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EXHIBIT 4.1
CERTIFICATE OF DESIGNATION OF SERIES
AND DETERMINATION OF RIGHTS AND PREFERENCES
OF
SERIES G CONVERTIBLE PREFERRED STOCK
OF
CAIS INTERNET, INC.
CAIS Internet, Inc., a Delaware corporation (the "Company"), acting
pursuant to Section 151 of the General Corporation Law of Delaware, does hereby
submit the following Certificate of Designation of Series and Determination of
Rights and Preferences of its Series G Convertible Preferred Stock.
FIRST: The name of the Company is CAIS Internet, Inc.
SECOND: By unanimous consent of the Board of Directors of the Company (the
"Board"), dated as of March 17, 2000, the following resolutions were duly
adopted:
WHEREAS, the Company's Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") authorizes the issuance of up to 25,000,000
shares of preferred stock, par value $.01 per share (the "Preferred Stock"),
issuable from time to time in one or more series; and
WHEREAS, the Board is authorized, subject to certain limitations prescribed
by law and certain provisions of the Certificate of Incorporation, to establish
and fix the number of shares to be included in any series of Preferred Stock and
the designations, rights, preferences, powers, restrictions and limitations of
the shares of such series; and
WHEREAS, the Board deems it advisable to establish a series of Preferred
Stock, designated as Series G Convertible Preferred Stock, par value $.01 per
share (the "Series G Stock");
NOW, THEREFORE, BE IT RESOLVED, that the series of Preferred Stock
designated as Series G Stock is hereby authorized and established; and be it
FURTHER, RESOLVED, that the Series G Stock shall have the powers,
designations, preferences, rights, qualifications, and limitations as stated in
a certain Certificate of Designation of Series and Determination of Rights and
Preferences of Series G Convertible Preferred Stock, as follows:
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Section 1. Designation; Rank.
(a) This series of cumulative convertible Preferred Stock shall be
designated and known as the "Series G Preferred Stock." The number of shares
constituting the Series G Preferred Stock shall be 28,051 shares (including
8,051 shares of Series G Preferred Stock reserved exclusively for the payment of
dividends pursuant to Section 2).
(b) The Series G Preferred Stock shall, with respect to dividends and
rights upon liquidation, dissolution or winding up, whether voluntary or
involuntary, rank (i) senior to the common stock of the Company, par value $.01
per share (the "Common Stock"), and to each other class of capital stock or
series of Preferred Stock or other equity-linked security established after the
date on which the first share of Series G Preferred Stock is issued by the
Company under this Certificate of Designation (the "Original Issuance Date"),
the terms of which do not expressly provide that it ranks senior to or on a
parity with the Series G Preferred Stock as to dividends and rights upon
liquidation, dissolution or winding up, whether voluntary or involuntary
(collectively referred to with the Common Stock as "Junior Securities"); (ii) on
parity with any additional shares of Series G Preferred Stock issued by the
Company in the future, Series F Convertible Preferred Stock ("Series F Shares"),
and any other class of capital stock or series of Preferred Stock or other
equity-linked security established after the Original Issuance Date, the terms
of which expressly provide that it will rank on a parity with the Series G
Preferred Stock as to dividends and rights upon liquidation, dissolution or
winding up, whether voluntary or involuntary (collectively referred to as
"Parity Securities"); and (iii) junior to the Company's Series C Convertible
Preferred Stock ("Series C Shares"), Series D Convertible Participating
Preferred Stock ("Series D Shares"), Series E Convertible Participating
Preferred Stock ("Series E Shares") and to each other class of capital stock or
series of Preferred Stock or other equity-linked security issued by the Company
after the Original Issuance Date the terms of which expressly provide that it
will rank senior to the Series G Preferred Stock as to dividends and rights upon
liquidation, dissolution or winding up, whether voluntary or involuntary
(collectively referred to as "Senior Securities").
Section 2. Dividends.
(a) The holders of outstanding shares of Series G Preferred Stock shall be
entitled to receive, and the Board of Directors shall declare, if assets of the
Company are by law available for such payment, cumulative dividends, payable in
additional shares of Series G Preferred Stock, at a rate per annum equal to 6.0%
of the sum of (i) $1,000 per share and (ii) all accrued and unpaid dividends on
such shares of Series G Preferred Stock, in each case, as appropriately adjusted
for any recapitalizations, stock dividends, combinations or splits or the like,
and no more, payable quarterly on the fifteenth day of December, March, June and
September in each year commencing with a payment on September 15, 2000 of
dividends accrued from the date of issuance (the "Payment Date"). The amount of
the dividend payable for each such quarter shall equal 1.5%.
