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Exhibit 3.1
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CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES A SENIOR CUMULATIVE PREFERRED
STOCK
of
CHOICE ONE COMMUNICATIONS INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Choice One Communications Inc., a Delaware corporation (the "Corporation"),
hereby certifies that, pursuant to the authority expressly vested in the Board
of Directors of the Corporation by its Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), and in accordance with the provisions of
Sections 103 and 151 of the General Corporation Law of the State of Delaware,
the Board of Directors has duly adopted the following resolutions.
RESOLVED, that, pursuant to Article FOURTH of the Certificate of
Incorporation, which authorizes 5,000,000 shares of preferred stock, $0.01 par
value per share, of the Corporation (the "Preferred Stock"), the Board of
Directors hereby fixes the powers, designations, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions, of a series of Preferred Stock.
RESOLVED, that each share of such series of Preferred Stock shall rank
equally in all respects and shall be subject to the following provisions:
1. Number and Designation. 200,000 shares of the Preferred Stock shall
constitute a series of the Preferred Stock designated as Series A Senior
Cumulative Preferred Stock (the "Series A Preferred Stock").
2. Definitions. Unless the context otherwise requires, when used herein
the following terms have the meanings indicated.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such Person;
provided no securityholder of the Issuer shall be deemed an Affiliate of any
other securityholder solely by reason of any investment in the Issuer. For the
purpose of this definition, the term "control" (including with correlative
meanings, the terms "controlling", "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise.
"Annualized EBITDA" means, for any fiscal quarter, the EBITDA for such
fiscal quarter multiplied by four.
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"Capital Stock" of any Person means any and all shares, interests,
participation or other equivalents (however designated) of stock of, or other
ownership interests in, such Person.
"Certificate of Designations" means this Certificate of Designations,
Preferences and Rights of Series A Senior Cumulative Preferred Stock.
"Change of Control" means such time as: (a) after the Issue Date, a Person
or Group (within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act), other than any person or group comprised solely of the Initial
Holders and their Affiliates, has become the beneficial owner, by way of merger,
consolidation or otherwise, of 40% or more of the voting power of all classes of
voting securities of the Corporation; (b) a sale or transfer of all or
substantially all of the assets of the Corporation to any person or group (other
than any group consisting solely of the Initial Holders or their Affiliates) has
been consummated; or (c) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of the
Corporation (together with any new directors whose election was approved by a
vote of a majority of the directors then still in office, who either were
directors at the beginning of such period or whose election or nomination for
the election was previously so approved) cease for any reason to constitute a
majority of the directors of the Corporation as the case may be, then in office,
other than as a result of election and removal of directors pursuant to the
provisions of this Certificate of Designations.
"Consolidated Adjusted Net Income (Loss)" means, for any period, the
Corporation's Consolidated Adjusted Net Income or Consolidated Adjusted Net Loss
for such period, as applicable.
"Consolidated Adjusted Net Income" and "Consolidated Adjusted Net Loss"
mean, for any period, the net income or net loss, as the case may be, of the
Corporation for such period, as determined on a consolidated basis in accordance
with generally accepted accounting principles consistently applied, adjusted, to
the extent included in calculating such net income or net loss, as the case may
be, by excluding without duplication (i) any after-tax gain or loss attributable
to the sale, conversion or other disposition of assets other than in the
ordinary course of business, (ii) any after-tax gains resulting from the write-
up of assets and any loss resulting from the write-down of assets, (iii) any
after-tax gain or loss on the repurchase or redemption of any securities
(including in connection with the early retirement or defeasance of any Debt),
(iv) any foreign exchange gain or loss, (v) any other extraordinary, non-
recurring or unusual items incurred by the Corporation or any of the Restricted
Subsidiaries on an after-tax basis; provided that such items shall not include
non-cash deferred compensation and non-cash management ownership allocation
charges determined in accordance with generally accepted accounting principles
consistently applied, (vi) all income or losses of Unrestricted Subsidiaries and
Persons (other than Subsidiaries) accounted for by the Corporation using the
equity method of accounting except, in the case of any such income, to the
extent of dividends, interest or other cash distributions received directly or
indirectly from any such Unrestricted Subsidiary or Person and (vii) the net
income (but not net loss) of any Restricted Subsidiary which is subject to
restrictions which prevent the payment of dividends or the making of
distributions to the Corporation but only to the extent of such restrictions.
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"Consolidated Leverage Ratio" means, as at any date of determination, the
ratio of (i) the aggregate amount of Debt of the Corporation and the Restricted
Subsidiaries on a consolidated basis outstanding as at the date of determination
to (ii) the Annualized EBITDA for the most recently completed fiscal quarter of
the Corporation.
"Consolidated Net Worth" means the consolidated stockholders' equity of the
Corporation determined on a consolidated basis in accordance with generally
accepted accounting principles, less all amounts attributable to Redeemable
Stock of the Corporation (if any).
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business which are not overdue or which are being contested
in good faith), (v) every capital lease obligation of such Person, (vi) the
maximum fixed redemption or repurchase price of Redeemable Stock of such Person
at the time of determination plus accrued but unpaid dividends, (vii) every net
obligation of such Person under interest rate swap or similar agreements or
foreign currency hedge, exchange or similar agreements of such Person, and
(viii) every obligation of the type referred to in clauses (i) through (vii) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has Guaranteed or is responsible or liable, directly or
indirectly, as obligor, Guarantor or otherwise. For avoidance of doubt, (i) the
amount of Debt of any Person issued with original issue discount is the face
amount of such Debt less the unamortized portion of the original issue discount
of such Debt at the date of determination (as determined in conformity with
generally accepted accounting principles), and (ii) money borrowed at the time
of the Incurrence of any Debt in order to pre-fund the payment of interest on
such Debt shall be deemed to be "Debt."
"Default" means any event described in clauses (i) through (v) of paragraph
8(b) of this Certificate of Designations.
"Directed Investment" by the Corporation or any of the Restricted
Subsidiaries means any Investment for which the cash or property used for such
Investment is received by the Corporation from the issuance and sale (other than
to a Restricted Subsidiary) on or after the Issue Date of Junior Securities, or
any options, warrants or other rights to purchase such Junior Securities
designated by the Board of Directors as a "Directed Investment" to be used for
one or more specified investments in the telecommunications business (including
related activities and services) and is so designated and used at any time
within 365 days after the receipt thereof; provided that any proceeds from any
such issuance or sale may not be used for such an Investment if such proceeds
were, prior to being designated for use as a Directed Investment (x) used as the
basis for making a Restricted Payment or (y) used as the basis for the
Incurrence of Debt under clause (A) of subparagraph 4(f)(i) unless and until the
amount of any such Debt (I) is treated as newly issued Debt and could be
Incurred in accordance with subparagraph 4(f)(i)
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(other than under clause (A) thereof) or (II) has been repaid or refinanced with
the proceeds of Debt Incurred in accordance with subparagraph 4(f)(i) (other
than under clause (A) thereof) or (III) has otherwise been repaid (other than
with proceeds of Junior Securities used for the purposes described in the
preceding clause (x)) and, in the circumstances described in clauses (I) and
(II), the Company delivers to the Holders a certificate confirming that the
requirements of such clauses have been met.
