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Exhibit 4.8
Z-TEL TECHNOLOGIES, INC.
CERTIFICATE OF DESIGNATION OF 8% CONVERTIBLE
PREFERRED STOCK, SERIES E, SETTING FORTH THE POWERS,
PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS OF SUCH SERIES OF PREFERRED STOCK
Pursuant to Section 151 of the Delaware General Corporation Law, Z-Tel
Technologies, Inc., a Delaware corporation (the "Corporation"), DOES HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of
the Corporation by the Certificate of Incorporation of the Corporation (the
"Charter"), the Board of Directors of the Corporation on October 17, 2000 duly
adopted the following resolution creating a series of Preferred Stock designated
as 8% Convertible Preferred Stock, Series E, and such resolution has not been
modified and is in full force and effect on the date hereof:
RESOLVED that, pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of the Charter, a
series of the class of authorized Preferred Stock, par value $0.01 per share, of
the Corporation is hereby created and that the designation and number of shares
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof are as follows:
Section 1. DESIGNATION AND NUMBER; RANKING
(a) The shares of such series shall be designated as Series E
Convertible Preferred Stock (the "Series E Preferred"). The number of authorized
shares of the Series E Preferred shall be 6,250,000, which number may be
decreased (but not increased) by the Board of Directors without a vote of
stockholders; PROVIDED, HOWEVER, that such number may not be decreased below the
number of then outstanding shares of Series E Preferred or shares of Series E
Preferred to be issued pursuant to the Stock Purchase Agreement (as defined
below).
(b) The Series E Preferred shall, with respect to dividend rights and
rights on liquidation, dissolution or winding up, rank on a parity with the
Series D Convertible Preferred Stock, par value of $0.01 per share of the
Corporation and prior to all other classes and series of Junior Stock (as
defined below) of the Corporation now or hereafter authorized including, without
limitation, the Common Stock (as defined below).
(c) Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in Section 11.
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Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) SERIES E DIVIDENDS. The holders of shares of Series E Preferred, in
preference to the holders of shares of Common Stock and of any shares of other
Junior Stock of the Corporation, shall be entitled to receive, when, as and if
declared by the Board of Directors, out of the assets of the Corporation legally
available therefor, cumulative cash dividends at an annual rate per share of
Series E Preferred equal to 8.00% of the Liquidation Preference with respect to
such share per annum ("Series E Dividend Rate"), calculated on the basis of a
360-day year consisting of twelve 30-day months, accruing and payable in equal
quarterly payments, in immediately available funds, on the last day of March,
June, September and December or, if any such day is not a Business Day, the next
succeeding Business Day, in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date"), commencing on the first quarterly
dividend date to occur after the issue date of such shares; PROVIDED that the
dividend payable on the first Quarterly Dividend Payment Date to occur after the
original issue date shall be computed based on the number of days prior to such
date that the Series E Preferred has been issued and outstanding; and PROVIDED
FURTHER that, notwithstanding the foregoing (i) no dividends shall be paid or
payable in cash with respect to any share of Series E Preferred until the
earliest of the date (x) such share is redeemed in accordance with the terms of
the Series E Preferred and (y) payment is made to the Series E Preferred
pursuant to Section 7 and (ii) upon conversion of any share of Series E
Preferred, accrued dividends shall be treated as contemplated by Section 8 or
Section 10.
(b) DIVIDEND ARREARAGE. If as of any Quarterly Dividend Payment Date
there is a Dividend Arrearage (as hereinafter defined), an additional dividend
(the "Additional Dividend") shall accrue on each share of the Series E Preferred
for the period from such Quarterly Dividend Payment Date through the earlier of
(x) the date on which such Dividend Arrearage is paid in full and (y) the next
succeeding Quarterly Dividend Payment Date, in an amount equal to the product of
(i) the Series E Dividend Rate and (ii) the amount of such Dividend Arrearage as
of such Quarterly Dividend Payment Date. For purposes of this Section 2(b),
"Dividend Arrearage" shall mean, with respect to each share of Series E
Preferred, as of any Quarterly Dividend Payment Date, the excess, if any of (i)
the sum of all dividends theretofore accrued on such share in accordance with
Section 2(a) (including those accrued as of and including such Quarterly
Dividend Payment Date) plus all Additional Dividends, if any, theretofore
accrued on such share in accordance with this Section 2(b) (including those
accrued as of and including such Quarterly Dividend Payment Date), over (ii) all
dividends actually paid with respect to such share on or before such Quarterly
Dividend Payment Date.
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(c) ACCRUAL OF DIVIDENDS. Dividends payable pursuant to Section 2(a)
shall begin to accrue and be cumulative from the Issue Date, and shall accrue on
a daily basis, in each case whether or not declared. Dividends paid on the
shares of Series E Preferred in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares of Series E Preferred at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series E Preferred entitled to receive
payment of a dividend declared thereon, which record date shall be no more than
60 days or less than 10 days prior to the date fixed for the payment thereof.
Accumulated but unpaid dividends for any past quarterly dividend periods may be
declared and paid at any time, without reference to any regular Quarterly
Dividend Payment Date, to holders of record on such date, not more than 60 nor
less than 10 days preceding the payment date thereof, as may be fixed by the
Board of Directors.
(d) OTHER DIVIDENDS. In addition to the dividends or distributions on
the Series E Preferred described in Section 2(a), in the event that the
Corporation shall declare a dividend or make any other distribution (including,
without limitation, in cash, in capital stock (which shall include, without
limitation, any options, warrants or other rights to acquire capital stock) of
the Corporation, whether or not pursuant to a shareholder rights plan, "poison
pill" or similar arrangement, or other property or assets)) to holders of Common
Stock, then the Board of Directors shall declare and the holder of each share of
Series E Preferred shall be entitled to receive a dividend or distribution in an
amount equal to the amount of such dividend or distribution received by a holder
of the number of shares of Common Stock for which such share of Series E
Preferred is convertible on the record date for such dividend or distribution.
Any such amount shall be paid to the holders of shares of Series E Preferred at
the same time such dividend or distribution is made to holders of Common Stock.
Section 3. VOTING RIGHTS.
In addition to any voting rights provided by law, the holders
of shares of Series E Preferred shall have the following voting rights:
(a) So long as the Series E Preferred is outstanding, each share of
Series E Preferred shall entitle the holder thereof to vote, in person or by
proxy, at a special or annual meeting of stockholders, on all matters voted on
by holders of Common Stock voting together as a single class with other shares
entitled to vote thereon. With respect to any such vote, each share of Series E
Preferred shall entitle the holder thereof to cast that number of votes per
share as is equal to the number of votes that such holder would be entitled to
cast had such holder converted such share of Series E Preferred into Common
Stock on the record date for determining the stockholders of the Corporation
eligible to vote on any such matters.
