<PAGE> 1
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): April 21, 1999
WORLD ACCESS, INC.
------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-29782 58-2398004
(State of (Commission File No.) (I.R.S. Employer
incorporation) Identification No.)
945 E. PACES FERRY ROAD, SUITE 2200
ATLANTA, GEORGIA 30326
(Address of principal executive offices, including zip code)
(404) 231-2025
(Registrant's telephone number, including area code)
<PAGE> 2
ITEMS 5. OTHER EVENTS.
On April 21, 1999, World Access, Inc. (the "Company") sold 50,000
newly issued shares of 4.25% Cumulative Senior Perpetual Convertible Preferred
Stock, Series A (the "Preferred Stock") to The 1818 Fund III, L.P. ("The 1818
Fund III") for an aggregate purchase price of $50 million pursuant to that
certain Stock Purchase Agreement dated as of April 19, 1999 by and between
World Access, Inc. and The 1818 Fund III. The 1818 Fund III is one of a family
of private equity partnerships (the "Funds") organized to acquire substantial,
non-controlling, long-term ownership positions in growing, strongly positioned
companies. The Funds have provided active early support and capital to a number
of highly successful telecommunications and media companies, including MCI
WorldCom and Frontier Vision. The General Partner of the Funds is Brown
Brothers Harriman & Co. ("BBH"), America's largest private bank and the oldest
owner-managed business partnership in the country.
Upon the closing of the transaction, Lawrence C. Tucker, a partner at
BBH and co-manager of The 1818 Fund III, became a member of the Company's Board
of Directors. Lawrence C. Tucker has been a partner of BBH since 1979 and
currently serves as a director of MCI WorldCom, National HealthCare
Corporation, Riverwood International Corporation and the MCI WorldCom Venture
Fund.
Each share of Preferred Stock is convertible at the option of the
holder into the Company's common stock in accordance with a conversion formula
equal to the liquidation preference per share divided by a conversion price of
$11.50 per share, subject to adjustment. If the closing trading price of the
Company's common stock as quoted by The Nasdaq Stock Market exceeds $30 per
share for 45 consecutive trading days, the Preferred Stock will be
automatically converted into the Company's common stock. The Preferred Stock
may be voted with the Company's common stock on an as converted basis. The
holders of Preferred Stock also have the right to designate one member to the
Board of Directors. The holders of Preferred Stock have certain supermajority
voting rights upon certain circumstances, such as the authorization of a class
of securities having senior or parity rights with the Preferred Stock, a
reorganization or liquidation of the Company, or a consolidation or merger of
the Company into a third party. As part of the above sale, The 1818 Fund III
also received an option to purchase an additional $20 million in Preferred
Stock from the Company prior to June 30, 2000 at the original purchase price
per share. The foregoing description is qualified in its entirety by reference
to the press release attached hereto as Exhibit No. 99 and incorporated herein
by reference.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
4 Certificate of Designation of 4.25% Cumulative Senior
Perpetual Convertible Preferred Stock, Series A.
99 Press Release dated April 19, 1999.
</TABLE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on behalf of the
undersigned hereunto duly authorized.
WORLD ACCESS, INC.
Date: May 3, 1999 By: /s/ MARTIN D. KIDDER
Martin D. Kidder
Its Vice President and Controller
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
4 Certificate of Designation of 4.25% Cumulative Senior
Perpetual Convertible Preferred Stock, Series A.
99 Press Release dated April 19, 1999.
</TABLE>
<PAGE> 1
WORLD ACCESS, INC.
CERTIFICATE OF DESIGNATION OF
4.25% CUMULATIVE SENIOR PERPETUAL CONVERTIBLE
PREFERRED STOCK, SERIES A, SETTING FORTH THE POWERS, PREFERENCES, RIGHTS,
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF SUCH SERIES OF PREFERRED
STOCK
Pursuant to Section 151 of the Delaware General Corporation Law,
World Access, Inc., a Delaware corporation (the "Corporation"), DOES HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors of the Corporation by the Certificate of Incorporation of the
Corporation (the "Charter"), the Board of Directors of the Corporation on April
16, 1999 duly adopted the following resolution creating a series of Preferred
Stock designated as 4.25% Cumulative Senior Perpetual Convertible Preferred
Stock, Series A, and such resolution has not been modified and is in full force
and effect on the date hereof:
RESOLVED that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the Charter,
a series of the class of authorized Preferred Stock, par value $0.01 per share,
of the Corporation is hereby created and that the designation and number of
shares thereof and the voting powers, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations and restrictions thereof are as follows:
Section 1. Designation and Number.
(a) The shares of such series shall be designated as 4.25%
Cumulative Senior Perpetual Convertible Preferred Stock, Series A (the
"Preferred Stock"). The number of shares initially constituting the Preferred
Stock shall be 70,000, which number may be decreased (but not increased) by the
Board of Directors without a vote of stockholders; provided, however, that such
number may not be decreased below the number of then outstanding shares of
Preferred Stock or shares of Preferred Stock which may be issued pursuant to
the Stock Purchase Agreement.
(b) The Preferred Stock shall, with respect to dividend
rights and rights on liquidation, dissolution or winding up, rank prior to all
other classes and series of Junior Stock (as defined below) of the Corporation
now or hereafter authorized including, without limitation, the Common Stock.
(c) Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in Section 12 below.
Section 2. Dividends and Distributions.
(a) The holders of shares of Preferred Stock, in
preference to the holders of shares of Common Stock and of any shares of other
Junior Stock of the Corporation, shall be entitled to receive, when, as and if
declared by the Board of Directors, out of the assets of the Corporation
legally available therefor, cumulative cash dividends at an annual rate on the
Liquidation Preference thereof equal to (x) 4.25% or (y) if a Change of Control
occurs on or prior to April 21, 2001, then upon such Change of Control and at
all times thereafter, 15% ("Higher Dividend Rate"), in each case, calculated on
the basis of a 360-day year consisting of twelve 30-day months, accruing and
payable in equal quarterly payments, in immediately available funds, on the
last day of March, June, September and December or, if any such day is not a
Business Day, the next succeeding Business Day, in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing
June 30, 1999; provided, however, that with respect to such first Quarterly
Dividend Payment Date, the holders of shares of Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the assets of the Corporation legally available therefor, a cumulative cash
dividend in respect of each share of Preferred Stock in the
<PAGE> 2
amount of (i) $10.625, multiplied by (ii) a fraction equal to (A) the number of
days from (and including) the Issue Date to (but excluding) such Quarterly
Dividend Payment Date divided by (B) 90; and provided further that the Higher
Dividend Rate shall not be applied if, as of the date the Change of Control
occurs, the Purchaser's internal rate of return ("IRR") (calculated as set
forth below) as of such date (assuming for this purpose that the Change of
Control has been completed) equals or exceeds 25% per annum.
The Purchaser's IRR shall be calculated using the
Microsoft Excel "XIRR" function (or, if that is not available, a similar
computer program selected by the Purchaser). Such IRR shall take into account
the timing and amount of all cash or non-cash items received by the Purchaser
with respect to dividends or other distributions on shares of the Preferred
Stock and the Per Share Equity Value of the Common Stock held by the Purchaser
(assuming that all of the Purchaser's shares of Preferred Stock are converted
into Common Stock and the Change of Control is simultaneously occurring). The
amount of non-cash items shall be the Fair Market Value of such items, as
determined by a nationally recognized investment banking firm chosen by the
holders of at least 51% of the outstanding shares of Preferred Stock and the
Corporation (at the Corporation's expense).
(b) If as of any Quarterly Dividend Payment Date there is
a Dividend Arrearage (as hereinafter defined), an additional dividend (the
"Additional Dividend") shall accrue on each share of the Preferred Stock for
the period from such Quarterly Dividend Payment Date through the earlier of (x)
the date on which such Dividend Arrearage is paid in full and (y) the next
succeeding Quarterly Dividend Date, in an amount equal to the product of (i)
the dividend rate (calculated for such period in accordance with Section 2(a))
and (ii) the amount of such Dividend Arrearage as of such Quarterly Dividend
Payment Date. For purposes of this Section 2(b), "Dividend Arrearage" shall
mean, with respect to each share of Preferred Stock, as of any Quarterly
Dividend Payment Date, the excess, if any of (i) the sum of all dividends
theretofore accrued on such share in accordance with Section 2(a) (including
those accrued as of and including such Quarterly Dividend Date) plus all
Additional Dividends, if any, theretofore accrued on such share in accordance
with this Section 2(b) (including those accrued as of and including such
Quarterly Dividend Date), over (ii) all dividends actually paid with respect to
such share on or before such Quarterly Dividend Payment Date. Except as
provided in this Section 2(b) no dividend shall accrue and no other sums shall
be payable with respect to any Dividend Arrearage.