"Disinterested Director" means, with respect to any proposed transaction
between the Corporation and an Affiliate thereof, a member of the Board of
Directors who is not an officer or employee of the Corporation, would not be a
party to, or have a financial interest in, such transaction and is not an
officer, director or employee of, and does not have a financial interest in,
such Affiliate. For purposes of this definition, no person would be deemed not
to be a Disinterested Director solely because such person holds Capital Stock of
the Corporation.
"EBITDA" means, for any fiscal quarter, (i) the Company's Consolidated
Adjusted Net Income (Loss), plus (ii) to the extent included in calculating the
Company's Consolidated Adjusted Net Income (Loss), all amounts deducted in
calculating Consolidated Adjusted Net Income (Loss) for such fiscal quarter in
respect of depreciation and amortization, interest expense net of interest
income, dividends paid in respect of Redeemable Stock, and all income taxes,
whether or not deferred, applicable to such fiscal quarter, all as determined on
a consolidated basis in accordance with generally accepted accounting principles
consistently applied. For purposes of calculating EBITDA for the fiscal quarter
most recently completed prior to any date on which an action is taken that
requires a calculation of the Consolidated Leverage Ratio, (1) any Person that
is a Restricted Subsidiary on such date (or would become a Restricted Subsidiary
in connection with the transaction that requires the determination of such
ratio) will be deemed to have been a Restricted Subsidiary at all times during
such fiscal quarter, (2) any Person that is not a Restricted Subsidiary on such
date (or would cease to be a Restricted Subsidiary in connection with the
transaction that requires the determination of such ratio) will be deemed not to
have been a Restricted Subsidiary at any time during such fiscal quarter and (3)
if the Company or any Restricted Subsidiary shall have in any manner acquired
(including through commencement of activities constituting such operating
business) or disposed (including through termination or discontinuance of
activities constituting such operating business) of any operating business
during or subsequent to the most recently completed fiscal quarter, such
calculation will be made on a pro forma basis on the assumption that such
acquisition or disposition had been completed on the first day of such completed
fiscal quarter.
"Exchange Act" means Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"First Call Date" means the fifth anniversary of the Issue Date.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing any Debt of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, and including any obligation of such
Person, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Debt, (ii) to purchase
property, securities or services for the purpose of assuring the holder of such
Debt of
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the payment of such Debt, or (iii) to maintain working capital, equity capital
or other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such Debt (and "Guaranteed", "Guaranteeing"
and "Guarantor" shall have meanings correlative to the foregoing); provided that
the Guarantee by any Person shall not include endorsements by such Person for
collection or deposit, in either case, in the ordinary course of business.
"Holder" means a holder of shares of Series A Preferred Stock.
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume (pursuant
to a merger, consolidation, acquisition or other transaction), Guarantee or
otherwise become liable in respect of such Debt or other obligation or the
recording, as required pursuant to generally accepted accounting principles or
otherwise, of any such Debt or other obligation on the balance sheet of such
person (and "Incurrence" and "Incurred" shall have meanings correlative to the
foregoing). Debt otherwise Incurred by a Person before it becomes a Restricted
Subsidiary of the Corporation shall be deemed to have been Incurred at the time
it becomes a Restricted Subsidiary.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution to (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise), or purchase or acquisition of Capital
Stock, bonds, notes, debentures or other securities or evidence of Debt issued
by, any other Person.
"Initial Holders" means the Holders of Series A Preferred Stock on the
Issue Date, and their respective permitted transferees.
"Issue Date" means the first date of issuance of shares of Series A
Preferred Stock.
"Liquidation Preference" is an amount equal to $1,000 per share of Series A
Preferred Stock.
"Loan Agreements" means (x) the Second Amended and Restated Credit
Agreement dated as of August 1, 2000 by and among the Corporation, certain of
its subsidiaries, the lenders referred to therein and First Union Investors,
Inc., as Administrative Agent, and (y) the Bridge Financing Agreement, dated as
of August 1, 2000, among the Corporation, the lenders party thereto and Morgan
Stanley Senior Funding, Inc. as arranger and book runner, in each case as in
effect on the Issue Date, with such amendments, restatements or extensions
thereof as do not adversely affect the rights of the holders of the Series A
Preferred Stock under either paragraph 4 or paragraph 6 hereof (it being
understood and agreed that any amendment, restatement or extension of any Loan
Agreement beyond its term in effect on the date hereof that would contain a
covenant, default or other provision restricting (or having the effect of
restricting) the dividend, redemption or other rights of the holders under
paragraph 4 or paragraph 6 hereof would be adverse).
"Marketable Securities" means: (i) securities either issued directly or
fully guaranteed or insured by the government of the United States of America or
any agency or instrumentality
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thereof having maturities of not more than six months; (ii) time deposits and
certificates of deposit, having maturities of not more than six months from the
date of deposit, of any domestic commercial bank having capital and surplus in
excess of $500 million and having outstanding long-term debt rated A or better
(or the equivalent thereof) by S&P or AAA or better (or the equivalent thereof)
by Moody's; and (iii) commercial paper rated A-1 or the equivalent thereof by
S&P or P-1 or the equivalent thereof by Moody's, and in each case maturing
within six months.
"Moody's" means Moody's Investors Service, Inc. or, if Moody's Investors
Service, Inc. shall cease rating debt securities having a maturity at original
issuance of at least one year and such ratings business shall have been
transferred to a successor Person, such successor Person; provided that if
Moody's Investors Service, Inc. ceases rating debt securities having a maturity
at original issuance of at least one year and its ratings business with respect
thereto shall not have been transferred to any successor Person, then "Moody's"
shall mean any other national recognized rating agency (other than S&P) that
rates debt securities having a maturity at original issuance of at least one
year and that shall have been designated by the Company by a written notice
given to the Holders.
"Outstanding", when used with reference to shares of stock, shall mean
issued shares, excluding shares held by the Corporation or any Subsidiary.