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(b) PROTECTIVE PROVISIONS. Unless the consent or approval of a greater
number of shares shall then be required by law, the affirmative vote of the
holders of at least 50% of the outstanding shares of Series E Preferred, voting
separately as a single class, shall be necessary to:
(i) authorize, increase the authorized number of shares of, or
issue (including on conversion or exchange of any convertible or exchangeable
securities or by reclassification), any shares of any class or classes of Senior
Stock, Parity Stock, the Series E Preferred or Junior Stock, if in the case of
Junior Stock, such Stock has a mandatory or optional redemption date and such
dates could be earlier than the Mandatory Redemption Date or the Optional
Redemption Date;
(ii) authorize, adopt or approve an amendment to the Charter
that would increase or decrease the par value of the shares of Series E
Preferred, or alter or change the powers, preferences or special rights of the
shares of Series E Preferred or the shares of any class of Parity Stock or
Senior Stock;
(iii) amend or alter the Charter so as to affect the shares of
Series E Preferred adversely, including by granting any voting right to any
holder of notes, bonds, debentures or other debt obligations of the Corporation,
by reclassifying any capital stock into Senior Stock or Parity Stock or by
amending the terms of any class of Parity Stock or Senior Stock or amending the
terms covering redemption of any Junior Stock;
(iv) authorize or issue any security convertible into,
exchangeable for or evidencing the right to purchase or otherwise receive any
shares of any class or classes of Senior Stock or Parity Stock;
(v) effect any sale or merger of a Material Subsidiary or
effect a sale of assets of the Corporation in any transaction or series of
transactions having an aggregate fair market value of more than $50 million
during any 365 day period;
(vi) incur any indebtedness for borrowed money other than
indebtedness under receivable financing arrangements not to exceed $50 million
in the aggregate total if, after giving effect to the incurrence of such
indebtedness, the indebtedness for borrowed money of the Corporation exceeds the
Permissible Amount;
(vii) take any action which would have the effect of reducing
stockholders equity as defined by GAAP by more than 10% during any 365 day
period;
(viii) issue shares of Common Stock or securities convertible
into Common Stock (other than issuances for cash or issuances pursuant to a
stock option plan approved by the Board of Directors of the Corporation) if such
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issuance would increase, during any 365 day period, the number of shares of
Common Stock outstanding on a fully-diluted basis by more than 20%;
(ix) effect any Change of Control of the Corporation in
connection with which a vote of shareholders of the Corporation is required; or
(x) effect the voluntary liquidation, dissolution, winding up,
recapitalization or reorganization of the Corporation, or the consolidation or
merger of the Corporation with or into any other Person (except a wholly-owned
subsidiary of the Corporation), or the sale or other distribution to another
Person of all or substantially all of the assets of the Corporation in each case
not constituting a Change of Control in connection with which a vote of
shareholders of the Corporation is required; PROVIDED, HOWEVER, that no separate
vote of the holders of the Series E Preferred as a class shall be required under
this clause (x) in the case of a recapitalization, reorganization, consolidation
or merger of the Corporation if:
(A) the resulting or surviving corporation will have
after such recapitalization, reorganization, consolidation or merger no Senior
Stock or Parity Stock either authorized or outstanding (except such Senior Stock
or Parity Stock of the Corporation as may have been authorized or outstanding
immediately preceding such consolidation or merger, or such stock of the
resulting or surviving corporation (having the same powers, preferences and
special rights of any such Senior Stock or Parity Stock) as may be issued in
exchange therefor),
(B) each holder of shares of Series E Preferred
immediately preceding such recapitalization, reorganization, consolidation or
merger will receive in exchange therefor the same number of shares of stock,
with the same preferences, rights and powers, of the resulting or surviving
corporation, and
(C) after such recapitalization, reorganization,
consolidation or merger the resulting or surviving corporation shall not be in
breach of any of the terms hereof.
(c) EXERCISE OF VOTING RIGHTS. The foregoing right of holders of shares
of Series E Preferred to take any action as provided in Section 3(b) may be
exercised at any annual meeting of stockholders or at a special meeting of
holders of shares of Series E Preferred held for such purpose or at any
adjournment thereof, or by the written consent, delivered to the Secretary of
the Corporation, of the holders of the minimum number of shares required to take
such action.
In connection with the exercise of such right (and unless such right
has been exercised by written consent of the minimum number of shares required
to take such action), the President of the Corporation may call, and upon the
written request of holders of record of at least 5% of the outstanding shares of
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Series E Preferred, addressed to the Secretary of the Corporation at the
principal office of the Corporation, shall call, a special meeting of the
holders of Series E Preferred. Such meeting shall be held within 30 days after
delivery of such request to the Secretary, at the place and upon the notice
provided by law and in the by-laws of the Corporation for the holding of
meetings of stockholders.
(i) At each meeting of stockholders at which the holders of
shares of Series E Preferred shall have the right, voting separately as a single
class, to take any action, the presence in person or by proxy of the holders of
record of one third of the total number of shares of Series E Preferred then
outstanding and entitled to vote on the matter shall be necessary and sufficient
to constitute a quorum of such holders. At any such meeting or at any
adjournment thereof:
(A) the absence of a quorum of the holders of shares
of Series E Preferred shall not prevent the election of directors, and the
absence of a quorum of the holders of shares of any other class of series of
capital stock shall not prevent the taking of any action as provided in this
Section 3; and
(B) in the absence of a quorum of the holders of
shares of Series E Preferred, a majority of the holders of such shares present
in person or by proxy shall have the power to adjourn the meeting as to the
actions to be taken by the holders of shares of Series E Preferred from time to
time and place to place without notice other than announcement at the meeting
until a quorum shall be present.
For taking of any action by the holders of shares of Series E
Preferred, voting separately as a class, each such holder shall have one vote
for each share of such stock standing in his name on the transfer books of the
Corporation as of any record date fixed for such purpose or, if no such date be
fixed, at the close of business on the Business Day next preceding the day on
which notice is given, or if notice is waived, at the close of business on the
Business Day next preceding the day on which the meeting is held; PROVIDED,
HOWEVER, that shares of Series E Preferred held by the Corporation or any
Affiliate of the Corporation shall not be deemed to be outstanding for purposes
of taking any action as provided in this Section 3.
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Section 4. CERTAIN RESTRICTIONS.
(a) NO DIVIDENDS. Whenever quarterly dividends payable on shares of
Series E Preferred as provided in Section 2 are not paid in full in cash, at
such time and thereafter until all unpaid dividends payable, whether or not
declared, on the outstanding shares of Series E Preferred shall have been paid
in full in cash or declared and set apart in cash for payment, or whenever the
Corporation shall not have converted or exchanged shares of Series E Preferred
at a time required by Section 8 or 10, at such time and thereafter until all
conversion and exchange obligations provided in Section 8 or 10 that have come
due shall have been satisfied the Corporation shall not: (A) declare or pay
dividends, or make any other distributions, on any shares of Junior Stock or (B)
declare or pay dividends, or make any other distributions, on any shares of
Parity Stock, except (i) dividends or distributions paid ratably on the Series E
Preferred and all Parity Stock on which dividends are payable or in arrears, in
proportion to the total amounts to which the holders of all shares of the Series
E Preferred and such Parity Stock are then entitled and (ii) dividends paid on
the Series D Convertible Preferred Stock pursuant to the Certificate of
Designation of the Series D Convertible Preferred Stock dated July 13, 2000 so
long as dividends on the Series E Preferred are not payable at that time.
(b) NO REDEMPTION. Whenever dividends payable on shares of Series E
Preferred as provided in Section 2(a) are not paid in full in cash, at such time
and thereafter until all unpaid dividends payable, whether or not declared, on
the outstanding shares of Series E Preferred shall have been paid in full in
cash or declared and set apart in cash for payment, or whenever the Corporation
shall not have converted or exchanged shares of Series E Preferred at a time
required by Section 8 or 10, at such time and thereafter until all conversion
and exchange obligations provided in Section 8 or 10 that have come due shall
have been satisfied, the Corporation shall not redeem, purchase or otherwise
acquire for consideration any shares of Junior Stock or Parity Stock; PROVIDED,
HOWEVER, that (A) the Corporation may accept shares of any Senior Stock, Parity
Stock or Junior Stock for conversion into Junior Stock and (B) the Corporation
may at any time redeem, purchase or otherwise acquire shares of any Parity Stock
pursuant to any mandatory redemption, put, sinking fund or other similar
obligation contained in such Parity Stock, pro rata with the Series E Preferred
in proportion to the total amount then required to be applied by the Corporation
to redeem, repurchase, convert, exchange or otherwise acquire shares of Series E
Preferred and shares of such Parity Stock.