(c) Dividends payable pursuant to Section 2(a) shall begin
to accrue and be cumulative from the Issue Date, and shall accrue on a daily
basis, in each case whether or not declared. Dividends paid on the shares of
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares of Preferred Stock at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Preferred Stock entitled to receive payment of a
dividend declared thereon, which record date shall be no more than 60 days or
less than 10 days prior to the date fixed for the payment thereof. Accumulated
but unpaid dividends for any past quarterly dividend periods may be declared
and paid at any time, without reference to any regular Quarterly Dividend
Payment Date, to holders of record on such date, not more than 60 nor less than
10 days preceding the payment date thereof, as may be fixed by the Board of
Directors.
(d) In addition to the dividends or distributions on the
Preferred Stock described in Section 2(a), in the event that the Corporation
shall declare a dividend or make any other distribution (including, without
limitation, in cash, in capital stock (which shall include, without limitation,
any options, warrants or other rights to acquire capital stock) of the
Corporation, whether or not pursuant to a shareholder rights plan, "poison
pill" or similar arrangement, or other property or assets) to holders of Common
Stock, then the Board of Directors shall declare, and the holder of each share
of Preferred Stock shall be entitled to receive, a dividend or distribution in
an amount equal to the amount of such dividend or distribution received by a
holder of the number of shares of Common Stock for which such share of
Preferred Stock is convertible on the record date for such dividend or
distribution. Any such amount shall be paid to the holders of shares of
Preferred Stock at the same time such dividend or distribution is made to
holders of Common Stock.
(e) The holders of shares of Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided
herein.
<PAGE> 3
Section 3. Voting Rights.
In addition to any voting rights provided by law, the holders of
shares of Preferred Stock shall have the following voting rights:
(a) So long as the Preferred Stock is outstanding, each
share of Preferred Stock shall entitle the holder thereof to vote, in person or
by proxy, at a special or annual meeting of stockholders, on all matters voted
on by holders of Common Stock voting together as a single class with other
shares entitled to vote thereon. With respect to any such vote, each share of
Preferred Stock shall entitle the holder thereof to cast that number of votes
per share as is equal to the number of votes that such holder would be entitled
to cast had such holder converted his shares of Preferred Stock into Common
Stock on the record date for determining the stockholders of the Corporation
eligible to vote on any such matters.
(b) Unless the consent or approval of a greater number of
shares shall then be required by law, the affirmative vote of the holders of at
least 66-2/3% of the outstanding shares of Preferred Stock, voting separately
as a single class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, shall be necessary to:
(i) authorize, increase the authorized number of
shares of or issue (including on conversion or exchange of any convertible or
exchangeable securities or by reclassification), any shares of any class or
classes of Senior Stock or Parity Stock;
(ii) authorize, increase the authorized number of
shares of, or issue any shares of any class of capital stock of the Corporation
having an optional or mandatory redemption date earlier than April 21, 2004 or
amend the terms of any class of capital stock of the Corporation to provide
that such class of capital stock has an optional or mandatory redemption date
earlier than April 21, 2004;
(iii) authorize, adopt or approve an amendment to
the Charter that would increase or decrease the par value of the shares of
Preferred Stock, or alter or change the powers, preferences or special rights
of the shares of Preferred Stock, other Parity Stock or Senior Stock;
(iv) amend or alter the Charter so as to affect
the shares of Preferred Stock adversely, including, without limitation, by
granting any voting right to any holder of notes, bonds, debentures or other
debt obligations of the Corporation or by reclassifying any capital stock into
Senior Stock or Parity Stock;
(v) authorize or issue any security convertible
into, exchangeable for or evidencing the right to purchase or otherwise receive
any shares of any class or classes of Senior Stock or Parity Stock; and
(vi) effect the voluntary liquidation,
dissolution, winding up, recapitalization or reorganization of the Corporation,
or the consolidation or merger of the Corporation with or into any other Person
(except a wholly-owned subsidiary of the Corporation), or the sale or other
distribution to another Person of all or substantially all of the assets of the
Corporation; provided, however, that no separate vote of the holders of the
Preferred Stock as a class shall be required in the case of a recapitalization,
reorganization, consolidation or merger of the Corporation if:
(A) the resulting or surviving
corporation will have after such recapitalization, reorganization,
consolidation or merger no Senior Stock or Parity Stock either authorized or
outstanding (except such Senior Stock or Parity Stock of the Corporation as may
have been authorized or outstanding immediately preceding such consolidation or
merger, or such stock of the resulting or surviving corporation (having the
same powers, preferences and special rights of any such Senior Stock or Parity
Stock) as may be issued in exchange therefor),
(B) each holder of shares of Preferred
Stock immediately preceding such recapitalization, reorganization,
consolidation or merger will receive in exchange therefor the same number of
shares of stock, with the same preferences, rights and powers, of the resulting
or surviving corporation, and
<PAGE> 4
(C) after such recapitalization,
reorganization, consolidation or merger the resulting or surviving corporation
shall not be in breach of any of the terms hereof or of Section 8.8, 8.9, 8.10,
8.11, 8.13 or 8.14, or Article 9 of the Stock Purchase Agreement.
(c) If on any date (i) the Corporation shall have failed
to declare, or shall have failed to pay, the full amount of dividends payable
on the Preferred Stock pursuant to Section 2(a) hereof for two quarterly
dividend periods (whether consecutive or not), or (ii) the Corporation shall
have failed to satisfy its obligation to convert or exchange shares of
Preferred Stock pursuant to Section 8, 10 or 11 or (iii) a breach of any of
Section 8.8, 8.9, 8.10, 8.11, 8.13 or 8.14 or Article 9 of the Stock Purchase
Agreement shall have occurred and been continuing for a period of at least 30
days after written notice of such breach has been delivered to the Corporation
by any Holder of shares of Preferred Stock, then the number of directors
constituting the Board of Directors shall, without further action, be increased
by one and the holders of shares of Preferred Stock shall have, in addition to
the other voting rights set forth herein, the exclusive right, voting
separately as a single class, to elect a director of the Corporation to fill
such newly created directorship, by written consent as provided herein, or at a
special meeting of such holders called as provided herein. Any such additional
director shall continue as a director (subject to reelection or removal as
provided in Section 3(d)(ii)) and the holders of Preferred Stock shall have
such additional voting rights until such time as (A) dividends then payable on
the Preferred Stock shall have been declared and paid in full or (B) any
conversion or exchange obligation provided in Section 8, 10 or 11 that has
become due shall have been satisfied or all necessary funds have been set aside
for payment or there shall exist no breach of any of Section 8.8, 8.9, 8.10,
8.11, 8.13 or 8.14 or Article 9 of the Stock Purchase Agreement, as the case
may be, at which time such additional director shall cease to be a director and
such additional voting rights of the holders of Preferred Stock shall terminate
subject to revesting in the event of each and every subsequent event of the
character indicated above.
(d) (i) The foregoing right of holders of shares of
Preferred Stock to take any action as provided in Section 3(c) may be exercised
at any annual meeting of stockholders or at a special meeting of holders of
shares of Preferred Stock held for such purpose as hereinafter provided or at
any adjournment thereof, or by the written consent, delivered to the Secretary
of the Corporation, of the holders of the minimum number of shares required to
take such action.
So long as such right to vote continues
(and unless such right has been exercised by written consent of the minimum
number of shares required to take such action), the President of the
Corporation may call, and upon the written request of holders of record of at
least 5% of the outstanding shares of Preferred Stock, addressed to the
Secretary of the Corporation at the principal office of the Corporation, shall
call, a special meeting of the holders of shares entitled to vote as provided
herein. Such meeting shall be held within 30 days after delivery of such
request to the Secretary, at the place and upon the notice provided by law and
in the by-laws of the Corporation for the holding of meetings of stockholders.
(ii) At each meeting of stockholders at which
the holders of shares of Preferred Stock shall have the right, voting
separately as a single class, to elect one director of the Corporation as
provided in Section 3(c) or to take any other action, the presence in person or
by proxy of the holders of record of one-third of the total number of shares of
Preferred Stock then outstanding and entitled to vote on the matter shall be
necessary and sufficient to constitute a quorum of such holders. At any such
meeting or at any adjournment thereof:
(A) the absence of a quorum of the
holders of shares of Preferred Stock shall not prevent the election of
directors other than those to be elected by the holders of shares of Preferred
Stock (voting separately as a single class), and the absence of a quorum of the
holders of shares of any other class or series of capital stock shall not
prevent the election of directors to be elected by the holders of shares of
Preferred Stock, or the taking of any action as provided in this Section 3; and
(B) in the absence of a quorum of the
holders of shares of Preferred Stock, a majority of the holders of such shares
present in person or by proxy shall have the power to adjourn the meeting as to
the actions to be taken by the holders of shares of Preferred Stock from time
to time and place to place without notice other than announcement at the
meeting until a quorum shall be present.