"Permitted Debt" means, without duplication: (i) any Debt (including
Guarantees thereof) outstanding immediately prior to the Closing Date and any
accretion of original issue discount and accrual of interest with respect to
such Debt; (ii) any Vendor Financing Debt or any other Debt Incurred to finance
the cost (including the cost of design, development, construction, improvement,
installation or integration) of telecommunications equipment, inventory or
network assets acquired or leased by the Corporation or any of its Restricted
Subsidiaries after the Closing Date; (iii) Debt (A) to the Corporation or (B) to
any wholly-owned Restricted Subsidiary; provided that any event which results in
any such wholly-owned Restricted Subsidiary ceasing to be a wholly-owned
Restricted Subsidiary or any subsequent transfer or such Debt (other than to the
Corporation or another wholly-owned Restricted Subsidiary) shall be deemed, in
each case, to constitute an Incurrence of such Debt not permitted by this clause
(iii); (iv) borrowing under bank credit facilities and other Debt (including
Debt assumed or incurred in connection with the Corporation's acquisition of US
Xchange Inc.) not exceeding in the aggregate $700 million, (v) renewals,
refunding or extensions of any Debt referred to in clause (i) and (iv) above and
any renewals, refundings or extensions thereof; and (vi) Debt payable solely in,
or mandatorily convertible into, Common Stock.
"Permitted Distribution" of a Person means the redemption, repurchase,
defeasance or other acquisition or retirement for value of (x) Junior Securities
of the Corporation, in exchange for (including any such exchange pursuant to the
exercise of a conversion right or privilege in connection with which cash is
paid in lieu of the issuance of fractional shares or scrip), or out of the
proceeds of a substantially concurrent issue and sale (other than to a
Restricted Subsidiary) of Junior Securities of the Corporation (other than
Redeemable Stock) or (y) of the Series A Preferred Stock in accordance with the
terms of this Certificate of Designations.
"Permitted Investment" means any Investment in Marketable Securities.
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"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization or government or
any agency or political subdivision thereof.
"Preferred Capital Stock", as applied to the Capital Stock of any Person,
means Capital Stock of such Person of any class or classes (however designated)
that ranks prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Redeemable Stock" of any Person means Capital Stock of such Person that by
its terms or otherwise is (i) required to be redeemed prior to the mandatory
redemption date of the Series A Preferred Stock, (ii) redeemable at the option
of the holder thereof at any time prior to the mandatory redemption date of the
Series A Preferred Stock or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Debt having a scheduled
maturity prior to the mandatory redemption date of the Series A Preferred Stock;
provided that any Capital Stock that would not constitute Redeemable Stock but
for provisions thereof giving holders thereof the right to require such Person
to repurchase or redeem such Capital Stock upon the occurrence of a "change of
control" occurring prior to the mandatory redemption date of the Series A
Preferred Stock shall not constitute Redeemable Stock if the "change of control"
provisions as applicable to such Capital Stock are no more favorable to the
holders of such Capital Stock than the provisions contained herein and such
Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Corporation's
repurchase of such shares of Series A Preferred Stock as are required to be
repurchased hereunder.
"Restricted Subsidiary" means any Subsidiary of the Corporation, whether
existing on the Closing Date or created subsequent thereto, designated from time
to time by the Board of Directors as (or otherwise deemed to be) a "Restricted
Subsidiary" in accordance with paragraph 4(f)(v).
"S&P" means Standard & Poor's Ratings Services or, if Standard & Poor's
Ratings Services shall cease rating debt securities having a maturity at
original issuance of at least one year and such ratings business shall have been
transferred to a successor Person, such successor Person; provided that if
Standard & Poor's Ratings Services ceases rating debt securities having a
maturity at original issuance of at least one year and its ratings business with
respect thereto shall not have been transferred to any successor Person, then
"S&P" shall mean any other nationally recognized rating agency (other than
Moody's) that rates debt securities having a maturity at original issuance of at
least one year and that shall have been designated by the Company by a written
notice given to the Holders.
"Subsidiary" means any Person of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by the Corporation.
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"Unrestricted Subsidiary" means any Subsidiary that is not a Restricted
Subsidiary and includes any Restricted Subsidiary that becomes an Unrestricted
Subsidiary in accordance with paragraph 4(f)(v).
"Vendor Financing Debt" means any Debt owed to (i) a vendor or supplier of
any property or materials used by the Company or its Restricted Subsidiaries in
their telecommunications business, (ii) any Affiliate of such a vendor or
supplier, (iii) any assignee of such a vendor, supplier or Affiliate of such a
vendor or supplier, or (iv) a bank or other financial institution that has
financed or refinanced the purchase of such property or materials from such a
vendor, supplier, Affiliate of such a vendor or supplier or assignee of such a
vendor or supplier; provided that the aggregate amount of such Debt does not
exceed the sum of (w) the purchase price of such property or materials, (x) the
cost of design, development, acquisition, improvement, integration, installation
and construction, and (y) any interest or other financing costs accruing or
otherwise payable in respect of the foregoing.
3. Rank. The Series A Preferred Stock shall, with respect to dividend
rights, rights to redemption payments and rights upon merger, consolidation,
liquidation, dissolution and winding up, (i) rank prior to all classes of the
Corporation's common stock, $0.01 par value ("Common Stock") and to each other
class or series of capital stock of the Corporation established hereafter by the
Board of Directors, except for any such other class or series of capital stock
the terms of which expressly provide that it ranks on a parity with the Series A
Preferred Stock as to dividend rights, rights to redemption payments and rights
upon liquidation, winding-up and dissolution of the Corporation (the securities
in this clause (i) are collectively referred to as "Junior Securities") and (ii)
rank on parity with each class or series of capital stock of the Corporation
established hereafter by the Board of Directors (subject to paragraph 8(a)), the
terms of which expressly provide that such class or series will rank on a parity
with the Series A Preferred Stock as to dividend rights, rights to redemption
payments and rights upon liquidation, winding-up and dissolution (the securities
in this clause (ii) are collectively referred to as "Parity Securities"). The
respective definitions of Junior Securities and Parity Securities shall also
include any rights or options exercisable for or convertible into any of the
Junior Securities and Parity Securities, as the case may be. The Series A
Preferred Stock shall be subject to the creation of Junior Securities and,
subject to paragraph 8(a), Parity Securities.
4. Dividends; Covenants. (a) Each holder of a share of Series A Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available for the payment of dividends,
cumulative cash dividends (or, to the extent permitted by paragraph 4(b),
dividends in kind) at a rate per annum equal to fourteen percent (14.0%) of the
stated value of $1,000 per share plus accumulated dividends, compounded
quarterly. Such dividends shall be payable in arrears in equal amounts quarterly
on March 31, June 30, September 30 and December 31 of each year (each of such
dates being a "Dividend Payment Date" and each such quarterly period being a
"Dividend Period"). Such dividends shall accrue and be cumulative from the Issue
Date (except that dividends on Additional Shares (as defined below) shall accrue
and be cumulative from the date such Additional Shares are issued), whether or
not in any Dividend Period or Periods there shall be funds of the Corporation
legally available for the payment of such dividends and whether or not such
dividends are declared by the Board of Directors. Each such dividend shall be
payable to the holders of record
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of shares of the Series A Preferred Stock, as they appear on the stock records
of the Corporation at the close of business on such record dates, not more than
60 days or less than 10 days preceding the payment dates thereof, as shall be
fixed by the Board of Directors. Accrued and unpaid dividends for any past
Dividend Periods may be declared and paid at any time, without reference to any
Dividend Payment Date, to holders of record on such date, not more than 45 days
preceding the payment date thereof, as may be fixed by the Board of Directors.
