the Corporation
may exercise pursuant to paragraph 6 hereof after November 5, 2004, the
Corporation shall also have the right (but not the obligation), at any
time and from time to time prior to November 5, 2004, to offer (the
"Purchase Offer") to repurchase the shares of Series A Preferred Stock at
a purchase price per share in cash equal to 101% of the Liquidation
Preference of each share of Series A Preferred Stock repurchased, plus
101% of the Special Amount in respect of such share, plus an amount equal
to 101% of all dividends and the Additional Amount accrued and unpaid
thereon from the last Dividend Payment Date to the date fixed for
repurchase (the "Purchase Payment"). If the Corporation elects to make a
Purchase Offer, the Corporation shall mail a notice to each holder of
shares of Series A Preferred Stock (with a copy to the Registrar) offering
to repurchase shares of Series A Preferred Stock on a date specified in
such notice (the "Purchase Payment Date"), which date shall be no earlier
than 90 days and no later than 120 days from the date such notice is
mailed, pursuant to the procedures required by Section 6 and described in
such notice. The Corporation shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
to the extent such laws and regulations are applicable in connection with
the repurchase of the Series A Preferred Stock hereunder.
(b) On the Purchase Payment Date, the Corporation shall, to
the extent lawful:
(1) accept for payment all shares of Series A Preferred
Stock properly tendered pursuant to the Purchase Offer;
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<PAGE>
(2) deposit with the paying agent an amount equal to the
Purchase Payment in respect of all shares of Series A
Preferred Stock so tendered; and
(3) deliver or cause to be delivered to the Registrar all
certificates for shares of Series A Preferred Stock so
accepted together with an officer's certificate stating
the aggregate number of shares being purchased by the
Company.
(c) The paying agent shall promptly mail to each holder of
shares of Series A Preferred Stock so tendered the Purchase Payment for such
shares of Series A Preferred Stock, and the Registrar shall promptly
authenticate and mail (or cause to be transferred by book entry) to each such
holder a new certificate for any shares of Series A Preferred Stock not tendered
that are represented by the surrendered certificate. The Corporation shall
notify the holders of Series A Preferred Stock the results of the Purchase Offer
on or as soon as practicable after the Purchase Payment Date.
(d) If a holder of shares of Series A Preferred Stock elects
not to, or otherwise fails to, properly tender shares of Series A Preferred
Stock into the Purchase Offer, then (i) with respect to each share of Series A
Preferred Stock that such holder fails to tender, the Liquidation Preference,
the Special Amount and all dividends and the Additional Amount that have accrued
thereon or been paid thereon in shares of Series A Preferred Stock from the
effective date of any increase in the dividend rate effected pursuant to
paragraph 4 (following the failure of the Company to make the Change of Control
Offer) through the expiration date of the Purchase Offer made pursuant to
paragraph 12 shall be recalculated as if the dividend rate applicable to each
share of Series A Preferred Stock for such period had been seven and one-half
percent (7.5%); (ii) any dividends and any Additional Amount applicable to
periods following the expiration of the Purchase Offer with respect to each such
share shall be computed at a rate of seven and one-half percent (7.5%) per
annum; (iii) the amount of dividends and the Additional Amount payable for each
full Dividend Period for the Series A Preferred Stock applicable to periods
following the expiration of the Purchase Offer shall be computed by dividing
seven and one-half percent (7.5%) by four (4); and (iv) the special voting
provisions provided in paragraph 9(j) shall terminate on the expiration date of
the Purchase Offer, in each case subject to reinstatement upon a subsequent
Change of Control.
13. Limitation and Rights Upon Insolvency. Notwithstanding any other
provision of this Certificate of Designations, the Corporation shall not be
required to pay any dividend on, or to pay any amount in respect of any
redemption of, the Series A Preferred Stock at a time when immediately after
making such payment the Corporation is or would be
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<PAGE>
rendered insolvent (as defined by applicable law), provided that the obligation
of the Corporation to make any such payment shall not be extinguished in the
event the foregoing limitation applies.
14. Reports. So long as any of the Series A Preferred Stock is
outstanding, in the event the Corporation is not required to file quarterly and
annual financial reports with the Securities and Exchange Commission pursuant to
Section 13 or Section 15(d) of the Exchange Act, the Corporation will furnish
the holders of the Series A Preferred Stock with reports containing the same
information as would be required in such reports.
