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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
AUGUST 6, 1999
McLEODUSA INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 0-20763 42-1407240
(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION
OF INCORPORATION) NUMBER)
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MCLEODUSA TECHNOLOGY PARK
6400 C STREET, S.W., P.O. BOX 3177,
CEDAR RAPIDS, IA 52406-3177
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(319) 364-0000
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
On August 6, 1999, we sold 1,000,000 shares of our 6.75% Series A
cumulative convertible preferred stock, liquidation preference $250 per share
(the "Series A preferred stock") in an underwritten public offering. The Series
A preferred stock is convertible at the option of the holders into an aggregate
of 8,602,890 shares of our Class A common stock at a conversion price of $29.06
per share of Class A common stock, subject to adjustment in certain
circumstances. We received approximately $241.5 million in net proceeds from the
offering .
The offering was made pursuant to a Prospectus Supplement dated August 6,
1999 and filed with the SEC on August 9, 1999 pursuant to Rule 424(b) under the
Securities Act as part of our universal shelf registration statement on Form
S-3.
Copies of the Certificate of Designations of the form of Series A preferred
stock and the form of Series A preferred stock certificate are enclosed as
Exhibits 3.1 and 4.1, respectively, to this Current Report on Form 8-K, and
incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
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3.1 Certificate of Designations of the 6.75% Series A preferred stock.
4.1 Form of 6.75% Series A preferred stock certificate.
5.1 Opinion of Hogan & Hartson L.L.P. regarding the legality of the Series
A preferred stock.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
McLeodUSA Incorporated
Date: August 9, 1999 By: /s/ Randall Rings
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Randall Rings
Vice President, Secretary and
General Counsel
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EXHIBIT INDEX
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PAGE NUMBER
IN SEQUENTIAL
EXHIBIT NUMBERING
NUMBER EXHIBIT SYSTEM
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3.1 Certificate of Designations of the 6.75% Series A preferred stock.
4.1 Form of 6.75% Series A preferred stock certificate.
5.1 Opinion of Hogan & Hartson L.L.P. regarding the legality of the
Series A preferred stock.
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Exhibit 3.1
McLEODUSA INCORPORATED
CERTIFICATE OF DESIGNATIONS OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF 6.75% SERIES A
CUMULATIVE CONVERTIBLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
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Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
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McLeodUSA Incorporated (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the board of directors of the
Company (the "Board of Directors") by the Company's Amended and Restated
Certificate of Incorporation, as amended (the "Restated Certificate of
Incorporation") and pursuant to authority conferred upon the Pricing Committee
(the "Pricing Committee") of the Board of Directors by the Company's Amended and
Restated Bylaws, as amended (the "Bylaws"), and pursuant to the provisions of
Sections 141(c)(1) and 151 of the General Corporation Law of the State of
Delaware, said Board of Directors is authorized to issue Preferred Stock of the
Company in one or more series and the Pricing Committee has approved and adopted
the following resolution on August 6, 1999 (the "Resolution"):
RESOLVED that, the Board of Directors and, pursuant to the authority
vested in the Pricing Committee by the Board of Directors and the Bylaws,
the Pricing Committee, hereby create, authorize and provide for the
issuance of 6.75% Series A Cumulative Convertible Preferred Stock, par
value $0.01 per share, with a liquidation preference of $250.00 per share,
consisting of 1,150,000 shares having the designations, preferences,
relative, participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set forth in
the Restated Certificate of Incorporation and in this Resolution as
follows:
(a) Designation. There is hereby created out of the authorized and
-----------
unissued shares of Preferred Stock of the Company a series of Preferred Stock
designated as the 6.75% Series A Cumulative Convertible Preferred Stock (the
"Series A Preferred Stock"). The number of shares constituting the Series A
Preferred Stock shall be 1,150,000. The liquidation preference of the Series A
Preferred Stock shall be $250.00 per share (the "Liquidation Preference").
Capital terms used herein but not defined shall have the meanings assigned
to them in paragraph (k).