(b) At the option of the Corporation, by declaration of the Board of
Directors, dividends may be paid, in additional shares of Series A
Preferred Stock (the "Additional Shares") in lieu of cash, out of funds
legally available for the payment of dividends, for any or all Dividend
Periods through and including the First Call Date. To the extent dividends
are paid in additional Shares such additional Shares shall be valued at
$1,000 per share with a liquidation value of $1,000 per share, as of the
date of issuance of such additional Shares. Holders of such Additional
Shares shall be entitled to receive dividends payable at the rate specified
in the next preceding paragraph, subject to the option of the Corporation
to pay such dividends in Additional Shares as permitted by this paragraph
4.
(c) The amount of dividends payable for each full Dividend Period for
the Series A Preferred Stock shall be computed by dividing the annual
dividend rate by four. The amount of dividends payable for the initial
Dividend Period, or any other period shorter or longer than a full Dividend
Period, on the Series A Preferred Stock shall be computed on the basis of
twelve 30-day months and a 360-day year. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series A Preferred Stock that may be in arrears; provided
that if dividends are not paid in full in either cash or Additional Shares
on any Dividend Payment Date, dividends will cumulate as if dividends had
been paid in Additional Shares and such Additional Shares were outstanding
for succeeding Dividend Periods.
(d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends or other distributions, except as described in
the next succeeding sentence, shall be declared or paid or set apart for
payment on Parity Securities, nor shall any Parity Securities be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be
paid to or made available for a sinking fund for the redemption of any
Parity Securities), for any period unless in each case the full cumulative
dividends on all outstanding shares of Series A Preferred Stock shall have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Series
A Preferred Stock for all Dividend Periods terminating on or prior to the
date of payment of the dividend or other distribution on such Parity
Securities. When dividends are not paid in full or a sum sufficient for
such payment is not set apart as aforesaid, all dividends and other
distributions declared upon shares of the Series A Preferred Stock and all
dividends and other distributions declared upon any Parity Securities shall
be declared ratably in proportion to the respective amounts of dividends
accumulated and unpaid on the Series A Preferred Stock and on such Parity
Securities.
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(e) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends or other distributions (other than dividends or
distributions paid in shares of, or options, warrants or rights to
subscribe for or purchase shares of, Junior Securities) shall be declared
or paid or set apart for payment or other distribution declared or made
upon Junior Securities, nor shall any Junior Securities be redeemed,
purchased or otherwise acquired (other than a redemption, purchase or other
acquisition of shares of Common Stock made for purposes of an employee
incentive or benefit plan of the Corporation or any Subsidiary) (all such
dividends, distributions, redemptions or purchases being hereinafter
referred to as a "Junior Securities Distribution") for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such stock) by the Corporation, directly or
indirectly (except by conversion into or exchange for Junior Securities),
unless in each case (i) the full cumulative dividends on all outstanding
shares of the Series A Preferred Stock and any other Parity Securities
shall have been paid or set apart for payment for all past Dividend Periods
with respect to the Series A Preferred Stock and all past dividend periods
with respect to such Parity Securities and (ii) sufficient funds shall have
been paid or set apart for the payment of the dividend for the current
Dividend Period with respect to the Series A Preferred Stock and the
current dividend period with respect to such Parity Securities.
(f) Certain Additional Provisions.
(i) Limitation on Consolidated Debt. The Corporation shall not,
and shall not permit any Restricted Subsidiary to, Incur any Debt,
other than Permitted Debt, unless (A) with respect to Debt Incurred
under this clause (A), the Debt so Incurred is in an aggregate
principal amount that does not exceed 2.0 times the aggregate amount
of cash proceeds received by the Corporation from the issuance and
sale (other than to a Restricted Subsidiary) of shares of its Capital
Stock, or any options, warrants or other rights to purchase such
Capital Stock, other than proceeds which have been (x) included in the
computation of the amounts available for Restricted Payments pursuant
to clause (c)(y) of subparagraph (f)(ii), to the extent the inclusion
thereof was necessary to allow a subsequent Restricted Payment to be
made or (y) used as the basis of making or maintaining Directed
Investment, or (B) on the date of such Incurrence, after giving effect
to the Incurrence of such Debt and the receipt and application of the
net proceeds thereof (and, if the net proceeds of such new Debt are
used to acquire a Person that becomes a Restricted Subsidiary or an
operating business of the Corporation or a Restricted Subsidiary, to
all terms of such acquisition) on a pro forma basis, the Consolidated
Leverage Ratio would be less than 6.0 to 1.0.
(ii) Limitations on Restricted Payments. The Corporation shall
not, directly or indirectly:
(A) declare or pay any dividend on, or make any distribution
to the holders of, any Capital Stock of the Corporation (other
than dividends or distributions payable solely in its Junior
Securities (other than Redeemable Stock) or in options, warrants
or other rights to purchase Junior Securities (other than
Redeemable Stock));
<PAGE>
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(B) purchase, redeem or otherwise acquire or retire for
value, or permit any Restricted Subsidiary to, directly or
indirectly, purchase, redeem or otherwise acquire or retire for
value (other than value consisting solely of Junior Securities of
the Corporation that are not Redeemable Stock or options,
warrants or other rights to acquire Junior Securities that are
not Redeemable Stock), any Capital Stock of the Corporation
(including options, warrants or other rights to acquire Capital
Stock of the Corporation); or
(C) make, or permit any Restricted Subsidiary, directly or
indirectly, to make any Investment (other than any Permitted
Investment) in any Person (other than in a Restricted Subsidiary
or a Person that becomes a Restricted Subsidiary as a result of
such Investment);
(each of the foregoing actions set forth in clauses (A) through (C),
other than any such action that is a Permitted Investment or a
Permitted Distribution, being referred to as a "Restricted Payment")
unless, at the time of such Restricted Payment, and after giving
effect thereto:
(a) no Default shall have occurred and be continuing;
(b) after giving effect, on a pro forma basis, to such Restricted
Payment and the Incurrence of any Debt the net proceeds of which
are used to finance such Restricted Payment, the Consolidated
Leverage Ratio would not have exceeded 6.0 to 1.0; and
(c) after giving effect to such Restricted Payment on a pro forma
basis, the aggregate amount of all Restricted Payments made on or
after the Issue Date shall not exceed:
(x) 50% of the Consolidated Net Income (or, in the case of a
Consolidated Net Loss, minus 100% of such deficit) of the
Corporation for the period (taken as one accounting period)
from the Issue Date to the last day of the last fiscal
quarter preceding the date of the proposed Restricted
Payment, plus
(y) the aggregate net cash proceeds received by the Corporation
from the issuance and sale (other than to a Subsidiary)
after the Issue Date of its Junior Securities or any
options, warrants or other rights to purchase such Junior
Securities (other than Redeemable Stock), excluding such net
cash proceeds used to Incur Debt under clause (A) of
subparagraph 4(f)(i), plus
(z) $50,000,000.