15. Notice. Except as may otherwise be provided for herein, all
notices referred to herein shall be in writing, and all notices hereunder shall
be deemed to have been given upon, the earlier of receipt of such notice or
three Business Days after the mailing of such notice if sent by registered mail
(unless first-class mail shall be specifically permitted for such notice under
the terms of this Certificate of Designations) with postage prepaid, addressed:
if to the Corporation to Globix Corporation, 139 Centre Street, New York, New
York, 10012, Attention: Chief Financial Officer, or to an agent of the
Corporation designated as permitted by the Certificate of Incorporation or, if
to any holder of the Series A Preferred Stock, to such holder at the address of
such holder of the Series A Preferred Stock as listed in the stock record books
of the Corporation; or to such other address as the Corporation or holder, as
the case may be, shall have designated by notice similarly given.
16. General Provisions. (a) The term "Person" as used herein means any
corporation, limited liability company, partnership, trust, organization,
association, other entity or individual.
(b) The term "outstanding", when used with reference to shares of
stock, shall mean issued shares, excluding shares held by the Corporation
or a subsidiary.
(c) The headings of the paragraphs, subparagraphs, clauses and
subclauses of this Certificate of Designations are for convenience of
reference only and shall not define, limit or affect any of the provisions
hereof.
(d) Each holder of shares of Series A Preferred Stock, by acceptance
thereof, acknowledges and agrees that payments of dividends, interest,
premium and principal on, and exchange, redemption and repurchase of, such
securities by the Corporation are subject to restrictions on the
Corporation contained in certain credit and financing agreements.
IN WITNESS WHEREOF, Globix Corporation has caused this Certificate of
Designations to be signed and attested by the undersigned this 3rd day of
December, 1999.
GLOBIX CORPORATION
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By: /s/ Brian L. Reach
-------------------------------
Name: Brian L. Reach
Title: Chief Financial Officer
By: /s/ Paul Asher
-------------------------------
Name: Paul Asher
Title: Secretary
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GLOBIX CORPORATION
UNDER SECTION 242 OF THE DELAWARE GENERAL CORPORATION LAW
Globix Corporation, a corporation organized and existing under the laws of
the State of Delaware under the laws of the State of Delaware (the
"Corporation") hereby certifies as follows:
1.The name of the Corporation is Globix Corporation.
2.The Certificate of Incorporation of the Corporation was filed with the
Secretary of State of Delaware, Division of Corporations on September 29, 1995
under the name Bell Technology Group Ltd.
3.The amendment of the Certificate of Incorporation of the Corporation
effected by this Certificate of Amendment is to increase the number of shares
authorized common stock of the corporation.
4. To accomplish the foregoing amendment, Article FOURTH of the
Certificate of Incorporation of the Corporation, is hereby amended to read as
follows:
"FOURTH: The Corporation shall have the authority to issue five hundred
million (500,000,000) shares of Common Stock having a par value of $.01
per share. The Corporation shall also have the authority to issue five
million (5,000,000) shares of Preferred Stock having a par value of $.01
per share (the "Preferred Shares"). The Board of Directors of the
Corporation (the "Board") shall have the right to authorize, by resolution
of the Board adopted in accordance with the By-laws of the Corporation,
the issuance of the Preferred Shares and, in connection therewith, to (a)
cause such shares to be issued in series; (b) fix the annual rate of
dividends payable with respect to the Preferred shares or series thereof;
(c) fix the amount payable upon redemption of the Preferred shares; (d)
fix the amount payable upon liquidation or dissolution of the Company; (e)
fix provisions as to voting rights, if any; and (e) fix such other rights,
powers and preferences as the Board shall determine."
5.The foregoing amendment of the Certificate of Incorporation of the
Corporation was authorized by a vote of Board of Directors of the Corporation,
followed by a vote of the holders of a majority of all outstanding shares of the
Corporation entitled to vote on said amendment of the Certificate of
Incorporation.
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<PAGE>
IN WITNESS WHEREOF, we have subscribed this document on the date set forth
below and do hereby affirm, under the penalties of perjury, that the statements
contained herein have been examined by us and are true and correct.
April 4, 2000
By: /s/ Marc H. Bell
----------------------------
Marc H. Bell
Chairman, President and
Chief Executive Officer
Attest:
By: /s/ Paul Asher
---------------------------
Paul Asher, Secretary
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