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Exhibit 3.3
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
SERIES A SENIOR CUMULATIVE CONVERTIBLE
PREFERRED STOCK
OF
PF.NET HOLDINGS, LIMITED
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Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
------------------------------------------------
PF.Net Holdings, Limited (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, certifies that pursuant to the authority contained in Article 4 of its
Certificate of Incorporation (the "Certificate of Incorporation") and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the board of directors (the "Board of Directors") of the
Corporation by unanimous written consent dated October 29, 1999 duly approved
and adopted the following resolution which resolution remains in full force and
effect on the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors does
hereby designate, create, authorize and provide for the issue of Series A Senior
Cumulative Convertible Preferred Stock (the "Senior Preferred Stock"), par value
$0.01 per share, with an initial liquidation preference of $100.00 per share,
consisting of 1,250,000 shares, having the following voting powers, preferences
and relative, participating, optional and other special rights, and
qualifications, limitations and restrictions thereof as follows:
1. Certain Definitions.
Unless the context otherwise requires, the terms defined in this
Section 1 shall have, for all purposes of this resolution, the meanings herein
specified (with terms defined in the singular having comparable meanings when
used in the plural).
Actively Publicly Traded shall mean, with respect to the Common
Stock, that an offering (or series of offerings) of the Common Stock has been
consummated pursuant to one or more registration statements following which
shares of the Common Stock representing (a) at least 10% of the outstanding
shares of the Common Stock and (b) an aggregate Current Market
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Price of at least $50 million, have been sold to the public and are listed on a
national securities exchange or the Nasdaq Stock Market.
Affiliate of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"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 or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
and provided further, that without limiting the foregoing, the following Persons
shall be deemed to be "Affiliates" of the Corporation solely for the purpose of
this Certificate of Designations: PF Telecom Holdings, LLC, Koch Telecom
Ventures, Inc., Odyssey Investment Partners Fund, LP, John Warta and Stephen
Irwin.
AT&T Warrants shall mean the warrants to purchase 7,070,707 shares
of Common Stock (subject to adjustment in accordance with the terms thereof)
dated as of the Initial Issue Date issued to AT&T Corp.
Beneficial Owner shall have the meaning assigned to such term in
Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating
the beneficial ownership of any particular "person" (as that term is used in
Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have
beneficial ownership of all securities that such "person" has the right to
acquire by conversion or exercise of other securities, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition. The terms "Beneficially Owns" and "Beneficially Owned" shall have a
corresponding meaning.
Bridge Loan Agreement shall mean the bridge loan agreement, dated as
of the Initial Issue Date, among the Corporation, the lenders party thereto and
Warburg Dillon Read LLC, as Joint Lead Arranger and Syndication Agent and Credit
Suisse First Boston, as Joint Lead Arranger and Administrative Agent.
Business Day shall mean a day other than a Saturday or Sunday or any
federal holiday.
Capital Stock shall mean (i) in the case of a corporation, corporate
stock, (ii) in the case of a partnership, partnership interests (whether general
or limited), (iii) in the case of an association, limited liability company or
other business entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock and (iv) any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, the issuing Person.
Change of Control shall mean the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Corporation and its Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) (other than a Subsidiary of the Corporation), (ii) the
adoption of a plan relating to the liquidation or dissolution of the
Corporation, (iii) the consummation of any
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transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than the
Principals and their respective Permitted Transferees (as such term is defined
in the Stockholders Agreement) or a Permitted Group, becomes the Beneficial
Owner, directly or indirectly, of Voting Stock of the Corporation having more
than (A) prior to the date on which the Common Stock is Actively Publicly
Traded, 35% of the combined voting power of all classes of Voting Stock of the
Corporation then outstanding or (B) on or after the date on which the Common
Stock is Actively Publicly Traded, 50% of the combined voting power of all
classes of Voting Stock of the Corporation then outstanding or (iv) the first
day on which a majority of the members of the Board of Directors are not
Continuing Directors (except as a result of the exercise of the Holders' rights
following a Voting Rights Trigger Event).
Change of Control Offer shall have the meaning set forth in Section
7(a) below.
Change of Control Payment shall have the meaning set forth in
Section 7(a) below.
Change of Control Payment Date shall have the meaning set forth in
Section 7(d)(ii) below.
Commission shall mean the Securities and Exchange Commission.
Common Stock shall mean the common stock, par value $.01 per share,
of the Corporation and any successor(s) to such common stock.
Continuing Director shall mean, as of any date of determination, any
member of the Board of Directors who (i) was a member of the Board of Directors
on the Initial Issue Date or (ii) was nominated for election or elected to the
Board of Directors with the approval of (A) a majority of the Continuing
Directors who were members of the Board of Directors at the time of such
nomination or election or (B) of any Person having the right to designate such
member of the Board of Directors pursuant to the terms and conditions of the
Stockholders Agreement.
Conversion Date shall have the meaning set forth in Section 4(b)
below.
Conversion Price shall initially mean $5.6250 and thereafter shall
be subject to adjustment from time to time pursuant to the terms of Section 4
below. The Conversion Price shall be rounded to four decimal places.
Conversion Rate shall mean, as of any date, the number of shares of
Common Stock issuable upon conversion of one share of Senior Preferred Stock,
determined by dividing the sum of the Liquidation Preference of such share of
Senior Preferred Stock plus accrued dividends by the Conversion Price then in
effect.
Current Market Price shall mean, with respect to any particular
security on any date of determination, the average over the 20 Trading Days
ending on the date immediately preceding the date of such determination of the
last reported sale price, or, if no such sale takes place on any such day, the
closing bid price, in either case as reported for consolidated transactions on
the principal national securities exchange (including the Nasdaq Stock Market)
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on which such security is listed or admitted for trading; provided, however,
that (a) if any event that results in an adjustment of the Conversion Rate
occurs during the period beginning on the first day of such 20-day period and
ending on the date immediately preceding the date of determination, the Current
Market Price will be the average over the 20 Trading Days ending on the date
immediately preceding the date of the occurrence of such event of the last
reported sale price, or, if no such sale takes place on any such day, the
closing bid price, in either case as reported for consolidated transactions on
the principal national securities exchange (including the Nasdaq Stock Market)
on which such security is listed or admitted for trading and (b) if such
security is not listed on any exchange or admitted for trading on the Nasdaq
Stock Market, the Current Market Price of such security shall be the last
reported bid price for such security on the date preceding the date of such
determination provided by a New York Stock Exchange member firm designated by
the Corporation or, if no such member firm can provide such a bid price, as
determined in good faith by the unanimous written resolution of the Board of
Directors. In the event that the Board of Directors cannot unanimously agree on
the Current Market Price on any date, the Current Market Price will be
determined pursuant to the Valuation Procedures.
