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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 27, 1997
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IXC Communications, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-20803 74-2644120
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
5000 Plaza on the Lake, Suite 200, Austin, Texas 78746
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (512) 328-1112
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Not applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On February 27, 1997, the Registrant entered into a Securities Purchase
Agreement with Morgan Stanley Capital Partners III, L.P. and two related
investment limited partnerships (collectively, the "MS Purchasers") and
Trustees of General Electric Pension Trust to issue an aggregate of $100
million of a new 7% Series A Convertible Preferred Stock ("Series A Stock").
The Series A Stock will be convertible into the Registrant's common stock
beginning one year after the date of issuance (two years for the MS Purchasers)
at a conversion price of $38.40 per share, which is subject to adjustment for
certain events as set forth in the Certificate of Designations. The holders of
the Series A Stock will have the right to elect one director of the Registrant,
and upon the occurrence of certain defaults, will have the right to elect an
additional three directors. Upon the closing of the sale of Series A Stock,
the Registrant will expand its Board of Directors from six to seven and the
holders of the Series A Stock will designate such additional director. In
addition, the holders of Series A Stock will be granted certain registration
rights with respect to the Series A Stock. A copy of the Form of Certificate
of Designations to be filed with the Secretary of State of the State of
Delaware relating to the Series A Stock is attached hereto as Exhibit 4.1 and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS
4.1 Form of Certificate of Powers, Designations, Preferences and
Relative, Participating, Optional or Other Special Rights and
Qualifications, Limitations and Restrictions Thereof of the 7%
Series A Convertible Preferred Stock of IXC Communications, Inc.
to be filed with the Secretary of State of the State of
Delaware (conversion price $38.40 per share).
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SIGNATURE
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 hereunto duly authorized.
Date: March 3, 1997
IXC Communications, Inc.
By: /s/ John J. Willingham
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John J. Willingham
Senior Vice President, Chief
Financial Officer and Assistant
Secretary
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EXHIBIT INDEX
Exhibit
Number Description
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4.1 Form of Certificate of Powers, Designations, Preferences and
Relative, Participating, Optional or Other Special Rights and
Qualifications, Limitations and Restrictions Thereof of the 7%
Series A Convertible Preferred Stock of IXC Communications, Inc. to
be filed with the Secretary of State of the State of Delaware
(conversion price $38.40 per share).
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EXHIBIT 4.1
FORM OF
CERTIFICATE OF POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
THEREOF OF THE 7% SERIES A CONVERTIBLE
PREFERRED STOCK
OF
IXC COMMUNICATIONS, INC.
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Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
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I, [___________], [__________] of IXC Communications, Inc. (the
"Corporation"), a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, DO HEREBY CERTIFY
That, pursuant to authority conferred upon the Board of Directors by the
Restated Certificate of Incorporation of said Corporation, said Board of
Directors, at a meeting duly called and held on [__________], 1997, adopted a
resolution providing for the issuance of 12,000 authorized shares of 7% Series
A Convertible Preferred Stock (the "Series A Stock"), which resolution is as
follows:
WHEREAS, the Board of Directors of the Corporation (the "Board of
Directors") is authorized, within the limitations and restrictions stated in
the Restated Certificate of Incorporation, as amended, to fix by resolution or
resolutions the designation of each series of preferred stock and the powers,
preferences and relative, participating, optional and other rights, if any, the
qualifications, limitations and restrictions thereof, including, without
limiting the generality of the foregoing, such provisions as may be desired
concerning voting, redemption, dividends, dissolution or the distribution of
assets, conversion or exchange, and such other subjects or matters as may be
fixed by resolution or resolutions of the Board of Directors under the General
Corporation Law of Delaware; and
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WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such series
of preferred stock on the terms and with the provisions herein set forth:
I. Certain Definitions.
As used herein, the following terms shall have the following meanings (with
terms defined in the singular having comparable meanings when used in the
plural and vice versa), unless the context otherwise requires:
"Board of Directors" has the meaning specified in the Preamble hereof.
"Business Day" means a day other than a Saturday, Sunday, national or New
York State holiday or other day on which commercial banks in New York City
are authorized or required by law to close.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock.
"Change of Control" has the meaning specified in Article VIII(B) hereof.
"Change of Control Price" has the meaning specified in Article VIII(B)
hereof.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Corporation and any other class of common stock hereafter authorized by the
Corporation from time to time.
"Constituent Entity" has the meaning specified in Article VIII(A) hereof.
"Conversion Agent" has the meaning specified in Article VIII(A) hereof.
"Conversion Price" has the meaning specified in Article VIII(A) hereof.
"Conversion Right" has the meaning specified in Article VIII(B) hereof.
"Conversion Shares" has the meaning specified in Article VIII(A) hereof.
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"Continuing Directors" means, as of the date of determination, any member of
the Board of Directors, excluding the Series A Director and any member
elected to the Board of Directors pursuant to a Voting Rights Triggering
Event (such excluded directors being referred to as "Preferred Stock
Directors"), who (i) was a member of the Board of Directors on the Original
Issue Date or (ii) was nominated for election or elected to the Board of
Directors with the approval of a majority of Continuing Directors who were
members of the Board of Directors at the time of such nomination or election.
"Corporation" has the meaning specified in the Preamble hereof.
"Dividend Default" has the meaning specified in Article VII(D)(i)(a) hereof.
"Dividend Payment Date" means each June 30, September 30, December 31 and
March 31 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter, each
Quarterly Dividend Period.
"Dividend Record Date" means, with respect to each Dividend Payment Date,
the June 15, September 15, December 15 and March 15, immediately preceding
such Dividend Payment Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" has the meaning specified in Article VIII(B)(1) hereof.
"Fair Value" means the price a willing buyer, under no compulsion to buy,
would pay a willing seller, under no compulsion to sell, in an arms' length
transaction.
"Financial Expert" means one of Bear, Stearns & Co., Inc.; Credit Suisse
First Boston; Dillon, Read & Co. Inc.; Donaldson, Lufkin & Jenrette
Securities Corporation; Goldman, Sachs & Co.; Merrill Lynch, Pierce, Fenner &
Smith Incorporated; Salomon Brothers Inc; Oppenheimer & Co.; Smith Barney;
J.P. Morgan or Lehman Brothers.
"Holder" means a registered holder of shares of Series A Stock.
"Indenture" means the Indenture dated as of October 5, 1995, as amended, by
and among the Corporation and the other parties thereto relating to the
12 1/2% Series A and Series B Senior Notes due 2005 of the Corporation.
"Independent Financial Expert" means a Financial Expert that does not (or
whose directors, executive officers or 5% stockholders do not) have a direct
or indirect financial
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interest in the Corporation or any of its Subsidiaries, which has not been for
at least five years, and, at the time it is called upon to give independent
financial advice to the Corporation, is not (and none of its directors,
executive officers or 5% stockholders is) a promoter, director, or officer of
the Corporation or any of its Subsidiaries. The Independent Financial Expert
may be compensated and indemnified by the Corporation for opinions or services
it provides as an Independent Financial Expert.
"Initial Dividend Period" means the Dividend Period commencing on and
including the Original Issue Date and ending on and including June 30, 1997.
"Investment Bank of National Standing" has the meaning specified in Article
VIII(A) hereof.
"Issuance Date" has the meaning specified in Article VIII(A) hereof.
"Junior Securities" has the meaning specified in Article III(A)(i) hereof.
"Liquidation Preference" means the Original Liquidation Preference, plus an
amount equal to all accumulated and unpaid dividends on the Series A Stock. The
Liquidation Preference of a share of Series A Stock will increase by the amount
of dividends that accumulate on such share through a Dividend Payment Date as
they so accumulate on a daily basis and will decrease only to the extent such
dividends are actually paid, all as provided in Article IV hereof.
Notwithstanding the foregoing, in determining the amount to be paid on a
Redemption Date or the amount of shares to be issued in payment of a dividend on
a Dividend Payment Date, Liquidation Preference shall not be deemed to include
any dividends to the extent such dividends are to be paid on or after such date
in respect of a record date occurring on or prior to such date in accordance
with the requirements of this Certificate of Designations.