<PAGE> 5
For taking of any action as provided in Section 3(b) or Section
3(c) by the holders of shares of Preferred Stock, each such holder shall have
one vote for each share of such stock standing in his name on the transfer
books of the Corporation as of any record date fixed for such purpose or, if no
such date be fixed, at the close of business on the Business Day next preceding
the day on which notice is given, or if notice is waived, at the close of
business on the Business Day next preceding the day on which the meeting is
held; provided, however, that shares of Preferred Stock held by the Corporation
or any Affiliate of the Corporation shall not be deemed to be outstanding for
purposes of taking any action as provided in this Section 3.
Each director elected by the holders of shares of Preferred
Stock as provided in Section 3(c) shall, unless his term shall expire earlier
in accordance with the provisions thereof, hold office until the annual meeting
of stockholders next succeeding his election or until his successor, if any, is
elected and qualified.
If any director so elected by the holders of Preferred Stock
shall cease to serve as a director before his term shall expire (except by
reason of the termination of the voting rights accorded to the holders of
Preferred Stock in accordance with Section 3(c)), the holders of the Preferred
Stock then outstanding and entitled to vote for such director may, by written
consent as provided herein, or at a special meeting of such holders called as
provided herein, elect a successor to hold office for the unexpired term of the
director whose place shall be vacant.
Any director elected by the holders of shares of Preferred
Stock voting separately as a single class may be removed from office with or
without cause by the vote or written consent of the holders of at least a
majority of the outstanding shares of Preferred Stock, at the time of removal.
A special meeting of the holders of shares of Preferred Stock may be called in
accordance with the procedures set forth in Section 3(d)(i).
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends payable on shares of
Preferred Stock as provided in Section 2 are not paid in full, at such time and
thereafter until all unpaid dividends payable, whether or not declared, on the
outstanding shares of Preferred Stock shall have been paid in full or declared
and set apart for payment, or whenever the Corporation shall not have converted
or exchanged shares of Preferred Stock at a time required by Section 8, 10 or
11, at such time and thereafter until all conversion and exchange obligations
provided in Section 8, 10 or 11 that have come due shall have been satisfied or
all necessary funds have been set apart for payment, the Corporation shall not:
(A) declare or pay dividends, or make any other distribu tions, on any shares
of Junior Stock or (B) declare or pay dividends, or make any other
distributions, on any shares of Parity Stock, except dividends or distributions
paid ratably on the Preferred Stock and all Parity Stock on which dividends are
payable or in arrears, in proportion to the total amounts to which the holders
of all shares of the Preferred Stock and such Parity Stock are then entitled.
(b) Whenever dividends payable on shares of Preferred
Stock as provided in Section 2(a) are not paid in full, at such time and
thereafter until all unpaid dividends payable, whether or not declared, on the
outstanding shares of Preferred Stock shall have been paid in full or declared
and set apart for payment, or whenever the Corporation shall not have converted
or exchanged shares of Preferred Stock at a time required by Section 8, 10 or
11, at such time and thereafter until all conversion and exchange obligations
provided in Section 8, 10 or 11 that have come due shall have been satisfied or
all necessary funds have been set apart for payment, the Corporation shall not
redeem, purchase or otherwise acquire for consideration any shares of Junior
Stock or Parity Stock; provided, however, that (A) the Corporation may accept
shares of any Senior Stock, Parity Stock or Junior Stock for conversion into
Junior Stock and (B) the Corporation may at any time redeem, purchase or
otherwise acquire shares of any Parity Stock pursuant to any mandatory
redemption, put, sinking fund or other similar obligation contained in such
Parity Stock, pro rata with the Preferred Stock in proportion to the total
amount then required to be applied by the Corporation to redeem, repurchase,
convert, exchange or otherwise acquire shares of Preferred Stock and shares of
such Parity Stock.
(c) The Corporation shall not permit any Subsidiary of the
Corporation, or cause any
<PAGE> 6
other Person, to purchase or otherwise acquire for consideration any shares of
capital stock of the Corporation unless the Corporation could, pursuant to
Section 4(b), purchase such shares at such time and in such manner.
Section 5. Redemption.
(a) Except as otherwise set forth in this Section 5, the
Corporation shall not have any right to redeem any shares of Preferred Stock
prior to April 21, 2003. On and after April 21, 2003, or in connection with any
Change in Control, which occurs on or before April 21, 2001, the Corporation
shall have the right, at its sole option and election, to redeem the shares of
Preferred Stock, in whole but not in part, on not less than 30 days notice of
the date of redemption (any such date an "Optional Redemption Date") at a price
per share (the "Optional Redemption Price") equal to (A) the Liquidation
Preference plus (B) an amount per share equal to all accrued and unpaid
dividends thereon, whether or not declared or payable, to the applicable
Optional Redemption Date, in immediately available funds, provided, however,
that, notwithstanding the foregoing provisions, in the event of any redemption
upon such Change of Control, the Optional Redemption Price per share shall be
equal to (A) 125% of the Liquidation Preference plus (B) an amount per share
equal to all accrued and unpaid dividends thereon, whether or not declared or
payable, to the applicable Optional Redemption Date, in immediately available
funds.
(b) Notice of any redemption of shares of Preferred Stock
pursuant to Section 5(a) shall be given by publication in a newspaper of
general circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), not less than 30, nor more than 60, days prior to the
date fixed for redemption. In any case, a similar notice shall be mailed at
least 30, but not more than 60, days prior to the date fixed for redemption to
each holder of shares of Preferred Stock to be redeemed, at such holder's
address as it appears on the transfer books of the Corporation. In order to
facilitate the redemption of shares of Preferred Stock, the Board of Directors
may fix a record date for the determination of shares of Preferred Stock to be
redeemed, or may cause the transfer books of the Corporation for the Preferred
Stock to be closed, not more than 60 days or less than 30 days prior to the
date fixed for such redemption.
(c) At any time after a notice of redemption shall have
been mailed and before the Optional Redemption Date, the Corporation shall
deposit for the benefit of the holders of shares of Preferred Stock to be
redeemed the funds necessary for such redemption with a bank or trust company
in the Borough of Manhattan. The City of New York, having a capital and surplus
of at least $500,000,000. Any moneys so deposited by the Corporation and
unclaimed at the end of two years from the date designated for such redemption
shall revert to the general funds of the Corporation. After such reversion, any
such bank or trust company, upon demand, shall pay over to the Corporation such
unclaimed amounts and thereupon such bank or trust company shall be relieved of
all responsibility in respect thereof and any holder of shares of Preferred
Stock to be redeemed shall look only to the Corporation for the payment of the
Optional Redemption Price. In the event that moneys are deposited pursuant to
this Section 5(c) in respect of shares of Preferred Stock that are converted in
accordance with the provisions of Section 8, such moneys shall, upon such
conversion, revert to the general funds of the Corporation and, upon demand,
such bank or trust company shall pay over to the Corporation such moneys and
shall be relieved of all responsibilities to the holders of such converted
shares in respect thereof. Any interest accrued on funds deposited pursuant to
this Section 5(c) shall be paid from time to time to the Corporation for its
own account.
(d) Notice of redemption having been given as aforesaid,
upon the deposit of funds pursuant to Section 5(c) in respect of shares of
Preferred Stock to be redeemed pursuant to Section 5(a), notwithstanding that
any certificates for such shares shall not have been surrendered for
cancellation, from and after the date of redemption designated in the notice of
redemption (i) the shares represented thereby shall no longer be deemed
outstanding, (ii) the rights to receive dividends thereon shall cease to accrue
and (iii) all rights of the holders of shares of Preferred Stock to be redeemed
shall cease and terminate, excepting only the right to receive the Optional
Redemption Price therefor and the right to convert such shares into shares of
Common Stock until the close of business on the date of redemption, in
accordance with Section 8; provided, however, that if the Corporation shall
default in the pay ment of the Optional Redemption Price, the shares of
Preferred Stock that were to be redeemed shall thereafter be deemed to be
outstanding and the holders thereof shall have all of the rights of a holder of
Preferred Stock until such
<PAGE> 7
time as such default shall no longer be continuing or shall have been waived by
holders of at least 66-2/3% of the then outstanding shares of Preferred Stock.
Section 6. Reacquired Shares.