(c) SUBSIDIARY ACTION. The Corporation shall not permit any Subsidiary
of the Corporation, or cause any other Person, to purchase or otherwise acquire
for consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to Section 4(b), purchase such shares at such time
and in such manner; provided that this provision shall not prohibit sales of
shares of capital stock by the Corporation to any third party.
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Section 5. REDEMPTION.
(a) OPTIONAL REDEMPTION. Except as otherwise set forth in this Section
5, the Corporation shall not have any right to redeem any shares of Series E
Preferred prior to the third anniversary of the Issue Date. On and after the
third anniversary of the Issue Date, or in connection with any Change in
Control, the Corporation shall have the right, at its sole option and election,
to redeem the shares of Series E Preferred, in whole but not in part, on not
less than 30 days notice of the date of redemption (any such date an "Optional
Redemption Date") at a price per share (the "Optional Redemption Price") equal
to the applicable percentage set forth below of the sum of the (i) Liquidation
Preference per share and (ii) any accrued and unpaid dividends thereon
(including Additional Dividends), whether or not declared or payable, to the
applicable Optional Redemption Date, in immediately available funds.
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<TABLE>
<CAPTION>
IF REDEEMED ON OR AFTER THE AND REDEEMED BEFORE THE
ANNIVERSARY OF THE ORIGINAL ISSUE ANNIVERSARY OF THE ORIGINAL ISSUE
DATE OCCURRING IN DATE OCCURRING IN APPLICABLE PERCENTAGE
--------------------------------- --------------------------------- ---------------------
<S> <C> <C>
2003 2004 105%
2004 2005 104%
2005 2006 103%
2006 2007 102%
2007 2008 101%
</TABLE>
(b) MANDATORY REDEMPTION. To the extent permitted by law, the
Corporation shall redeem, on the eighth anniversary of the Original Issue Date
(or, if such day is not a Business Day, on the first Business Day thereafter)
(the "MANDATORY REDEMPTION DATE"), all remaining shares of Series E Preferred
then outstanding, for an amount equal to the Liquidation Preference for each
share outstanding, plus an amount in cash equal to all accrued but unpaid
dividends thereon (including Additional Dividends) to the Mandatory Redemption
Date (the "MANDATORY REDEMPTION PRICE"), in immediately available funds. Prior
to authorizing or making such redemption with respect to the Series E Preferred,
the Corporation, by resolution of the Board of Directors shall, to the extent of
funds legally available therefor, declare a dividend on the Series E Preferred
payable on the Mandatory Redemption Date in an amount equal to any accrued and
unpaid dividends on the Series E Preferred as of such date (including Additional
Dividends) and, if the Corporation does not have sufficient legally available
funds to declare and pay all dividends accrued at the time of such redemption,
any remaining accrued and unpaid dividends (including Additional Dividends)
shall be added to the Mandatory Redemption Price. After paying any accrued and
unpaid dividends pursuant to the foregoing sentence, if the funds of the
Corporation legally available for redemption of shares of the Series E Preferred
then required to be redeemed are insufficient to redeem the total number of such
shares then outstanding, those funds which are legally available shall be used
to redeem the maximum possible number of shares of the Series E Preferred, which
shares to be redeemed shall be allocated pro rata among the holders of the
Series E Preferred based on the number of shares of Series E Preferred held by
such holders. At any time and from time to time thereafter, when additional
funds of the Corporation are legally available to discharge its obligation to
redeem all of the outstanding shares of Series E Preferred required to be
redeemed pursuant to this Section (the "MANDATORY REDEMPTION OBLIGATION"), such
funds shall be immediately used to discharge such Mandatory Redemption
Obligation until the balance of such shares have been redeemed. If and so long
as the Mandatory Redemption Obligation shall not be fully discharged, dividends
on any remaining outstanding shares of Series E Preferred shall continue to
accrue and be added to the dividend payable pursuant to the second preceding
sentence.
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(c) CHANGE OF CONTROL. If, on or prior to the third anniversary of the
Issue Date, (i) a Change of Control occurs, a holder of Series E Preferred may
require the Corporation to redeem the holder's shares of Series E Preferred, in
whole but not in part (the "Holder's Put Right") or (ii) the corporation wishes
to effect a Change of Control in connection with which a vote of the
shareholders is required and the holders of a majority of the shares of Series E
Preferred notify the Corporation that they intend to exercise their right under
Section 3(b)(ix) to vote against a proposed transaction that would result in a
Change of Control, the Corporation may require the holders of Series E Preferred
to surrender all but not less than all their shares of Series E Preferred for
redemption (the "Company Call Right"), in either case at a price per share (the
"Control Redemption Price") equal to 125% of the sum of the (a) Liquidation
Preference plus (B) an amount per share equal to all accrued and unpaid
dividends thereon (including Additional Dividends), whether or not declared or
payable, in immediately available funds. (The Control Redemption Price, Optional
Redemption Price and Mandatory Redemption Price are sometimes referred to as the
"Applicable Redemption Price," which Price in all cases, includes full
cumulative dividends accrued and unpaid (including Additional Dividends) on the
shares of Series E Preferred being redeemed. The Control Redemption Date (as
defined below), Optional Redemption Date, and Mandatory Redemption Date are
sometimes referred to as the "Applicable Redemption Date".)
(d) NOTICE.
(1) The Corporation will provide notice to holders of record
of the Series E Preferred (x) of any redemption pursuant to Section 5(a) or 5(b)
not less than 30 nor more than 60 days prior to the date fixed for such
redemption (a "Redemption Notice") and (y) of any Change of Control within 30
days of such Change of Control, provided that in the case of a Change of Control
requiring a shareholder vote, the Corporation shall provide such notice at least
30 days prior to the date fixed for the meeting of holders of Series E Preferred
called to vote on that proposed transaction (a "Change of Control Notice"). Any
Notice provided pursuant to this Section 8(d) shall be provided by first-class
mail postage prepaid, to each holder of record of the Series E Preferred, at
such holder's address as it appears on the stock transfer books of the
Corporation.
(2) Each Redemption Notice shall state, as appropriate, (x)
the Applicable Redemption Date; (y) the number of shares of Series E Preferred
to be redeemed and, if fewer than all the shares held by any holder are to be
redeemed, the number of such shares to be redeemed from such holder; and (z) the
Optional Redemption Price or Mandatory Redemption Price.
(3) Each Change of Control Notice shall state that: (v) the
Corporation proposes to effect a Change of Control in connection with which a
vote of shareholders is required and the holders of the Series E Preferred have
the right to approve such transaction; (w) if holders of 50% or more of the
outstanding shares of Series E Preferred notify the Corporation that they will
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not approve such transaction within 20 days of the receipt of the Change of
Control Notice, the Corporation may redeem all but not less than all the shares
of Series E Preferred; (x) if a Change of Control occurs, each holder has the
right to require the Company to redeem its shares of Series E Preferred and any
shares of Series E Preferred not tendered for redemption will remain outstanding
and continue to accrue dividends (including Additional Dividends); (y) the
Control Redemption Price; and (z) the date on which the Corporation must redeem
the shares upon exercise of the Holder's Put Right or the Company Call Right,
whichever is applicable (in either case, the "Control Redemption Date"), which
shall be not later than 30 days from the date the Change of Control Notice is
mailed. Within 20 days of receipt of the Change of Control Notice notifying that
the Corporation proposes to effect a Change of Control in connection with which
a shareholder vote is required, each holder of Series E Preferred shall notify
the Corporation as to whether it will vote to approve or vote against such
transaction. If it states it will approve such transaction, then that holder of
Series E Preferred agrees to vote in favor of the transaction.