"Mandatory Redemption Date" means March 31, 2009.
"MS Purchasers" means Morgan Stanley Capital Partners III, L.P., Morgan
Stanley Capital Investors, L.P. and MSCP III 892 Investors, L.P.
"Original Issue Date" means the date on which shares of Series A Stock were
first issued by the Corporation.
"Original Liquidation Preference" means $10,000 per share of Series A Stock.
"Parity Securities" has the meaning specified in Article III(A)(ii) hereof.
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"Person" means any individual, general partnership, limited partnership,
corporation, trust, joint stock company, association, joint venture or any other
entity or organization, whether or not a legal entity, including a government or
political subdivision or an agency or instrumentality thereof.
"Quarterly Dividend Period" means the quarterly period commencing on and
including a Dividend Payment Date and ending on and including the day
immediately preceding the next subsequent Dividend Payment Date.
"Redemption Date" has the meaning specified in Article VI(C)(i)(c) hereof.
"Redemption Default" has the meaning specified in Article VII(D)(i)(b)
hereof.
"Redemption Notice" has the meaning specified in Article VI(C)(i) hereof.
"Redemption Price" has the meaning specified in Article VI(A)(i) hereof.
"Repurchase Offer" has the meaning specified in Article VIII(B) hereof.
"Repurchased Securities" has the meaning specified in Article VIII(A)
hereof.
"Restricted Dividend Event" has the meaning specified in Article IV(E)
hereof.
"Restricted Repurchase Payment" has the meaning specified in Article IV(E)
hereof.
"SEC" means the Securities and Exchange Commission.
"Securities Purchase Agreement" means the Securities Purchase Agreement
dated as of February 27, 1997, among the Corporation and the Purchasers named
therein.
"Senior Securities" has the meaning specified in Article III(A)(iii) hereof.
"Series A Director" has the meaning specified in Article VII(E) hereof.
"Series A Stock" has the meaning specified in the Preamble hereof.
"Series 3 Preferred Stock" means the 10% Junior Series 3 Cumulative
Redeemable Preferred Stock of the Corporation outstanding on the Original
Issue Date and any shares of such stock subsequently issued as dividends
thereon.
"Special Conversion Right" has the meaning specified in Article VIII(B)
hereof.
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"Subsidiaries" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person (or any
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Value Report" has the meaning specified in Article VIII(A) hereof.
"Voting Rights Triggering Event" has the meaning specified in Article
VII(D)(i) hereof.
II. Designation.
The series of preferred stock authorized hereunder shall be designated as
the "7% Series A Convertible Preferred Stock". The number of shares
constituting such series shall be equal to 12,000. The par value of the Series
A Stock shall be $.01 per share of Series A Stock, and the Original Liquidation
Preference of the Series A Stock shall be $10,000 per share.
III. Ranking.
(A) The Series A Stock shall rank, with respect to dividends and with
respect to distributions upon the liquidation, dissolution or winding-up of the
Corporation:
(i) senior to (A) all classes or series of Common Stock of the
Corporation and (B) any Capital Stock of the Corporation, the terms of which
do not expressly provide that it ranks senior to or on a parity with the
Series A Stock as to dividends and distributions upon the liquidation,
dissolution or winding-up of the Corporation (such Common Stock and such other
Capital Stock are collectively referred to as "Junior Securities");
(ii) on a parity with any Capital Stock, including any series of
Preferred Stock hereafter issued or created by the Corporation in compliance
with Article VII hereof, the terms of which expressly provide that it ranks on
a parity with the Series A Stock as to dividends and distributions upon the
liquidation, dissolution or winding-up of the Corporation (collectively
referred to as "Parity Securities"); and
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(iii) junior to the Series 3 Preferred Stock and to any other Capital
Stock hereafter issued or created by the Corporation in compliance with
Article VII hereof, the terms of which expressly provide that it ranks senior
to the Series A Stock as to dividends and distributions upon the liquidation,
dissolution or winding-up of the Corporation (the Series 3 Preferred Stock and
such other Capital Stock are collectively referred to as "Senior Securities").
IV. Dividends.
(A) Beginning on the Original Issue Date, each Holder shall be entitled to
receive on each Dividend Payment Date, when, as and if declared by the Board of
Directors, out of funds legally available for the payment of such dividends,
dividends on each outstanding share of Series A Stock held by such Holder, at a
rate per annum equal to 7% of the Liquidation Preference of such share of the
Series A Stock on such Dividend Payment Date, payable with respect to the
preceding Dividend Period. All dividends shall be cumulative and shall be
payable in arrears for each Dividend Period on each Dividend Payment Date,
commencing on June 30, 1997. Dividends with respect to a share of Series A
Stock shall only cumulate from the date of its issuance, or, if later, the last
Dividend Payment Date in respect of which dividends on such share of Series A
Stock were paid. Prior to the Dividend Payment Date occurring on March 31,
1999, dividends may, at the option of the Corporation, be (i) paid in cash or
(ii) paid in fully paid and non-assessable shares (including fractional shares
computed to the nearest 1/100 of a share) of Series A Stock with an aggregate
Liquidation Preference equal to the amount of such dividend (or in any
combination of cash and such shares). Notwithstanding the foregoing, if the
Corporation shall, prior to the Dividend Payment Date occurring on March 31,
1999, fail to pay any dividend as aforesaid, then such unpaid dividend shall
cumulate from the Dividend Payment Date on which such dividend payment was not
made at a rate per annum equal to 12%. Notwithstanding the foregoing, on the
Dividend Payment Date occurring on March 31, 1999, all accumulated and unpaid
dividends shall become immediately due and payable by the Corporation in the
manner provided in Clause (i) or Clause (ii) above. Notwithstanding any of the
foregoing, after the Dividend Payment Date occurring on March 31, 1999,
dividends accruing from and after such date shall be paid only in cash and
shall be mandatorily payable on each Dividend Payment Date out of funds legally
available therefor.
(B) Each dividend paid on the Series A Stock shall be payable to Holders
of record as their names shall appear in the security register maintained by
the Corporation on the Dividend Record Date for such dividend, except that
dividends in arrears for any past Dividend Payment Date may be declared and
paid at any time without reference to such regular Dividend Payment Date to
Holders of record on a later dividend record date determined by the Board of
Directors.
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(C) Dividends shall cease to accumulate in respect of shares of Series A
Stock on the day of their redemption, unless the Corporation shall fail to pay
the relevant redemption price on the date fixed for redemption.
(D) No dividends shall be declared by the Board of Directors or paid or
funds set apart for payment by the Corporation on the Series A Stock or any
Parity Securities for any period unless (i) full cumulative dividends have been
or contemporaneously are declared and paid, or declared and (in the case of
dividends to be paid in cash) a sum set apart sufficient for such payment, on
the Series A Stock and any Parity Securities for all Dividend Periods or
dividend periods, as the case may be, terminating on or prior to the date of
payment of such full cumulative dividends on the Series A Stock or such Parity
Securities or (ii) such dividends are applied to the earliest Dividend Periods
and dividend periods, as the case may be, for which dividends have not yet been
paid and, in each case, shall be declared and paid (or, in the case of
dividends to be paid in cash, declared and a sum set apart sufficient for such
payment) pro rata so that the amount of dividends declared and paid (or
declared and set apart) per share on the Series A Stock and such Parity
Securities shall in all cases bear to each other the same ratio that
accumulated and unpaid dividends per share on the Series A Stock and such
Parity Securities bear to each other. Nothing in this paragraph (D) shall be
construed to limit the obligation of the Corporation to pay dividends to the
Holders pursuant to paragraph (A) above.