(b) Dividends shall accrue whether or not the Company has earnings or
profits, whether or not there are funds legally available for payment of such
dividends
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and whether or not dividends are declared. Dividends will accrue to the extent
that they are not paid. The Company shall take all actions required or permitted
under the General Corporation Law of Delaware to permit the payment of dividends
on the Series G Preferred Stock and shall declare and pay such dividends to the
extent that there are funds legally available therefor.
(c) So long as any shares of Series G Preferred Stock are outstanding,
unless full cumulative dividends on all outstanding shares of Series G Preferred
Stock for all past dividends have contemporaneously been declared and paid in
full or declared and consideration sufficient for the payment thereof set apart
for such payment on the Series G Preferred Stock, then (i) no dividend shall be
declared or paid upon, or any sum set apart for the payment of dividends upon,
any shares of Parity Securities; (ii) no other distribution shall be declared or
made upon, or any sum set apart for the payment of any distribution upon, any
shares of Parity Securities; (iii) no shares of Parity Securities shall be
purchased, redeemed or otherwise acquired or retired for value (except by
conversion into or an exchange for shares of Junior Securities) by the Company
or any entity as to which the Company owns, directly or indirectly, more than
50% of such entity's stock (or similar voting interests) entitled to vote
generally in the election of directors (or other governing body) (a
"Subsidiary"); and (iv) no monies shall be paid into or set apart or made
available for a sinking or other like fund for the purchase, redemption or other
acquisition or retirement for value of any shares of Parity Securities by the
Company or any of its Subsidiaries. When dividends are not paid in full or
consideration sufficient for such payment is not set apart, as aforesaid, all
dividends declared upon any other class or series of Parity Securities shall be
declared ratably in proportion to the respective amounts of dividends accrued
and unpaid on the Series G Preferred Stock and accrued and unpaid on such Parity
Securities.
(d) Unless full cumulative dividends on all outstanding shares of Series G
Preferred Stock for all past dividends have been declared and paid in full or
declared and consideration sufficient for the payment thereof set apart for such
payment on the Series G Preferred Stock, then (i) no dividend (other than a
dividend payable solely in shares of any Junior Securities) shall be declared or
paid upon, or any sum set apart for the payment of dividends upon, any shares of
Junior Securities; (ii) no other distribution shall be declared or made upon, or
any sum set apart for the payment of any distribution upon, any shares of Junior
Securities; (iii) no shares of Junior Securities shall be purchased, redeemed or
otherwise acquired or retired for value (excluding an exchange for shares of
other Junior Securities) by the Company or any of its Subsidiaries; and (iv) no
monies shall be paid into or set apart or made available for a sinking or other
like fund for the purchase, redemption or other acquisition or retirement for
value of any shares of Junior Securities by the Company or any of its
Subsidiaries.
Section 3. Liquidation Preference.
(a) Upon any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, before any distribution or payment shall be
made to the holders of any Junior Securities, the holders of Series G Preferred
Stock shall be entitled to be paid out of the remaining assets of the Company
legally available for distribution with
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respect to each share of Series G Preferred Stock an amount equal to the sum of
(i) $1,000.00 per share, as adjusted for any recapitalizations, stock dividends,
combinations or splits or the like with respect to such shares (the "Original
Series G Issue Price") plus (ii) any accrued but unpaid dividends thereon
(whether or not declared) (such sum, the "Series G Liquidation Value"). If upon
any such liquidation, dissolution or winding up of the Company the remaining
assets of the Company available for distribution to its stockholders shall be
insufficient to pay the holders of shares of Series G Preferred Stock the full
Series G Liquidation Value and the holders of all Parity Securities the full
liquidation preference thereof, the holders of shares of Series G Preferred
Stock and any such other Parity Securities shall share ratably in any
distribution of the remaining assets of the Company in proportion to the
respective amounts which would otherwise be payable in respect of the shares
held by them upon such distribution if all amounts payable on or with respect to
such shares were paid in full.
(b) After payment in full of the Series G Liquidation Value and the full
liquidation preference amounts with respect to all Parity Securities, the
remaining assets of the Company legally available for distribution, if any,
shall be distributed to the holders of any Junior Securities and to all of the
holders of shares of Series G Preferred Stock (and all other holders of Senior
Securities and Parity Securities, the terms of which so require) on an as-
converted basis.
(c) The value of any property not consisting of cash which is distributed
by the Company to the holders of the Series G Preferred Stock pursuant to
Section 3(a) or otherwise will equal the Fair Market Value (as defined below)
thereof. For purposes hereof, the "Fair Market Value" of any property shall mean
the fair market value thereof as determined in good faith by the Board;
provided, however, that the value of any securities will be determined as
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follows:
(i) Securities not subject to investment letter or other similar
restrictions on free marketability covered by (ii) below:
(A) If traded on a securities exchange or through the Nasdaq
National Market, the value shall be deemed to be the
average of the closing prices of the securities on such
quotation system over the thirty (30) day period ending
three (3) days prior to the closing;
(B) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period
ending three (3) days prior to the closing; and
(C) If there is no active public market, the value shall be the
fair market value thereof, as mutually determined by the
Board and the holders of at least a majority of the voting
power of all then outstanding shares of Series G Preferred
Stock.