Any shares of Preferred Stock converted, exchanged, redeemed,
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares of Preferred Stock shall upon their cancellation become authorized but
unissued shares of preferred stock, par value $.01 per share, of the
Corporation and, upon the filing of an appropriate Certificate of Designation
with the Secretary of State of the State of Delaware, may be reissued as part
of another series of preferred stock, par value $.01 per share, of the
Corporation subject to the conditions or restrictions on issuance set forth
therein, but in any event may not be reissued as shares of Preferred Stock or
other Parity Stock unless all shares of the Preferred Stock issued on the Issue
Date shall have already been redeemed, converted or exchanged.
Section 7. Liquidation, Dissolution or Winding Up.
(a) If the Corporation shall commence a voluntary case
under the United States bankruptcy laws or any applicable bankruptcy,
insolvency or similar law of any other country, or consent to the entry of an
order for relief in an involuntary case under any such law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due (any such event, a "Voluntary Liquidation Event"), or if a decree or
order for relief in respect of the Corporation shall be entered by a court
having jurisdiction in the premises in an involuntary case under the United
States bankruptcy laws or any applicable bankruptcy, insolvency or similar law
of any other country, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and on account of any such event the Corporation
shall liquidate, dissolve or wind up, or if the Corporation shall otherwise
liquidate, dissolve or wind up, no distribution shall be made:
(i) to the holders of shares of Junior Stock
unless, prior thereto, the holders of shares of Preferred Stock, subject to
Section 8, shall have received (A) if a Voluntary Liquidation Event shall have
occurred, the Optional Redemption Price with respect to each share and (B) if a
Voluntary Liquidation Event shall not have occurred, the Liquidation
Preference, plus all accrued and unpaid dividends, whether or not declared or
currently payable, to the date of distribution, with respect to each share, or
(ii) to the holders of shares of Parity Stock,
except distributions made ratably on the Preferred Stock and all other Parity
Stock in propor tion to the total amounts to which the Holders of all shares of
the Preferred Stock and other Parity Stock are entitled upon such liquidation,
dissolution or winding up. Nothing in this section shall affect the rights of
Holders of shares of Preferred Stock under Section 3 with respect to a
Voluntary Liquidation Event.
(b) Neither the consolidation or merger of the Corporation
with or into any other Person nor the sale or other distribution to another
Person of all or substantially all the assets, property or business of the
Corporation, in each case when permitted by Section 3(b), shall be deemed to be
a liquidation, dissolution or winding up of the Corporation for purposes of
this Section 7.
Section 8. Voluntary Conversion.
(a) Any holder of Preferred Stock shall have the right, at
its option, at any time and from time to time, to convert, subject to the terms
and provisions of this Section 8, any or all of such holder's shares of
Preferred Stock into such number of fully paid and non-assessable shares of
Common Stock as is equal, subject to Section 8(g), to the product of the number
of shares of Preferred Stock being so converted multiplied by the quotient of
(i) the Liquidation Preference divided by (ii) the Conversion Price (as defined
<PAGE> 8
below) then in effect, except that with respect to any shares which shall be
called for exchange or redemption, such right shall terminate at the close of
business on the date of exchange or redemption for such shares, unless in any
such case the Corporation shall default in performance or payment due upon
exchange or redemption thereof. The Conversion Price shall be $11.50, subject
to adjustment as set forth in Section 8(d). Such conversion right shall be
exercised by the surrender of the shares to be converted to the Corporation at
any time during usual business hours at its principal place of business to be
maintained by it, accompanied by written notice that the holder elects to
convert such Shares and, subject to Section 8(k), specifying the name or names
(with address) in which a certificate or certificates for shares of Common
Stock are to be issued and (if so required by the Corporation) by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Corporation duly executed by the holder or its duly authorized legal
representative and transfer tax stamps or funds therefor, if required pursuant
to Section 8(k). All shares of Preferred Stock surrendered for conversion shall
be delivered to the Corporation for cancellation and canceled by it and no
shares of Preferred Stock shall be issued in lieu thereof.
(b) As promptly as practicable after the surrender, as
herein provided, of any shares of Preferred Stock for conversion pursuant to
Section 8(a), the Corporation shall deliver to or upon the written order of the
holder of such shares so surrendered a certificate or certificates representing
the number of fully paid and non-assessable shares of Common Stock into which
such shares of Preferred Stock have been converted in accordance with the
provisions of this Section 8. Subject to the following provisions of this
paragraph and of Section 8(d), such conversion shall be deemed to have been
made immediately prior to the close of business on the date that such shares of
Preferred Stock shall have been surrendered in satisfactory form for
conversion, and the Person or Persons entitled to receive the Common Stock
deliverable upon conversion of such shares of Preferred Stock shall be treated
for all purposes as having become the record holder or holders of such Common
Stock at such time, and such conversion shall be at the Conversion Price in
effect at such time; provided, however, that no surrender shall be effective to
constitute the Person or Persons entitled to receive the Common Stock
deliverable upon such conversion as the record holder or holders of such Common
Stock while the share transfer books of the Corporation shall be closed (but
not for any period in excess of five days), but such surrender shall be
effective to constitute the Person or Persons entitled to receive such Common
Stock as the record holder or holders thereof for all purposes immediately
prior to the close of business on the next succeeding day on which such share
transfer books are open, and such conversion shall be deemed to have been made
at, and shall be made at the Conversion Price in effect at, such time on such
next succeeding day.
(c) To the extent permitted by law, when shares of
Preferred Stock are converted, all dividends accrued and unpaid (whether or not
declared or currently payable) on the Preferred Stock so converted to the date
of conversion shall be immediately due and payable and must accompany the
shares of Common Stock issued upon such conversion.
(d) The Conversion Price (and the price at which a share
of Common Stock is valued pursuant to Section 10(a) or Section 11) shall be
subject to adjustment as follows:
(i) In case the Corporation shall at any time or
from time to time (A) pay a dividend or make a distribution (other than a
dividend or distribution paid or made to holders of shares of Preferred Stock
in the manner provided in Section 2(d)) on the outstanding shares of Common
Stock in capital stock (which, for purposes of this Section 8(d) shall include,
without limitation, any options, warrants or other rights to acquire capital
stock) of the Corporation, (B) subdivide the outstanding shares of Common Stock
into a larger number of shares, (C) combine the outstanding shares of Common
Stock into a smaller number of shares, (D) issue any shares of its capital
stock in a reclassification of the Common Stock or (E) pay a dividend or make a
distribution (other than a dividend or distribution paid or made to holders of
shares of Preferred Stock in the manner provided in Section 2(d)) on the
outstanding shares of Common Stock in securities of the Corporation pursuant to
a shareholder rights plan, "poison pill" or similar arrangement,
then, and in each such case, the Conversion Price in effect immediately prior
to such event shall be adjusted (and any other appropriate actions shall be
taken by the Corporation) so that the holder of any share of Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number
of shares of Common Stock or other securities of the Corporation that such
holder would have owned or
<PAGE> 9
would have been entitled to receive upon or by reason of any of the events
described above, had such share of Preferred Stock been converted immediately
prior to the occurrence of such event. An adjustment made pursuant to this
Section 8(d)(i) shall become effective retroactively (A) in the case of any
such dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of Common Stock
entitled to receive such dividend or distribution or (B) in the case of any
such subdivision, combination or reclassification, to the close of business on
the day upon which such corporate action becomes effective.
(ii) In case the Corporation shall at any time or
from time to time issue shares of Common Stock (or securities convertible into
or exchangeable for Common Stock, or any options, warrants or other rights to
acquire shares of Common Stock) for a consideration per share less than the
Conversion Price or the Current Market Price per share of Common Stock then in
effect at the record date or issuance date, as the case may be (the "Date"),
referred to in the following sentence (treating the price per share of any
security convertible or exchangeable or exercisable into Common Stock as equal
to (A) the sum of the price for such security convertible, exchangeable or
exercisable into Common Stock plus any additional consideration payable
(without regard to any anti-dilution adjustments) upon the conversion, exchange
or exercise of such security into Common Stock divided by (B) the number of
shares of Common Stock initially underlying such convertible, exchangeable or
exercisable security),
then, and in each such case, the Conversion Price then in effect shall be
adjusted by dividing the Conversion Price in effect on the day immediately
prior to the Date by a fraction (x) the numerator of which shall be the sum of
the number of shares of Common Stock outstanding on the Date plus the number of
additional shares of Common Stock issued or to be issued (or the maximum number
into which such convertible or exchangeable securities initially may convert or
exchange or for which such options, warrants or other rights initially may be
exercised) and (y) the denominator of which shall be the sum of the number of
shares of Common Stock outstanding on the Date plus the number of shares of
Common Stock which the aggregate consideration for the total number of such
additional shares of Common Stock so issued or to be issued upon the
conversion, exchange or exercise of such convertible or exchangeable securities
or options, warrants or other rights (plus the aggregate amount of any
additional consideration initially payable upon such conversion, exchange or
exercise of such security) would purchase at the Conversion Price or Current
Market Price per share of Common Stock on the Date, as the case may be;
provided, however, that any shares of Common Stock or securities convertible or
exchangeable into Common Stock issued in connection with settlement or other
resolution of suits alleging class action violations of federal securities laws
by the Corporation and/or any of its officers and directors, shall be deemed to
be issued for no consideration per share.