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(b) Rank. The Series A Preferred Stock will, with respect to dividend
----
rights and rights on liquidation, winding-up and dissolution, rank (i) senior to
all classes of Common Stock and to each other class of Capital Stock of the
Company or series of Preferred Stock of the Company established hereafter by the
Board of Directors of the Company, the terms of which do not expressly provide
that such class or series ranks senior to, or on a parity with, the Series A
Preferred Stock as to dividend rights and rights on liquidation, winding-up and
dissolution of the Company (collectively referred to, together with all classes
of Common Stock of the Company, as "Junior Stock"); (ii) on a parity with each
class of Capital Stock of the Company or series of Preferred Stock of the
Company established hereafter by the Board of Directors of the Company, the
terms of which expressly provide that such class or series will rank on a parity
with the Series A Preferred Stock as to dividend rights and rights on
liquidation, winding-up and dissolution (collectively referred to as "Parity
Stock"); and (iii) junior to each class of Capital Stock of the Company or
series of Preferred Stock of the Company established hereafter by the Board of
Directors of the Company, the terms of which expressly provide that such class
or series will rank senior to the Series A Preferred Stock as to dividend rights
or rights on liquidation, winding-up and dissolution of the Company
(collectively referred to as "Senior Stock").
(c) Dividends.
---------
(i) Subject to the rights of any holders of Senior Stock or Parity
Stock, Holders of the outstanding shares of Series A Preferred Stock will
be entitled to receive, when, as and if declared by the Board of Directors
of the Company, out of funds legally available therefor, dividends on each
share of the Series A Preferred Stock at a rate per annum equal to 6.75% of
the Liquidation Preference of such share payable quarterly (each such
quarterly period being herein called a "Dividend Period").
All dividends on the Series A Preferred Stock, to the extent accrued,
shall be cumulative, whether or not earned or declared, on a daily basis
from the last date through which dividends have been paid or, if no
dividends have been paid, from the Issue Date, and shall be payable
quarterly in arrears on November 15, February 15, May 15 and August 15 of
each year (each a "Dividend Payment Date"), commencing on November 15,
1999, to Holders of record as they appear on the stock register of the
Company at the close of business on the Record Date (as defined
hereinafter) immediately preceding the relevant Dividend Payment Date. No
interest or sum of money or other property or securities in lieu of
interest will be payable in respect of any accumulated and unpaid
dividends. "Record Date" means, with respect to a Dividend Payment Date,
the date established by the Board of Directors as the record date therefor,
which date shall, in any event, be a date that is not more than 60 calendar
days nor less than 15 calendar days before such Dividend Payment Date.
Any dividend on the Series A Preferred Stock shall be, at the option
of the Company, payable (A) in cash or (B) through the delivery of a number
of shares of the Company's Class A Common Stock (dividends paid or payable
in Class A Common Stock are hereinafter referred to as "Dividend Common
Stock") equal to the total
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dividend amount divided by the applicable Discounted Current Market Value
(as defined below) of the Class A Common Stock. No fractional shares of
Class A Common Stock shall be issued as a dividend on the Series A
Preferred Stock. The Transfer Agent shall have the authority to aggregate
any fractional shares of Class A Common Stock that are issued as dividends,
and to sell them at the best available price and distribute the proceeds to
the Holders thereof in proportion to their respective interests; provided,
that if such fractional shares, when so aggregated, result in a number of
shares that includes a fractional share, the Transfer Agent shall not sell
such remaining fractional share and the Company shall in lieu thereof pay
to the Transfer Agent the cash equivalent of such fractional share (at the
same price per share as the price at which the Transfer Agent sold the
aggregated fractional shares) and the Transfer Agent shall include such
cash payment in the proceeds distributed to the Holders. The Company shall
reimburse the Transfer Agent for any expenses incurred with respect to such
sale, including brokerage commissions. If the Company is not entitled to
pay cash for fractional shares, it shall pay cash to the Holder for the
fractional shares when it becomes legally and contractually able to pay
such cash.