Dark Fiber Warrants shall mean the warrants to purchase shares of
Common Stock issued pursuant to the terms of the Subscription Agreement.
Disinterested Director shall mean each member of the Board of
Directors who is not (a) an officer, employee, director, agent or other
Affiliate of the Majority Holders or (b) an Odyssey Director or Co-investor
Director (as such terms are defined in the Stockholders Agreement).
Dividend Payment Date shall have the meaning set forth in Section
2(a) below.
Exchange Act shall mean the Securities Exchange Act of 1934, as
amended.
Exempt Issuances shall have the meaning set forth in Section 4(g)
below.
Fair Market Value shall be determined in accordance with Section
4(1) below.
Finance Warrants shall mean the warrants to purchase up to 6,913,580
shares of Common Stock (subject to adjustment in accordance with the terms
thereof) issued on the Initial Issue Date in escrow to a warrant agent, which
may be released to Warburg Dillon Read LLC and Credit Suisse First Boston
pursuant to the terms of the Escrow Agreement (as defined in the Bridge Loan
Agreement).
Fully Diluted Common Stock shall mean, as of any date of
determination, the total number of shares of Common Stock outstanding as of such
date (calculated assuming exercise of all outstanding warrants and options that
as of such date are permitted by their terms to be exercised for shares of
Common Stock and conversion of all outstanding securities that as of such date
are permitted by their terms to be converted into shares of Common Stock for an
amount per share that is less than the Current Market Price per share).
Notwithstanding the foregoing, the definition of "Fully Diluted Common Stock"
shall include, without limitation, shares of Common Stock issuable upon exercise
of the Finance Warrants to the extent such Finance Warrants have been released
from escrow in accordance with the Escrow Agreement.
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Holder shall mean the record holder of one or more shares of Senior
Preferred Stock, as shown on the books and records of the Corporation.
Initial Issue Date shall mean the date that shares of Senior
Preferred Stock are first issued by the Corporation.
Junior Securities shall mean any class of stock ranking junior to
the Senior Preferred Stock as to the payment of dividends and as to rights in
liquidation, dissolution or winding up of the affairs of the Corporation. The
Corporation's Common Stock is expressly defined and included as Junior
Securities.
Liquidation Preference shall initially mean $100.00 per share of
Senior Preferred Stock, plus Preferred Dividends paid on such share in
accordance with Section 2(c) below.
Lucent Warrants shall mean the warrants to purchase 1,414,141 shares
of Common Stock (subject to adjustment in accordance with the terms thereof) to
be issued to Lucent Technologies Inc. by the Corporation on the Initial Issue
Date.
Majority Holders shall mean the Holders of at least a majority of
the shares of Senior Preferred Stock (with shares held by the Corporation or any
of its Subsidiaries not being considered to be outstanding for this purpose).
Mandatory Redemption Date shall have the meaning set forth in
Section 5(a) below.
Odyssey shall mean Odyssey Investment Partners Fund, LP.
Original Owners Warrants shall mean the warrants to purchase up to
10,101,010 shares of Common Stock (subject to adjustment in accordance with the
terms thereof) to be issued to PF Telecom Holdings, LLC and Koch Telecom
Ventures, Inc. by the Corporation on the Initial Issue Date.
Parity Securities shall mean any class or series of stock of the
Corporation authorized after the Initial Issue Date that is entitled to receive
payment of dividends and to receive assets upon liquidation, dissolution or
winding up of the affairs of the Corporation on a parity with the Senior
Preferred Stock.
Permitted Group shall mean any group of investors that is deemed to
be a "person" (as that term is used in Section 13(d)(3) of the Exchange Act) at
any time prior to the Corporation's initial public offering of Common Stock, by
virtue of the Stockholders Agreement, provided that no single Person (other than
the Principals and their Permitted Transferees) Beneficially Owns (together with
its Affiliates) more of the Voting Stock of the Corporation that is Beneficially
Owned by such group of investors than is then collectively Beneficially Owned by
the Principals and their Permitted Transferees in the aggregate.
Person shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
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Preferred Dividends shall have the meaning set forth in Section 2(a)
below.
Principals shall mean Odyssey, PF Telecom Holdings, LLC, John Warta,
GLW Ventures LLC, Treg Ventures LLC and Koch Telecom Ventures, Inc.
Rights shall mean securities, rights, options or warrants entitling
a holder thereof to subscribe for or purchase any shares of Common Stock of the
Corporation.
Securities Act shall mean the Securities Act of 1933, as amended.
Senior Securities shall mean any class or series of stock of the
Corporation authorized after the Initial Issue Date ranking senior to the Senior
Preferred Stock in respect of the right to receive dividends and in respect of
the right to participate in any distribution upon liquidation, dissolution or
winding up of the affairs of the Corporation.
Stockholders Agreement shall mean the Stockholders Agreement, dated
as of the Initial Issue Date, by and among the Corporation, Warburg Dillon Read
LLC, Credit Suisse First Boston, Odyssey Investment Partners Fund, LP, Odyssey
Coinvestors, LLC, UBS Capital II LLC, Koch Telecom Ventures, Inc., Lucent
Technologies Inc., John Warta, Karen Irwin, Treg Ventures LLC, GLW Ventures LLC,
Georgiana Warta and PF Telecom Holdings, LLC, as may be amended, modified or
supplemented from time to time.
Subscription Agreement shall mean the Subscription Agreement, dated
as of the Initial Issue Date, by and among the Corporation, Odyssey Investment
Partners Fund, LP, Odyssey Coinvestors, LLC and UBS Capital II LLC.
Subsidiary shall mean, with respect to any person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Voting Stock thereof is at the time owned or
controlled, directly or indirectly, by such person or one or more of the other
Subsidiaries of that person (or a combination thereof) and (ii) any partnership
(a) the sole general partner or the managing general partner of which is such
person or a Subsidiary of such person or (b) the only general partners of which
are such person or of one or more Subsidiaries of such person (or any
combination thereof).
Trading Day with respect to the Common Stock, shall mean any day on
which any market (including, without limitation, any formal or informal over the
counter market) in which the Common Stock is then traded and in which a quoted
price may be ascertained is open for business.