Such adjustment shall be made whenever such shares, securities, options,
warrants or other rights are issued, and shall become effective retroactively
to a date immediately following the close of business (1) in the case of
issuance to stockholders of the Corporation, as such, on the record date for
the determination of stockholders entitled to receive such shares, securities,
options, warrants or other rights and (2) in all other cases, on the date
("issuance date") of such issuance; provided that:
(A) the determination as to whether an
adjustment is required to be made pursuant to this Section 8(d)(ii) shall be
made upon the issuance of such shares or such convertible or exchangeable
securities, options, warrants or other rights;
(B) if any convertible or exchangeable
securities, options, warrants or other rights (or any portions thereof) which
shall have given rise to an adjustment pursuant to this Section 8(d)(ii) shall
have expired or terminated without the exercise thereof and/or if by reason of
the terms of such convertible or exchangeable securities, options, warrants or
other rights there shall have been an increase or increases, with the passage
of time or otherwise, in the price payable upon the exercise or conversion
thereof, then the Conversion Price hereunder shall be readjusted (but to no
greater extent than originally adjusted) on the basis of (x) eliminating from
the computation any additional shares of Common Stock corresponding to such
convertible or exchangeable securities, options, warrants or other rights as
shall have expired or terminated, (y) treating the additional shares of Common
Stock, if any, actually issued or issuable pursuant to the previous exercise of
such convertible or exchangeable securities, options, warrants or other rights
as having been issued for the consideration actually received and receivable
therefor and (z) treating any of such convertible or exchangeable securities,
options, warrants or other
<PAGE> 10
rights which remain outstanding as being subject to exercise or conversion on
the basis of such exercise or conversion price as shall be in effect at this
time; and
(C) no adjustment in the Conversion
Price shall be made pursuant to this Section 8(d)(ii) as a result of any
issuance of securities by the Corporation in respect of which an adjustment to
the Conversion Price is made pursuant to Section 8(d)(i).
(iii) In case the Corporation shall at any time or
from time to time distribute to all holders of shares of its Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Corporation is the resulting or surviving corporation and
the Common Stock is not changed or exchanged) cash, evidences of indebtedness
of the Corporation or another issuer, securities of the Corporation or another
issuer or other assets (excluding (A) dividends or distributions paid or made
to holders of shares of Preferred Stock in the manner provided in Section 2(d),
and (B) dividends payable in shares of Common Stock for which adjustment is
made under Section 8(d)(i)) or rights or warrants to subscribe for or purchase
securities of the Corporation (excluding those referred to in Section 8(d)(ii)
or those in respect of which an adjustment in the Conversion Price is made
pursuant to Section 8(d)(i) or (ii)), then, and in each such case, the
Conversion Price then in effect shall be adjusted by dividing the Conversion
Price in effect immediately prior to the date of such distribution by a
fraction (x) the numerator of which shall be the Market Price of the Common
Stock on the record date referred to below and (y) the denominator of which
shall be such Market Price of the Common Stock less the then Fair Market Value
(as determined by the Board of Directors of the Corporation) of the portion of
the cash, evidences of indebtedness, securities or other assets so distributed
or of such subscription rights or warrants applicable to one share of Common
Stock (but such denominator not to be less than one). Such adjustment shall be
made whenever any such distribution is made and shall become effective
retroactively to a date immediately following the close of business on the
record date for the determination of stockholders entitled to receive such
distribution.
(iv) In the case the Corporation, at any time or
from time to time, shall take any action affecting its Common Stock similar to
or having an effect similar to any of the actions described in any of Section
8(d)(i) through Section 8(d)(iii), inclusive, or Section 8(h) (but not
including any action described in any such Section) and the Board of Directors
of the Corporation in good faith determines that it would be equitable in the
circumstances to adjust the Conversion Price as a result of such action, then,
and in each such case, the Conversion Price shall be adjusted in such manner
and at such time as the Board of Directors of the Corporation in good faith
determines would be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
holders of the Preferred Stock).
(v) Notwithstanding anything herein to the
contrary, no adjustment under this Section 8(d) need be made to the Conversion
Price unless such adjustment would require an increase or decrease of at least
1% of the Conversion Price then in effect. Any lesser adjustment shall be
carried forward and shall be made at the time of and together with the next
subsequent adjustment, which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least 1% of such
Conversion Price. Any adjustment to the Conversion Price carried forward and
not theretofore made shall be made immediately prior to the conversion of any
shares of Preferred Stock pursuant hereto.
(vi) Notwithstanding anything herein to the
contrary, no adjustment under this Section 8(d) shall be made upon (A) the
grant of options to acquire up to 2,000,000 shares of Common Stock (subject to
increase equal to the number of shares represented by options exercisable below
the Conversion Price that are canceled) to employees or directors of the
Corporation pursuant to benefit plans approved by the Board of Directors of the
Corporation or upon the issuance of shares of Common Stock upon exercise of
such options, (B) the grant to Clifford Rees upon his employment by the
Corporation of options to acquire up to 400,000 shares of Common Stock, (C) the
issuance of any Common Stock (or securities convertible into or exchangeable
for capital stock or options, warrants or other rights to acquire capital
stock) in exchange for professional or other services rendered to the
Corporation up to a maximum of 500,000 shares of Common Stock per annum, but no
more than 1,000,000 shares of Common Stock in the aggregate, (D) the issuance
of any Common Stock or Subordinated Notes pursuant to this Certificate, or (E)
the sale of Common Stock by the Corporation in an underwritten public offering
at a price above the Conversion Price in effect on the date of such sale.
<PAGE> 11
(e) If the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Conversion Price,
then, and in each such case, the Corporation promptly shall deliver to each
registered holder of Preferred Stock at least 5 Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the
President or a Vice-President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and specifying, to the
extent feasible, (x) the method by which such adjustment was calculated and (y)
the increased or decreased Conversion Price then in effect following such
adjustment.
(g) No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of any shares of Preferred Stock. If
more than one share of Preferred Stock shall be surrendered for conversion at
one time by the same holder, the number of full shares of Common Stock issuable
upon conversion thereof shall be computed on the basis of the aggregate
Liquidation Preference of the shares of Preferred Stock so surrendered. If the
conversion of any share or shares of Preferred Stock results in a fraction, an
amount equal to such fraction multiplied by the Current Market Price of the
Common Stock on the Business Day preceding the day of conversion shall be paid
to such holder in cash by the Corporation.
(h) In case of any capital reorganization or
reclassification or other change of outstanding shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value), or in case of any consolidation or merger of the
Corporation with or into another Person (other than a consolidation or merger
in which the Corporation is the resulting or surviving Person and which does
not result in any reclassification or change of outstanding Common Stock) (any
of the foregoing, a "Transaction"), the Corporation, or such successor or
purchasing Person, as the case may be, shall execute and deliver to each holder
of Preferred Stock at least 10 Business Days prior to effecting any of the
foregoing Transactions a certificate that the holder of each share of Preferred
Stock then outstanding shall have the right thereafter to convert such share of
Preferred Stock into the kind and amount of shares of stock or other securities
(of the Corporation or another issuer) or property or cash receivable upon such
Transaction by a holder of the number of shares of Common Stock into which such
share of Preferred Stock could have been converted immediately prior to such
Transaction. Such certificate shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 8. If, in the case of any such Transaction, the stock, other
securities, cash or property receivable thereupon by a holder of Common Stock
includes shares of stock or other securities of a Person other than the
successor or purchasing Person and other than the Corporation, which controls
or is controlled by the successor or purchasing Person or which, in connection
with such Transaction, issues stock, securities, other property or cash to
holders of Common Stock, then such certificate also shall be executed by such
Person, and such Person shall, in such certificate, specifically acknowledge
the obligations of such successor or purchasing Person and acknowledge its
obligations to issue such stock, securities, other property or cash to the
holders of Preferred Stock upon conversion of the shares of Preferred Stock as
provided above. The provisions of this Section 8(h) and any equivalent thereof
in any such certificate similarly shall apply to successive Transactions.