(4) In addition, each Redemption Notice and Change of Control
Notice shall state, as appropriate, the place or places where certificates for
such shares are to be surrendered for redemption; (w) the amount of full
cumulative dividends per share of Series E Preferred to be redeemed (including
Additional Dividends) up to but excluding the Applicable Redemption Date, and
that dividends on shares of Series E Preferred to be redeemed will cease to
accrue on such Redemption Date unless the Corporation shall default in payment
of the Applicable Redemption Price; (x) the name and location of any bank or
trust company with which the Corporation will deposit redemption funds pursuant
to subsection (f) below; (y) the then-effective Conversion Price; and (z) that
the right of holders to convert shares of Series E Preferred to be redeemed will
terminate at the close of business on the Business Day next preceding the date
fixed for redemption (unless the Corporation shall default in the payment of the
Applicable Redemption Price).
Any Notice that is mailed pursuant to clause (i) shall be conclusively
presumed to have been duly given, whether or not the holder of shares of Series
E Preferred receives such notice, and failure to give such notice by mail, or
any defect in such notice, to the holders of any shares designated for
redemption shall not affect the validity of the proceedings for the redemption
of any other shares of Series E Preferred.
(e) MECHANICS OF REDEMPTION. Upon surrender in accordance with any
notice referred to in subsection (d) above of the certificate for any shares
redeemed pursuant to Section 8(a), (b) or (c) (duly endorsed or accompanied by
appropriate instruments of transfer if so required by the Corporation), the
holders of record of such shares shall be entitled to receive the Applicable
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Redemption Price, without interest, up to but excluding such Redemption Date out
of funds legally available therefor. If fewer than all the shares represented by
any such certificate are redeemed, a new certificate representing the unredeemed
shares shall be issued without cost to the holder thereof.
(f) REDEMPTION FUNDS. On the date of any redemption being made pursuant
to this Section, the Corporation shall, and at any time after mailing the
Redemption Notice or Change of Control Notice and before the Applicable
Redemption Date the Corporation may, deposit for the benefit of the holders of
shares of Series E Preferred to be redeemed the funds necessary for such
redemption with a bank or trust company having a capital and surplus of at least
$1 billion, with instructions to such bank or trust company to pay the full
redemption as provided herein to the holders of shares of Series E Preferred
upon surrender of certificates for such shares; PROVIDED, HOWEVER, that the
making of such deposit shall not release the Corporation from any of its
obligations hereunder. Any moneys so deposited by the Corporation and unclaimed
at the end of two years from the Applicable Redemption Date shall revert to the
general funds of the Corporation and, upon demand, such bank or trust company
shall pay over to the Corporation such unclaimed amounts and thereupon such bank
or trust company shall be relieved of all responsibility in respect thereof and
any holder of shares of Series E Preferred so redeemed shall look only to the
Corporation for the payment of the full redemption amounts, as provided herein.
(g) RIGHTS AFTER REDEMPTION. Notice of redemption having been given as
provided in Section 8(d), upon the deposit pursuant to subsection (f) of the
full redemption amounts as provided herein in respect of all shares of Series E
Preferred then to be redeemed, notwithstanding that any certificates for such
shares shall not have been surrendered in accordance with subsection (e), from
and after the Applicable Redemption Date: (i) the shares represented thereby
shall no longer be deemed outstanding, (ii) the right to receive dividends
thereon shall cease to accrue, and (iii) all rights of the holders of such
shares of Series E Preferred shall cease and terminate, excepting only the right
to receive the full redemption amounts as provided herein without interest
thereon. If the funds deposited are not sufficient for redemption of the shares
of the Series E Preferred that were to be redeemed, then no certificates
evidencing such shares shall be deemed surrendered and such shares shall remain
outstanding and the rights of holders of shares of Series E Preferred shall
continue to be those of holders of shares of the Series E Preferred.
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Section 6. REACQUIRED SHARES.
Any shares of Series E Preferred converted, exchanged, redeemed,
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares of Series E Preferred shall upon their cancellation become authorized but
unissued shares of preferred stock, par value $.01 per share, of the Corporation
and, upon the filing of an appropriate Certificate of Designation with the
Secretary of State of the State of Delaware, may be reissued as part of another
series of preferred stock, par value $.01 per share, of the Corporation subject
to the conditions or restrictions on issuance set forth therein, but in any
event may not be reissued as shares of Series E Preferred unless all shares of
the Series E Preferred issued on the Issue Date shall have already been
redeemed, converted or exchanged.
Section 7. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) EFFECT OF LIQUIDATION. If the Corporation shall commence a
voluntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or consent to the
entry of an order for relief in an involuntary case under any such law or to the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due (any such event, a "Voluntary Liquidation Event"), or if a decree or
order for relief in respect of the Corporation shall be entered by a court
having jurisdiction in the premises in an involuntary case under the United
States bankruptcy laws or any applicable bankruptcy, insolvency or similar law
of any other country, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and on account of any such event the Corporation shall liquidate,
dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve
or wind up, no distribution shall be made:
(i) to the holders of shares of Junior Stock unless, prior
thereto, the holders of shares of Series E Preferred, subject to Section 8,
shall have received the greater of (A) (1) if a Voluntary Liquidation Event
shall have occurred, the Optional Redemption Price with respect to each share
(or if such event is a Change of Control, the amount payable under Section 5(c)
with respect to such share) and (2) if a Voluntary Liquidation Event shall not
have occurred, the Liquidation Preference, plus all accrued and unpaid
dividends, whether or not declared or currently payable, to the date of
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distribution, with respect to each share and (B) the amount per share (subject
to adjustment to reflect stock splits, stock dividends, stock combinations,
recapitalizations and like occurrences) for each outstanding share of Series E
Preferred as if the holders had converted such shares into shares of Common
Stock immediately prior to the liquidation, dissolution or winding up, or
(ii) to the holders of shares of Parity Stock, except
distributions made ratably on the Series E Preferred and all other Parity Stock
in proportion to the total amounts to which the holders of all shares of the
Series E Preferred and other Parity Stock are entitled upon such liquidation,
dissolution or winding up;
PROVIDED that any distributions referred to in clauses (i) and (ii) shall also
include all amounts payable to the holders of shares of Series E Preferred under
this Section 7 or Section 5(c) as a result of a Change in Control.
Nothing in this section shall affect the rights of holders of shares of Series E
Preferred under Section 3 with respect to a Voluntary Liquidation Event.
(b) VOLUNTARY LIQUIDATION. For purposes of this Section 7, the holders
of a majority of the outstanding shares of the Series E Preferred may elect to
have treated as a Voluntary Liquidation Event the consolidation or merger of the
Corporation with or into any other corporation or the sale or other transfer in
a single transaction or a series of related transactions of all or substantially
all of the assets of the Corporation, or any other reorganization or business
combination of the Corporation or a Change of Control.
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Section 8. VOLUNTARY CONVERSION.