The "Discounted Current Market Value" of the Class A Common Stock with
respect to a Dividend Payment Date means the product of (x) 97% and (y) the
"Market Average Value" relating to such Dividend Payment Date. The "Market
Average Value" shall equal the average of the daily closing prices of the
Class A Common Stock for the five consecutive Trading Days ending on (and
including) the fourth Trading Day preceding such Dividend Payment Date.
The closing price for each Trading Day will be the last sales price on the
Nasdaq National Market (or the principal securities exchange or other
securities market on which the Class A Common Stock is then being traded).
"Trading Day" means any day on which the Class A Common Stock is traded for
any period on the Nasdaq National Market (or on the principal securities
exchange or other securities market on which the Class A Common Stock is
then being traded).
(ii) All dividends paid with respect to shares of the Series A
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to the
Holders entitled thereto.
(ii) Dividends shall accrue whether or not the Company 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. Dividends
shall accumulate to the extent that such dividends are not paid on the
Dividend Payment Date to which they relate. No dividend whatsoever shall
be declared or paid upon, or any sum set apart for the payment of dividends
upon, any outstanding share of the Series A Preferred Stock with respect to
any Dividend Period unless all dividends for all preceding Dividend Periods
have been declared and paid or declared and a sufficient sum set apart for
the payment of such dividend, upon all outstanding shares of Series A
Preferred Stock. No dividend will be declared or paid on any Parity Stock
unless full cumulative dividends have been paid on the Series A Preferred
Stock for all prior Dividend Periods; provided, however, that if accrued
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dividends on the Series A Preferred Stock for all prior Dividend Periods
have not
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been paid in full, then any dividend declared for any Dividend Period on
the Series A Preferred Stock and on any Parity Stock will be declared
ratably in proportion to accrued and unpaid dividends on the Series A
Preferred Stock and such Parity Stock.
(iv) The Company will not (A) declare, pay or set apart funds for the
payment of any dividend or other distribution with respect to any Junior
Stock or (B) redeem, purchase or otherwise acquire for consideration any
Junior Stock through a sinking fund or otherwise, unless (1) all accrued
and unpaid dividends with respect to the Series A Preferred Stock and any
Parity Stock at the time such dividends are payable have been paid or funds
have been set apart for payment of such dividends and (2) sufficient funds
have been paid or set apart for the payment of the dividend for the current
Dividend Period with respect to the Series A Preferred Stock and any Parity
Stock. Notwithstanding anything in this Certificate of Designations to the
contrary, the Company may declare and pay dividends on Parity Stock which
are payable solely in additional shares of or by the increase in the
liquidation value of Parity Stock or Junior Stock or on Junior Stock which
are payable in additional shares of or by the increase in the liquidation
value of Junior Stock, as applicable, or repurchase, redeem or otherwise
acquire Junior Stock in exchange for Junior Stock and Parity Stock in
exchange for Parity Stock or Junior Stock.
(v) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption may be declared and
paid at any time, without reference to any regular Dividend Payment Date,
to Holders of record on the Business Day immediately prior to the payment
thereof, as may be fixed by the Board of Directors of the Company.
(vi) Dividends payable on the Series A Preferred Stock for any period
other than a full Dividend Period shall be computed on the basis of a 360-
day year consisting of twelve 30-day months. If a Dividend Payment Date is
not a Business Day, payment of dividends shall be made on the next
succeeding Business Day and dividends accruing for the intervening period
shall be paid on the next succeeding Dividend Payment Date.
(d) Liquidation Preference.