(i) In case at any time or from time to time:
(i) the Corporation shall declare a dividend (or
any other distribution) on its Common Stock;
(ii) the Corporation shall authorize the granting
to the holders of its Common Stock of rights or warrants to subscribe for or
purchase any shares of stock of any class or of any other rights or warrants;
(iii) there shall be any reclassification of the
Common Stock, or any consolidation or merger to which the Corporation is a
party and for which approval of any shareholders of
<PAGE> 12
the Corporation is required, or any sale or other disposition of all or
substantially all of the assets of the Corporation; or
(iv) there shall be any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation; then the Corporation
shall mail to each holder of shares of Preferred Stock at such holder's address
as it appears on the transfer books of the Corporation, as promptly as possible
but in any event at least 10 days 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 or rights or warrants or, if a
record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution or rights are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding up is expected to
become effective. Such notice also shall specify the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their Common Stock for shares of stock or other securities or property or cash
deliverable upon such reclassification, consolidation, merger, sale,
conveyance, dissolution, liquidation or winding up.
(j) The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the Preferred Stock pursuant to
Section 8(a), 10(a) or 11(a), such number of its authorized but unissued shares
of Common Stock as will from time to time be sufficient to permit the
conversion of all outstanding shares of Preferred Stock, and shall take all
action required to increase the authorized number of shares of Common Stock if
at any time there shall be insufficient authorized but unissued shares of
Common Stock to permit such reservation or to permit the conversion of all
outstanding shares of Preferred Stock.
(k) The issuance or delivery of certificates for Common
Stock upon the conversion of shares of Preferred Stock pursuant to Section
8(a), 10(a) or 11(a) shall be made without charge to the converting holder of
shares of Preferred Stock for such certificates or for any tax in respect of
the issuance or delivery of such certificates or the securities represented
thereby, and such certificates shall be issued or delivered in the respective
names of, or (subject to compliance with the applicable provisions of federal
and state securities laws) in such names as may be directed by, the holders of
the shares of Preferred Stock converted; 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 issuance and delivery of any such
certificate in a name other than that of the holder of the shares of Preferred
Stock converted, and the Corporation shall not be required to issue or deliver
such certificate unless or until the Person or Persons requesting the issuance
or delivery thereof shall have paid to the Corporation the amount of such tax
or shall have established to the reasonable satisfaction of the Corporation
that such tax has been paid.
Section 9. Certain Remedies.
Any registered holder of Preferred Stock shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Certificate of Designation and to enforce specifically the terms and provisions
of this Certificate of Designation in any court of the United States or any
state thereof having jurisdiction, this being in addition to any other remedy
to which such holder may be entitled at law or in equity.
Section 10. Mandatory Exchange.
(a) If at any time on or after the fifth anniversary of
the Issue Date to and including the tenth anniversary of the Issue Date, the
holders of 50% or more of the shares of Preferred Stock shall deliver to the
Corporation a notice demanding that the Corporation exchange the shares of
Preferred Stock pursuant to this Section 10, then the Corporation shall
exchange all (but not less than all) of the outstanding shares of Preferred
Stock for shares of Common Stock or Subordinated Notes (as defined below) at
any time, or from time to time, during the period from the fortieth day
following the date of such notice (the "Demand Notice Date") to the third
anniversary of the Demand Notice Date, in integral multiples of $5,000,000, on
30 days notice of each date of exchange (any such date, a "Mandatory Exchange
Date"), at a price per share equal (subject to Section 8(g)) to (i) the
Liquidation Preference per share plus (ii) an amount per share equal to all
accrued and unpaid dividends thereon, whether or not declared or currently
<PAGE> 13
payable, to the applicable Mandatory Exchange Date. Any shares of Common Stock
to be issued pursuant to this Section 10(a) shall be valued for such purpose at
95% of the average Market Price as of the ten Trading Days immediately
preceding the applicable Mandatory Exchange Date. Any Subordinated Notes to be
issued pursuant to this Section 10(a) shall be valued for such purpose at their
principal amount; provided that for all exchanges:
(I) the Corporation shall effect one such
exchange on the fortieth day following the Demand Notice Date and, if any
shares of Preferred Stock shall be outstanding, shall effect a second such
exchange on or before the first anniversary of the Demand Notice Date and, if
any shares of Preferred Stock shall be outstanding on the third anniversary of
the Demand Notice Date, shall effect on or before such third anniversary a
final such exchange for all such shares; provided that if any such date is not
a Business Day, then the Mandatory Exchange date shall be the next succeeding
Business Day;
(II) any shares of Common Stock to be exchanged
shall in no event be valued at more than the Conversion Price then in effect;
(III) if less than all shares of Preferred Stock
outstanding on a Mandatory Exchange Date are to be exchanged, the shares to be
exchanged shall be determined pro rata or, if the shares of Preferred Stock are
then publicly held, by lot;
(IV) the Corporation shall not issue any
Subordinated Notes in exchange for Preferred Stock if such issuance would, with
or without notice or the lapse of time or both, result in or constitute a
default under or with respect to any indebtedness of the Corporation or any of
its Subsidiaries; and
(V) that the Corporation shall not issue any
Subordinated Notes in exchange for Preferred Stock unless such issuance would
result in a "substantially disproportionate" redemption of such Preferred Stock
for Federal income tax purposes under Section 302(b)(2) of the Internal Revenue
Code of 1986, as amended, assuming for this purpose that the holders of shares
of Preferred Stock do not own any shares of Common Stock other than those
issued or issuable upon conversion or exchange of the Preferred Stock.
(b) "Subordinated Notes" shall mean subordinated
nonconvertible notes of the Corporation having (i) a floating interest rate,
(ii) a final maturity date the same as that of all other such Subordinated
Notes but in any event no later than five years from the first Mandatory
Exchange Date and (iii) such other terms and conditions as shall result in a
determination (in the manner provided in Section 10(e)) that such Subordinated
Notes have a Fair Market Value at least equal to their principal amount as of
the date of their proposed issuance.
(c) Nothing in this Section 10 shall restrict or limit (i)
the Corporation's right to redeem shares of Preferred Stock pursuant to Section
5(a) or convert such shares pursuant to Section 11 or (ii) the holders' right
to convert shares of the Preferred Stock pursuant to Section 8(a) at any time
prior to any Mandatory Exchange Date under this Section 10.
(d) Notice of an exchange of shares of Preferred Stock
pursuant to Section 10(a) shall be given by publication in a newspaper of
general circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, rule, regulation or securities
exchange requirement), 30 days prior to the date fixed for exchange, and a
similar notice shall be mailed 30 days prior to the date fixed for exchange to
each holder at such holder's address as it appears on the transfer books of the
Corporation. In order to facilitate the exchange of shares of Preferred Stock
hereunder the Board of Directors may fix a record date for the determination of
shares of Preferred Stock to be exchanged, or may cause the transfer books of
the Corporation for the Preferred Stock to be closed, 30 days prior to the date
fixed for exchange.
(e) If the Corporation proposes to issue Subordinated
Notes in exchange for some or all of the Preferred Stock to be exchanged on the
applicable Mandatory Exchange Date, the notice referred to in Section 10(d)
shall include a form of the Subordinated Notes that the Corporation proposes to
issue in exchange for the Preferred Stock, and shall identify a nationally
recognized investment banking firm selected by the Corporation to represent the
Corporation in appraising the Fair Market Value of the
<PAGE> 14
Subordinated Notes. The holders of a majority of the shares of the Preferred
Stock shall have the right to retain, at the Corporation's expense, a second
nationally recognized investment banking firm, to represent the holders of the
Preferred Stock in appraising the Fair Market Value of the Subordinated Notes.
A determination by the two investment banking firms that the Subordinated Notes
have as of the date of exchange a Fair Market Value at least equal to the
principal amount of the Subordinated Notes shall be binding on the Corporation
and all holders of shares of Preferred Stock and the form of Subordinated Notes
shall be in accordance with such determination and otherwise as agreed by the
Corporation and the Holders of 51% of the outstanding shares of Preferred
Stock. If such investment banking firms so agree on such a determination, the
Subordinated Notes may be used by the Corporation in the exchange, valued at
their principal amount. If the two investment banking firms do not agree on
such a determination, they shall select a third nationally recognized
investment banking firm, at the Corporation's expense, to appraise the Fair
Market Value of the Subordinated Notes, and the determination of such third
investment banking firm shall be binding on the Corporation and all holders of
shares of Preferred Stock. If the third investment banking firm determines that
the Subordinated Notes have as of the proposed date of exchange a Fair Market
Value at least equal to their principal amount, the Subordinated Notes may be
used by the Corporation in the exchange, valued at their principal amount and
the form of Subordinated Notes shall be in accordance with such determination
and otherwise as agreed by the Corporation and the Holders of 51% of the
outstanding shares of Preferred Stock. If such investment banking firm
determines that the Subordinated Notes do not at such time have such value, and
the Corporation is not willing to alter the terms of the Subordinated Notes so
that such investment banking firm determines that the Subordinated Notes have
at such time such value, the Subordinated Notes may not be used in the exchange
and shares of Common Stock must be used instead.