(E) So long as any shares of the Series A Stock are outstanding, the
Corporation shall not (i) declare, pay or set apart for payment any dividend on
any Junior Securities (except dividends on Junior Securities payable in shares
of Junior Securities) (any of the foregoing actions described in this clause
(E)(i) being a "Restricted Dividend Event") or (ii) make any payment (whether
in the form of cash or other assets) on account of, or set apart for payment
money or other assets for a sinking or other similar fund for, the purchase,
redemption or other retirement of, any Junior Securities or any warrants,
rights, calls or options exercisable for or convertible into any Junior
Securities, and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase or redeem any Junior
Securities or any warrants, rights, calls or options exercisable for or
convertible into any Junior Securities (any of the foregoing actions described
in this clause (E)(ii) being a "Restricted Repurchase Payment") unless (x),
prior to or concurrently with such Restricted Dividend Event or Restricted
Repurchase Payment, as the case may be, all accumulated and unpaid dividends
(other than, during the period from the Original Issue Date through March 31,
1999, accumulated and unpaid dividends which are permitted to accumulate
pursuant to Article IV(A) hereof) on shares of the Series A Stock not paid on
the dates provided for in Article IV(A) hereof (and, to the extent previously
due but not yet paid, any and all redemption payments on the Series A Stock)
shall have been or are concurrently paid and (y), in the case of a Restricted
Repurchase Payment, such Restricted Repurchase Payment would be permitted under
the terms of the Indenture if any Senior Notes are then outstanding.
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(F) Dividends payable on shares of the Series A Stock for any period less
than a year shall be computed on the basis of a 360-day year of twelve 30-day
months in the period for which payable. If any Dividend Payment Date occurs on
a day that is not a Business Day, any accumulated and unpaid dividends
otherwise payable on such Dividend Payment Date shall be paid on the next
succeeding Business Day.
V. Payment on Liquidation.
(A) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, Holders will be entitled to receive out of the
assets of the Corporation available for distribution to the holders of its
Capital Stock, after payment of the liquidation preference and accrued and
unpaid dividends with respect to the Series 3 Preferred Stock and any Senior
Securities issued in accordance with Article VII hereof, whether such assets
are capital, surplus or earnings, an amount in cash equal to the Liquidation
Preference, before any payment shall be made or any assets distributed to the
holders of any Junior Securities. If upon any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Corporation, the
assets of the Corporation are not sufficient to pay in full the payments
payable to the holders of outstanding shares of the Series A Stock and all
Parity Securities issued in accordance with Article VII hereof, then the
holders of all such shares shall share equally and ratably (based on the
liquidation preference thereof and accrued and unpaid dividends thereon) in any
distribution of assets in proportion to the full payments, determined as of the
date of such voluntary or involuntary liquidation, dissolution or winding-up,
to which they are entitled by virtue of being Holders of Series A Stock or
holders of Parity Securities, as the case may be.
(B) For the purposes of this Article V only, the consolidation or merger
of the Corporation with or into one or more corporations or a sale of all or
substantially all of the assets of the Corporation shall be deemed not to be a
liquidation, dissolution or winding-up of the Corporation unless such
consolidation, merger or sale occurs in connection with a dissolution or
winding up of the Corporation.
VI. Redemption.
(A) Optional Redemption. (i) Subject to Article VIII hereof, the
Corporation may, at its option, redeem (subject to contractual and other
restrictions by which the Corporation is bound with respect thereto and the
legal availability of funds therefor), at any time on or after March 31, 2000,
in whole or in part, in the manner provided in Article VI(C) hereof, any or all
of the shares of the Series A Stock, at a redemption price in cash equal to the
Liquidation Preference thereof on the Redemption Date (the "Redemption Price").
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(ii) In the event of a redemption pursuant to this Article
VI(A) of only a portion of the then outstanding shares of Series A Stock, the
Corporation shall effect such redemption pro rata according to the number of
shares held by each Holder of such Series A Stock or by lot, as determined by
the Corporation, except that the Corporation may first redeem such shares held
by each Holder of fewer than 10 shares (or shares held by Holders who would
hold less than 10 shares as a result of a pro rata redemption), as determined
by the Corporation in its sole discretion.
(B) Mandatory Redemption. On the Mandatory Redemption
Date, the Corporation shall redeem from any source of funds legally available
therefor, and subject to contractual restrictions thereon, in the manner
provided in Article VI(C) below, all of the shares of the Series A Stock then
outstanding at the Redemption Price. The Corporation shall not enter into any
agreement that would prohibit or restrict its ability to (i) redeem the Series
A Stock on the Mandatory Redemption Date, or (ii) pay dividends in accordance
with Article IV hereof, to the extent mandatorily payable out of funds legally
available therefor.
(C) Procedure for Redemption. (i) Not more than sixty
(60) and not less than thirty (30) days prior to the date fixed for any
redemption of the Series A Stock, written notice (the "Redemption Notice")
shall be given by first-class mail, postage prepaid, to each Holder of record
of shares to be redeemed on the record date fixed for such redemption of the
Series A Stock at such Holder's address as the same appears on the security
register maintained by the Corporation; provided, however, that no failure to
give such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Series A Stock to be redeemed
except as to the Holder or Holders to whom the Corporation has failed to give
such notice or except as to the Holder or Holders whose notice was defective.
The Redemption Notice shall state:
(a) whether the redemption is pursuant to Article VI(A)
or VI(B) hereof;
(b) the Redemption Price;
(c) the date fixed for redemption (the "Redemption
Date");
(d) that the Holder is to surrender to the Corporation,
at the place or places, which shall be designated in such Redemption
Notice and which shall be in New York City, its certificates
representing the shares of Series A Stock to be redeemed;
(e) that dividends on the shares of the Series A Stock to
be redeemed shall cease to accumulate on the Redemption Date unless
the Corporation defaults in the payment of the Redemption Price;
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(f) in the case of redemption pursuant to paragraph (A)
above, whether all or less than all the outstanding shares of the
Series A Stock are to be redeemed and the total number of shares of
such Series A Stock being redeemed; and
(g) in the case of redemption pursuant to paragraph (A)
above, the number of shares of Series A Stock held by the Holder that
the Corporation intends to redeem.
(ii) On or before the Redemption Date, each Holder of
Series A Stock to be redeemed shall surrender the certificate or certificates
representing such shares of Series A Stock to the Corporation, in the manner
and at the place designated in the Redemption Notice, and on the Redemption
Date the full Redemption Price for such shares shall be payable in cash to the
Person whose name appears on such certificate or certificates as the owner
thereof. In the event that less than all of the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(iii) Unless the Corporation defaults in the payment of the
applicable redemption price, dividends on the Series A Stock called for
redemption shall cease to accumulate on the Redemption Date, and the Holders of
such shares shall cease to have any further rights with respect thereto on the
Redemption Date, other than the right to receive the Redemption Price.
(iv) If a Redemption Notice shall have been duly given,
and if, on or before the Redemption Date specified therein, all funds necessary
for such redemption shall have been set aside by the Corporation, separate and
apart from its other funds, in trust for the pro rata benefit of the Holders of
the Series A Stock called for redemption so as to be and continue to be
available therefor, then, notwithstanding that any certificate for shares so
called for redemption shall not have been surrendered for cancellation, all
shares so called for redemption shall be deemed no longer outstanding, and all
rights with respect to such shares shall forthwith on such Redemption Date
cease and terminate, except only the right of the Holders thereof to receive
the amount payable on redemption thereof.
VII. Voting Rights.
(A) Holders, in their capacity as such, shall not be
entitled or permitted to vote, except as otherwise required under Delaware law
and as set forth below.