Valuation Procedures shall mean the procedures used to determine
Fair Market Value or Current Market Price that are described below. The
Corporation shall engage an investment banking firm of recognized national
standing selected by a majority of the Disinterested Directors (the "Company
Bank") to determine the Fair Market Value or Current Market Price, as
applicable. Such investment banking firm shall have 15 days to make such
determination and shall promptly distribute such determination in writing to the
Corporation and each Holder. The Majority Holders shall have 15 days following
receipt of such written determination to object to the conclusions of the
Company Bank. If the Majority Holders do not object during such 15-day period
then the determination of the Company Bank shall be deemed
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to be the Fair Market Value or Current Market Price, as applicable. If the
Majority Holders shall object, the Majority Holders shall have the right to
select an independent investment banking firm of recognized national standing
(the "Holders Bank") to make an independent determination of Fair Market Value
or Current Market Price, as applicable. Such determination shall be completed
within 15 days of the selection of the Holders Bank. If upon completion of such
determination by the Holders Bank, the two investment banking firms are able to
agree upon a valuation, such value shall be deemed to be the Fair Market Value
or Current Market Price, as the case may be. If, at the expiration of such
15-day period, the two investment banking firms are unable to agree upon a
valuation, then the Majority Holders, on the one hand, and the Corporation (by
decision of a majority of the Disinterested Directors), on the other hand, shall
jointly select a third investment banking firm, which shall make a determination
on the basis described above, and within a period of 15 days after the date of
its engagement, select the determination calculated by either of the Company
Bank or the Holders Bank, and such determination shall be final, binding and
conclusive and enforceable in any court of competent jurisdiction. All fees and
expenses incurred in connection with the Valuation Procedures shall be borne by
the Corporation.
Voting Rights Trigger Event shall have the meaning set forth in
Section 6(b) below.
Voting Stock shall mean with respect to any specified Person,
Capital Stock with voting power, under ordinary circumstances and without regard
to the occurrence of any contingency, to elect the directors or other managers
or trustees of such Person.
2. Dividends.
(a) The Holders shall be entitled to receive cumulative preferential
dividends (the "Preferred Dividends") on each share of Senior Preferred Stock
accruing from the Initial Issue Date at the per annum rate of 10.0% of the
Liquidation Preference of such share as of the Initial Issue Date, with respect
to the first dividend payment, and as of the day after the most recent Dividend
Payment Date with respect to each subsequent dividend payment, on March 15, June
15, September 15 and December 15 of each year or, if any such date is not a
Business Day, on the next succeeding Business Day (each, a "Dividend Payment
Date"). Preferred Dividends will be payable as provided in Section 2(c) below.
The first Dividend Payment Date will be December 15, 1999. Preferred Dividends
will be computed on the basis of a 360-day year of twelve 30-day months and will
be deemed to accrue on a daily basis.
(b) Preferred Dividends shall accrue whether or not the Corporation
has earnings or profits, whether or not there are funds legally available for
the payment of such dividends and whether or not dividends are declared.
(c) On each Dividend Payment Date, the amount of Preferred Dividends
with respect to each share of Senior Preferred Stock shall be added permanently
to the Liquidation Preference of such share of Senior Preferred Stock and such
Preferred Dividends shall for all purposes be deemed to have been paid by the
Corporation.
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(d) In case the Corporation or any Subsidiary of the Corporation
shall at any time or from time to time declare, order, pay or make a dividend or
other distribution (including, without limitation, any distribution of stock or
other securities or property or rights or options or warrants to subscribe for
or purchase securities of the Corporation or any of its Subsidiaries by way of
dividend or spin off) on the Common Stock, other than any dividend or
distribution of shares of Common Stock covered by Section 4(f) below, then, and
in each such case, the Holders shall be entitled to receive from the
Corporation, with respect to each share of Senior Preferred Stock held, in
addition to the dividends payable under Section 2(a) above, the same dividend or
distribution that would be payable or made to a holder of the number of shares
of Common Stock into which such share of Senior Preferred Stock is convertible
on the record date for such dividend or distribution. Any such dividend or
distribution shall be declared, ordered, paid or made on the Senior Preferred
Stock at the same time such dividend or distribution is declared, ordered, paid
or made on the Common Stock and shall be in addition to any dividends payable
under Section 2(a) above.
3. Distributions Upon Liquidation, Dissolution or Winding Up.
Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation or reduction or decrease in its
capital stock resulting in a distribution of assets to the holders of any class
or series of the Corporation's Capital Stock (a "reduction or decrease in
capital stock"), each Holder shall be entitled to payment out of the assets of
the Corporation available for distribution of an amount equal to the Liquidation
Preference per share of Senior Preferred Stock held by such Holder plus accrued
dividends thereon from the most recent Dividend Payment Date determined as of
the date of such liquidation, dissolution, winding up or reduction or decrease
in capital stock, before any distribution is made on any Junior Securities.
After payment in full of the Liquidation Preference to which Holders are
entitled, the Holders will not be entitled to any further participation in any
distribution of assets of the Corporation. However, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Corporation nor the consolidation or merger of the Corporation with or into one
or more corporations will be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Corporation or reduction or
decrease in capital stock, unless such sale, conveyance, exchange or transfer
shall be in connection with a liquidation, dissolution or winding up of the
business of the Corporation or reduction or decrease in capital stock.
4. Conversion Rights.
(a) Each Holder shall have the right, at such Holder's option, to
convert all or any portion of its shares of Senior Preferred Stock into shares
of Common Stock at any time, at the Conversion Rate calculated as of the close
of business on the Conversion Date.
(b) The right of conversion attaching to any share of Senior
Preferred Stock may be exercised by the Holder thereof by delivering the share
of Senior Preferred Stock to be converted to the Corporation, at its principal
office or at the office or agency maintained by the Corporation for that
purpose, accompanied by a duly signed and completed notice of conversion in form
reasonably satisfactory to the Corporation. The "Conversion Date" will be the
date on which the share of Senior Preferred Stock and the duly signed and
completed notice of
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conversion are so delivered. As promptly as practicable on or after the
Conversion Date, the Corporation shall issue and deliver to the Holder (i) a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in cash, determined as provided
below, in lieu of any fraction of a share and (ii) if less than the full number
of shares of Senior Preferred Stock evidenced by the surrendered certificate or
certificates are being converted, a new certificate or certificates, of like
tenor, for the number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted. Such certificate or
certificates shall be delivered by the Corporation to the appropriate Holder by
mailing certificates evidencing the additional shares to the Holders at their
respective addresses set forth in the register of Holders maintained by the
Corporation. All shares of Common Stock issuable upon conversion of the Senior
Preferred Stock shall be fully paid and nonassessable and shall rank pari passu
with the other shares of Common Stock outstanding from time to time.