----------------------
(i) Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, and subject to the rights of holders of Senior
Stock and Parity Stock, each Holder of Series A Preferred Stock shall be
entitled to be paid, out of the assets of the Company available for
distribution to its stockholders, an amount equal to the Liquidation
Preference for each share of Series A Preferred Stock held by such Holder,
plus, without duplication, an amount in cash equal to all accumulated and
unpaid dividends (whether or not earned or declared) thereon to the date
fixed for liquidation, dissolution or winding-up (including an amount equal
to a prorated dividend for the period from the last Dividend Payment Date
to the date fixed for liquidation, dissolution or winding-up that would
have been payable had the Series A Preferred Stock been the
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subject of a redemption on such date pursuant to paragraph (e)(i)) before
any distribution is made on any Junior Stock. If, upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, the
amounts payable with respect to the Series A Preferred Stock and all Parity
Stock are not paid in full, the Holders of Series A Preferred Stock and the
holders of Parity Stock will share equally and ratably (in proportion to
the respective amounts that would be payable on such shares of Series A
Preferred Stock and the Parity Stock, respectively, if all amounts payable
thereon had been paid in full) in any distribution of assets of the Company
to which each is entitled. After payment of the full amount of the
Liquidation Preference of the outstanding shares of Series A Preferred
Stock (and, if applicable, an amount equal to a prorated dividend), the
Holders of shares of Series A Preferred Stock will not be entitled to any
further participation in any distribution of assets of the Company.
(ii) For the purposes of this paragraph (d), neither the 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 Company nor the consolidation or merger of the Company with or into
one or more other entities shall be deemed to be a liquidation, dissolution
or winding-up of the Company.
(e) Redemption.
----------
(i) (A) Provisional Redemption. The Series A Preferred Stock may be
----------------------
redeemed, in whole or in part, at the option of the Company at a redemption
price of 104.5% of the Liquidation Preference, plus accumulated and unpaid
dividends, if any, whether declared or undeclared, to the date fixed for
such redemption (the "Provisional Redemption Date") (the foregoing amounts,
together with the Additional Payment, as hereinafter defined, being the
"Provisional Redemption Price"), on or after August 15, 2001, but prior to
August 15, 2002, if the closing price of the Class A Common Stock equals or
exceeds 150% of the Conversion Price for at least 20 Trading Days within
any 30 Trading Day period (such redemption, a "Provisional Redemption").
In the event that the Company undertakes a Provisional Redemption, the
Holders of shares of Series A Preferred Stock that are called for
Provisional Redemption will also receive a payment (the "Additional
Payment") in an amount equal to the present value (calculated using the
bond equivalent yield on U.S. Treasury notes or bills having a term nearest
in length to that of the Additional Period (as hereinafter defined) as of
the day immediately preceding the date on which a notice of Provisional
Redemption is mailed to the Holders) of the aggregate amount of the
dividends that would thereafter have been payable on the Series A Preferred
Stock (whether or not such dividends have been declared) for the period
from the Provisional Redemption Date to August 15, 2002 (such period being
referred to as the "Additional Period").
The Provisional Redemption Price shall be, at the option of the
Company, payable (v) in cash, (w) through the delivery of a number of
shares of Class A Common Stock equal to the Provisional Redemption Price
divided by the Provisional Redemption Value
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(as defined below) of the Class A Common Stock or (x) any combination of
(v) and (w). The "Provisional Redemption Value" of the Class A Common Stock
with respect to a Provisional Redemption Date means the product of (y) 97%
and (z) the average of the daily closing prices of the Class A Common Stock
for the five consecutive Trading Days ending on (and including) the fourth
Trading Day preceding such Provisional Redemption Date. The closing price
for each Trading Day will be the last sales price on the Nasdaq National
Market (or the principal securities exchange or other securities market on
which the Class A Common Stock is then being traded.).
No fractional shares of Class A Common Stock shall be issued in
connection with the payment of the Provisional Redemption Price. The
Transfer Agent shall have the authority to aggregate any fractional shares
of Class A Common Stock that would otherwise be issued in connection with
the payment of the Provisional Redemption Price, and to sell them at the
best available price and distribute the proceeds to the Holders thereof in
proportion to their respective interests; provided, that if such fractional
shares, when so aggregated, result in a number of shares that includes a
fractional share, the Transfer Agent shall not sell such remaining
fractional share and the Company shall in lieu thereof pay to the Transfer
Agent the cash equivalent of such fractional share (at the same price per
share as the price at which the Transfer Agent sold the aggregated
fractional shares) and the Transfer Agent shall include such cash payment
in the proceeds distributed to the Holders. The Company shall reimburse
the Transfer Agent for any expenses incurred with respect to such sale,
including brokerage commissions. If the Company is not entitled to pay
cash for fractional shares, it shall pay cash to the Holder for the
fractional shares when it becomes legally and contractually able to pay
such cash.