The foregoing limitations in this subparagraph (f)(ii) do not
limit or restrict the making of any Permitted Distribution, Permitted
Investment or Directed Investment, and none of the Permitted
Distribution, Permitted
<PAGE>
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Investment or Directed Investment shall be counted as a Restricted
Payment for purposes of clause (C) above. In addition, the foregoing
limitations do not prevent the Corporation from (x) paying a dividend
on Junior Securities within 60 days after the declaration thereof if,
on the date when the dividend was declared, the Corporation could have
paid such dividend in accordance with the provisions of this
Certificate of Designations, or (y) repurchasing Junior Securities
(including options, warrants or other rights to acquire such Junior
Securities) from employees or former employees of the Corporation or
any Subsidiary thereof for consideration not to exceed $10,000,000 in
the aggregate after the Issue Date (with repurchases pursuant to this
clause (y) not being counted as Restricted Payments for purposes of
clause (C) above)
Notwithstanding the foregoing, no Investment in a Person that
immediately thereafter would be a Restricted Subsidiary shall be a
Restricted Payment. In addition, if any Person in which an Investment
is made, which Investment constitutes a Restricted Payment when made,
thereafter becomes a Restricted Subsidiary, all such Investments
previously made in such Person shall no longer be counted as
Restricted Payments for purposes of calculating the aggregate amount
of Restricted Payments or the aggregate amount of Investments, in each
case to the extent such Investments would otherwise be so counted.
(iii) Transactions with Affiliates. The Corporation shall not,
and shall not permit any Restricted Subsidiary to, directly or
indirectly, enter into any transaction (including the purchase, sale,
lease or exchange of any property or the rendering of any service) or
series of related transactions with any Affiliate of the Corporation
on terms that are less favorable to the Corporation or such Restricted
Subsidiary, as the case may be, than those which might be obtained at
the time of such transaction from a Person that is not such an
Affiliate; provided that this subparagraph (f)(iii) shall not limit,
or be applicable to, (A) any transaction between Unrestricted
Subsidiaries not involving the Corporation or any Restricted
Subsidiary or (B) any transaction between the Corporation and any
Restricted Subsidiary or between Restricted Subsidiaries. In
addition, any transaction or series of related transactions, between
the Corporation or any Restricted Subsidiary and any Affiliate of the
Corporation (other than a Restricted Subsidiary) involving an
aggregate consideration of $5 million or more must be approved in good
faith by a majority of the Corporation's Disinterested Directors (of
which there must be at least one) and evidenced by a resolution of the
Board of Directors. For purposes of this subparagraph (f) (iii), any
transaction or series of related transactions between the Corporation
or any Restricted Subsidiary and an Affiliate of the Corporation that
is approved by a majority of the Disinterested Directors (of which
there must be at least one) and evidenced by a resolution of the Board
of Directors shall be deemed to be on terms as favorable as those that
might be obtained at the time of such transactions (or series of
transactions) from a Person that is not such an Affiliate and thus
shall be permitted under this subparagraph (f)(iii).
<PAGE>
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(iv) Merger, Sale of Assets, Etc. The Corporation (x) shall not,
in any transaction or series of related transactions, merge or
consolidate with or into, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its assets to, any
Person, and (y) shall not permit any of its Restricted Subsidiaries to
enter into any such transaction or series of transactions if such
transaction or series of transactions, in the aggregate, would result
in a sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the assets of the
Corporation and its Restricted Subsidiaries, taken as a whole, unless
in each case, at the time and after giving effect thereto (i) either:
(A) if the transaction or series of transactions is a consolidation of
the Corporation with or a merger of the Corporation with or into any
other Person, the Corporation shall be the surviving Person of such
merger or consolidation, or (B) the Person formed by any consolidation
with or merger with or into the Corporation, or to which all or
substantially all of the assets of the Corporation and its Restricted
Subsidiaries, taken as a whole, as the case may be, are sold,
assigned, conveyed, leased or otherwise transferred (any such
surviving Person or transferee Person referred to in this clause (B)
being the "Surviving Entity"), shall be a corporation, organized and
existing under the laws of the United States of America, any state
thereof or the District of Columbia and the Series A Preferred Stock
shall be converted into or exchanged for and shall become shares of
such Surviving Entity having in respect of such Surviving Entity
substantially the same powers, preferences and relative participating,
optional or other special rights and the qualifications, limitations
or restrictions thereon that the Series A Preferred Stock had
immediately prior to such transaction, (ii) immediately before and
immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including any Debt Incurred or
anticipated to be Incurred in connection with or in respect of such
transaction or series of transactions), no Default shall have occurred
and be continuing, and (iii) (A) immediately after giving effect to
such transaction or series of transactions on a pro forma basis
(including any Debt Incurred or anticipated to be Incurred in
connection with or in respect of such transaction or series of
transactions), the Consolidated Net Worth is equal to or greater than
the Consolidated Net Worth immediately before giving effect to such
transaction or series of transactions, or (B) immediately after giving
effect to such transaction or series of transactions, the Consolidated
Leverage Ratio would not have exceeded 6.0 to 1.0.
In connection with any consolidation, merger, sale, assignment,
conveyance, transfer, lease or other disposition contemplated by the
foregoing provisions, the Corporation shall deliver, or cause to be
delivered, to the Holders a certificate of the Chief Executive Officer
or the Chief Financial Officer of the Corporation, stating that such
consolidation, merger, sale, assignment, conveyance, transfer, lease
or other disposition complies with the requirements of this
Certificate of Designations and an opinion of counsel that the
conditions of this subparagraph (f)(iv) have been complied with.
(v) Restricted Subsidiaries. The Corporation shall not designate
any Restricted Subsidiary as an Unrestricted Subsidiary, and shall not
itself, and shall
<PAGE>
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not permit any Restricted Subsidiary to, sell, convey, transfer or
otherwise dispose of any assets, other than in the ordinary course of
business, to any Unrestricted Subsidiary or any Person that becomes an
Unrestricted Subsidiary as part of such transaction, unless, after
giving effect to any such action, the assets (not including any assets
so sold, conveyed, transferred or otherwise disposed of, other than in
the ordinary course of business, to any Unrestricted Subsidiary or any
Person that becomes an Unrestricted Subsidiary as part of such
transaction) and business of the Corporation and its remaining
Restricted Subsidiaries generated at least 97% of EBITDA in the fiscal
quarter of the Corporation most recently completed prior to the date
of such action.