(B) Without the approval of Holders of at least a
majority of the shares of Series A Stock then outstanding, voting or
consenting, as the case may be, separately as a single class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting called for the purpose, the Corporation will not after the Original
Issue Date (i) create, authorize or issue any Senior Securities, Parity
Securities or Junior Securities (other than
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Common Stock) or any warrants, rights, calls or options exercisable or
exchangeable for or convertible into, or any obligations evidencing the right
to purchase or acquire, any Senior Securities, Parity Securities or Junior
Securities (other than Common Stock), including, without limitation, in
connection with a merger, consolidation or other reorganization or (ii)
reclassify (except into Common Stock) any Junior Securities, Parity Securities
or other outstanding Capital Stock of the Corporation into any Senior
Securities or Parity Securities or any warrants, rights, calls or options
exercisable or exchangeable for or convertible into, or any obligations
evidencing the right to purchase or acquire, any Senior Securities or Parity
Securities; provided that the Corporation may create, authorize and/or issue
any Parity Securities or Junior Securities if (i) the holders of such
securities are not entitled to vote with the Holders, as a class, in connection
with any matter for which a vote is required pursuant to this Article VII
(except as otherwise required under Delaware law) and (ii) such securities are
not required to be repurchased by the Corporation or any affiliate thereof,
including, without limitation, at the option of any holder thereof and/or on
the happening of any event, prior to the Mandatory Redemption Date; and
provided further, that the Corporation may create, authorize and/or issue
additional shares of Series 3 Preferred Stock in payment of any dividends with
respect to shares of Series 3 Preferred Stock; and provided further, that this
Article VII(B) shall not limit the ability of the Corporation to amend the
rights, preferences and privileges of the Series 3 Preferred Stock, or of any
other Senior Securities issued in compliance with this Section (B) of this
Article VII hereof, if such amendment complies with Section (C) of this Article
VII.
(C) Without the approval of Holders of at least a
majority of the shares of Series A Stock then outstanding, voting or
consenting, as the case may be, separately as a single class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting called for the purpose, the Corporation will not amend, modify or
repeal the Restated Certificate of Incorporation so as to adversely affect the
specified designations, rights, preferences, privileges or voting rights of the
Series A Stock. The authorization or consummation of a transaction that
results in the Series A Stock being converted or exchanged for or becoming
shares (having designations, rights, preferences, privileges and voting rights
substantially similar to those provided for herein) of the surviving
corporation of a merger or consolidation effected in accordance with this
Certificate of Designations shall not constitute an amendment, modification or
repeal of this Certificate of Designations or the Restated Certificate of
Incorporation for purposes of this Article VII.
Notwithstanding the provisions of this Article VII(C), without
the consent of each Holder affected, an amendment or waiver may not:
(i) reduce the Liquidation Preference of or dividends
payable or accumulated on any share of Series A Stock;
(ii) reduce the Redemption Price of any share of Series A
Stock;
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<PAGE> 13
(iii) increase the Conversion Price of any share of Series
A Stock;
(iv) change the Mandatory Redemption Date or date after
which the shares of Series A Stock may be redeemed by the
Corporation or change the period during which the Conversion Right,
Repurchase Right or Put Right provided for in Article VIII(B) may be
exercised by Holders;
(v) change the currency of dividends or payments upon
liquidation or redemption;
(vi) impair the right to institute suit for the
enforcement for any payment upon liquidation or redemption;
(vii) reduce the stated percentage of outstanding shares of
Series A Stock consent of whose Holders is necessary under any
provision of this Article VII; or
(viii) waive a default in payment upon liquidation or
redemption.
It shall not be necessary for the consent of the Holders under
this Article VII(C) to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
(D) (i) In the event that (a) with respect to any
Dividend Periods commencing on or after June 30, 1999, dividends on the Series
A Stock are in arrears and unpaid for six such Dividend Periods (a "Dividend
Default"), or (b) the Corporation shall fail to discharge its obligation to
redeem the Series A Stock on the Mandatory Redemption Date (a "Redemption
Default"), then if at least 2,000 shares of Series A Stock are outstanding, the
number of directors constituting the entire Board of Directors shall be
immediately increased by three and the Holders of a majority of the shares of
Series A Stock then outstanding, voting or consenting, as the case may be,
separately as a single class, shall thereupon have the exclusive right to elect
three members of the Board of Directors at any annual or special meeting of
stockholders or at a special meeting of Holders of Series A Stock called as
hereinafter provided. Each such event described in clause (a) or (b) is a
"Voting Rights Triggering Event".
(ii) The right of the Holders of Series A Stock to vote
pursuant to Article VII(D)(i) to elect three members of the Board of Directors
as aforesaid shall continue until such time as (a) in the event such right
arises due to a Dividend Default, all accumulated dividends that are in arrears
on the Series A Stock are paid in full and (b) in the event such right arises
due to a Redemption Default, the Corporation remedies any such failure, at
which time the special right of the Holders of Series A Stock to vote for the
election of three directors and the term of office of the directors elected by
the Holders of Series A Stock shall terminate, and the number of directors
constituting the Board of Directors shall be immediately reduced by three.
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<PAGE> 14
At any time after voting power to elect three directors shall have become
vested and be continuing in the Holders of Series A Stock pursuant to Article
VII(D)(i) hereof, if a vacancy shall exist in the office of any such director
elected by the Holders of Series A Stock, a proper officer of the corporation
may, and, upon the written request of the Holders of record of at least twenty
percent (20%) of the shares of Series A Stock then outstanding addressed to the
Secretary of the Corporation, shall, call a special meeting of the Holders of
Series A Stock, for the purpose of electing the director(s) which such Holders
are entitled to elect as herein provided. If such meeting shall not be called
by a proper officer of the Corporation within 20 days after service of such
written request upon the Secretary of the Corporation, or within 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 record of at least twenty percent (20%) of the outstanding shares of
Series A Stock may designate in writing one of such Holders to call such
meeting at the expense of the Corporation, and such meeting may be called by
the Holder so designated, upon the notice required for annual meetings of
stockholders of the Corporation and shall be held at the place designated by
such Holders in such notice. Notwithstanding the provisions of this Article
VII(D)(ii), no such special meeting shall be called if any such request is
received less than 60 days before the date fixed for the next annual or special
meeting of stockholders of the Corporation. Any Holder of Series A Stock so
designated shall have access to the list of Holders of Series A Stock entitled
to attend the meeting pursuant to the provisions hereof. Any action to be
taken at a meeting referred to herein may be taken by a written consent of the
Holders of a majority of the shares of Series A Stock outstanding.
(iii) At any meeting held for the purpose of electing
directors at which the Holders of Series A Stock then outstanding shall have
the right, voting separately as a single class, to elect directors as
aforesaid, the presence in person or by proxy of the Holders of at least a
majority of the outstanding Series A Stock shall be required to constitute a
quorum.
(E) In addition to the rights set forth in paragraph (D)
above, the Holders of a majority of the shares of Series A Stock then
outstanding, voting separately as a single class, shall be entitled to elect
one member of the Board of Directors (the "Series A Director") so long as at
least 2,000 shares of Series A Stock remain outstanding. The number of
directors constituting the Board of Directors shall be immediately increased by
one upon the initial issuance of at least 5,001 shares of Series A Stock and
the Series A Director shall be elected effective immediately upon the delivery
to the Corporation of a writing, signed by the Holders of a majority of the
shares of Series A Stock outstanding, specifying the person so elected. The
term of office of the Series A Director shall terminate at such time as less
than 2,000 shares of Series A Stock are outstanding and the number of directors
constituting the Board of Directors shall thereupon be immediately reduced by
one.
(F) In the event a shareholder vote is required by law on
any transaction that would result in a Change of Control, the Holders of the
shares of Series A Stock then outstanding shall vote together, as a single
class, with the holders of shares of Common Stock
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<PAGE> 15
as a single class. Each share of Series A Stock shall be entitled to such
number of votes that would attach to the number of shares of Common Stock that
would have been issued had such shares of Series A Stock been converted
immediately prior to the record date in respect of such vote.
(G) (i) Any vacancy occurring in the office of a
director elected by the Holders of Series A Stock shall be filled by the person
specified in writing by the departing director unless and until such vacancy
shall be filled as provided in the manner provided above.
(ii) In any case in which the Holders of Series A Stock
shall otherwise be entitled to vote pursuant to Delaware law, each Holder of
shares of Series A Stock shall be entitled to such number of votes that would
attach to the number of shares of Common Stock that would have been issued had
such shares of Series A Stock been converted immediately prior to the record
date in respect of such vote.