(B) Optional Redemption. Except under the foregoing circumstances
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with respect to a Provisional Redemption, and except under the
circumstances set forth in Section 4.5 of the Restated Certificate of
Incorporation (in which case the terms, conditions and procedures set forth
therein for redemption of any Capital Stock of the Company under such
circumstances shall apply to any redemption of shares of Series A Preferred
Stock pursuant thereto), the Series A Preferred Stock shall not be
redeemable at the option of the Company prior to August 15, 2002. On or
after August 15, 2002, each share of the Series A Preferred Stock may be
redeemed (subject to the legal availability of funds therefor) at any time,
in whole or in part, at the option of the Company (such redemption, an
"Optional Redemption"), at the redemption prices set forth below, payable
in cash, plus, without duplication, an amount in cash equal to all accrued
and unpaid dividends to the date fixed for redemption (the "Optional
Redemption Date") (including a cash amount equal to a prorated dividend for
the period from the Dividend Payment Date immediately preceding the
Optional Redemption Date) (the "Optional Redemption Price").
If redeemed during the 12-month period commencing on August 15 (or, if
such date is not a day on which the Nasdaq National Market is open for
business, then the next day the Nasdaq National Market is open for
business) of the years
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set forth below, the redemption prices, expressed as a percentage of the
Liquidation Preference, shall be:
Period Redemption Price
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2002...................... 103.3750%
2003...................... 102.2500%
2004...................... 101.1250%
2005 and thereafter....... 100.0000%
(C) In the case of any partial Optional Redemption or Provisional
Redemption, selection of the Series A Preferred Stock for redemption will be
made by the Company in compliance with the requirements of the principal
national securities exchange, if any, on which the Series A Preferred Stock
is listed, or if the Series A Preferred Stock is not listed on a national
securities exchange, on a pro rata basis, by lot or such other method as the
Company, in its sole discretion, shall deem fair and appropriate; provided,
--------
however, that the Company may redeem all the shares held by Holders of fewer
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than 5 shares (or all of the shares held by the Holders who would hold less
than 5 shares as a result of such redemption) as may be determined by the
Company.
(D) In the case of an Optional Redemption Date or Provisional
Redemption Date falling after a Record Date and prior to the related Dividend
Payment Date, the Holders of the Series A Preferred Stock at the close of
business on such Record Date will be entitled to receive the dividend payable
on such shares on the corresponding Dividend Payment Date, notwithstanding
the redemption of such shares following such Record Date. Except as provided
for in the preceding sentence, no payment or allowance will be made for
accrued dividends on any shares of Series A Preferred Stock called for
redemption.
(ii) Procedure for Redemption. (A) On and after the Optional
------------------------
Redemption Date or Provisional Redemption Date, as the case may be, unless
the Company defaults in the payment of the applicable redemption price,
dividends will cease to accumulate on shares of Series A Preferred Stock
called for redemption and all rights of Holders of such shares will terminate
except for the right to receive the Optional Redemption Price or Provisional
Redemption Price, as the case may be, without interest; provided, however,
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that if a notice of redemption shall have been given as provided in
subparagraph (ii)(B) and the funds and/or shares of Class A Common Stock, as
the case may be, necessary for redemption (including an amount in respect of
all dividends that will accrue to the Optional Redemption Date or Provisional
Redemption Date, as the case may be) shall have been segregated and
irrevocably set apart by the Company, in trust for the benefit of the Holders
of the shares of Series A Preferred Stock called for redemption, then
dividends shall cease to accumulate on the Optional Redemption Date or
Provisional Redemption Date, as the case may be, on the shares of Series A
Preferred Stock to be redeemed and, at the close of
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business on the day on which such funds and/or shares of Class A Common
Stock, as the case may be, are segregated and set apart, the Holders of the
shares of Series A Preferred Stock to be redeemed shall, with respect to such
shares to be redeemed, cease to be stockholders of the Company and shall be
entitled only to receive the Optional Redemption Price or Provisional
Redemption Price, as the case may be, for such shares without interest from
the Optional Redemption Date or Provisional Redemption Date, as applicable.