The Board of Directors may designate any existing Unrestricted
Subsidiary or any Person that is about to become a Subsidiary of the
Corporation as a Restricted Subsidiary if, after giving effect to such
action (and, if such designation is made in connection with the
acquisition of a Person or an operating business that is about to
become a Subsidiary of the Corporation, after giving effect to all
terms of such acquisition) on a pro forma basis, on the date of such
action, the Debt of such Unrestricted Subsidiary outstanding
immediately prior to such designation would have been permitted to be
Incurred (and shall be deemed to have been Incurred) for all purposes
of this Certificate of Designations.
Subject to the second preceding paragraph and compliance with
subparagraph (f)(ii), the Board of Directors may designate any
Restricted Subsidiary as an Unrestricted Subsidiary.
The designation by the Board of Directors of a Restricted
Subsidiary as an Unrestricted Subsidiary shall, for all purposes of
subparagraph (f)(ii) (including clause (B) thereof), be deemed to be a
Restricted Payment of an amount equal to the fair market value of the
Corporation's ownership interest in such Subsidiary (including,
without duplication, such indirect ownership interest in all
Subsidiaries of such Subsidiary), as determined by the Board of
Directors in good faith and evidenced by a resolution of the Board of
Directors.
Notwithstanding the foregoing provisions of this subparagraph
(f)(v), the Board of Directors may not designate a Subsidiary of the
Corporation to be an Unrestricted Subsidiary if, after such
designation, (a) the Corporation or any of its other Restricted
Subsidiaries (i) provides credit support for, or a Guarantee of, any
Debt of such Subsidiary (including any undertaking, agreement or
instrument evidencing such Debt) or (ii) is directly or indirectly
liable for any Debt of such Subsidiary, (b) a default with respect to
any Debt of such Subsidiary (including any right which the holders
thereof may have to take enforcement action against such Subsidiary)
would permit (upon notice, lapse of time or both) any holder of any
other Debt of the Corporation or any Restricted Subsidiary to declare
a default on such other Debt or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity or (c)
such Subsidiary owns any Capital Stock of, or owns or holds any lien
on any property of, any Restricted Subsidiary which is not a
Subsidiary of the Subsidiary to be so designated.
<PAGE>
-15-
The Board of Directors, from time to time, may designate any
Person that is about to become a Subsidiary of the Corporation as an
Unrestricted Subsidiary, and may designate any newly-created
Subsidiary as an Unrestricted Subsidiary, if at the time such
Subsidiary is created it contains no assets (other than such de
minimis amount of assets then required by law for the formation of
corporations) and no Debt. Subsidiaries of the Corporation that are
not designated by the board of Directors as Restricted or Unrestricted
Subsidiaries shall be deemed to be Restricted Subsidiaries.
Notwithstanding any provisions of this subparagraph (f)(v), all
Subsidiaries of an Unrestricted Subsidiary shall be Unrestricted
Subsidiaries. The Board of Directors shall not change the designation
of a Subsidiary of the Corporation more than twice in any period of
five years.
(vi) Preferred Capital Stock Issuances. The Corporation will not
permit any of its Subsidiaries, and will cause each of its
Subsidiaries not to, issue any Preferred Capital Stock to any Person.
5. Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Junior
Securities, each Holder shall be entitled to receive, and the Corporation shall
pay or distribute to such Holder, an amount in cash equal to the Liquidation
Preference per share plus an amount equal to all dividends (whether or not
earned or declared) accrued and unpaid thereon to the date of final distribution
to such Holders, but such holders shall not be entitled to any further payment.
If, upon any liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation, or proceeds thereof, distributable among the Holders
shall be insufficient to pay in full the preferential amount aforesaid and
liquidating payments on any Parity Securities, then such assets, or the proceeds
thereof, shall be distributed among the holders of shares of Series A Preferred
Stock and any such other Parity Securities ratably in accordance with the
respective amounts that would be payable on such shares of Series A Preferred
Stock and any such other stock if all amounts payable thereon were paid in full.
Notwithstanding anything else in the Certificate of Incorporation, a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation shall be deemed to have occurred upon (i) the acquisition of the
Corporation by another entity by means of any transaction or series of related
transactions (including, without limitation, any reorganization, merger or
consolidation, whether of the Corporation with or into any other corporation or
corporations or of any other corporation or corporations with or into the
Corporation, but excluding any merger effected exclusively for the purpose of
changing the domicile of the Corporation); or (ii) a sale of all or
substantially all of the assets of the Corporation; provided that a
consolidation or merger as a result of which the holders of Capital Stock of the
Corporation immediately prior to such merger or consolidation possess (by reason
of such holdings) 50% or more of the voting power of the corporation surviving
such merger or consolidation (or other corporation which is the issuer of the
Capital Stock into which the Capital Stock of the Corporation is converted or
exchanged in such merger or consolidation) shall not be treated as a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation within the meaning of this paragraph 5.
<PAGE>
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(b) Subject to the rights of the holders of any Parity Securities,
after payment shall have been made in full to the Holders as provided in
this paragraph 5, any other series or class or classes of Junior Securities
shall, subject to the respective terms and provisions (if any) applying
thereto, be entitled to receive any and all assets remaining to be paid or
distributed, and the Holders shall not be entitled to share therein.
6. Redemption. (a) The Series A Preferred Stock shall not be redeemable
by the Corporation prior to the First Call Date. On and after the First Call
Date, to the extent the Corporation shall have funds legally available for such
payment, the Corporation may redeem at its option shares of Series A Preferred
Stock, at any time in whole but not in part, at a redemption price equal to the
percentage of the sum of (i) the Liquidation Preference set forth below plus
(ii) accrued and unpaid dividends thereon to the date fixed for redemption.
12-month period
commencing on the
anniversary of the
Issuance Date in Year Percentage
---------------------------- --------------------
2005 107%
2006 104.67%
2007 102.33%
2008
and thereafter 100%
(b) (i) Upon the occurrence of a Change of Control, the Corporation
shall be required to make an Offer to Purchase to each Holder to purchase
all or any part of such Holder's shares of Series A Preferred Stock at a
cash purchase price equal to 10 1 % of the Liquidation Preference, plus
accrued and unpaid dividends (if any) to the date of purchase (the "Change
of Control Payment").