(f) Unless otherwise agreed, on any Mandatory Exchange
Date, the Corporation shall deposit for the benefit of the holders of shares of
Preferred Stock to be exchanged the shares of Common Stock or Subordinated
Notes necessary for such exchange with a bank or trust company in the Borough
of Manhattan, The City of New York, having a capital and surplus of at least
$500,000,000. Any shares of Common Stock or Subordinated Notes so deposited by
the Corporation and unclaimed at the end of two years from such Mandatory
Exchange Date shall revert to the Corporation. After such reversion, any such
bank or trust company shall, upon demand, return to the Corporation such
unclaimed shares of Common Stock or Subordinated Notes and thereupon such bank
or trust company shall be relieved of all responsibility in respect thereof and
any holder of shares of Preferred Stock to be exchanged shall look only to the
Corporation for the delivery of the shares of Common Stock or Subordinated
Notes. In the event that shares of Common Stock or Subordinated Notes are
deposited pursuant to this Section 10(f) in respect of shares of Preferred
Stock that are converted in accordance with the provisions of Section 8, such
shares of Common Stock or Subordinated Notes shall, upon such conversion,
revert to the Corporation and, upon demand, such bank or trust company shall
return to the Corporation such shares of Common Stock or Subordinated Notes and
shall be relieved of all responsibilities to the holders of such converted
shares in respect thereof. Any dividends accrued on shares of Common Stock or
interest in the Subordinated Notes deposited pursuant to this Section 10(f)
shall accrue for the accounts of, and be payable to, the holders of shares of
Preferred Stock to be exchanged therefor.
(g) Notice of mandatory exchange having been given as
aforesaid, upon the deposit of shares of Common Stock or Subordinated Notes
pursuant to Section 10(f) in respect of shares of Preferred Stock to be
exchanged pursuant to Section 10(a), notwithstanding that any certificates for
such shares shall not have been surrendered for cancellation, from and after
the Mandatory Exchange Date (i) the shares represented thereby shall no longer
be deemed outstanding, (ii) the rights to receive dividends thereon shall cease
to accrue and (iii) all rights of the holders of shares of Preferred Stock to
be exchanged shall cease and terminate, excepting only the right to receive the
shares of Common Stock or the Subordinated Notes and the right to convert such
Preferred Stock into shares of Common Stock until the close of business on the
Mandatory Exchange Date, in accordance with Section 8; provided, however, that
if the Corporation shall default in the execution and delivery of the shares of
Common Stock or the Subordinated Notes, the shares of Preferred Stock that were
to be exchanged shall thereafter be deemed to be outstanding and the holders
thereof shall have all of the rights of a holder of Preferred Stock until such
time as such default shall no longer be continuing or shall have been waived by
holders of at least 66-2/3% of the then outstanding shares of Preferred Stock.
<PAGE> 15
Section 11. Mandatory Conversion.
(a) If for 45 consecutive Trading Days the Market Price of
the Common Stock at the end of each such Trading Day during such period exceeds
261% of the Conversion Price in effect on each such Trading Day, then on the
Business Day next succeeding such 45-day period (the "Mandatory Conversion
Date"), the outstanding shares of Preferred Stock shall automatically be
converted into such number of fully paid and non-assessable shares of Common
Stock as is equal, subject to Section 8(g), to the product of the number of
shares of Preferred Stock being so converted multiplied by the quotient of (i)
the Liquidation Preference divided by (ii) the Conversion Price in effect on
the Mandatory Conversion Date.
(b) Within 10 Business Days of the Mandatory Conversion
Date, the Corporation shall deliver to each Holder of Preferred Stock being
converted (i) an officer's certificate attesting to the satisfaction of the
condition precedent to mandatory conversion and (ii) a certificate or
certificates representing the number of fully paid and non-assessable shares of
Common Stock into which such shares of Preferred Stock have been converted in
accordance with this Section 11. Such conversion shall be deemed to have been
made immediately prior to the close of business on the Mandatory Conversion
Date, and the Person or Persons entitled to receive the Common Stock
deliverable upon conversion of such shares of Preferred Stock shall be treated
for all purposes as having become the record holder or holders of such Common
Stock at such time, and such conversion shall be at the Conversion Price in
effect at such time.
(c) To the extent permitted by law, when shares of
Preferred Stock are converted, all dividends accrued and unpaid (whether or not
declared or currently payable) on the Preferred Stock so converted to the date
of conversion shall be immediately due and payable and must accompany the
shares of Common Stock issued upon such conversion.
(d) Notice of a conversion of shares of Preferred Stock
pursuant to Section 11(a) shall be given by publication in a newspaper of
general circulation in the Borough of Manhattan, The City of New York (if such
publication shall be required by applicable law, regulation or securities
exchange requirement).
(e) Notwithstanding that any certificates for such shares
shall not have been surrendered for cancellation, from and after the Mandatory
Conversion Date (i) the shares represented thereby shall no longer be deemed
outstanding, (ii) the rights to receive dividends thereon shall cease to
accrue, and (iii) all rights of the holders of shares of Preferred Stock to be
converted shall cease and terminate, excepting only the right to receive the
shares of Common Stock and Dividends; provided, however, that if the
Corporation shall default in the execution and delivery of the shares of Common
Stock or Dividends, the shares of Preferred Stock that were to be converted
shall thereafter be deemed to be outstanding and the holders thereof shall have
all of the rights of a holder of Preferred Stock until such time as such
default shall no longer be continuing or shall have been waived by holders of
at least 66-2/3% of the then outstanding shares of Preferred Stock.
Section 12. Definitions.
For the purposes of this Certificate of Designation of
Preferred Stock, the following terms shall have the meanings indicated:
"Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act;
provided that for purposes of this Certificate, the Purchaser shall not be
considered an Affiliate of the Corporation.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in The City of New York, New York
or City of Atlanta, Georgia are authorized or required by law or executive
order to close.
A "Change of Control" of the Corporation shall mean such
times as:
(i) Any Person or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of outstanding shares of stock of the Corporation
entitling such Person or Persons to exercise 50% or more of the total votes
(excluding the
<PAGE> 16
Preferred Stock) entitled to be cast at a regular or special meeting, or by
action by written consent, of shareholders of the Corporation (the term
"beneficial owner" shall be determined in accordance with Rule 13d-3,
promulgated by the Commission under the Exchange Act);
(ii) A majority of the Board of Directors of the
Corporation shall consist of Persons other than Continuing Directors. The term
"Continuing Director" shall mean any member of the Board of Directors on the
Closing Date (as defined in the Stock Purchase Agreement) and any other member
of the Board of Directors who shall be recommended or elected to succeed or
become a Continuing Director by a majority of Continuing Directors who are then
members of the Board of Directors.
(iii) The shareholders of the Corporation shall
have approved a recapitalization, reorganization, merger, consolidation or
similar transaction, in each case with respect to which all or substantially
all the Persons who were the respective beneficial owners, directly or
indirectly, of the outstanding shares of capital stock of the Corporation
immediately prior to such recapitalization, reorganization, merger,
consolidation or similar transaction, will own less than 50% of the combined
voting power of the then outstanding shares of capital stock of the Corporation
resulting from such recapitalization, reorganization, merger, consolidation or
similar transaction; provided that any such recapitalization shall not be
considered a Change of Control if the holders of Preferred Stock have the right
to participate on at least a pari passu basis.
(iv) The shareholders of the Corporation shall
have approved of the sale or other disposition of all or substantially all the
assets of the Corporation in one transaction or in a series of related
transactions;
(v) Any transaction occurs (other than one
described in (iii) above or (vi) below), the result of which is that the Common
Stock is not required to be registered under Section 12 of the Exchange Act and
that the holders of Common Stock do not receive common stock of the Person
surviving such transaction which is required to be registered under Section 12
of the Exchange Act; or
(vi) Immediately after any merger, consolidation,
recapitalization or similar transaction, Jack Phillips or a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) shall be the beneficial
owners, directly or indirectly, of outstanding shares of capital stock of the
Corporation (or any Person surviving such transaction) entitling them
collectively to exercise 50% or more of the total voting power of shares of
capital stock of the Corporation (or the surviving Person in such transaction)
and in connection with or as a result of such transaction, the Corporation (or
such surviving Person) shall have incurred or issued additional indebtedness
such that the total indebtedness so incurred or issued equals at least 50% of
the consideration payable in such transaction; provided that any such
transactions shall not be considered a Change of Control if the holders of
Preferred Stock have the right to participate on at least a pari passu basis.
"Common Stock" shall mean the common stock, par value $.01
per share, and each other class of capital stock of the Corporation into which
such stock is reclassified or reconstituted.