(c) The Corporation shall not issue a fractional share of Common
Stock upon conversion of Senior Preferred Stock. Instead the Corporation shall
deliver a check for an amount equal to the applicable fraction of a share
multiplied by the Current Market Price calculated as of the close of business on
the Conversion Date, rounded to the nearest cent.
(d) A Holder delivering Senior Preferred Stock for conversion will
not be required to pay any taxes or duties in respect of the issue or delivery
of Common Stock on conversion but will be required to pay any tax or duty that
may be payable in respect of any transfer involved in the issue or delivery of
the shares of Common Stock in a name other than that of the Holder of the Senior
Preferred Stock. Certificates representing shares of Common Stock will not be
issued or delivered unless all taxes and duties, if any, payable by the Holder
have been paid.
(e) The Corporation has reserved and shall continue to reserve out
of its authorized but unissued Common Stock or its Common Stock held in treasury
enough shares of Common Stock to permit the conversion of all outstanding shares
of Senior Preferred Stock in full as of the next succeeding Dividend Payment
Date assuming that such conversion took place at the Conversion Rate then in
effect (provided that such reservation may be proportionally reduced as shares
of Senior Preferred Stock are repurchased, converted, exchanged or retired and
shall be increased as necessary to reflect increases in the Liquidation
Preference that occur as a result of the accrual and payment of dividends) and
such shares shall be fully paid and nonassessable and free of preemptive or
similar rights. The Corporation shall take all commercially reasonable steps to
comply with all securities laws regulating the offer and delivery of shares of
Common Stock upon conversion of Senior Preferred Stock, provided, however, that
the Corporation shall not be required to file a registration statement with
respect to such securities, except as provided in the Stockholders Agreement.
(f) If the Corporation:
(i) pays a dividend (or makes a distribution) on its Common
Stock in shares of its Common Stock;
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(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(iv) issues any shares of its Capital Stock by
reclassification of its Common Stock;
then the Conversion Price in effect immediately prior to such action shall be
adjusted so that the Holder of each share of Senior Preferred Stock thereafter
converted may receive the number of shares of capital stock of the Corporation
that he would have owned immediately following such action if he had converted
Senior Preferred Stock immediately prior to such action. The adjustment shall
become effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, combination or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur. If, after an
adjustment referred to in clauses (f)(i) through (iv) above, a Holder of Senior
Preferred Stock upon conversion of it may receive shares of two or more classes
of Capital Stock of the Corporation, then the Conversion Price shall be split
into two or more components, as the case may be, and the Conversion Price of
each class of Capital Stock shall thereafter be subject to adjustment on terms
comparable to those applicable to Common Stock in this Section 4(f).
(g) If the Corporation issues shares of Common Stock for a
consideration per share less than the Current Market Price per share on the date
the Corporation issues such additional shares, the Conversion Price shall be
adjusted in accordance with the formula:
C' = C x ((0 + (P / M)) / A)
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Fully Diluted Common Stock
outstanding immediately prior to the issuance of such
additional shares (excluding the shares of Common Stock
issuable upon conversion of any shares of Preferred Stock).
P = the aggregate consideration received for the issuance of such
additional shares.
M = the Current Market Price per share on the date of issuance of
such additional shares.
A = the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares.
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The adjustment shall be made successively whenever any such issuance is made,
and shall become effective immediately after such issuance. This Section 4(g)
does not apply to (i) any transaction or issuance described in Section 4(h)
below, (ii) Common Stock issued to the Corporation's employees under bona fide
employee compensation or benefit plans or packages adopted by the Board of
Directors and approved by the holders of Common Stock when required by law,
(iii) Common Stock issued to acquire, or in the acquisition of, all or any
portion of a business as a going concern, in an arm's-length transaction between
the Corporation and an unaffiliated third party, whether such acquisition shall
be effected by purchase of assets, exchange of securities, merger, consolidation
or otherwise, (iv) Common Stock issued in (A) a bona fide public offering
pursuant to a firm commitment underwriting or (B) a private placement pursuant
to a plan of distribution that involves resales into a diverse market of
"qualified institutional buyers" (as such term is used in Rule 144A under the
Securities Act) that is broadly marketed by one or more nationally recognized
investment banks, (v) Common Stock issued to lenders or bond purchasers that are
unaffiliated third parties in any financing transaction on arm's-length terms,
(vi) Common Stock issued upon exercise of the AT&T Warrants, the Dark Fiber
Warrants, the Lucent Warrants, the Finance Warrants or the Original Owners
Warrants or (vii) Common Stock issued upon conversion of shares of the Senior
Preferred Stock (collectively, "Exempt Issuances").
(h) If the Corporation issues any Rights (other than in a dividend
or distribution in which the Holders participate as provided in Section 2(d)
above) for a consideration per share of Common Stock initially deliverable upon
conversion, exchange or exercise of such Rights (including the aggregate
consideration received for the issuance of such Rights plus the aggregate
consideration receivable upon exercise of all such Rights) that is less than the
Current Market Price per share on the date of issuance of such Rights, the
Conversion Price shall be adjusted in accordance with the formula:
C' = C x ((0 + (P / M)) / (0 + D))
where:
C' = the adjusted Conversion Price.
C = the then current Conversion Price.
O = the number of shares of Fully Diluted Common Stock
outstanding immediately prior to the issuance of such Rights
(excluding the shares of Common Stock issuable upon
conversion of any shares of Preferred Stock).
P = the aggregate consideration received for the issuance of such
Rights plus the aggregate consideration receivable upon
exercise of all such Rights.
M = the Current Market Price per share of Common Stock on the date
of issuance of such securities.
D = the maximum number of shares deliverable upon conversion or in
exchange for or upon exercise of such Rights at the initial
conversion, exchange or
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exercise rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance. If all of
the Common Stock deliverable upon conversion, exchange or exercise of such
Rights has not been issued when such Rights are no longer outstanding, then the
Conversion Price shall promptly be readjusted to the Conversion Price that would
then be in effect had the adjustment upon the issuance of such Rights been made
on the basis of the actual number of shares of Common Stock issued upon
conversion, exchange or exercise of such Rights. This Section 4(h) does not
apply to (i) any transaction that would be an Exempt Issuance if shares of
Common Stock were issued instead of Rights or (ii) the issuance of the AT&T
Warrants, the Dark Fiber Warrants, the Finance Warrants, the Lucent Warrants and
the Original Owners Warrants.