(a) CONVERSION RIGHT. Any holder of Series E Preferred shall have the
right, at its option, at any time and from time to time, to convert, subject to
the terms and provisions of this Section 8, any or all of such holder's shares
of Series E Preferred into such number of fully paid and non-assessable shares
of Common Stock as is equal, subject to Section 8(f), to the product of the
number of shares of Series E Preferred being so converted multiplied by the
quotient of (i) the sum of the Liquidation Preference and all dividends accrued
and unpaid (including Additional Dividends) on the Series E Preferred so
converted to the date of conversion divided by (ii) the Conversion Price (as
defined below) then in effect, except that with respect to any shares which
shall be called for exchange or redemption, such right shall terminate at the
close of business on the date of exchange or redemption for such shares, unless
in any such case the Corporation shall default in performance or payment due
upon exchange or redemption thereof. The Conversion Price shall be $12.00,
subject to adjustment as set forth in Section 8(c). Such conversion right shall
be exercised by the surrender of the shares to be converted to the Corporation
at any time during usual business hours at its principal place of business to be
maintained by it, accompanied by written notice that the holder elects to
convert such Shares and, subject to Section 8(j), specifying the name or names
(with address) in which a certificate or certificates for shares of Common Stock
are to be issued and (if so required by the Corporation) by a written instrument
or instruments of transfer in form reasonably satisfactory to the Corporation
duly executed by the holder or its duly authorized legal representative and
transfer tax stamps or funds therefor, if required pursuant to Section 8(j). All
shares of Series E Preferred surrendered for conversion shall be delivered to
the Corporation for cancellation and canceled by it and no shares of Series E
Preferred shall be issued in lieu thereof.
(b) MECHANICS OF CONVERSION. As promptly as practicable after the
surrender, as herein provided, of any shares of Series E Preferred for
conversion pursuant to Section 8(a), the Corporation shall deliver to or upon
the written order of the holder of such shares so surrendered a certificate or
certificates representing the number of fully paid and non-assessable shares of
Common Stock into which such shares of Series E Preferred have been converted in
accordance with the provisions of this Section 8. Subject to the following
provisions of this paragraph and of Section 8(c), such conversion shall be
deemed to have been made immediately prior to the close of business on the date
that such shares of Series E Preferred shall have been surrendered in
satisfactory form for conversion, and the Person or Persons entitled to receive
the Common Stock deliverable upon conversion of such shares of Series E
Preferred shall be treated for all purposes as having become the record holder
or holders of such Common Stock at such time, and such conversion shall be at
the Conversion Price in effect at such time; PROVIDED, HOWEVER, that no
surrender shall be effective to constitute the Person or Persons entitled to
receive the Common Stock deliverable upon such conversion as the record holder
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<PAGE> 16
or holders of such Common Stock while the share transfer books of the
Corporation shall be closed (but not for any period in excess of five days), but
such surrender shall be effective to constitute the Person or Persons entitled
to receive such Common Stock as the record holder or holders thereof for all
purposes immediately prior to the close of business on the next succeeding day
on which such share transfer books are open, and such conversion shall be deemed
to have been made at, and shall be made at the Conversion Price in effect at,
such time on such next succeeding day.
(c) ADJUSTMENT OF CONVERSION PRICE. The Conversion Price (and the price
at which a share of Common Stock is valued pursuant to Section 10) shall be
subject to adjustment as follows:
(1) In case the Corporation shall at any time or from time to
time after the Issue Date (A) pay a dividend or make a distribution (other than
a dividend or distribution paid or made to holders of shares of Series E
Preferred in the manner provided in Section 2(d)) on the outstanding shares of
Common Stock in capital stock (which, for purposes of this Section 8(c) shall
include, without limitation, any options, warrants or other rights to acquire
capital stock) of the Corporation, (B) subdivide the outstanding shares of
Common Stock into a larger number of shares, (C) combine the outstanding shares
of Common Stock into a smaller number of shares, (D) issue any shares of its
capital stock in a reclassification of the Common Stock or (E) pay a dividend or
make a distribution (other than a dividend or distribution paid or made to
holders of shares of Series E Preferred in the manner provided in Section 2(d))
on the outstanding shares of Common Stock in securities of the Corporation
pursuant to a shareholder rights plan, "poison pill" or similar arrangement,
then, and in each such case, the Conversion Price in effect immediately prior to
such event shall be adjusted (and any other appropriate actions shall be taken
by the Corporation) so that the holder of any share of Series E Preferred
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other securities of the Corporation that such holder
would have owned or would have been entitled to receive upon or by reason of any
of the events described above, had such share of Series E Preferred been
converted immediately prior to the occurrence of such event. An adjustment made
pursuant to this Section 8(c)(i) shall become effective retroactively (A) in the
case of any such dividend or distribution, to a date immediately following the
close of business on the record date for the determination of holders of Common
Stock entitled to receive such dividend or distribution or (B) in the case of
any such subdivision, combination or reclassification, to the close of business
on the day upon which such corporate action becomes effective.
(2) In case the Corporation shall at any time or from time to
time after the Issue Date issue shares of Common Stock (or securities
convertible into or exchangeable for Common Stock, or any options, warrants or
other rights to acquire shares of Common Stock) for a consideration per share
less than either the Conversion Price or the Current Market Price per share of
Common Stock then in effect at the record date or issuance date, as the case may
be (the "Date"), referred to in the following sentence (treating the price per
share of any security convertible or exchangeable or exercisable into Common
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Stock as equal to (A) the sum of the price for such security convertible,
exchangeable or exercisable into Common Stock plus any additional consideration
payable (without regard to any anti-dilution adjustments) upon the conversion,
exchange or exercise of such security into Common Stock divided by (B) the
number of shares of Common Stock initially underlying such convertible,
exchangeable or exercisable security),
then, and in each such case, the Conversion Price then in effect shall be
adjusted by dividing the Conversion Price in effect on the day immediately prior
to the Date by a fraction (x) the numerator of which shall be the sum of the
number of shares of Common Stock outstanding on the Date plus the number of
additional shares of Common Stock issued or to be issued (or the maximum number
into which such convertible or exchangeable securities initially may convert or
exchange or for which such options, warrants or other rights initially may be
exercised) and (y) the denominator of which shall be the sum of the number of
shares of Common Stock outstanding on the Date plus the number of shares of
Common Stock which the aggregate consideration for the total number of such
additional shares of Common Stock so issued or to be issued upon the conversion,
exchange or exercise of such convertible or exchangeable securities or options,
warrants or other rights (plus the aggregate amount of any additional
consideration initially payable upon such conversion, exchange or exercise of
such security) would purchase at the greater of the Conversion Price or Current
Market Price per share of Common Stock on the Date, as the case may be.