(H) The Corporation shall not issue shares of Series A
Stock other than the 10,000 shares originally issued and shares issued as
payment of dividends on Series A Stock.
VIII. Conversion
(A) General Rights. Each share of Series A Stock shall
be convertible, at any time after the first anniversary of the Original Issue
Date, and as provided in paragraph (B) below, at the option of the Holder
thereof (but if such share is called for redemption pursuant to Article VI,
then only to and including but not after the close of the business on the
Business Day preceding the date fixed irrevocably for such redemption,
provided, that if a default by the Corporation in the payment of the Redemption
Price occurs on the date fixed for such redemption such right of conversion
shall be reinstated until such Redemption Price is paid), into that number of
fully paid and non-assessable shares of Common Stock of the Corporation
(computed, with respect to the aggregate number of shares to be converted by
each Holder, to the nearest 1/100th of a share) obtained by dividing the
Liquidation Preference of the shares of Series A Stock surrendered for
conversion by the Conversion Price (as defined below) then in effect; provided,
however, that, except as provided in Article VIII(B)(2), shares of Series A
Stock held by any of the MS Purchasers shall not be convertible by such MS
Purchaser until the second anniversary of the Original Issue Date.
The conversion price shall initially be $38.40 (as adjusted
from time to time, the "Conversion Price").
In order to exercise the conversion privilege, a Holder shall
surrender the certificate(s) representing such shares, accompanied by transfer
instrument(s) reasonably satisfactory to the Corporation, at any of the offices
or agencies maintained for such purpose by
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<PAGE> 16
the conversion agent designated by the Corporation (the "Conversion Agent") and
shall give written notice to the Corporation that the Holder elects to convert
such shares. The initial Conversion Agent shall be the Corporation. Such
notice shall also state the name(s), together with address(es), in which the
certificate(s) for shares of Common Stock shall be issued and the effective
date of such conversion, which shall be a date within 10 Business Days after
the mailing of such notice. As promptly as practicable after the surrender of
such shares of Series A Stock as aforesaid, the Corporation shall at the office
of such Conversion Agent, issue and deliver to such Holder, or on its written
order, to a Person designated by such Holder, certificate(s) representing the
number of full shares of Common Stock issuable upon the conversion of such
shares of Series A Stock in accordance with the provisions hereof ("Conversion
Shares"), and any fractional interest in respect of a share of Common Stock
arising upon such conversion shall be settled as provided for below.
Certificates will be issued representing the balance of any remaining shares of
Series A Stock in any case in which fewer than all of the shares of Series A
Stock represented by a certificate are converted. Each conversion shall be
deemed to have been effected immediately prior to the close of business on the
Business Day specified by the Holder in the transfer instruments referred to
above (provided that the shares of Series A Stock shall have been surrendered
to the Corporation as aforesaid), and the Person(s) in whose name(s) any
certificate(s) for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder(s) of record of the Common
Stock represented thereby at such time. In either circumstance, such
conversion shall be at the Conversion Price in effect on the date specified in
such transfer instruments.
The dividend payable on a share of Series A Stock on a
Dividend Payment Date shall be payable to the Holder of record of such share at
the close of business on the Dividend Record Date applicable thereto,
notwithstanding the conversion of such share after such Dividend Record Date
and prior to the opening of business on such Dividend Payment Date or the
default by the Corporation in the payment of the dividend due on such Dividend
Payment Date. Shares of Series A Stock surrendered for conversion during the
period from the close of business on any Dividend Record Date to the opening of
business on the Dividend Payment Date with respect to such dividend shall be
accompanied by payment in immediately available funds or other funds acceptable
to the Corporation of an amount equal to the dividend payable on such Dividend
Payment Date on the shares of Series A Stock being surrendered for conversion.
Except as provided in this paragraph, no payment or adjustment shall be made
upon any conversion on account of any dividends accrued on shares of Series A
Stock surrendered for conversion or on account of any dividends on the Common
Stock issued upon conversion.
Any fractional interest in a share of Common Stock resulting
from conversion of any share(s) of Series A Stock may, at the option of the
Corporation, be paid in cash (computed to the next highest cent) based on the
last reported sale price of the Common Stock on the last trading day prior to
the date on which such share or shares of Series A Stock are converted in the
manner set forth above. If more than one certificate representing shares of
Series A Stock shall be surrendered for conversion at one time by the same
Holder, the number of shares
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<PAGE> 17
issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of Series A Stock represented by such certificates
which are to be converted.
The Conversion Price shall be adjusted from time to time as
follows:
(a) In case the Corporation shall pay or make a dividend
or other distribution on any class of Capital Stock of the Corporation
in Common Stock, the Conversion Price in effect at the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction
the numerator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator of which shall be the sum of such
number of shares of Common Stock and the total number of shares of
Common Stock constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of
business on the day following the date fixed for such determination.
For the purposes of this subsection (a), the number of shares of
Common Stock at any time outstanding shall not include shares held in
the treasury of the Corporation. The Corporation will not pay any
dividend or make any distribution on shares of Common Stock held in
the treasury of the Corporation.
(b) (i) In case the Corporation shall issue Common Stock
or options, rights or warrants entitling the holder thereof to
subscribe for, purchase or acquire shares of Common Stock or
securities exchangeable for or convertible into Common Stock (other
than (w) Common Stock issued as provided in the immediately preceding
paragraph (a), (x) shares of Series A Stock issuable as payment of
dividends in accordance herewith, (y) Conversion Shares and (z) in
connection with registered public offerings (A) in a transaction in
which the lead underwriter or placement agent is a Financial Expert or
Morgan Stanley & Co. Incorporated or any affiliate thereof (each an
"Investment Bank of National Standing") and (B) with respect to which
the Series A Director was offered the opportunity to serve on the
pricing committee of the Board of Directors), in each case at a price
per share (which price shall, in the case of options, rights, warrants
or exchangeable or convertible securities, be deemed to include the
price paid on the issuance thereof and the price to be paid on the
exercise, exchange or conversion thereof) less than the then current
market price per share (determined as provided in subsection (g)
below) of the Common Stock on the date of issuance (the "Issuance
Date") of the Common Stock, options, rights, warrants or exchangeable
or convertible securities, the Conversion Price in effect at the
opening of business on such date shall be reduced by multiplying the
Conversion Price in effect immediately prior thereto by a fraction the
numerator of which shall be the number of shares of Common Stock
outstanding at the close of business on the date immediately preceding
the Issuance Date plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of
Common Stock, options, rights, warrants or exchangeable or convertible
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<PAGE> 18
securities so offered for subscription, purchase or acquisition would
purchase at such current market price and the denominator of which
shall be the number of shares of Common Stock outstanding at the close
of business on such date plus the number of shares of Common Stock so
offered for subscription, purchase or acquisition and the number of
shares of Common Stock issuable upon the exercise, exchange or
conversion of such options, rights, warrants or exchangeable or
convertible securities, such reduction to become effective immediately
after the opening of business on the day following the date fixed for
such determination.
(ii) Notwithstanding the foregoing, no adjustment
shall be made to the Conversion Price in connection with the granting
of any employee, director or consultant options to purchase Common
Stock at an exercise price equal to the then current market price of
the Common Stock (as determined by the Board of Directors) or the
issuance of any stock in connection with any acquisition. In
addition, notwithstanding the foregoing, no adjustment shall be made
with respect to the exercise of any employee, director or consultant
options outstanding on the Original Issue Date or granted in
compliance with the preceding sentence. In addition, in the event of
a distribution of options, rights or warrants to purchase Common Stock
issued to all holders of Common Stock pursuant to an anti-takeover
arrangement, no adjustment to the Conversion Price shall be required
hereunder if such arrangement provides that, upon the conversion of
any shares of Series A Stock into Common Stock, Holders thereof shall
be entitled to immediately receive the number of such options, rights
or warrants as such Holders would have received had they converted
their shares of Series A Stock immediately prior to such distribution.