Notwithstanding the foregoing, in the event that any Rights are
granted or issued after the date hereof with respect to which either (i) the
exercise or conversion price applicable to such Right or (ii) the number of
shares of Common Stock for which such Right is exercisable or into which such
Right is convertible is undetermined on the date of issuance, then there shall
not be deemed to have been an issuance of such Rights for purposes of this
Section 4(h) unless and until the date on which the conversion or exercise
price, and the number of shares into which such Rights are exercisable or for
which such Rights are convertible, shall have been determined (subject to any
adjustments that may occur pursuant to the terms thereof after such date of
initial determination).
(i) If the Corporation consolidates or merges with or into, or
transfers or leases all or substantially all its assets to, any person, upon
consummation of such transaction the Senior Preferred Stock shall automatically
become convertible into the kind and amount of securities, cash, or other assets
that the Holder would have owned immediately after the consolidation, merger,
transfer or lease if the Holder had converted the Senior Preferred Stock
immediately before the effective date of the transaction. Concurrently with the
consummation of such transaction, the corporation formed by or surviving any
such consolidation or merger if other than the Corporation, or the person to
which such sale or conveyance shall have been made, shall enter into an amended
Certificate of Designations so providing and further providing for adjustments
which shall be as nearly equivalent as practical to the adjustments provided for
in this Section 4. The successor Corporation shall mail to the Holders a notice
describing the amended Certificate of Designations. If the issuer of securities
deliverable upon conversion of the Senior Preferred Stock under the amended
Certificate of Designations is an Affiliate of the formed, surviving, transferee
or lessee corporation, then that issuer shall join in the amended Certificate of
Designations. If this subsection (i) applies, other subsections of this Section
4 (except subsection (j) below) do not apply.
(j) Change of Control.
In the event of a Change of Control, if the Current Market Price of
the Corporation's Common Stock as of the date of consummation of such Change of
Control is less than the Conversion Price, the Conversion Price will be reduced
to an adjusted Conversion Price equal to the last reported sale price for one
share of the Common Stock in an arms-length
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transaction as of the date of the Change of Control. In the event of a Change of
Control involving a sale by the holders of the Common Stock of all or a portion
of shares of Common Stock held by them to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), then the "last reported sale price" of a
share of Common Stock shall be the value of the consideration received for one
share of Common Stock in the transaction resulting in such Change of Control;
provided that with respect to any non-cash consideration, the value of such
consideration shall be the Fair Market Value thereof.
(k) In addition, in the event that any other transaction or event
occurs as to which the foregoing conversion price adjustment provisions are not
strictly applicable but the failure to make any adjustment would adversely
affect the conversion rights represented by the Senior Preferred Stock in
accordance with the essential intent and principles of such provisions, then, in
each such case, the Corporation shall appoint an investment banking firm of
recognized national standing, or any other financial expert that does not (or
whose directors, officers, employees, affiliates or stockholders do not) have a
direct or material indirect financial interest in the Corporation or any of its
Subsidiaries, who has not been, and, at the time it is called upon to give
independent financial advice to the Corporation, is not (and none of its
directors, officers, employees, affiliates or stockholders are) a promoter,
director or officer of the Corporation or any of its Subsidiaries, which will
give their opinion upon, or the Board of Directors shall determine, consistent
with the Board of Directors' fiduciary duties to the Corporation's stockholders,
the adjustment, if any, on a basis consistent with the essential intent and
principles established in the foregoing conversion price adjustment provisions,
necessary to preserve, without dilution, the conversion rights represented by
the Senior Preferred Stock. Upon receipt of such opinion or determination, the
Corporation shall promptly mail a copy thereof to the Holders and will make the
adjustments described therein.
(l) For purposes of any computation respecting consideration
received pursuant to a transaction described or contemplated by this Section 4,
the following shall apply:
(i) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or
other expenses incurred by the Corporation for any underwriting of the
issue or otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the Fair Market Value thereof
(irrespective of the accounting treatment thereof);
(iii) whenever this Certificate of Designations calls for the
determination of "Fair Market Value," such Fair Market Value shall be
determined in good faith by the unanimous written consent of Board of
Directors and as evidenced by a written resolution thereof and in the
event the Board of Directors cannot unanimously agree on the Fair Market
Value on any date, the Fair Market Value will be determined pursuant to
the Valuation Procedures; and
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(iv) in the case of the issuance of Rights, the aggregate
consideration received therefor shall be deemed to be the consideration
received by the Corporation for the issuance of such Rights plus the
additional minimum consideration, if any, to be received by the
Corporation upon the conversion or exchange or exercise thereof (the
consideration in each case to be determined in the same manner as provided
in this Section 4(l)).
(m) No adjustment in the Conversion Price need be made unless the
adjustment would require an increase or decrease of at least .01% in the
Conversion Price. Any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment or upon conversion of any shares
of Senior Preferred Stock. All calculations under this Section 4 shall be made
to the nearest one hundredth of a cent or to the nearest 1/1000th of a share, as
the case may be.
(n) No adjustment in the Conversion Price need be made under this
Section 4 for any change in the par value or no par value of the Common Stock,
and in no event shall any adjustment be made under this Section 4 that would
reduce the Conversion Price below the par value of the Common Stock.
(o) The Corporation shall provide to Holders reasonable notice of
any event that would result in an adjustment to the Conversion Price pursuant to
any of the adjustments in this Section 4 so as to permit the Holders to effect a
conversion of shares of Senior Preferred Stock into shares of Common Stock prior
to the occurrence of such event.
(p) The Corporation from time to time may reduce the Conversion
Price by any amount for any period of time if the period is at least 20 Business
Days and if the reduction is irrevocable during the period, but in no event may
the Conversion Price be less than the par value of a share of Common Stock.
Whenever the Conversion Price is reduced, the Corporation shall mail to Holders
a notice of the reduction. The Corporation shall mail, first class, postage
prepaid, the notice at least 15 days before the date the reduced Conversion
Price takes effect. The notice shall state the reduced Conversion Price and the
period it will be in effect. A reduction of the Conversion Price pursuant to
this Section 4(p) does not change or adjust the Conversion Price otherwise in
effect for purposes of Sections 4(f), 4(g), 4(h), 4(i) and 4(j) above.