Such adjustment shall be made whenever such shares, securities, options,
warrants or other rights are issued, and shall, in each case, become effective,
in each case, retroactively to a date immediately following the close of
business (1) in the case of issuance to stockholders of the Corporation, as
such, on the record date for the determination of stockholders entitled to
receive such shares, securities, options, warrants or other rights and (2) in
all other cases, on the date ("issuance date") of such issuance; PROVIDED that:
(A) the determination as to whether an adjustment is required
to be made pursuant to this Section 8(d)(ii) shall be made upon the issuance of
such shares or such convertible or exchangeable securities, options, warrants or
other rights;
(B) if any convertible or exchangeable securities, options,
warrants or other rights (or any portions thereof) which shall have given rise
to an adjustment pursuant to this Section 8(d)(ii) shall have expired or
terminated without the exercise thereof and/or if by reason of the terms of such
convertible or exchangeable securities, options, warrants or other rights there
shall have been an increase or increases, with the passage of time or otherwise,
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<PAGE> 18
in the price payable upon the exercise or conversion thereof, then the
Conversion Price hereunder shall be readjusted (but to no greater extent than
originally adjusted) on the basis of (1) eliminating from the computation any
additional shares of Common Stock corresponding to such convertible or
exchangeable securities, options, warrants or other rights as shall have expired
or terminated, (2) treating the additional shares of Common Stock, if any,
actually issued or issuable pursuant to the previous exercise of such
convertible or exchangeable securities, options, warrants or other rights as
having been issued for the consideration actually received and receivable
therefor and (3) treating any of such convertible or exchangeable securities,
options, warrants or other rights which remain outstanding as being subject to
exercise or conversion on the basis of such exercise or conversion price as
shall be in effect at this time; and
(C) no adjustment in the Conversion Price shall be made
pursuant to this Section 8(d)(ii) as a result of any issuance of securities by
the Corporation in respect of which an adjustment to the Conversion Price is
made pursuant to Section 8(c)(i).
(3) In case the Corporation shall at any time or from time to time
after the Issue Date distribute to all holders of shares of its Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Corporation is the resulting or surviving corporation and
the Common Stock is not changed or exchanged) cash, evidences of indebtedness of
the Corporation or another issuer, securities of the Corporation or another
issuer or other assets (excluding (A) dividends or distributions paid or made to
holders of shares of Series E Preferred in the manner provided in Section 2(d),
and (B) dividends payable in shares of Common Stock for which adjustment is made
under Section 8(c)(i)) or rights or warrants to subscribe for or purchase
securities of the Corporation (excluding those referred to in Section 8(c)(ii)
or those in respect of which an adjustment in the Conversion Price is made
pursuant to Section 8(c)(i) or (ii)), then, and in each such case, the
Conversion Price then in effect shall be adjusted by dividing the Conversion
Price in effect immediately prior to the date of such distribution by a fraction
(x) the numerator of which shall be the Market Price of the Common Stock on the
record date referred to below and (y) the denominator of which shall be such
Market Price of the Common Stock less the then Fair Market Value (as determined
by the Board of Directors of the Corporation) of the portion of the cash,
evidences of indebtedness, securities or other assets so distributed or of such
subscription rights or warrants applicable to one share of Common Stock (but
such denominator not to be less than one). Such adjustment shall be made
whenever any such distribution is made and shall become effective retroactively
to a date immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
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(4) In the case the Corporation, at any time or from time to time after
the Issue Date, shall take any action affecting its Common Stock similar to or
having an effect similar to any of the actions described in any of Section
8(c)(i) through Section 8(c)(iii), inclusive, or Section 8(g) (but not including
any action described in any such Section) and the Board of Directors of the
Corporation in good faith determines that it would be equitable in the
circumstances to adjust the Conversion Price as a result of such action, then,
and in each such case, the Conversion Price shall be adjusted in such manner and
at such time as the Board of Directors of the Corporation in good faith
determines would be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
holders of the Series E Preferred).
(5) Notwithstanding anything herein to the contrary, no adjustment
under this Section 8(c) need be made to the Conversion Price unless such
adjustment would require an increase or decrease of at least 1% of the
Conversion Price then in effect. Any lesser adjustment shall be carried forward
and shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment or adjustments so carried
forward, shall amount to an increase or decrease of at least 1% of such
Conversion Price. Any adjustment to the Conversion Price carried forward and not
theretofore made shall be made immediately prior to the conversion of any shares
of Series E Preferred pursuant hereto.
(6) Notwithstanding anything herein to the contrary, no adjustment
under this Section 8(c)(ii) or (iii) shall be made upon (A) the grant of options
to employees or directors of the Corporation permitted under benefit plans in
existence on the Issue Date pursuant to the terms of such plans in effect on the
Issue Date, (B) the issuance of any Common Stock upon conversion of the Series E
Preferred in accordance with the terms of its Certificate of Designation, (C)
the issuance of any Common Stock upon conversion of the Series D Preferred in
accordance with the terms of its Certificate of Designation in effect on the
Issue Date and (D) the issuance of any Common Stock upon conversion or exercise
of any convertible securities outstanding on the Issue Date in accordance with
terms of such security in effect on the Issue Date.
(a) EFFECT OF SETTING RECORD DATE. If the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, and shall thereafter and before the
distribution to stockholders thereof legally abandon its plan to pay or deliver
such dividend or distribution, then thereafter no adjustment in the Conversion
Price then in effect shall be required by reason of the taking of such record.
(b) CERTIFICATE OF ADJUSTMENT. Upon any increase or decrease in the
Conversion Price, then, and in each such case, the Corporation promptly shall
deliver to each registered holder of Series E Preferred at least five Business
Days prior to effecting any of the foregoing transactions a certificate, signed
by the President or a Vice-President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation, setting
forth in reasonable detail the event requiring the adjustment and specifying, to
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the extent feasible, (x) the method by which such adjustment was calculated and
(y) the increased or decreased Conversion Price then in effect following such
adjustment.
(c) NO FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of Series E
Preferred. If more than one share of Series E Preferred shall be surrendered for
conversion at one time by the same holder, the number of full shares of Common
Stock issuable upon conversion thereof shall be computed on the basis of the
aggregate Liquidation Preference (plus accrued and unpaid dividends, including
any Additional Dividends) of the shares of Series E Preferred so surrendered. If
the conversion of any share or shares of Series E Preferred results in a
fraction, an amount equal to such fraction multiplied by the Current Market
Price of the Common Stock on the Business Day preceding the day of conversion
shall be paid to such holder in cash by the Corporation.
(d) TRANSACTIONS. In case of any capital reorganization or
reclassification or other change of outstanding shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value), or in case of any consolidation or merger of the
Corporation with or into another Person (other than a consolidation or merger in
which the Corporation is the resulting or surviving Person and which does not
result in any reclassification or change of outstanding Common Stock) (any of
the foregoing, a "Transaction"), the Corporation, or such successor or
purchasing Person, as the case may be, shall execute and deliver to each holder
of Series E Preferred at least 10 Business Days prior to effecting any of the
foregoing Transactions a certificate that the holder of each share of Series E
Preferred then outstanding shall have the right after the Transaction to convert
such share of Series E Preferred into the kind and amount of shares of stock or
other securities (of the Corporation or another issuer) or property or cash
receivable upon such Transaction by a holder of the number of shares of Common
Stock into which such share of Series E Preferred could have been converted
immediately prior to such Transaction. Such certificate shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 8. If, in the case of any such
Transaction, the stock, other securities, cash or property receivable thereupon
by a holder of Common Stock includes shares of stock or other securities of a
Person other than the successor or purchasing Person and other than the
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Corporation, which controls or is controlled by the successor or purchasing
Person or which, in connection with such Transaction, issues stock, securities,
other property or cash to holders of Common Stock, then such certificate also
shall be executed by such Person, and such Person shall, in such certificate,
specifically acknowledge the obligations of such successor or purchasing Person
and acknowledge its obligations to issue such stock, securities, other property
or cash to the holders of Series E Preferred upon conversion of the shares of
Series E Preferred as provided above. The provisions of this Section 8(h) and
any equivalent thereof in any such certificate similarly shall apply to
successive Transactions.