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(ii) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status
as an affiliate or former affiliate) shall be to make an
appropriate discount from the market value determined as above
in (i)(A), (B) or (C) to reflect the approximate fair market
value thereof, as mutually determined by the Board and the
holders of at least a majority of the voting power of all then
outstanding shares of Series G Preferred Stock.
(d) For purposes of this Section 3, a merger or consolidation of the
Company with or into another entity or entities, or a sale, lease, transfer or
other disposition of all or substantially all of the Company's assets or stock
of its Subsidiaries shall be deemed a liquidation, dissolution or winding up of
the Company with respect to the Series G Preferred Stock, unless the
stockholders of the Company immediately prior to such transaction hold at least
50% of the outstanding voting securities of the entity surviving or resulting
from such transaction.
Section 4. Voting Rights.
Except as set forth in Section 8.1 of the Series G Preferred Stock Purchase
Agreement, dated as of March 20, 2000, between the Company and 3Com Corporation,
each holder of outstanding shares of Series G Preferred Stock shall be entitled
to the number of votes equal to the number of whole shares of Common Stock into
which all of the shares of Series G Preferred Stock held by such holder are
convertible (as adjusted from time to time pursuant to Section 5 hereof), at
each meeting of stockholders of the Company (and written actions of stockholders
in lieu of meetings) with respect to any and all matters presented to the
stockholders of the Company for their action or consideration. Except as
provided by law or by the express provisions hereof, holders of Series G
Preferred Stock shall vote together with the holders of Common Stock as a single
class.
Section 5. Conversion Rights.
The holders of the Series G Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series G Preferred Stock shall be
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convertible, at the option of the holder thereof, at any time and from time to
time, into such number of fully paid and nonassessable shares of Common Stock as
is determined by dividing the Original Series G Issue Price by the Conversion
Price (as defined below) in effect at the time of conversion. The Conversion
Price at which shares of Common Stock shall be deliverable upon conversion of
Series G Preferred Stock without the payment of additional consideration by the
holder thereof (the "Conversion Price") shall initially be thirty-six dollars
($36). Such initial Conversion Price and the rate at which shares of Series G
Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided below.
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In the event of a liquidation of the Company as set forth in Section 3
above, the Conversion Rights shall terminate at the close of business on the
first full day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of Series G Preferred Stock.
(b) Fractional Shares. No fractional shares of Common Stock shall be
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issued upon conversion of the Series G Preferred Stock. In lieu of fractional
shares, the Company shall pay cash equal to such fraction multiplied by the then
effective Conversion Price.
(c) Mechanics of Conversion.
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(i) In order to convert shares of Series G Preferred Stock into
shares of Common Stock, the holder shall surrender the
certificate or certificates for such shares of Series G
Preferred Stock at the office of the transfer agent (or at the
principal office of the Company if the Company serves as its own
transfer agent), together with written notice that such holder
elects to convert all or any number of the shares represented by
such certificate or certificates. Such notice shall state the
number of shares of Series G Preferred Stock which the holder
seeks to convert. If required by the Company, certificates
surrendered for conversion shall be endorsed or accompanied by a
written instrument or instruments of transfer, in form
satisfactory to the Company, duly executed by the registered
holder or his or its attorney duly authorized in writing. The
date of receipt of such certificates and notice by the transfer
agent or the Company shall be the conversion date ("Conversion
Date"). As soon as practicable after the Conversion Date, the
Company shall promptly issue and deliver at such office to such
holder a certificate or certificates for the number of shares of
Common Stock to which such holder is entitled. Such conversion
shall be deemed to have been made at the close of business on
the date of such surrender of the certificate representing the
shares of Series G Preferred Stock to be converted, and the
person entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock on such date.
(ii) The Company shall at all times during which the Series G
Preferred Stock shall be outstanding, reserve and keep available
out of its authorized but unissued stock, for the purpose of
effecting the conversion of the Series G Preferred Stock, such
number of its duly authorized shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all
outstanding Series G Preferred Stock. Before taking any action
which would cause an adjustment reducing the Conversion Price
below the then par value of the shares of Common Stock issuable
upon conversion of the Series G Preferred Stock, the Company
will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may
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validly and legally issue fully paid and nonassessable shares of
Common Stock at such adjusted Conversion Price.
(iii) Upon any conversion, the Company shall promptly pay in cash or,
to the extent sufficient funds are not then legally available
therefor, in Common Stock (at the Common Stock's Fair Market
Value as of the date of such conversion) or a combination of
cash and Common Stock, any accrued but unpaid dividends (whether
or not declared) on the shares of Series G Preferred Stock being
converted.