(B) With respect to a redemption pursuant to paragraph (e)(i), the
Company will send a written notice of redemption by first class mail to each
Holder of record of shares of Series A Preferred Stock, not fewer than 30
days nor more than 60 days prior to the Optional Redemption Date or
Provisional Redemption Date, as applicable, at its registered address (the
"Redemption Notice"); provided, however, that no failure to give such notice
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nor any deficiency therein shall affect the validity of the procedure for the
redemption of any shares of Series A Preferred Stock to be redeemed except as
to the Holder or Holders to whom the Company has failed to give said notice
or except as to the Holder or Holders whose notice was defective. The
Redemption Notice shall state:
(1) that the redemption is pursuant to paragraph (e)(i)(A) or (e)(i)(B)
hereof, as applicable;
(2) the Optional Redemption Price or Provisional Redemption Price, as
applicable and, in the case of a Provisional Redemption, whether the
Provisional Redemption Price will be paid in cash, through the delivery
of shares of Class A Common Stock, or a combination thereof (and, if a
combination thereof, stating the percentages of the total Provisional
Redemption Price that will be paid in cash and in shares of Class A
Common Stock);
(3) in the case of a Provisional Redemption as to which all or a portion
of the Provisional Redemption Price is to be paid through the delivery of
shares of Class A Common Stock, that the determination of the number of
shares of Class A Common Stock to be delivered shall be calculated as set
forth in paragraph (e)(i)(A);
(4) whether all or less than all the outstanding shares of the Series A
Preferred Stock are to be redeemed and the total number of shares of the
Series A Preferred Stock being redeemed;
(5) the Optional Redemption Date or Provisional Redemption Date, as
applicable;
(6) that the Holder is to surrender to the Company, in the manner, at the
place or places and at the price designated, his certificate or
certificates representing the shares of Series A Preferred Stock to be
redeemed; and
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(7) that dividends on the shares of the Series A Preferred Stock to be
redeemed shall cease to accumulate on such Optional Redemption Date or
Provisional Redemption Date, as the case may be, unless the Company
defaults in the payment of the Optional Redemption Price or Provisional
Redemption Price, as the case may be.
(C) Each Holder of Series A Preferred Stock shall surrender the
certificate or certificates representing such shares of Series A Preferred
Stock to the Company, duly endorsed (or otherwise in proper form for
transfer, as determined by the Company), in the manner and at the place
designated in the Redemption Notice, and on the Optional Redemption Date or
Provisional Redemption Date the full Optional Redemption Price or Provisional
Redemption Price, respectively, for such shares shall be payable in cash
and/or shares of Class A Common Stock, as the case may be, to the person
whose name appears on such certificate or certificates as the owner thereof,
and each surrendered certificate shall be canceled and retired. In the event
that less than all of the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed
shares.
(f) Voting Rights.
-------------
(A) The Holders of Series A Preferred Stock, except as otherwise
required under Delaware law or as set forth in paragraphs (B) and (C) below,
shall not be entitled to vote on any matter required or permitted to be voted
upon by the stockholders of the Company.