(e) NOTICE. In case at any time or from time to time:
(i) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock;
(ii) the Corporation shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe for or purchase
any shares of stock of any class or of any other rights or warrants;
(iii) there shall be any reclassification of the Common Stock,
or any consolidation or merger to which the Corporation is a party and for which
approval of any shareholders of the Corporation is required, or any sale or
other disposition of all or substantially all of the assets of the Corporation;
or
(iv) there shall be any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall mail to each holder of shares of Series E Preferred
at such holder's address as it appears on the transfer books of the Corporation,
as promptly as possible but in any event at least 10 days prior to the
applicable date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights
or warrants or, if a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such dividend, distribution or
rights are to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, conveyance, dissolution, liquidation or winding up
is expected to become effective. Such notice also shall specify the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for shares of stock or other securities or property
or cash deliverable upon such reclassification, consolidation, merger, sale,
conveyance, dissolution, liquidation or winding up.
(f) RESERVATION OF COMMON STOCK. The Corporation shall at all times
reserve and keep available for issuance upon the conversion of the Series E
Preferred pursuant to Section 8(a) or 10(a), such number of its authorized but
unissued shares of Common Stock as will from time to time be sufficient to
permit the conversion of all outstanding shares of Series E Preferred, and shall
take all action required to increase the authorized number of shares of Common
Stock if at any time there shall be insufficient authorized but unissued shares
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of Common Stock to permit such reservation or to permit the conversion of all
outstanding shares of Series E Preferred.
(g) ISSUANCE OF CERTIFICATES. The issuance or delivery of certificates
for Common Stock upon the conversion of shares of Series E Preferred pursuant to
Section 8(a) or 10(a) shall be made without charge to the converting holder of
shares of Series E Preferred for such certificates or for any tax in respect of
the issuance or delivery of such certificates or the securities represented
thereby, and such certificates shall be issued or delivered in the respective
names of, or (subject to compliance with the applicable provisions of federal
and state securities laws) in such names as may be directed by, the holders of
the shares of Series E Preferred converted; PROVIDED, HOWEVER, that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate in
a name other than that of the holder of the shares of Series E Preferred
converted, and the Corporation shall not be required to issue or deliver such
certificate unless or until the Person or Persons requesting the issuance or
delivery thereof shall have paid to the Corporation the amount of such tax or
shall have established to the reasonable satisfaction of the Corporation that
such tax has been paid.
Section 9. CERTAIN REMEDIES.
Any registered holder of Series E Preferred shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Certificate of Designation and to enforce specifically the terms and provisions
of this Certificate of Designation in any court of the United States or any
state thereof having jurisdiction, this being in addition to any other remedy to
which such holder may be entitled at law or in equity.
Section 10. CONVERSION AT THE OPTION OF THE CORPORATION.
(a) TIME OF CONVERSION. At any time after the third anniversary of the
Issue Date, if for 20 consecutive Trading Days beginning on or after such
anniversary, the Market Price of the Common Stock at the end of each such
Trading Day during such period exceeds 250% of the Conversion Price in effect on
each such Trading Day, then on the 20th Business Day following such 20-day
period (the "Optional Conversion Date"), the Corporation shall have the right to
cause all, but not less then all, of the outstanding shares of Series E
Preferred to be converted automatically into such number of fully paid and
non-assessable shares of Common Stock as is equal, subject to Section 8(g), to
the product of the number of shares of Series E Preferred being so converted
multiplied by the quotient of (i) the Liquidation Preference (plus accrued and
unpaid dividends, including any Additional Dividends) divided by (ii) the
Conversion Price in effect on the Optional Conversion Date.
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(b) OFFICER'S CERTIFICATE. The Corporation will provide notice to
holders of record of Series E Preferred of its election to cause all the Series
E Preferred to be converted pursuant to Section 10(a) on the Optional Conversion
Date. The Corporation shall deliver such notice at least ten Business Days prior
to the Optional Conversion Date, by first-class mail postage prepaid, to each
holder of record of the Series E Preferred, at such holder's address as it
appears on the stock transfer books of the Corporation. Such notice shall
include an officer's certificate attesting to the satisfaction of the condition
precedent to optional conversion, stating the Conversion Price and the number of
fully paid and non-assessable shares of Common Stock into which such shares of
Series E Preferred will be converted in accordance with Section 8 and this
Section 10.
(c) The Corporation shall deposit for the benefit of the holders of
shares of Series E Preferred the share certificates representing the shares of
Common Stock deliverable upon conversion of the shares of Series E Preferred
with a bank or trust company having a capital and surplus of at least $1
billion, with instructions to such bank or trust company to deliver the
certificates to the holders of shares of Series E Preferred upon surrender of
the certificates for such shares; PROVIDED, HOWEVER, that the making of such
deposit shall not release the Corporation from any of its obligations hereunder.
Any certificates so deposited by the Corporation and unclaimed at the end of two
years from the Optional Redemption Date shall revert to the Corporation and the
bank or trust company shall be relieved of all responsibility in respect thereof
and any holder of shares of Series E Preferred so converted shall look only to
the Corporation for the certificate representing the Common Stock issued upon
the conversion, as provided herein.
(d) EFFECT OF CONVERSION. Notice of conversion having been given as
provided in Section 10(b), upon the deposit pursuant to subsection (c) of the
certificates representing the shares of Common Stock issuable upon conversion of
the shares of Series E Preferred, notwithstanding that any certificates for such
shares shall not have been surrendered for cancellation, from and after the
Optional Conversion Date (i) the shares represented thereby shall no longer be
deemed outstanding, (ii) the rights to receive dividends thereon shall cease to
accrue, and (iii) all rights of the holders of shares of Series E Preferred to
be converted shall cease and terminate, excepting only the right to receive the
shares of Common Stock and Dividends. If the Corporation shall default in the
execution and delivery of the shares of Common Stock, then no certificates
evidencing such shares shall be deemed surrendered and such shares shall remain
outstanding and the rights of holders of Series E Preferred shall continue to be
those of holders of shares of the Series E Preferred.
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Section 11. DEFINITIONS.
For the purposes of this Certificate of Designation of Series E
Preferred, the following terms shall have the meanings indicated:
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act; PROVIDED that for
purposes of this Certificate, the Purchaser shall not be considered an Affiliate
of the Corporation.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the State of Delaware are authorized or
required by law or executive order to close.