(iv) All shares of Series G Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such
shares, including the rights, if any, to receive dividends,
notices and to vote, shall immediately cease and terminate on
the Conversion Date, except only the right of the holders
thereof to receive shares of Common Stock in exchange therefor,
and if applicable, cash for any fractional shares of Common
Stock. Any shares of Series G Preferred Stock so converted shall
be retired and cancelled and shall not be reissued, and the
Company may from time to time take such appropriate action as
may be necessary to reduce the number of shares of authorized
Series G Preferred Stock accordingly.
(v) If the conversion is in connection with an underwritten offering
of securities registered pursuant to the Securities Act of 1933,
as amended (the "1933 Act"), the conversion may, at the option
of any holder tendering Series G Preferred Stock for conversion,
be conditioned upon the closing with the underwriter of the sale
of securities pursuant to such offering, in which event the
person(s) entitled to receive the Common Stock issuable upon
such conversion of the Series G Preferred Stock shall not be
deemed to have converted such Series G Preferred Stock until
immediately prior to the closing of the sale of securities.
(d) Adjustments to Conversion Price for Diluting Issues.
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(i) Special Definitions. For purposes of this Subsection 5(d), the
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following definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock
or Convertible Securities, excluding rights or options
granted to employees, vendors, officers, directors and
executives of, and consultants or shareholders to, the
Company in an amount not exceeding the number of Reserved
Employee Shares.
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(B) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or
indirectly convertible into or exchangeable for Common
Stock.
(C) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued (or, pursuant to Subsection
5(d)(iii) below, deemed to be issued) by the Company after
the Original Issuance Date, other than Reserved Employee
Shares and other than shares of Common Stock issued or
issuable:
(1) as a dividend or distribution on Series G Preferred
Stock, Series C Shares, Series D Shares, Series E
Shares or Series F Shares;
(2) by reason of the issuance of Series D Shares or
Series E Shares pursuant to the Preferred Stock
Purchase Agreement between the Company and CII
Ventures LLC, dated as of December 20, 1999;
(3) by reason of the issuance of Series F Shares pursuant
to the Series F Preferred Stock Purchase Agreement
between the Company and Microsoft Corporation, dated
as of April 28, 2000;
(4) by reason of a dividend, stock split, split-up or
other distribution on shares of Common Stock;
(5) upon the exercise of Options;
(6) upon conversion of Series C Shares, Series D Shares,
Series E Shares, Series F Shares or Series G Preferred
Stock;
(7) pursuant to warrants issued by the Company pursuant to
(a) the Common Stock Warrant dated as of October 27,
1999 and the Series C Preferred Stock Purchase
Agreement, dated as of September 29, 1999, between the
Company and U.S. Telesource, Inc. (the "Qwest
Warrant"), (b) the Warrant Agreement dated as of
September 4, 1998 among the Company, Cleartel
Communications, Inc., CAIS, Inc. and ING (U.S.)
Capital Corporation, Inc. (the "ING Warrant
Agreement"), (c) the Series A Preferred Stock and
Warrant Purchase Agreement dated as of February 19,
1999 among the Company and the several purchasers set
forth therein, (d) the Warrant to Purchase Common
Stock issued pursuant to the First Amendment to the
Master License Agreement, dated as of April 23, 1999,
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among the Company, CAIS, Inc., and Hilton Hotels
Corporation (the "Hilton Warrant"), (e) the Common
Stock Warrant dated as of April 28, 2000, issued to
Microsoft Corporation (the "Microsoft Warrant") and
(f) the Master Agreement for Hotel Internet Service
dated as of February 1, 2000, between CAIS, Inc. and
Bass Hotels and Resorts, Inc.;
(8) to a corporation, partnership or other entity with
which the Company is seeking to establish a
partnership, joint venture or other business
relationship when the total number of shares of Common
Stock so issuable or issued does not exceed 1,000,000
shares (as appropriately adjusted for any stock
dividends, combinations, splits or the like with
respect to shares of Common Stock), provided the
Company receives at least 95% of Fair Market Value for
such shares;
(9) in connection with any high-yield debt financing
undertaken by the Company, not to exceed 2,000,000
shares of Common Stock in the aggregate, provided that
the Company receives at least 95% of Fair Market Value
for such shares (or, in the case of Convertible
Securities, the conversion or exercise price therefor
is at least 95% of the Fair Market Value of the Common
Stock on the date of issuance of the Convertible
Securities);
(10) pursuant to the Agreement and Plan of Merger among the
Company, Business Anywhere USA, Inc., CIBA Merger
Corp., Kim Kao, and Amy Hsiao dated September 7, 1999,
including without limitation, the conversion of
Business Anywhere options into options to acquire
Common Stock and the issuance of shares of Common
Stock upon the exercise thereof, not to exceed 288,371
shares of Common Stock in the aggregate;
(11) in connection with the acquisition by the Company of
the securities or assets of another corporation,
partnership or other entity, provided the Company
receives at least 95% of Fair Market Value for such
shares; and
(12) pursuant to the Agreement and Plan of Merger among the
Company, CIAM Corp. and Atcom, Inc. dated August 4,
1999, as amended, including without limitation, the
conversion of Atcom options into
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options to acquire Common Stock as described therein,
the issuance of shares of Common Stock upon the
exercise thereof and the issuance of Common Stock
constituting "Contingent Consideration" as defined
therein, not to exceed 2,654,826 shares of Common
Stock in the aggregate.