(B) (1) If dividends on the Series A Preferred Stock are in
arrears and unpaid for six or more Dividend Periods (whether or not
consecutive) (a "Voting Rights Triggering Event"), then the Holders of the
then outstanding shares of Series A Preferred Stock (together with the
holders of Parity Stock upon which like rights have been conferred and are
exercisable), voting separately and as a class, shall have the right and
power to elect to serve on the Board of Directors the lesser of (x) two
additional members to the Board of Directors or (y) that number of directors
constituting at least 25% of the members of the Board of Directors, and the
number of members of the Board of Directors shall, subject to paragraph
(f)(B)(5), be immediately and automatically increased by such number.
(2) The voting rights set forth in paragraph (f)(B)(1) above will
continue until such time as all dividends in arrears on the Series A
Preferred Stock are paid in full, at which time the term of any directors
elected pursuant to the provisions of paragraph (f)(B)(1) above (subject to
the right of holders of any other Preferred Stock to elect directors pursuant
to the terms of the instruments governing such Preferred Stock) shall
terminate forthwith and the number of directors constituting the Board of
Directors shall be decreased by such number (until the occurrence of any
subsequent Voting Rights Triggering Event).
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At any time after voting power to elect directors shall have become
vested and be continuing in the Holders of Series A Preferred Stock (together
with the holders of Parity Stock upon which like rights have been conferred
and are exercisable) pursuant to paragraph (f)(B)(1) hereof, or if vacancies
shall exist in the offices of directors elected by such holders, a proper
officer of the Company may, and upon the written request of the Holders of
record of at least 25% of the shares of Series A Preferred Stock then
outstanding or the holders of 25% of the shares of Parity Stock then
outstanding upon which like rights have been conferred and are exercisable
addressed to the secretary of the Company shall, call a special meeting of
the Holders of Series A Preferred Stock and the holders of such Parity Stock
for the purpose of electing the directors which such holders are entitled to
elect pursuant to the terms hereof; provided, however, that no such special
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meeting shall be called if the next annual meeting of stockholders of the
Company is to be held within 60 days after the voting power to elect
directors shall have become vested, in which case such meeting shall be
deemed to have been called for such next annual meeting. If such meeting
shall not be called by a proper officer of the Company within 20 days after
personal service to the secretary of the Company at its principal executive
offices, then the Holders of record of at least 25% of the outstanding shares
of Series A Preferred Stock or the holders of 25% of the shares of Parity
Stock upon which like rights have been conferred and are exercisable may
designate in writing one of their members to call such meeting at the expense
of the Company, and such meeting may be called by the person so designated
upon the notice required for the annual meetings of stockholders of the
Company and shall be held at the place for holding the annual meetings of
stockholders. Any holder of Series A Preferred Stock or such Parity Stock so
designated shall have, and the Company shall provide, access to the lists of
Holders of Series A Preferred Stock and the holders of such Parity Stock to
be called pursuant to the provisions hereof. If no special meeting of the
Holders of Series A Preferred Stock and the holders of such Parity Stock is
called as provided in this paragraph (f)(B), then such meeting shall be
deemed to have been called for the next annual meeting of stockholders of the
Company or special meeting of the holders of any other Capital Stock of the
Company.
(3) At any meeting held for the purposes of electing directors at
which the Holders of Series A Preferred Stock (together with the holders of
Parity Stock upon which like rights have been conferred and are exercisable)
shall have the right, voting together as a separate class, to elect directors
as aforesaid, the presence in person or by proxy of the holders of at least a
majority in voting power of the outstanding shares of Series A Preferred
Stock (and such Parity Stock) shall be required to constitute a quorum
thereof.
(4) Any vacancy occurring in the office of a director elected by the
Holders of Series A Preferred Stock (and such Parity Stock) may be filled by
the remaining director (if any) elected by the Holders of Series A Preferred
Stock (and such Parity Stock) unless and until such vacancy shall be filled
by the Holders of Series A Preferred Stock (and such Parity Stock).