(iii) For the purposes of this subsection (b), the
number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Corporation. The
Corporation will not issue any options, rights or warrants in respect
of shares of Common Stock held in the treasury of the Corporation.
(c) In case the outstanding shares of Common Stock shall
be subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall each be combined into a smaller number of
shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction
or increase, as the case may be, to become effective immediately after
the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) In case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock (i) capital
stock of the Corporation, (ii) evidences of its
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<PAGE> 19
indebtedness and/or (iii) cash or other assets of the Corporation
(excluding (x) any Common Stock, options, rights or warrants referred
to in subsection (b) above, (y) any dividend or distribution referred
to in subsection (a) above, and (z) cash dividends or distributions
from earnings unless all such cash dividends and distributions made
within the preceding 12 months in respect of which no adjustment has
been made exceed $3 million, then in each case, the Conversion Price
in effect at the opening of business on the day following the date
fixed for the determination of holders of Common Stock entitled to
receive such distribution shall be adjusted by multiplying such
Conversion Price by a fraction, the numerator of which shall be the
current market price per share (determined as provided in subsection
(g) below) of the Common Stock on such date of determination (or, if
earlier, on the date on which the Common Stock goes "ex-dividend" in
respect of such distribution) less the then fair market value as
determined by the Board of Directors (whose determination shall be
described in a statement filed with the Conversion Agent) of the
portion of the assets, capital stock or evidences of indebtedness so
distributed (and for which an adjustment to the Conversion Price has
not previously been made pursuant to the terms of this Article VIII)
applicable to one share of Common Stock, and the denominator shall be
such current market price per share of the Common Stock, such
adjustment to become effective immediately after the opening of
business on the day following such date of determination.
(e) In case the Corporation shall repurchase, by
self-tender offer or otherwise, any shares of Capital Stock (other
than (w) shares of restricted Common Stock that were issued to
employees, consultants or directors, at a purchase price equal to the
then current market price of the Common Stock (as determined by the
Board of Directors) which are repurchased at a reasonably equivalent
price, (x) shares of Senior Securities, (y) shares of Series A Stock
(if partially redeemed) and (z) evidences of its indebtedness)
(collectively, the "Repurchased Securities") in each case, other than
exclusively through one or more Investment Banks of National Standing,
at a price in excess of the then Current Market Value (as defined
below) of such Repurchased Securities on the date of such repurchase,
the Conversion Price in effect at the opening of business on the
Business Day following such date shall be reduced by multiplying such
Conversion Price by a fraction the numerator of which shall be the
Current Market Value per share of the Common Stock on such date of
determination less (A) the difference between the then Current Market
Value of the Repurchased Securities and the price paid (or Current
Market Value of property exchanged for) for such Repurchased
Securities, divided by (B) the total number of shares of Common Stock
outstanding on the date of such repurchase (and for which an
adjustment to the Conversion Price has not previously been made
pursuant to the terms of this Article VIII), and the denominator shall
be such Current Market Value per share of the Common Stock, such
adjustment to become effective immediately after the opening of
business on the day following such repurchase date.
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<PAGE> 20
For the purposes of this subsection (e), the Current Market
Value per share of Repurchased Securities at any date herein specified
shall be:
(i) if the Repurchased Security is not registered
under the Exchange Act, the Fair Value of the Repurchased Security (1)
most recently determined as of a date within the six months preceding
such date by an Independent Financial Expert selected by the
Corporation, in accordance with the criteria for such valuation set out
in clause (iii) below, or (2) if no such determination shall have been
made within such six-month period or if the Corporation so chooses,
determined as of such date by an Independent Financial Expert selected
by the Corporation in accordance with the criteria for such valuation
set out in clause (iii) below, or
(ii) if the Repurchased Security is registered
under the Exchange Act, the average of the last sale prices of the
Repurchased Security for the 20 consecutive trading days immediately
preceding such date or, if the Repurchased Security has been registered
under the Exchange Act for less than 20 consecutive trading days before
such date, then the average of the last sale prices for all of the
trading days before such date for which last sale prices are available.
(iii) For purposes of clause (i) of this subsection
(e), the Current Market Value shall be deemed to be equal to the Fair
Value set forth in the Value Report (as defined below) as determined by
an Independent Financial Expert, which shall be selected by the Board
of Directors, and retained on customary terms and conditions, using one
or more valuation methods that the Independent Financial Expert, in its
best professional judgment, determines to be most appropriate. The
Corporation shall engage the Independent Financial Expert to deliver to
the Corporation, within 45 days of the appointment of the Independent
Financial Expert, a value report (the "Value Report") stating the value
of the Repurchased Securities or property of the Corporation, if any,
being valued as of the date of determination and containing a brief
statement as to the nature and scope of the examination or
investigation upon which the determination of value was made. The
determination as to Current Market Value in accordance with the
provisions of this subsection (e) shall be final and binding on all
Persons. The Independent Financial Expert shall consult with
management of the Corporation in order to allow management to comment
on the proposed value prior to delivery to the Corporation of any Value
Report of the Independent Financial Expert.
(f) The reclassification or change of Common Stock into
securities including securities other than Common Stock (other than
any reclassification upon a consolidation or merger to which
subsection (j) below applies) shall be deemed to involve (i) a
distribution of such securities other than Common Stock to all holders
of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of holders of
Common Stock entitled to receive such distribution"
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<PAGE> 21
within the meaning of subsection (d) above), and (ii) a subdivision or
combination, as the case may be, of the number of shares of Common
Stock outstanding immediately prior to such reclassification into the
number of shares of Common Stock outstanding immediately thereafter
(and the effective date of such reclassification shall be deemed to be
"the day upon which such subdivision becomes effective" or "the day
upon which such combination becomes effective," as the case may be,
and "the day upon which such subdivision or combination becomes
effective" within the meaning of subsection (c) above).
(g) Except as specified in this Certificate of
Designations for the purpose of any computation hereunder, the current
market price per share of Common Stock on any day shall be deemed to
be the average of the last sale prices of the Common Stock for the
twenty preceding consecutive trading days. For the purpose of
subsection (b)(ii) above, the current market price per share of Common
Stock on any day shall be deemed to be the average of the last sale
prices of the Common Stock for the five preceding consecutive trading
days; provided, however, that, in the case of clause (d), if the
period between the date of the public announcement of the dividend or
distribution and the date for the determination of holders of Common
Stock entitled to receive such dividend or distribution (or, if
earlier, the date on which the Common Stock goes "ex-dividend" in
respect of such dividend or distribution) shall be less than twenty
trading days, the period shall be such lesser number of trading days.
(h) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or decrease
of at least 1% of such price; provided, however, that any adjustments
which by reason of this clause (h) are not required to be made shall
be carried forward and taken into account in any subsequent
adjustments and provided further, that adjustments shall be required
and made in accordance with the provisions of this Article VIII (other
than this clause (h)) not later than such time as may be required in
order to preserve the tax free nature of a distribution to the holders
of shares of Common Stock. Anything in this clause (h) to the
contrary notwithstanding, the Corporation shall be entitled, at its
option, to make such reductions in the Conversion Price, in addition
to those required by this Article VIII, as it in its discretion shall
determine to be advisable in order that any stock dividend,
subdivision or combination of shares, distribution of capital stock or
rights or warrants to purchase stock or securities, or distribution of
evidences of indebtedness or assets (other than cash dividends or
distributions paid from earnings) or other event shall be a tax free
distribution for federal income tax purposes. All calculations under
this clause (h) shall be made to the nearest cent.
(i) Whenever the Conversion Price is adjusted as herein
provided, the Corporation shall promptly mail a certificate of a firm
of independent public accountants setting forth the Conversion Price
after such adjustment and setting forth a brief
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<PAGE> 22
statement of the facts requiring such adjustment and the manner of
computing the same, which certificate shall constitute conclusive
evidence, absent manifest error, of the correctness of such
adjustment. The certificate shall be mailed to each Holder, at its
last address as the same appears on the securities register maintained
by the Corporation, and to the Conversion Agent.