(D) "Reserved Employee Shares" shall mean shares of Common
Stock issued to employees, officers, directors,
shareholders and executives of, and consultants or vendors
to, the Company of up to: (i) 5,000,000 shares (as
appropriately adjusted for any stock dividends,
combinations, splits or the like with respect to shares of
Common Stock), plus such additional number of shares of
Common Stock issued or deemed issued for like purposes as
shall be approved by holders of at least a majority of the
voting power of all then outstanding shares of Series G
Preferred Stock, voting together as a single class; plus
(ii) shares reserved, as of the date hereof, for issuance
upon the exercise of outstanding Options to purchase up to
3,031,495 shares of Common Stock presently held by certain
management employees of the Company. Such Reserved Employee
Shares shall be issued, at any time, and from time to time,
under such arrangements, contracts or plans as are
recommended by the Company's management and approved by the
Board.
(E) "Rights to Acquire Common Stock" (or "Rights") shall mean
all rights issued by the Company to acquire Common Stock
whether by exercise of a warrant, option or similar call,
or conversion of any existing instruments, in either case
for consideration fixed, in amount or by formula, as of the
date of issuance.
(ii) No Adjustment of Conversion Price. No adjustment in the number
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of shares of Common Stock into which the Series G Preferred
Stock is convertible shall be made, by adjustment in the
applicable Conversion Price thereof, unless the Fair Market
Value of the consideration per share (determined pursuant to
Subsection 5(d)(v) below) received by the Company for an
Additional Share of Common Stock issued or deemed to be issued
by the Company is less than the greater of 95% of the Fair
Market Value per share of the Common Stock or the applicable
Conversion Price in effect on the date of, and immediately prior
to, the issue of such additional shares, or if prior to such
issuance, the Company receives written notice from the holders
of at least a majority of the voting power of all then
outstanding shares of Series G Preferred Stock, voting together
as a single class, agreeing that no such
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adjustment shall be made as the result of the issuance of
Additional Shares of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of Common
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Stock. If the Company at any time or from time to time after
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the Original Issuance Date shall issue any Options or
Convertible Securities or Rights to Acquire Common Stock, then
the maximum number of shares of Common Stock (as set forth in
the instrument relating thereto without regard to any provision
contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options, Rights to Acquire
Common Stock or, in the case of Convertible Securities, the
conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the
time of such issue; provided, however, that Additional Shares of
Common Stock shall not be deemed to have been issued unless the
Fair Market Value of the consideration per share (determined
pursuant to Subsection 5(d)(v) hereof) received by the Company
for such Additional Shares of Common Stock would be less than
the greater of 95% of the Fair Market Value per share of Common
Stock or the applicable Conversion Price in effect on the date
of and immediately prior to such issue, or such record date, as
the case may be, and provided, further, that in any such case:
(A) No further adjustment in the Conversion Price shall be made
upon the subsequent issue of shares of Common Stock upon
the exercise of such Options, Rights or conversion or
exchange of such Convertible Securities;
(B) Upon the expiration or termination of any unexercised
Option, Right or Convertible Security, the Conversion Price
shall be adjusted immediately to reflect the applicable
Conversion Price which would have been in effect had such
Option, Right or Convertible Security (to the extent
outstanding immediately prior to such expiration or
termination) never been issued; and
(C) In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or
exchange of any Option, Right or Convertible Security,
including, but not limited to, a change resulting from the
anti-dilution provisions thereof, the Conversion Price then
in effect shall forthwith be readjusted to such Conversion
Price as would have obtained had the Conversion Price
adjustment that was originally made upon the issuance of
such Option, Right or Convertible Security which were not
exercised or converted prior to such change been made upon
the basis of such change, but no further adjustment shall
be made for the actual issuance of
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Common Stock upon the exercise or conversion of any such
Option, Right or Convertible Security.