(ii) Within 30 days following any Change of Control, the
Corporation shall mail a notice (the "Offer to Purchase") to such
Holder stating: (A) that the Offer to Purchase is being made pursuant
to this Certificate of Designations and that, to the extent lawful,
all shares of Series A Preferred Stock tendered will be accepted for
payment; (B) the purchase price and the purchase date, which shall be
no earlier than 30 days nor later than 40 days from the date such
notice is mailed (the "Change of Control Payment Date"); (C) that any
shares of Series A Preferred Stock not tendered will continue to
accrue dividends in accordance with the terms of this Certificate of
Designations; (D) that, unless the Corporation defaults in the payment
of the Change of Control Payment, all shares of Series A Preferred
Stock accepted for payment pursuant to the Offer to Purchase shall
cease to accrue dividends on and after the Change of Control Payment
Date and all rights of the Holders shall terminate on and after the
Change of Control Payment Date; and (E) a description of the
procedures to be followed by such Holder in order to have its shares
of Series A Preferred Stock repurchased.
<PAGE>
-17-
(iii) On the Change of Control Payment Date; (A) the
Corporation shall, to the extent lawful, (1) accept for payment shares
of Series A Preferred Stock tendered pursuant to the Offer to Purchase
and (2) promptly mail to each Holder of shares of Series A Preferred
Stock so accepted payment in an amount equal to the change of Control
Payment for such shares and (B) unless the Corporation defaults in the
payment for the shares of Series A Preferred Stock tendered pursuant
to the Offer to Purchase, dividends shall cease to accrue with respect
to the shares of Series A Preferred Stock tendered and all rights of
Holders of such tendered shares shall terminate, except for the right
to receive payment therefor, on the Change of Control Payment Date.
The Corporation shall publicly announce the results of the Offer to
Purchase on or as soon as practicable after the Change of Control
Payment Date.
(iv) The Corporation shall comply with Rule 14e-1 under the
Exchange Act and any securities laws and regulations to the extent
such laws and regulations are applicable to the repurchase of shares
of the Series A Preferred Stock in connection with a Change of
Control.
(c) To the extent the Corporation shall have funds legally available
for such payment, on the twelfth anniversary of the Issue Date, if any
shares of the Series A Preferred Stock shall be outstanding, the
Corporation shall redeem all outstanding shares of the Series A Preferred
Stock, at a redemption price of $1,000 per share in cash, together with
accrued and unpaid dividends thereon to such date.
(d) Shares of Series A Preferred Stock which have been issued and
reacquired in any manner, including shares purchased or redeemed, shall
(upon compliance with any applicable provisions of the laws of the State of
Delaware) have the status of authorized and unissued shares of the class of
preferred stock of the Corporation undesignated as to series and may be
redesignated and reissued as part of any series of the preferred stock of
the Corporation; provided that no such issued and reacquired shares of
Series A Preferred Stock shall be reissued or sold as Series A Preferred
Stock.
(e) If the Corporation is unable or shall fail to discharge its
obligation to redeem all outstanding shares of Series A Preferred Stock
pursuant to paragraphs 6(b) or 6(c) (the "Mandatory Redemption
Obligation"), the Mandatory Redemption Obligation shall be discharged as
soon as the Corporation is able to discharge such Mandatory Redemption
Obligation. If and so long as any Mandatory Redemption Obligation with
respect to the Series A Preferred Stock shall not be fully discharged, the
Corporation shall not (i) directly or indirectly, redeem, purchase, or
otherwise acquire any Parity Security or discharge any mandatory or
optional redemption, sinking fund or other similar obligation in respect of
any Parity Securities (except in connection with a redemption, sinking fund
or other similar obligation to be satisfied pro rata with the Series A
Preferred Stock) or (ii) declare or make any Junior Securities
Distribution, or, directly or indirectly, discharge any mandatory or
optional redemption, sinking fund or other similar obligation in respect of
the Junior Securities.
<PAGE>
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(f) Notwithstanding the foregoing provisions of this paragraph 6,
unless full cumulative and compounded quarterly dividends (whether or not
declared) on all outstanding shares of Series A Preferred Stock shall have
been paid or contemporaneously are declared and paid or set apart for
payment for all dividend periods terminating on or prior to the applicable
redemption date, none of the shares of Series A Preferred Stock shall be
redeemed, and no sum shall be set aside for such redemption, unless shares
of Series A Preferred Stock are redeemed pro rata.
7. Procedure for Redemption. (a) In the event that fewer than all the
outstanding shares of Series A Preferred Stock are to be redeemed, the number of
shares to be redeemed shall be determined by the Board of Directors and the
shares to be redeemed shall be selected by lot or pro rata (with any fractional
shares being rounded to the nearest whole share) as may be determined by the
Board of Directors (subject to paragraph 6(f)).
(b) In the event the Corporation shall redeem shares of Series A
Preferred Stock, notice of such redemption shall be given by first class
mail, postage prepaid, mailed not less than 30 days nor more than 60 days
prior to the redemption date, to each holder of record of the shares to be
redeemed at such holder's address as the same appears on the stock register
of the Corporation; provided that neither the failure to give such notice
nor any defect therein shall affect the validity of the giving of notice
for the redemption of any share of Series A Preferred Stock to be redeemed
except as to the holder to whom the Corporation has failed to give said
notice or except as to the holder whose notice was defective. Each such
notice shall state: (i) the redemption date; (ii) the number of shares of
Series A Preferred Stock to be redeemed and, if fewer than all the shares
held by such holder are to be redeemed, the number of shares to be redeemed
from such holder; (iii) the redemption price; (iv) the place or places
where certificates for such shares are to be surrendered for payment of the
redemption price; and (v) that dividends on the shares to be redeemed will
cease to accrue on such redemption date.
(c) Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price of the shares
called for redemption), dividends on the shares of Series A Preferred Stock
so called for redemption shall cease to accrue, and all rights of the
holders thereof as stockholders of the Corporation (except the right to
receive from the Corporation the redemption price) shall cease. Upon
surrender in accordance with said notice of the certificates for any shares
so redeemed (properly endorsed or assigned for transfer, if the Board of
Directors of the Corporation shall so require and the notice shall so
state), such share shall be redeemed by the Corporation at the redemption
price aforesaid. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares without cost to the holder thereof.