A "Change of Control" of the Corporation shall mean such times as: (1)
Any Person or "group" (within the meaning of Section 13(d)(3) of the Exchange
Act) is or becomes the beneficial owner, directly or indirectly, of outstanding
shares of stock of the Corporation entitling such Person or Persons to exercise
50% or more of the total votes (excluding the Series E Preferred) entitled to be
cast at a regular or special meeting, or by action by written consent, of
shareholders of the Corporation (the term "beneficial owner" shall be determined
in accordance with Rule 13d-3, promulgated by the Commission under the Exchange
Act);
(2) A majority of the Board of Directors of the Corporation shall
consist of Persons other than Continuing Directors. The term "Continuing
Director" shall mean any member of the Board of Directors on the Closing Date
(as defined in the Stock Purchase Agreement) and any other member of the Board
of Directors who shall be recommended or elected to succeed or become a
Continuing Director by a majority of Continuing Directors who are then members
of the Board of Directors;
(3) The shareholders of the Corporation shall have approved a
recapitalization, reorganization, merger, consolidation or similar transaction,
in each case with respect to which all or substantially all the Persons who were
the respective beneficial owners, directly or indirectly, of the outstanding
shares of capital stock of the Corporation immediately prior to such
recapitalization, reorganization, merger, consolidation or similar transaction,
will own less than 50% of the combined voting power of the then outstanding
shares of capital stock of the Corporation resulting from such recapitalization,
reorganization, merger, consolidation or similar transaction; PROVIDED that any
such recapitalization shall not be considered a Change of Control if the holders
of Series E Preferred have the right to participate on at least a PARI PASSU
basis;
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(4) The shareholders of the Corporation shall have approved of the sale
or other disposition of all or substantially all the assets of the Corporation
in one transaction or in a series of related transactions;
(5) Any transaction occurs (other than one described in (iii) above or
(vi) below), the result of which is that the Common Stock is not required to be
registered under Section 12 of the Exchange Act and that the holders of Common
Stock do not receive common stock of the Person surviving such transaction which
is required to be registered under Section 12 of the Exchange Act; or
(vi) Immediately after any merger, consolidation,
recapitalization or similar transaction, D. Gregory Smith or a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) shall be the beneficial
owners, directly or indirectly, of outstanding shares of capital stock of the
Corporation (or any Person surviving such transaction) entitling them
collectively to exercise 50% or more of the total voting power of shares of
capital stock of the Corporation (or the surviving Person in such transaction)
and in connection with or as a result of such transaction, the Corporation (or
such surviving Person) shall have incurred or issued additional indebtedness
such that the total indebtedness so incurred or issued equals at least 50% of
the consideration payable in such transaction; PROVIDED that any such
transactions shall not be considered a Change of Control if the holders of
Series E Preferred have the right to participate on at least a PARI PASSU basis.
"Common Stock" shall mean the common stock, par value $.01 per share,
and each other class of capital stock of the Corporation into which such stock
is reclassified or reconstituted.
"Consolidated EBITDA" shall mean for any period, the Consolidated Net
Income for such period, plus, to the extent deducted in determining such
Consolidated Net Income (i) Consolidated Interest Expense; (ii) depreciation;
(iii) depletion; (iv) amortization; (v) all federal, state, local and foreign
income taxes; and (vi) all other non-cash expenses, minus, to the extent added
in determining such Consolidated Net Income, any non-cash income or non-cash
gains, all as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" shall mean for any period, the net
interest expense of the Corporation and its Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" shall mean for any period, the net income of
the Corporation and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, but excluding from the determination
of Consolidated Net Income (without duplication) (a) any extraordinary or
non-recurring gains or losses or gains or losses from asset sales; (b) effects
of discontinued operations; (c) the income (or loss) of any Person in which any
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other Person (other than the Corporation or any of the Subsidiaries) has a joint
interest, except to the extent of the amount of dividends or other distributions
actually paid in cash to the Corporation or any of its Subsidiaries by such
Person during such period; and (d) the income (or loss) of any Person accrued
prior to the date it becomes a Subsidiary of the Corporation or is merged into
or consolidated with the Corporation or any of its Subsidiaries or the date such
Person's assets are acquired by the Corporation or any of its Subsidiaries.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) the average daily Market Price of the
Common Stock for those days during the period of 20 days, ending on such date,
which are Trading Days, and (b) if the Common Stock is not then listed or
admitted to trading on any national securities exchange or quoted in the
over-the-counter market, the Market Price on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
thereunder.
"Fair Market Value" shall mean the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to sell,
in an arm's-length transaction (assuming that the Common Stock is valued "as if
fully distributed" so that, among other things, there is no consideration given
for minority investment discounts or discounts related to illiquidity or
restrictions on transferability).
"GAAP" shall mean the generally accepted United States accounting
principles in effect from time to time.
"Issue Date" shall mean the original date of issuance of shares of
Series E Preferred to the holders pursuant to the Stock Purchase Agreement.
"Junior Stock" shall mean any capital stock of the corporation ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series E Preferred including, without limitation, the Common Stock.
"Liquidation Preference" with respect to a share of Series E Preferred
shall mean $12.00.
"Market Price" shall mean, per share of Common Stock on any date
specified herein: (a) the closing price per share of the Common Stock on such
date published in THE WALL STREET JOURNAL or, if no such closing price on such
date is published in THE WALL STREET JOURNAL, the average of the closing bid and
asked prices on such date, as officially reported on the principal national
securities exchange on which the Common Stock is then listed or admitted to
trading; (b) if the Common Stock is not then listed or admitted to trading on
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any national securities exchange but is designated as a national market system
security, the last trading price of the Common Stock on such date; or (c) if
there shall have been no trading on such date or if the Common Stock is not so
designated, the average of the reported closing bid and asked prices of the
Common Stock on such date as shown by NASDAQ and reported by any member firm of
the NYSE, selected by the Corporation. If neither (a), (b) or (c) is applicable,
Market Price shall mean the Fair Market Value per share determined in good faith
by the Board of Directors of the Corporation which shall be deemed to be Fair
Market Value unless holders of at least 15% of the outstanding shares of Series
E Preferred request that the Corporation obtain an opinion of a nationally
recognized investment banking firm chosen by such holders and the Corporation
(at the Corporation's expense), in which event Fair Market Value shall be as
determined by such investment banking firm.
"Material Subsidiary" shall mean the subsidiaries of the Corporation
set forth on the Schedule attached hereto and any other Subsidiary that would
constitute a Significant Subsidiary (as defined in Article 1 of Regulation S-X
promulgated under the Securities Act of 1933, as amended).
"NASDAQ" shall mean the National Market System of the NASDAQ Stock
Market.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Parity Stock" shall mean any capital stock of the corporation,
including the Series D Preferred, ranking on a par (either as to dividends or
upon liquidation, dissolution or winding up) with the Series E Preferred.
"Permissible Amount" shall mean:
(i) if the Consolidated EBITDA for the immediately preceding
four fiscal quarters is $25 million or less, $100 million; or
(ii) if the Consolidated EBITDA for the immediately preceding
four fiscal quarters is greater than $25 million, an amount equal to the
Consolidated EBITDA for the immediately preceding four fiscal quarters
multiplied by 4.
"Per Share Equity Value" of a share of Common Stock shall mean the
quotient obtained by dividing (a) the "as if fully distributed value" (so that,
among other things, there is no consideration given for any minority investment
discounts or discounts related to illiquidity or restrictions on
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transferability) of all the Corporation's outstanding shares of Common Stock (on
a fully diluted basis), by (b) the number of outstanding shares of Common Stock
on a fully diluted basis.
"Person" shall mean any individual, firm, corporation, partnership,
limited liability company trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind, and shall any successor (by
merger) of such entity.
"Senior Stock" shall mean any capital stock of the Corporation ranking
senior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series E Preferred.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement,
dated October 19, 2000 between the Corporation, The 1818 Fund III, L.P. and the
other persons listed therein, as the same may be amended from time to time.
"Subsidiary" shall mean, with respect to any Person, a corporation or
other entity of which 50% or more of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
"Trading Days" shall mean a day on which the national securities
exchanges are open for trading.
Section 12. MODIFICATION OR AMENDMENT.
Except as specifically set forth herein, modifications or amendments to
this Certificate of Designation may be made by the Corporation with the consent
of the holders of at least 50% of the outstanding shares of Series E Preferred.
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IN WITNESS WHEREOF, Z-Tel Technologies, Inc. has caused this
Certificate to be duly executed in its corporate name on this 10th day of
November, 2000.
Z-TEL TECHNOLOGIES, INC.
By: /s/ D. Gregory Smith
--------------------------
Name: D. Gregory Smith
Title: CEO
29