(j) In case of (i) any consolidation of the Corporation
with, or merger of the Corporation into, any other entity, (ii) any
merger of another entity into the Corporation (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock) or (iii) any sale
or transfer of all or substantially all of the assets of the
Corporation, each Holder shall have the right thereafter to convert
such share only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer
by a holder of the number of shares of Common Stock into which such
share of Series A Stock might have been converted immediately prior to
such consolidation, merger, sale or transfer, assuming such holder of
Common Stock is not an entity with which the Corporation consolidated
or into which the Corporation merged or which merged into the
Corporation or to which such sale or transfer was made, as the case
may be (a "Constituent Entity"), or an affiliate of a Constituent
Entity and failed to exercise its rights of election, if any, as to
the kind or amount of securities, cash or other property receivable
upon such consolidation, merger, sale or transfer (provided that if
the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer is not the same for
each share of Common Stock held immediately prior to such
consolidation, merger, sale or transfer by other than a Constituent
Entity or an affiliate thereof and in respect of which such rights of
election shall not have been exercised (a "non-electing share"), then
for the purpose of this subsection (j) the kind and amount of
securities, cash and other property receivable upon such
consolidation, merger, 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). If necessary, appropriate
adjustment shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of
the Holders, to the end that the provisions set forth herein shall
thereafter correspondingly be made applicable, as nearly as they may
reasonably be, in relation to any shares of stock or other securities
or property thereafter deliverable on the conversion of the shares.
Any such adjustment shall be evidenced by a certificate of independent
public accountants and a notice of such adjustment filed and mailed in
the manner set forth in subsection (i) above and containing the
information set forth in such subsection (i), and any adjustment so
certified shall for all purposes hereof conclusively be deemed to be
an appropriate adjustment, absent manifest error. The above
provisions shall similarly apply to successive consolidations,
mergers, sales or transfers.
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In case:
(i) of any consolidation or merger to which the
Corporation is a party and for which approval of any stockholders of
the Corporation is required, or of the sale or transfer of all or
substantially all of the assets of the Corporation; or
(ii) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation;
then the Corporation shall cause to be filed with any Conversion Agent and
shall cause to be mailed to each Holder at its last address as the same appears
on the securities register maintained by the Corporation, at least 15 days
prior to the applicable record or effective date hereinafter specified, a
notice stating (A) the date on which a record is to be taken for the purpose of
such actions, or, if the record is not to be taken, the date as of which the
holders of Common Stock of record are to be determined, or (B) the date on
which such consolidation, merger, share exchange, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities, cash or other property
deliverable upon such consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding-up. Neither the failure to give such
notice nor any defect therein shall affect the legality or validity of the
proceedings described in clauses (i) through (iii) above.
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 shares of Series A Stock pursuant
hereto; provided, however, 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 shares of Series A 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.
The Corporation covenants that it will cause all (x) shares of
Common Stock which may be issued upon conversions of shares of Series A Stock
and (y) shares of Series A Stock issued as dividends hereunder to be, upon
issue, duly and validly issued, fully paid and non-assessable, free of all
liens and charges and not subject to any preemptive rights.
The Corporation covenants that it will at all times reserve
and keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock, the full number of shares of
Common Stock deliverable upon the conversion of all (x) outstanding shares of
Series A Stock not theretofore converted and (y) shares of Series A Stock
issuable as dividends hereunder.
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(k) Notwithstanding anything contained herein to the contrary, no
adjustment to the Conversion Price shall be made with respect to any
transaction or event if the Series A Director shall have, in writing delivered
to the Corporation, waived such adjustments.
(l) The Conversion Price may also be reduced if the Board of
Directors determines that such reduction would be equitable in order to protect
the interests of Holders. Such reduction may be effective for such period as
the Board of Directors may determine.
(m) Notwithstanding the foregoing, no adjustment to the Conversion
Price shall be required if the Corporation shall pay any dividend or make any
distribution on Senior Securities in accordance with the terms thereof.
(B) Special Conversion or Offer to Purchase upon Change
of Control.
(1) General. Subject to Article VI(B) hereof, upon the
Public Announcement of any transaction that would result in a Change of
Control, the Corporation shall no later than the fifth Business Day (except in
the case of a Change of Control consisting of a 13D Acquisition, Material
Merger or Asset Sale or a Change of Control of the Board, in which case the
election referred to below shall be made within 6 Business Days following the
Change of Control) after such Public Announcement make an election to either
(a) offer to purchase all the issued and outstanding shares of Series A Stock
from the Holders thereof at a price equal to the Liquidation Preference on the
date of such repurchase (the "Repurchase Offer") or (b) afford each Holder the
opportunity to convert (the "Special Conversion Right"), during the Special
Conversion Period, its shares of Series A Stock into shares of Common Stock at
the Conversion Price (the Corporation's option, to either make a Repurchase
Offer or afford the Holders of Series A Stock the Special Conversion Right, is
referred to herein as the "Company Option"). Notwithstanding anything to the
contrary contained in this Certificate of Designations, if the Change of
Control Price exceeds the Conversion Price in effect immediately prior to the
Change of Control, the Corporation may not elect to effect the Repurchase Offer
(but it may otherwise offer to repurchase shares of Series A stock) and the
Holders shall have the Special Conversion Right with no adjustment to the
Conversion Price pursuant to this Article VIII(B). The Corporation shall not
be entitled to elect to make a Repurchase Offer if it shall not reasonably
anticipate that it shall be able to lawfully pay for all Series A Shares that
could be tendered with respect thereto. Shares of Series A Stock which become
convertible pursuant to this paragraph shall, unless converted during a Special
Conversion Period, only be convertible as provided, pursuant to Article
VIII(A), unless another Change of Control shall occur.
(2) Change of Control Conversion Price. Upon the
commencement of the Special Conversion Period, the Conversion Price shall, for
the Special Conversion Period, be adjusted to be equal to the lesser of (i) the
Conversion Price in effect immediately prior to the Change of Control (or, in
the case of a Change of Control resulting from a Tender Offer, the Conversion
Price in effect at 5:00 P.M. New York time on the Business Day immediately
prior
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to the expiration of the Tender Offer (the "Existing Conversion Price")) or
(ii) the Change of Control Price.
(3) Related Definitions.
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act)
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 35% of the voting power of the outstanding Capital
Stock of the Corporation having full voting power or substantially full voting
power or entitled to vote with the Common Stock in the election of directors;
(ii) a majority of the Directors other than the Preferred Stock Directors are
not Continuing Directors (such event being a "Change of Control of the Board");
(iii) in one or a series of related transactions, the Corporation sells,
transfers, leases, conveys or otherwise disposes (other than by way of merger
or consolidation) of all or substantially all of its assets to any Person (an
"Asset Sale"); or (iv) the Corporation merges or consolidates with or into any
Person or any Person merges or consolidates with or into the Corporation, in
either case, in a transaction or series of related transactions in which the
Corporation issues at least 35% of the number of shares of its Capital Stock
(on a fully diluted basis) outstanding immediately prior to such merger (a
"Material Merger"). For purposes of clause (i) of this definition, Capital
Stock will be treated as "beneficially owned" only by (i) any person or group
that has the power to vote or direct the voting of such Capital Stock and (ii)
any person or group that can acquire such power by taking action that does not
require the consent or approval of any stockholder or director not affiliated
with such person or group.