(q) If:
(i) the Corporation takes any action which would require an
adjustment in the Conversion Price pursuant to clause (iv) of Section 4(f)
above;
(ii) the Corporation consolidates or merges with, or transfers
all or substantially all of its assets to, another corporation, and
stockholders of the Corporation must approve the transaction; or
(iii) there is a dissolution or liquidation of the
Corporation;
a Holder may want to convert such stock into shares of Common Stock prior to the
record date for or the effective date of the transaction so that he may receive
the rights, warrants, securities or assets which a holder of shares of Common
Stock on that date may receive. Therefore, the
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Corporation shall mail to such Holders, first class, postage prepaid, a notice
stating the proposed record or effective date, as the case may be. The
Corporation shall mail the notice at least ten days before such date. No
transaction referred to in clause (i), (ii) or (iii) of this Section 4(q) may be
consummated until the tenth day following delivery of such notice.
(r) Except as provided in the immediately following sentence, any
determination that the Corporation or its Board of Directors must make pursuant
to this Section 4 shall be conclusive. Whenever the Corporation or its Board of
Directors shall be required to make a valuation determination under this Section
4, such determination shall be made in good faith by the unanimous written
consent of the Board of Directors as evidenced by a written resolution thereof;
provided that in the event the Board of Directors cannot unanimously agree on
any determination of value, such dispute shall be resolved pursuant to the
Valuation Procedures.
(s) All shares of Senior Preferred Stock convened pursuant to this
Section 4 shall be retired and shall be restored to the status of authorized and
unissued shares of preferred stock, without designation as to series and may
thereafter be reissued as shares of any series of preferred stock other than
Senior Preferred Stock.
(t) The Corporation shall not pay any dividend or make any
distribution to, or on behalf of, the holders of any class or series of common
equity of the Corporation unless the holders of Common Stock share therein on an
equal share for share basis.
(u) Except as specifically set forth in this Section 4, none of the
adjustments described in this Section 4 shall duplicate adjustments previously
made or made simultaneously pursuant to other subsections of this Section 4, or
otherwise double count any transaction.
5. Redemption by the Corporation.
(a) On the earlier of (a) February 1, 2011 or (b) 91 days after the
final maturity of any Term Loans, Exchange Notes or Take-Out Securities (each as
defined in the Bridge Loan Agreement), but in no event earlier than the tenth
anniversary of the Initial Issue Date (the "Mandatory Redemption Date"), the
Corporation shall redeem all outstanding shares of Senior Preferred Stock at a
price in cash equal to the Liquidation Preference thereof plus accrued dividends
thereon from the most recent Dividend Payment Date to the date of redemption.
(b) The Senior Preferred Stock may not be redeemed at the option of
the Corporation prior to the Mandatory Redemption Date.
(c) Notice of redemption shall be sent by or on behalf of the
Corporation not more than 90 days nor less than 30 days prior to the Mandatory
Redemption Date by first class mail, postage prepaid, to all Holders of record
at their respective last addresses as they shall appear on the books of the
Corporation; provided, however, that no failure to give such notice or any
defect therein or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any shares of Senior Preferred Stock except as
to the Holder to whom the Corporation has failed to give notice or except as to
the Holder to whom notice was defective. In addition to any information required
by law or by the applicable rules of any exchange upon which Senior Preferred
Stock may be listed or admitted to trading, such notice shall state: (i) the
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Mandatory Redemption Date; (ii) the redemption price; (iii) the number of shares
of Senior Preferred Stock to be redeemed; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the redemption
price, including any procedures applicable to redemptions to be accomplished
through book-entry transfers; (v) that dividends on the shares to be redeemed
will cease to accrue on the Mandatory Redemption Date; (vi) the Conversion
Price; (vii) that Senior Preferred Stock called for redemption may be converted
at any time before the close of business on the Mandatory Redemption Date; and
(viii) that Holders must satisfy the requirements of Section 4(b) above if such
Holders desire to convert such shares.
(d) If notice has been mailed in accordance with Section 5(c) above
and provided that on or before the Mandatory Redemption Date specified in such
notice, all funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds in trust for the pro rata
benefit of the Holders of the shares so called for redemption, so as to be, and
to continue to be available therefor, then, from and after the Mandatory
Redemption Date, dividends on the shares of the Senior Preferred Stock so called
for redemption shall cease to accrue, and said shares shall no longer be deemed
to be outstanding and shall not have the status of shares of Senior Preferred
Stock, 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
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the redemption price.
(e) Any deposits of funds with a bank or trust company for the
purpose of redeeming Senior Preferred Stock shall be irrevocable except that:
(i) the Corporation shall be entitled to receive from such
bank or trust company the interest or other earnings, if any, earned on
any money so deposited in trust, and the Holders of any shares redeemed
shall have no claim to such interest or other earnings; and
(ii) any balance of monies so deposited by the Corporation and
unclaimed by the Holders entitled thereto at the expiration of two years
from the applicable Mandatory Redemption Date shall be repaid, together
with any interest or other earnings earned thereon, to the Corporation,
and after any such repayment, the Holders of the shares entitled to the
funds so repaid to the Corporation shall look only to the Corporation for
payment without interest or other earnings.
(f) All shares of Senior Preferred Stock redeemed pursuant to this
Section 5 shall be restored to the status of authorized and unissued shares of
preferred stock, without designation as to series and may thereafter be reissued
as shares of any series of preferred stock.
6. Voting Rights.
In addition to any voting rights provided elsewhere herein, and any
voting rights provided by law, the Holders of shares of Senior Preferred Stock
shall have the following voting rights:
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(a) So long as the Senior Preferred Stock is outstanding, each share
of Senior Preferred Stock shall entitle the Holder thereof to vote on all
matters voted on by holders of the Capital Stock of the Corporation into which
such share of Senior Preferred Stock is convertible, voting together as a single
class with the other shares entitled to vote, at all meetings of the
stockholders of the Corporation. With respect to any such vote, each share of
Senior Preferred Stock shall entitle the Holder thereof to cast the number of
votes equal to the number of votes which could be cast in such vote by a holder
of the shares of Capital Stock of the Corporation into which such share of
Senior Preferred Stock is convertible on the record date for such vote or, if no
such record date is established, on the date any written consent of stockholders
is solicited; provided, however, that if such vote relates to the liquidation,
dissolution or winding up of the Corporation or any other matter which, if
approved would entitle the Holder thereof to receive on an accelerated basis any
additional shares of Senior Preferred Stock, then the number of votes such
Holder shall be entitled to cast shall be the number of votes equal to the
number of votes which could be cast in such vote by a holder of shares of
Capital Stock of the Corporation into which such share of Senior Preferred Stock
(and any Senior Preferred Stock that would be so received on an accelerated
basis) would be convertible.