"Current Market Price" per share shall mean, on any date
specified herein for the determination thereof, (a) the average daily Market
Price of the Common Stock for those days during the period of 20 days, ending
on such date, which are Trading Days, and (b) if the Common Stock is not then
listed or admitted to trading on any national securities exchange or quoted in
the over-the-counter market, the Market Price on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Securities and Exchange
Commission thereunder.
"Fair Market Value" shall mean the amount which a willing buyer,
under no compulsion to buy, would pay a willing seller, under no compulsion to
sell, in an arm's-length transaction (assuming that the Common Stock is valued
"as if fully distributed" so that, among other things, there is no
consideration given for minority investment discounts or discounts related to
illiquidity or restrictions on transferability).
<PAGE> 17
"Issue Date" shall mean the original date of issuance of shares
of Preferred Stock to the holders pursuant to the Stock Purchase Agreement.
"Junior Stock" shall mean any capital stock of the corporation
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Preferred Stock including, without limitation, the Common
Stock.
"Liquidation Preference" with respect to a share of Preferred
Stock shall mean $1,000.00.
"Market Price" shall mean, per share of Common Stock on any
date specified herein: (a) the closing price per share of the Common Stock on
such date published in The Wall Street Journal or, if no such closing price on
such date is published in The Wall Street Journal, the average of the closing
bid and asked prices on such date, as officially reported on the principal
national securities exchange on which the Common Stock is then listed or
admitted to trading; (b) if the Common Stock is not then listed or admitted to
trading on any national securities exchange but is designated as a national
market system security, the last trading price of the Common Stock on such
date; or (c) if there shall have been no trading on such date or if the Common
Stock is not so designated, the average of the reported closing bid and asked
prices of the Common Stock on such date as shown by NASDAQ and reported by any
member firm of the NYSE, selected by the Corporation. If neither (a), (b) or
(c) is applicable, Market Price shall mean the Fair Market Value per share
determined in good faith by the Board of Directors of the Corporation which
shall be deemed to be Fair Market Value unless holders of at least 15% of the
outstanding shares of Preferred Stock request that the Corporation obtain an
opinion of a nationally recognized investment banking firm chosen by such
holders and the Corporation (at the Corporation's expense), in which event Fair
Market Value shall be as determined by such investment banking firm.
"NASDAQ" shall mean the National Market System of the NASDAQ
Stock Market.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Parity Stock" shall mean any capital stock of the corporation,
including the Preferred Stock, ranking on a par (either as to dividends or upon
liquidation, dissolution or winding up) with the Preferred Stock.
"Per Share Equity Value" of a share of Common Stock shall mean
the quotient obtained by dividing (a) the "as if fully distributed value" (so
that, among other things, there is no consideration given for any minority
investment discounts or discounts related to illiquidity or restrictions on
transferability) of all the Corporation's outstanding shares of Common Stock
(on a fully diluted basis), by (b) the number of outstanding shares of Common
Stock on a fully diluted basis.
"Person" shall mean any individual, firm, corporation,
partnership, limited liability company trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall any
successor (by merger) of such entity.
"Senior Stock" shall mean any capital stock of the Corporation
ranking senior (either as to dividends or upon liquidation, dissolution or
winding up) to the Preferred Stock.
"Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, dated April 19, 1999 between the Corporation and The 1818 Fund III,
L.P., as the same may be amended from time to time.
"Subsidiary" shall mean, with respect to any Person, a
corporation or other entity of which 50% or more of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly,
by such Person.
"Trading Days" shall mean a day on which the national securities
exchanges are open for trading.
<PAGE> 18
Section 13. Modification or Amendment.
Except as specifically set forth herein, modifications or
amendments to this Certificate of Designation may be made by the Corporation
with the consent of the holders of at least 50% of the outstanding shares of
Preferred Stock.
IN WITNESS WHEREOF, World Access, Inc. has caused this
Certificate to be duly executed in its corporate name on this 19th day of
April, 1999.
WORLD ACCESS, INC.
By:
-------------------------------------
Name: John D. Phillips
Title: CEO
<PAGE> 1
[WORLD ACCESS, INC. LOGO]
WORLD ACCESS RAISES $50 MILLION IN NEW CAPITAL
Company to Sell New Series of Convertible Preferred Stock to Fund Managed by
Brown Brothers Harriman & Co.
Lawrence C. Tucker to Join World Access Board of Directors
ATLANTA, GEORGIA - April 19, 1999 - World Access, Inc. (Nasdaq: WAXS) announced
today that it has entered into an agreement to raise $50 million in equity
capital through the sale of 50,000 newly issued shares of 4.25% Cumulative
Senior Perpetual Convertible Preferred Stock, Series A (the "Preferred Stock")
to The 1818 Fund III, L.P. In connection with the closing of the transaction
later this week, Lawrence C. Tucker, a partner at Brown Brothers Harriman & Co.
and a co-manager of The 1818 Funds, has agreed to join the Company's Board of
Directors.
The 1818 Funds are a family of private equity partnerships organized to acquire
substantial, non-controlling, long-term ownership positions in growing,
strongly positioned companies. The Funds have provided active early support and
capital to a number of highly successful telecommunications and media
companies, including MCI WorldCom and Frontier Vision. The General Partner of
the Funds is Brown Brothers Harriman & Co. ("BBH"), America's largest private
bank and the oldest owner-managed business partnership in the country. Lawrence
C. Tucker has been a partner of BBH since 1979 and currently serves as a
director of MCI WorldCom, National HealthCare Corporation, Riverwood
International Corporation and the MCI WorldCom Venture Fund.
John D. Phillips, President and Chief Executive Officer, said, "Although we are
obviously pleased to complete this transaction and further strengthen the
Company's balance sheet, we are particularly excited to add BBH as a strategic
partner. BBH and Larry Tucker have an excellent track record of assisting
management teams in building profitable, world-class telecommunications
companies. We expect Larry to play a key role in the development and execution
of World Access' future strategic plans."
"With the sale of the Preferred Stock, the Company now has cash balances
approaching $100 million as well as $75 million in available funds through a
revolving line of credit facility with a banking syndicate group led by Bank of
America. We believe the Company is in a strong financial condition and,
therefore, is well positioned to aggressively pursue the large number of
external and internal growth opportunities present within the Company's core
telecommunications markets."
<PAGE> 2
Mr. Tucker, partner at BBH, said, "World Access is in almost all respects a new
company since the mergers of last year. World Access represents a group of very
promising and complementary businesses in both the service and equipment
sectors has been brought together under strong leadership, and we are pleased
to be associated with the company at this interesting transition point in its
development."
The Preferred Stock pays dividends on a quarterly basis. Each share of
Preferred Stock is convertible into one share of Common Stock at $11.50 per
share. If the closing trading price of the Common Stock on The Nasdaq Stock
Market exceeds $30.00 per share for 45 consecutive trading days, the Preferred
Stock will be automatically converted into Common Stock. As part of the above
sale, The 1818 Funds also received an option to purchase, at the same price, an
additional $20 million in Preferred Stock from the Company prior to June 30,
2000.
World Access, Inc. provides international long distance voice and data services
and proprietary network equipment to the global telecommunications markets. The
World Access Telecommunications Group provides wholesale international long
distance service to over 200 foreign countries through a combination of its own
international network facilities, various international termination
relationships and resale arrangements with other international long distance
service providers. The World Access Equipment Group develops, manufactures and
markets digital switches, billing and network telemanagement systems, cellular
base stations, fixed wireless local loop systems, intelligent multiplexers,
digital microwave radio systems and other telecommunications network products.
For additional information, please refer to the World Access web site at
www.waxs.com.
THIS PRESS RELEASE MAY CONTAIN FINANCIAL PROJECTIONS OR OTHER
FORWARD-LOOKING STATEMENTS MADE PURSUANT TO THE SAFE HARBOR
PROVISIONS OF THE SECURITIES REFORM ACT OF 1995. SUCH
STATEMENTS INVOLVE RISKS AND UNCERTAINTIES WHICH MAY CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY. THESE RISKS INCLUDE THE
COMPANY'S ABILITY TO IDENTIFY, COMPLETE AND INTEGRATE
ACQUISITIONS, CONTINUE INTERNAL GROWTH, AND OTHER RISKS
DESCRIBED IN THE COMPANY'S SEC FILINGS, INCLUDING THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1998 AND THE COMPANY'S REGISTRATION STATEMENT ON
FORM S-3 (NO. 333-43497) INCORPORATED BY REFERENCE IN THIS
PRESS RELEASE.
WORLD ACCESS CONTACT: NANCY L. DE JONGE
(404-231-2025) DIRECTOR OF INVESTOR RELATIONS
http://www.waxs.com