"Change of Control Price" means
(i) in the event of a Tender Offer, (A) the Existing
Conversion Price, if the offeror also offers to purchase the
outstanding shares of Series A Stock for a price in cash equal to or
in excess of the Liquidation Preference of such shares (the "Series A
Stock Offer") and the closing of the Tender Offer is conditioned upon
the closing of the Series A Stock Offer and such condition cannot be
waived or (B) if the offeror has not made a Series A Stock Offer, the
lower of (x) the Existing Conversion Price, (y) in a cash only Tender
Offer the cash price offered per share of Common Stock in such Tender
Offer on and as of the date such Tender Offer expires, and (z) the
value of the securities or other consideration (including, without
limitation, cash) offered in exchange for shares of Common Stock, as
determined by the Board of Directors on and as of the date such Tender
Offer expires;
(ii) in the event of a 13D Acquisition or a Change in Control
of the Board, the lower of (1) the Conversion Price on the date of the
Change of Control or (2) the average last sale price per share of
Common Stock during the five Business Day period following such Change
of Control; and
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(iii) in the event of an Asset Sale or Material Merger, (A)
the Conversion Price in effect on the date of the Change of Control if
the terms of the documents governing such Asset Sale or Material
Merger provide for the conversion of the outstanding shares of Series
A Stock into the unconditional right to receive, from a solvent
entity, cash consideration equal to or in excess of the Liquidation
Preference, reasonably promptly after such Asset Sale or Material
Merger or (B) in all other cases, the lower of (1) the Conversion
Price on the date of the Change of Control or (2) the average of the
last sale price of the Common Stock for the five preceding Business
Day period ending on the Business Day prior to the date on which the
related stockholder meeting is to be held.
"Expiration Date" means the end of the Special Conversion
Period.
"13D Acquisition" means an event that constitutes a Change of
Control as defined in clause (i) of the definition of Change of
Control, other than a Tender Offer.
"Public Announcement" of a particular event shall mean the
first to occur of (i) a press release announcing such event released
on a national wire service or (ii) any public filing under the
Exchange Act disclosing such event.
"Tender Offer" means a publicly announced tender offer to
acquire outstanding shares of the Corporation's Common Stock, which,
if successful, would result in a Change of Control.
"Special Conversion Period" means:
(i) in the event of a Tender Offer, the period commencing
with the tenth Business Day prior to the expiration of the Tender
Offer (as first announced) and ending with the date of the actual
expiration of the Tender Offer; and
(ii) in the event of a 13D Acquisition, a Change of Control
of the Board, an Asset Sale or a Material Merger, the period
commencing on the eighth Business Day following the Change of Control
and ending on the twentieth Business Day following the Change of
Control.
(4) Procedures. Within five Business Days following a
Public Announcement of any transaction that would result in a Change of
Control, the Corporation shall mail to each Holder a notice thereof (the
"Change of Control Rights Notice") setting forth the following:
(i) the event constituting the Change of Control,
together with such other information as may be required pursuant to
the securities laws;
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(ii) the date on which the Special Conversion Right or, if
applicable, the Repurchase Offer will expire;
(iii) the Liquidation Preference then in effect;
(iv) the Conversion Price then in effect and the
continuing conversion rights, if any, under Article VIII(A) and
Article VIII(B);
(v) the Change of Control Price or the mechanism for
calculation thereof;
(vi) the name and address of the paying agent and
Conversion Agent;
(vii) that any Holder who wishes to exercise its right
pursuant to the Special Conversion Right or Repurchase Offer, as
applicable, must deliver its shares of Series A Stock to the
Corporation prior to the Expiration Date in accordance with reasonable
procedures specified in the Change of Control Rights Notice;
(viii) that exercise of such Special Conversion Right or
acceptance of the Repurchase Offer, as the case may be, shall be
irrevocable except that Holders shall have the right to withdraw their
acceptance of the Repurchase Offer at any time prior to 5:00 P.M. New
York time on the Expiration Date by providing written, telegraphic or
facsimile transmission notice of withdrawal to the Conversion Agent,
which notice, to be effective, must be received by the Conversion
Agent prior to the close of business on the Expiration Date; and
(ix) that no dividends on shares of Series A Stock (or
portions thereof) tendered for purchase (and not withdrawn) shall
accrue from and after the date of such repurchase or conversion.
(5) Miscellaneous. The Special Conversion Right must be
exercised in accordance with Article VIII(A) to the extent the procedures in
Article VIII(A) are consistent with the special provisions of this Article
VIII(B).
(6) Mandatory Obligation to Pay; Liquidation, etc. Upon
the expiration of the Repurchase Offer, the Corporation shall purchase and pay,
in cash, for all shares of Series A Stock validly tendered pursuant thereto,
regardless of any contractual restriction on its ability to do so. In the
event of a Change of Control, the Corporation shall not effect any liquidation,
dissolution or winding-up until two Business Days after the expiration of the
Special Conversion Period with respect to such Change of Control.
(7) Tender Offer Mechanics. In the event of a Tender
Offer, Holders converting their shares of Series A Stock may elect, in the
documents delivered with such
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shares for conversion, to have their Conversion Shares tendered into the Tender
Offer by the Corporation. In such case, (1) such shares of Series A Stock must
be delivered to the Corporation no later than 5:00 P.M. New York time on the
Business Day preceding the date the Tender Offer expires and (2) the
Corporation shall deliver such Conversion Shares to the offeror in such Tender
Offer (in accordance with the procedures applicable to such Tender Offer) prior
to the expiration of such Tender Offer and (3) the Corporation shall, in
connection with such delivery to the offeror, instruct the offeror to make
payment to each former Holder on whose behalf it tendered shares of Series A
Stock.
IX. Covenant to Report.
Whether or not the Corporation is subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act, the
Corporation will deliver for filing with the SEC, all information, documents
and reports specified in Section 13 and Section 15(d) of the Exchange Act.
X. Mutilated or Missing Series A Stock Certificates.
If any of the Series A Stock certificates shall be mutilated,
lost, stolen or destroyed, the Corporation shall issue, in exchange and in
substitution for and upon cancellation of the mutilated Series A Stock
certificate, or in lieu of and substitution for the Series A Stock certificate
lost, stolen or destroyed, a new Series A Stock certificate of like tenor and
representing an equivalent amount of shares of Series A Stock, but only upon
receipt of evidence of such loss, theft or destruction of such Series A Stock
certificate and indemnity, if requested, reasonably satisfactory to the
Corporation.
XI. Reissuance; Preemptive Rights.
(A) Shares of Series A Stock that have been issued and
reacquired in any manner, including shares purchased, redeemed or surrendered
for conversion, shall (upon compliance with any applicable provisions of the
laws of the State of Delaware) have the status of authorized and unissued
shares of preferred stock undesignated as to series and may be redesignated and
reissued as part of any series of preferred stock other than the Series A
Stock.
(B) No shares of Series A Stock shall have any rights of
preemption whatsoever as to any securities of the Corporation, or any warrants,
rights or options issued or granted with respect thereto, regardless of how
such securities or such warrants, rights or options may be designated, issued
or granted.
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XII. Business Day.
If any payment or redemption shall be required by the terms
hereof to be made on a day that is not a Business Day, such payment or
redemption shall be made on the immediately succeeding Business Day.
XIII. Headings.
The headings contained herein are for convenience of reference
only and shall not affect the interpretation of any of the provisions hereof.
XIV. Severability of Provisions.
If any right, preference or limitation of the Series A Stock
set forth in these resolutions and this Certificate of Designations (as this
Certificate of Designations may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule or law or public
policy, all other rights, preferences and limitations set forth in this
Certificate of Designations, as amended, which can be given effect without the
invalid, unlawful or unenforceable right, preference or limitation shall,
nevertheless remain in full force and effect, and no right, preference or
limitation herein set forth shall be deemed dependent upon any other such
right, preference or limitation unless so expressed herein.
XV. Notice to the Corporation.
All notices and other communications required or permitted to
be given to the Corporation hereunder shall be made by first-class mail,
postage prepaid, to the Corporation at its principal executive offices
(currently located on the date of the adoption of these resolutions at the
following address: IXC Communications, Inc., 5000 Plaza on the Lake, Suite
200, Austin, Texas 78746, Attention: Chief Financial Officer). Minor
imperfections in any such notice shall not affect the validity thereof.
XVI. Miscellaneous.
All payments to Holders to be made "in cash" hereunder shall
be made in U.S. dollars.
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IN WITNESS WHEREOF, this Certificate has been signed on this [_____] day of
[________], 1997.
IXC COMMUNICATIONS, INC.
By:
----------------------------------
Name:
Title:
Attested by:
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