(b) If and upon the failure, for a period or 30 days after delivery
of notice by the Majority Holders, of the Corporation to:
(i) honor its obligations with respect to any share of Senior
Preferred Stock upon conversion thereof pursuant to Section 4 hereof;
(ii) satisfy any mandatory redemption or repurchase obligation
(including, without limitation, pursuant to any required Change of Control
Offer) with respect to the Senior Preferred Stock;
(iii) make a Change of Control Offer on the terms and in
accordance with the provisions described below in Section 7 hereof; or
(iv) comply with any of the other covenants or agreements set
forth in this Certificate of Designations and the continuance of such
failure for 60 consecutive days or more (each of the events described in
clauses 6(b)(i) and (iv) being referred to herein as a "Voting Rights
Trigger Event");
then the Holders of a majority of the outstanding shares of the Senior Preferred
Stock, voting separately as a class, shall be entitled at the next annual
meeting of the stockholders or at any special meeting to elect such number of
Directors as constitutes a majority of the Corporation's Board of Directors.
Upon election, such directors shall become additional directors of the
Corporation and the authorized number of directors of the Corporation shall
thereupon be automatically increased by such number of directors. The exercise
of such right by the Holders of the Senior Preferred Stock shall be accompanied
by a resolution of the Holders (which may be passed at a meeting of the Holders
or in writing to the extent permitted under applicable law) instructing such
additional directors to use their good faith effort to cause the Corporation to
cure the Voting Rights Trigger Event as expeditiously as possible.
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(c) Whenever a Voting Rights Trigger Event shall have occurred and
be continuing, the voting rights set forth in Section 6(b) above may be
exercised initially either at a special meeting of the Holders, called as
hereinafter provided, or at any annual meeting of stockholders held for the
purpose of electing directors, and thereafter at such annual meetings or by the
written consent of the Holders. Such right of the Holders to elect additional
directors may be exercised until all Voting Rights Trigger Events have been
cured or waived, at which time the right of the Holders to elect such number of
directors shall cease, the term of such directors previously elected shall
thereupon terminate, and the authorized number of directors of the Corporation
shall thereupon return to the number of authorized directors otherwise in
effect, but subject always to the same provisions for the renewal and divestment
of such special voting rights in the case of any such future default.
(d) At any time when such voting right shall have vested in the
Holders and if such right shall not already have been initially exercised, a
proper officer of the Corporation shall, upon the written request of Holders of
record of 10% or more of the Senior Preferred Stock then outstanding, addressed
to the Secretary of the Corporation, call a special meeting of Holders. Such
meeting shall be held at the earliest practicable date upon the notice required
for annual meetings of stockholders at the place for holding annual meetings of
stockholders of the Corporation or, if none, at a place designated by the
Secretary of the Corporation. If such meeting shall not be called by the proper
officers of the Corporation within 30 days after the personal service of such
written request upon the Secretary of the Corporation, or within 30 days after
mailing the same within the United States, by registered mail, addressed to the
Secretary of the Corporation at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal authorities), then the
Holders of record of 10% of the shares of Senior Preferred Stock then
outstanding may designate in writing a Holder to call such meeting at the
expense of the Corporation, and such meeting may be called by such person so
designated upon the notice required for annual meetings of stockholders and
shall be held at the place for holding annual meetings of the Corporation or, if
none, at a place designated by such Holder. Any Holder that would be entitled to
vote at such meeting shall have access to the stock books of the Corporation for
the purpose of causing a meeting of stockholders to be called pursuant to the
provisions of this Section.
(e) If any of the directors so elected by the Holders shall cease to
serve as a director before his term shall expire, the Holders of Senior
Preferred Stock then outstanding may, at a special meeting of the Holders called
as provided above, elect a successor to hold office for the unexpired term of
the director whose place shall be vacant.
(f) The Corporation shall not, without the affirmative vote of the
Majority Holders (voting as a single class):
(i) effect any amendment, alteration or repeal of any of the
provisions of the Certificate of Incorporation (including without
limitation this Certificate of Designations) or the by-laws of the
Corporation which adversely affects the voting powers, preferences and
relative, participating, optional and other special rights of the Holders;
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(ii) effect any authorization, issuance or creation of, or
increase in the amount of any (A) Junior Securities (other than the Common
Stock) having the right to receive cash dividends prior to the payment of
any such cash dividends to Holders of Senior Preferred Stock or having a
repurchase or redemption right that may be exercised or otherwise effected
prior to the Mandatory Redemption Date (B) Parity Securities, (C) Senior
Securities; and
(iii) effect any amendment to the terms of the AT&T Warrants,
the Lucent Warrants, the Dark Fiber Warrants, the Finance Warrants or the
Original Owners Warrants in a manner that adversely affects the Holders.
(g) Without the consent of each Holder affected, an amendment or
waiver may not (with respect to any shares of Senior Preferred Stock held by a
non-consenting Holder):
(i) alter the voting rights with respect to the Senior
Preferred Stock or reduce the number of shares of Senior Preferred Stock
whose Holders must consent to an amendment, supplement or waiver;
(ii) reduce the Liquidation Preference of any share of Senior
Preferred Stock;
(iii) reduce the Conversion Rate or the rate of or change the
time for payment of dividends on any share of Senior Preferred Stock;
(iv) alter the mandatory redemption provisions contained in
Section 5 above; or
(v) make any change in the foregoing amendment and waiver
provisions.
(h) The Corporation shall not, without the affirmative vote of the
Majority Holders (as defined in the Dark Fiber Warrants) of the Dark Fiber
Warrants (voting as a single class) effect any amendment alteration or repeal of
any of the provisions of this Certificate of Designations which adversely
affects the holders of the Dark Fiber Warrants.
7. Change of Control.
(a) Upon the occurrence of a Change of Control other than a Change
of Control that has been unanimously approved by the members of the Board of
Directors nominated by the Holders pursuant to the Stockholders Agreement, each
Holder shall have the right to require the Corporation to repurchase all or any
part of such Holder's shares of Senior Preferred Stock (a "Change of Control
Offer") at an offer price in cash equal to 101% of the aggregate Liquidation
Preference thereof plus accrued dividends thereon from the most recent Dividend
Payment Date to the date of purchase (the "Change of Control Payment").
(b) The Change of Control Offer shall include all instructions and
materials necessary to enable Holders to tender their shares of Senior Preferred
Stock.