(iv) Adjustment of Conversion Price upon Issuance of Additional
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Shares of Common Stock. If the Company shall at any time after
----------------------
the Original Issuance Date issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be
issued pursuant to Subsection 5(d)(iii), but excluding shares
issued as a dividend or distribution as provided in Subsection
5(f) or upon a stock split or combination as provided in
Subsection 5(e)), without consideration, or for a consideration
per share less than the greater of 95% of the Fair Market Value
per share of Common Stock or the applicable Conversion Price in
effect on the date of and immediately prior to such issue, or
without the requisite number of notices contemplated by
Subsection 5(d)(ii) hereof, then and in such event, such
Conversion Price shall be reduced, concurrently with such issue,
to a price (calculated to the nearest cent) determined by
multiplying such Conversion Price by a fraction, the numerator
of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of
shares of Common Stock which the aggregate consideration
received by the Company for the total number of Additional
Shares of Common Stock so issued would purchase at the greater
of 95% of the Fair Market Value per share of Common Stock or
such Conversion Price; and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior
to such issue plus the number of such Additional Shares of
Common Stock so issued.
Notwithstanding the foregoing, the applicable Conversion Price
shall not be reduced if the amount of such reduction would be an
amount less than $.03, but any such amount shall be carried
forward and reduction with respect thereto made at the time of
and together with any subsequent reduction which, together with
such amount and any other amount or amounts so carried forward,
shall aggregate $.03 or more.
(v) Determination of Consideration. For purposes of this Subsection
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5(d), the Fair Market Value of the consideration received by the
Company for the issue of any Additional Shares of Common Stock
shall be computed as follows:
(A) Cash and Property. Such consideration shall:
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(1) insofar as it consists of cash, be computed at the
aggregate of cash received by the Company, excluding
amounts paid or payable for accrued interest or
accrued dividends;
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(2) insofar as it consists of property other than cash, be
computed at the Fair Market Value thereof at the time
of such issue, as determined in good faith by the
Board; and
(3) in the event Additional Shares of Common Stock are
issued together with other shares or securities or
other assets of the Company for consideration which
covers both, be the proportion of such consideration
so received, computed as provided in clauses (1) and
(2) above, as determined in good faith by the Board.
(B) Options, Rights and Convertible Securities. The
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consideration per share received by the Company for
Additional Shares of Common Stock deemed to have been
issued pursuant to Subsection 5(d)(iii), relating to
Options, Rights and Convertible Securities, shall be
determined by dividing
(1) the total amount, if any, received or receivable by
the Company as consideration for the issue of such
Options, Rights or Convertible Securities, plus the
minimum aggregate amount of additional consideration
(as set forth in the instruments relating thereto,
without regard to any provision contained therein for
a subsequent adjustment of such consideration) payable
to the Company upon the exercise of such Options,
Rights or the conversion or exchange of such
Convertible Securities, by
(2) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without
regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon
the exercise of such Options, Rights or the conversion
or exchange of such Convertible Securities.
(e) Adjustment for Stock Splits and Combinations. If the Company shall at
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any time or from time to time after the Original Issuance Date effect a
subdivision of the outstanding Common Stock, the Conversion Price then in effect
immediately before that subdivision shall be proportionately decreased. If the
Company shall at any time or from time to time after the Original Issuance Date
combine the outstanding shares of Common Stock, the Conversion Price then in
effect immediately before the combination shall be proportionately increased.
Any adjustment under this paragraph shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the event the
--------------------------------------------------
Company at any time or from time to time after the Original Issuance Date shall
make or
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issue a dividend or other distribution payable in Additional Shares of Common
Stock, then and in each such event the Conversion Price shall be decreased as of
the time of such issuance, by multiplying the Conversion Price by a fraction,
the numerator of which shall be the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance, and the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance plus the number
of shares of Common Stock issuable in payment of such dividend or distribution.
(g) Adjustments for Other Dividends and Distributions. In the event the
-------------------------------------------------
Company at any time, or from time to time after the Original Issuance Date shall
make or issue, a dividend or other distribution payable in securities of the
Company other than shares of Common Stock, then and in each such event provision
shall be made so that the holders of shares of the Series G Preferred Stock
shall receive upon conversion thereof in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the Company that
they would have received had their Series G Preferred Stock been converted into
Common Stock on the date of such event and had thereafter, during the period
from the date of such event to and including the Conversion Date, retained such
securities receivable by them as aforesaid during such period given application
to all adjustments called for during such period, under this paragraph with
respect to the rights of the holders of the Series G Preferred Stock.
(h) Adjustment for Reclassification, Exchange or Substitution. Except as
---------------------------------------------------------
provided in Section 3, if the Common Stock issuable upon the conversion of the
Series G Preferred Stock shall be changed into the same or a different number of
shares of any class or classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above), then and in each such event the
holder of each share of Series G Preferred Stock shall have the right thereafter
to convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change, by holders of the number of shares of Common Stock into which
such shares of Series G Preferred Stock might have been converted immediately
prior to such reorganization, reclassification, or change, all subject to
further adjustment as provided herein.