8. Voting Rights. (a) So long as any shares of Series A Preferred Stock
shall be outstanding, except where the vote or written consent of the holders of
a greater number of shares of the Corporation is required by law or by the
Certificate of Incorporation, and in addition to any other vote required by law
or the Certificate of Incorporation, without the approval of the holders of at
least a majority of the shares of Series A Preferred Stock then
<PAGE>
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outstanding, given in writing or by vote at a meeting, consenting or voting (as
the case may be) separately as a series, the Corporation will not, directly or
indirectly:
(i) (x) increase the authorized amount or issue any additional
shares of Series A Preferred Stock, or (y) create or authorize the
creation of or issue any shares of any other class or series of its
Capital Stock, or create or authorize the creation of or issue any
obligation or security, in each case convertible into shares of Series
A Preferred Stock;
(ii) create or authorize the creation of or issue any shares of
Parity Securities or any other Capital Stock (other than the Junior
Securities), or create or authorize the creation of or issue any
obligation or security convertible into shares of Parity Securities or
any other Capital Stock (other than the Junior Securities);
(iii) amend, alter or repeal any provision of the Certificate of
Incorporation (including in connection with any merger, consolidation,
business combination or other extraordinary corporate transaction)
that may adversely affect the rights, preferences or privileges of the
Series A Preferred Stock; provided that any such amendment that
changes the dividend payable on or the Liquidation Preference of the
Series A Preferred Stock shall require the affirmative vote at a
meeting of holders of Series A Preferred Stock called for such purpose
or written consent, in each case of the holder of each share of Series
A Preferred Stock; or
(iv) except for the Loan Agreements, enter into, or permit any
Subsidiary to enter into, any agreement, indenture or other instrument
that contains any provision that would restrict either (x) the payment
of dividends by the Corporation on the Series A Preferred Stock when
due to the full extent required by paragraph 4(b) (except for any
provisions contained in the terms of any Debt or any agreement
pursuant to which such Debt was issued if (A) the restriction applies
only in the event of a payment default or a default with respect to a
financial covenant contained in such Debt or agreement, (B) the
restriction is not materially more disadvantageous to the Holders of
the Series A Preferred Stock than is customary in comparable
financings (as determined by the Board of Directors of the Corporation
in good faith) and (C) the Board of Directors of the Corporation
determines in good faith that any such restriction will not materially
affect the Corporation's ability to pay dividends on the Series A
Preferred Stock), or (y) the redemption by the Corporation of the
Series A Preferred Stock to the full extent required or permitted by
paragraphs 6(b) and 6(c).
(b) If and whenever (i) six consecutive quarterly dividends payable on
the Series A Preferred Stock after the First Call Date have not been paid
in full; (ii) if the Corporation shall have failed to discharge its
Mandatory Redemption Obligation; (iii) if the Corporation shall have failed
to discharge its obligations under paragraphs 4(d) or 4(e); (iv) if the
Corporation shall have failed to obtain approval of holders of the Series A
Preferred Stock pursuant to paragraph 8(a); or (v) if the Corporation shall
have failed to
<PAGE>
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discharge its obligations under paragraph 4(f), the number of directors
then constituting the Board of Directors shall be increased by two and the
holders of shares of Series A Preferred Stock, together with the holders of
shares of every other series of preferred stock upon which like rights to
vote for the election of two additional directors have been conferred and
are exercisable (resulting from either the failure to pay dividends or the
failure to redeem) (any such other series is referred to as the "Preferred
Shares"), voting as a single class regardless of series, shall be entitled
to elect the two additional directors to serve on the Board of Directors at
any annual meeting of stockholders or special meeting held in place
thereof, or at a special meeting of the holders of the Series A Preferred
Stock and the Preferred Shares called as hereinafter provided. Whenever all
arrears in dividends on the Series A Preferred Stock and the Preferred
Shares then outstanding shall have been paid and dividends thereon for the
current quarterly dividend period shall have been paid or declared and set
apart for payment, or the Corporation shall have fulfilled its Mandatory
Redemption Obligation, or the Corporation shall have fulfilled its
obligations under paragraphs 4(d), 4(e), 4(f), and 8(a), as the case may
be, then the right of the holders of the Series A Preferred Stock and the
Preferred Shares to elect such additional two directors shall cease (but
subject always to the same provisions for the vesting of such voting rights
in the case of any similar future arrearages in six quarterly dividends,
failure to fulfill any Mandatory Redemption Obligation or failure to
fulfill any obligation under paragraphs 4(d), 4(e), 4(f), and 8(a), and the
terms of office of all persons elected as directors by the holders of the
Series A Preferred Stock and the Preferred Shares shall forthwith terminate
and the number of the Board of Directors shall be reduced accordingly. At
any time after such voting power shall have been so vested in the holders
of shares of Series A Preferred Stock and the Preferred Shares, the
secretary of the Corporation may, and upon the written request of any
holder of Series A Preferred Stock (addressed to the secretary at the
principal office of the Corporation) shall, call a special meeting of the
holders of the Series A Preferred Stock and of the Preferred Shares for the
election of the two directors to be elected by them as herein provided,
such call to be made by notice similar to that provided in the by-laws of
the Corporation for a special meeting of the stockholders or as required by
law. If any such special meeting required to be called as above provided
shall not be called by the secretary within 20 days after receipt of any
such request, then any holder of shares of Series A Preferred Stock may
call such meeting, upon the notice above provided, and for that purpose
shall have access to the stock books of the Corporation. The directors
elected at any such special meeting shall hold office until the next annual
meeting of the stockholders or special meeting held in lieu thereof if such
office shall not have previously terminated as above provided. If any
vacancy shall occur among the directors elected by the holders of the
Series A Preferred Stock and the Preferred Shares, a successor shall be
elected by the Board of Directors, upon the nomination of the then-
remaining director elected by the holders of the Series A Preferred Stock
and the Preferred Shares or the successor of such remaining director, to
serve until the next annual meeting of the stockholders or special meeting
held in place thereof if such office shall not have previously terminated
as provided above.
(c) In exercising the voting rights set forth in this paragraph 8,
each share of Series A Preferred Stock shall have one vote per share,
except that when any other series of preferred stock shall have the right
to vote with the Series A Preferred Stock as a
<PAGE>
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single class on any matter, then the Series A Preferred Stock and such
other series shall have with respect to such matters one vote per $1,000 of
stated Liquidation Preference plus accumulated and unpaid dividends
thereon. Except as otherwise required by applicable law or as set forth
herein, the shares of Series A Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers and the
consent of the holders thereof shall not be required for the taking of any
corporate action.
9. Reports. So long as any of the Series A Preferred Stock is
outstanding, the Corporation will furnish the holders thereof with the quarterly
and annual financial reports that the Corporation is required to file with the
Securities and Exchange Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act or, in the event the Corporation is not required to file such
reports, reports containing the same information as would be required in such
reports.
10. General Provisions. The headings of the paragraphs, subparagraphs,
clauses and subclauses of this Certificate of Designations are for convenience
of reference only and shall not define, limit or affect any of the provisions
hereof.
IN WITNESS WHEREOF, Choice One Communications Inc. has caused this
Certificate of Designations to be signed and attested by the undersigned this
1st day of August, 2000.
CHOICE ONE COMMUNICATIONS INC.
By: /s/ John J. Zimmer
---------------------------------------
Name: John J. Zimmer
Title: Vice President - Finance
ATTEST:
/s/ Kim Robert Scovill
---------------------------------
Name: Kim Robert Scovill
Title: General Counsel