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(c) The Corporation shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the shares of Senior Preferred Stock as a result of a Change of
Control.
(d) Within 30 days following any Change of Control, the Corporation
shall mail a notice to each Holder stating:
(i) that the Change of Control Offer is being made pursuant to
this Section 7 and that all shares of Senior Preferred Stock tendered will
be accepted for payment;
(ii) the purchase price and the purchase date, which shall be
no earlier than 30 days nor later than 60 days from the date such notice
is mailed (the "Change of Control Payment Date");
(iii) that any share of Senior Preferred Stock not tendered
will continue to accrue dividends;
(iv) that, unless the Corporation fails to pay the Change of
Control Payment, all shares of Senior Preferred Stock accepted for payment
pursuant to the Change of Control Offer shall cease to accrue dividends
after the Change of Control Payment Date;
(v) that Holders electing to have any shares of Senior
Preferred Stock purchased pursuant to a Change of Control Offer will be
required to surrender the shares of Senior Preferred Stock, with the form
entitled "Option of Holder to Elect Purchase" which shall be included with
the Notice of Change of Control completed, to the Corporation at the
address specified in the notice prior to the close of business on the
third Business Day preceding the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their election
if the Corporation receives, not later than the close of business on the
tenth Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the number of shares of Senior Preferred Stock delivered
for purchase, and a statement that such Holder is withdrawing his election
to have such shares purchased; and
(vii) the circumstances and relevant facts regarding such
Change of Control (including, but not limited to, information with respect
to pro forma historical financial information after giving effect to such
Change of Control and information regarding the Person or Persons
acquiring control).
(e) On the Change of Control Payment Date, the Corporation shall
accept for payment all shares of Senior Preferred Stock properly tendered
pursuant to the Change of Control Offer. The Corporation shall promptly mail to
each Holder so tendered the Change of Control Payment for such Senior Preferred
Stock and the Corporation will promptly authenticate and mail (or cause to be
transferred by book-entry) to each Holder a new certificate representing
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the shares of Senior Preferred Stock equal in Liquidation Preference amount to
any unpurchased portion of the shares of Senior Preferred Stock surrendered, if
any.
(f) Notwithstanding anything to the contrary in this Certificate of
Designations, prior to complying with the provisions of this Section 7, but in
any event within 90 days following a Change of Control, the Corporation shall
either repay all outstanding indebtedness or obtain the requisite consents, if
any, under all agreements governing indebtedness of the Corporation or any of
its Subsidiaries to permit the repurchase of Senior Preferred Stock required by
this Section 7.
(g) The Corporation shall not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 7 applicable to a Change of Control Offer
made by the Corporation and purchases all shares of Senior Preferred Stock
validly tendered and not withdrawn under such Change of Control Offer.
8. Automatic Conversion. Upon the consummation of a firm commitment
underwritten public offering by the Corporation of its Common Stock, with the
written consent of the Majority Holders prior to the consummation of such
offering, all shares of Senior Preferred Stock shall, by virtue of and
simultaneously with the closing of such offering and without any action on the
part of the Corporation, be deemed automatically converted into a number of
fully paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share of Common Stock) equal to the then
applicable Conversion Rate multiplied by the number of shares of Senior
Preferred Stock then outstanding.
9. Certain Covenants.
(a) Reports. Whether or not required by the rules and regulations of
the Commission, on or after January 1, 2001, so long as any shares of Senior
Preferred Stock are outstanding, the Corporation shall furnish to the Holders,
within five days of the time periods specified in the Commission's rules and
regulations, all annual financial statements that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Corporation were required to file such Forms, including "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Corporation's certified
independent accountants. In addition, so long as any shares of the Senior
Preferred Stock are outstanding, the Corporation shall promptly furnish to the
Holders all filings made with the Commission.
(b) Conflicts with By-laws. If any provisions of the Corporation's
By-laws conflict in any way with this Certificate of Designations, the
Corporation shall, so long as any of the shares of Senior Preferred Stock are
outstanding, take all necessary actions to amend such By-laws and thereby
resolve the conflict.
(c) Use of Proceeds. The proceeds from the issuance of the Senior
Preferred Stock will be used by the Corporation in the development of the
Corporation's proposed United States fiber optic network.
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10. Payment and Conversion.
(a) All amounts payable in cash with respect to the Senior Preferred
Stock shall be payable in United States dollars and may be paid by check mailed
to the Holders at their respective addresses set forth in the register of
Holders maintained by the Corporation, provided that all cash payments with
respect to shares of Senior Preferred Stock the Holders of which have given wire
transfer instructions to the Corporation not later than 72 hours prior to the
date of payment will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof.
(b) Any payment on the Senior Preferred Stock due on any day that is
not a Business Day need not be made on such day, but may be made on the next
succeeding Business Day with the same force and effect as if made on such due
date.
11. Exclusion of Other Rights.
Except as may otherwise be required by law, the shares of Senior
Preferred Stock shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those specifically
set forth in this Certificate of Designations (as such Certificate of
Designations may be amended from time to time) and in the Certificate of
Incorporation.
12. Headings of Subdivisions.
The headings of the various subdivisions hereof are for convenience
of reference only and shall not affect the interpretation of any of the
provisions hereof.
13. Severability of Provisions.
If any voting powers, preferences and relative, participating,
optional and other special rights of the Senior Preferred Stock and
qualifications, limitations and restrictions thereof set forth in this
resolution (as such resolution may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule of law or public
policy, all other voting powers, preferences and relative, participating,
optional and other special rights of Senior Preferred Stock and qualifications,
limitations and restrictions thereof set forth in this resolution (as so
amended) which can be given effect without the invalid, unlawful or
unenforceable voting powers, preferences and relative, participating, optional
and other special rights of Senior Preferred Stock and qualifications,
limitations and restrictions thereof shall, nevertheless, remain in full force
and effect, and no voting powers, preferences and relative, participating,
optional or other special rights of Senior Preferred Stock and qualifications,
limitations and restrictions thereof herein set forth shall be deemed dependent
upon any other such voting powers, preferences and relative, participating,
optional or other special rights of Senior Preferred Stock and qualifications,
limitations and restrictions thereof unless so expressed herein.
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IN WITNESS WHEREOF, the Corporation has caused this certificate to
be duly executed by Stephen Irwin this 29th day of October, 1999.
PF.NET HOLDINGS, LIMITED
By: /s/ Stephen Irwin
-----------------------------------
Stephen Irwin
Vice Chairman and
Executive Vice President