(i) No Impairment. The Company will not, by amendment of its Certificate
-------------
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series G Preferred Stock against impairment to the extent required hereunder.
(j) Certificate as to Adjustments. Upon the occurrence of each adjustment
-----------------------------
or readjustment of the Conversion Price pursuant to this Section 5, the Company
at its expense shall promptly compute such adjustment or readjustment in
accordance with the
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terms hereof and furnish to each holder, if any, of Series G Preferred Stock
outstanding a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based
and shall file a copy of such certificate with its corporate records. The
Company shall, upon the reasonable written request of any holder of Series G
Preferred Stock, furnish or cause to be furnished to such holder a similar
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price then in effect, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which then would be received upon the
conversion of Series G Preferred Stock. Despite such adjustment or readjustment,
the form of each or all Series G Preferred Stock certificates, if the same shall
reflect the initial or any subsequent Conversion Price, need not be changed in
order for the adjustments or readjustments to be valid in accordance with the
provisions of this Certificate, which shall control.
(k) Notice of Record Date. In the event
---------------------
(i) that the Company declares a dividend (or any other distribution)
on its Common Stock payable in Common Stock or other securities
of the Company;
(ii) that the Company subdivides or combines its outstanding shares
of Common Stock;
(iii) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding
shares of Common Stock or a stock dividend or stock distribution
thereon); or
(iv) of a merger or consolidation of the Company with or into another
entity or entities, or a sale, lease, transfer or other
disposition of all or substantially all of the Company's assets,
property or business, or the involuntary or voluntary
dissolution, liquidation or winding up of the Company;
then the Company shall cause to be filed at its principal office or at the
office of the transfer agent of the Series G Preferred Stock, and shall cause to
be mailed to the holders of the Series G Preferred Stock, by first class mail,
postage prepaid, at their last addresses as shown on the records of the Company,
or such transfer agent, at least 10 days prior to the record date specified in
(A) below or 20 days before the date specified in (B) below, a notice stating
(A) the record date of such dividend, distribution, subdivision
or combination, 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, subdivision or
combination are to be determined, or
(B) the date on which such reclassification, dissolution,
liquidation or winding up is expected to become effective,
and the date as
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of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon
such reclassification, dissolution or winding up.
Section 6. Mandatory Redemption.
(a) Upon the fifth anniversary of the Original Issuance Date, the Company
shall redeem, out of assets of the Company which are, by law, available for such
payment, all shares of Series G Preferred Stock (then outstanding and not
previously converted pursuant to Section 5), at a price per share equal to the
Original Series G Issue Price, plus any accrued but unpaid dividends thereon
(whether or not declared).
(b) The following events shall constitute "Mandatory Redemption Events"
for purposes hereof unless the holders of at least a majority of the voting
power of all then outstanding shares of Series G Preferred Stock, voting
together as a single class, vote otherwise:
(i) any merger, consolidation, reorganization or other business
combination of the Company in which the stockholders of the
Company immediately prior to such transaction will, immediately
after such transaction (by virtue of securities issued in the
transaction or otherwise), beneficially own (as determined
pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), capital stock
representing less than 50% of the voting power of the surviving
entity's voting stock immediately after such transaction;
(ii) a sale of all or substantially all of the assets of the Company
to any other entity, where the Company's stockholders
immediately prior to such sale will, immediately after such sale
(by virtue of securities issued as consideration for the
Company's sale or otherwise), beneficially own (as determined
pursuant to Rule 13d-3 under the Exchange Act) capital stock
representing less than 50% of the voting power of the acquiring
entity's voting stock;
(iii) any acquisition of voting stock of the Company by a person or
"group" (as such term is defined in Section 13(d)(3) of the
Exchange Act) (other than Ulysses G. Auger, Sr., Ulysses G.
Auger, II, William M. Caldwell, IV and/or Evans K. Anderson) in
a purchase or transaction or series of purchases or transactions
if immediately thereafter such person or group has, or would
have, ultimate "beneficial ownership" (as defined in Rule 13d-3
under the Exchange Act) of more than 50% of the combined voting
power of the Company's then outstanding voting stock;
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(iv) individuals who at the beginning of any period of three
consecutive calendar years constituted the Board of Directors
(together with any directors who are members of the Board on the
Original Issuance Date and any new directors whose election by
the Board of Directors or whose nomination for election by the
Company's stockholders was approved by a vote of at least a
majority of the members of the Board of Directors then still in
office who either were members of the Board of Directors at the
beginning of such period or whose election or nomination for
election was previously so approved) cease to constitute at
least a majority of the members of the Board of Directors then
in office;
(v) (A) an assignment by the Company for the benefit of creditors,
(B) the filing by the Company of a petition to have the Company
adjudged insolvent, bankrupt or seeking a reorganization or
liquidation under any law relating to bankruptcy, insolvency or
receivership, (C) an appointment of a receiver or trustee for
all or substantially all of the assets of the Company, unless
appointed without the Company's consent, in which case if after
sixty (60) days such appointment has not been vacated or stayed,
(D) a public admission in writing of the Company's inability
generally to pay its debts as they come due, or (E) the adoption
of a plan of liquidation or dissolution by the Board of
Directors of the Company; or
(vi) the execution of, or entering into by the Company, an agreement
to do any of the above.
(c) Upon the occurrence of any Mandatory Redemption Event, the Company
shall redeem, out of the assets of the Company which are, by law, available for
such payment, and subject to any obligation in respect of Senior Securities and
any Parity Securities, all of the Series G Preferred Stock then issued and
outstanding, at a price per share equal to the Original Series G Issue Price,
plus any accrued but unpaid dividends thereon (whether or not declared).
(d) At least twenty (20) but not more than sixty (60) days prior to any
date on which the Company must redeem shares of the Series G Preferred Stock
pursuant to Section 6(a) (each a "Redemption Date," together the "Redemption
Dates"), the Company shall send a notice (the "Redemption Notice") to all
holders of the outstanding Series G Preferred Stock of such redemption to be
effected, specifying the number of shares to be redeemed from such holder, the
Redemption Date, the price per share to be paid (the "Redemption Price") and the
place at which payment may be obtained.
(e) On or prior to the Redemption Date, the Company shall deposit the
Redemption Price of all shares to be redeemed as of such date with a bank or
trust company having aggregate capital and surplus in excess of $50,000,000, as
a trust fund, with irrevocable instructions and authority to the bank or trust
company to pay, upon receipt of notice from the Company that such holder has
surrendered the Series G
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Preferred Stock share certificates in accordance with Section 6(f), the
Redemption Price of the shares to their respective holders. Any moneys deposited
by the Company pursuant to this Section 6(e) for the redemption of shares
thereafter converted into shares of Common Stock pursuant to Section 5 hereof no
later than the fifth (5th) day preceding the Redemption Date shall be returned
to the Company forthwith upon such conversion. The balance of any funds
deposited by the Company pursuant to this Section 6(e) remaining unclaimed at
the expiration of one (1) year following such Redemption Date shall be returned
to the Company promptly upon its written request.
(f) On such Redemption Date, each holder of shares of Series G Preferred
Stock to be redeemed shall surrender such holder's certificates representing
such shares to the Company in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by such
certificates are redeemed, a new certificate shall be issued representing the
unredeemed shares. From and after such Redemption Date, unless there shall have
been a default in payment of the Redemption Price or the Company is unable to
pay the Redemption Price due to not having sufficient legally available funds,
all rights of the holder of such shares as a holder of Series G Preferred Stock
(except the right to receive the Redemption Price without interest upon
surrender of their certificates), shall cease and terminate with respect to such
shares; provided that in the event that shares of Series G Preferred Stock are
not redeemed due to a default in payment by the Company or because the Company
does not have sufficient legally available funds, such shares of Series G
Preferred Stock shall remain outstanding and shall be entitled to all of the
rights and preferences provided herein.
(g) Shares subject to redemption pursuant to this Section 6 shall be
redeemed from each holder of Series G Preferred Stock on a pro rata basis.
(h) If upon any Redemption Date the assets of the Company available for
redemption are insufficient to pay the redeeming holders of outstanding shares
of Series G Preferred Stock the full amounts to which they are entitled, all
shares of the Series G Preferred Stock will be redeemable for cash upon demand.
The shares of Series G Preferred Stock not redeemed shall remain outstanding and
entitled to all the powers, preferences and rights provided herein. At any
time thereafter when additional funds of the Company are legally available for
the redemption of shares of Series G Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which the Company has
become obligated to redeem on any Redemption Date but which it has not redeemed.
(i) In the event of a call for redemption of any shares of Series G
Preferred Stock, the Conversion Rights (as defined in Section 5) for such Series
G Preferred Stock shall terminate as to the shares designated for redemption at
the close of business on the fifth (5th) day preceding the Redemption Date,
unless default is made in payment of the Redemption Price.
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(j) The Company will not enter into any contract or agreement (whether
verbal or written) restricting or impairing its ability to redeem shares of the
Series G Preferred Stock in accordance with this Section 6.
[Signatures appear on the following page]dc-199909
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IN WITNESS WHEREOF, the Company has caused this Certificate of Designation
to be executed this 26th day of June 2000.
CAIS INTERNET, INC
By /s/ Ulysses G. Auger, II
________________________________
Name: Ulysses G. Auger, II
Title: Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/ Michael G. Plantamura
___________________________
Michael G. Plantamura
Secretary
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