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<PAGE>
(5) If an event occurs at any time that results in the holders of any
Parity Stock having voting rights to elect directors to the Board of
Directors, then Holders of Series A Preferred Stock shall, whether or not
such event otherwise constitutes a Voting Rights Triggering Event pursuant to
paragraph (f)(B)(1), have the voting rights set forth in paragraphs (f)(B)(1)
and (f)(B)(2), and such event shall be deemed (for purposes of this paragraph
(f) only) to constitute a Voting Rights Triggering Event. In addition, in
the event that during a time in which directors elected by the Holders of
Series A Preferred Stock pursuant to this paragraph (f)(B) are serving on the
Board of Directors ("Previously-Elected Directors") an event occurs that
results in holders of Parity Stock having voting rights to elect (voting
together with the Holders of Series A Preferred Stock) the lesser of (x) two
additional members to the Board of Directors or (y) that number of directors
constituting at least 25% of the members of the Board of Directors, the
Holders of Series A Preferred Stock shall vote together with the holders of
such Parity Stock to elect such new directors, and upon the election of the
new directors the Previously-Elected Directors shall (unless such Previously-
Elected Directors are elected as new directors) cease to serve on the Board
of Directors.
(C) (1) So long as any shares of the Series A Preferred Stock are
outstanding, the Company will not authorize, create or increase the
authorized amount of any class or series of Senior Stock without the
affirmative vote or consent of Holders of at least two-thirds of the shares
of Series A Preferred Stock then outstanding, voting or consenting, as the
case may be, as one class, given in person or by proxy, either in writing or
by resolution adopted at an annual or special meeting.
(2) So long as any shares of the Series A Preferred Stock are
outstanding, the Company will not amend this Certificate of Designations so
as to affect adversely the specified rights, preferences, privileges or
voting rights of Holders of shares of Series A Preferred Stock or to increase
or decrease the aggregate number of authorized shares of Series A Preferred
Stock without the affirmative vote or consent of Holders of at least a
majority of the issued and outstanding shares of Series A Preferred Stock,
voting or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting. Notwithstanding the foregoing, the Company when authorized by
resolutions of its Board of Directors may amend or supplement this
Certificate of Designations without the consent of any Holder to cure any
ambiguity, defect or inconsistency or make any other change provided that
such amendments or supplements shall not adversely affect the interests of
the Holders.
(3) Except as set forth in paragraph (f)(C)(1) or (2) above, (x) the
creation, authorization or issuance of any shares of any Junior Stock or
Parity Stock, including the designation of a series of Series A Preferred
Stock, or (y) the increase or decrease in the amount of authorized Capital
Stock of any class, including Preferred Stock, shall not require the consent
of Holders of Series A Preferred Stock and shall not be deemed to affect
adversely the rights, preferences, privileges or voting rights of shares of
Series A Preferred Stock.
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<PAGE>
(D) In any case in which the Holders of Series A Preferred Stock shall
be entitled to vote pursuant to this paragraph (f) or pursuant to Delaware
law, each Holder of Series A Preferred Stock entitled to vote with respect to
such matters shall be entitled to one vote for each share of Series A
Preferred Stock held; provided that any shares of Series A Preferred Stock
that are held by the Company or by any Person controlled by the Company shall
not entitle the Holders thereof to any votes with respect thereto. For
purposes of this provision, "controlled by," 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 equity securities, by agreement or
otherwise.
(E) Except as required by law, the Holders of the Series A Preferred
Stock will not be entitled to vote on any merger or consolidation involving
the Company or a sale of all or substantially all the assets of the Company.
(g) Conversion.
----------
(A) (1) At any time after the Issue Date, at the option of the
Holder thereof, any share of Series A Preferred Stock may be converted into
such number of fully paid and nonassessable shares of Class A Common Stock
(calculated as to each conversion to the nearest 1/10 of a share), as equals
the Liquidation Preference divided by the Conversion Price, determined as
hereinafter provided, in effect at the time of conversion. In case a share
of Series A Preferred Stock is called for Provisional Redemption or Optional
Redemption, such conversion right in respect of the share of Series A
Preferred Stock so called shall expire at the close of business on the
applicable Provisional Redemption Date or Optional Redemption Date, as the
case may be, unless the Company defaults in making the payment due upon
redemption.
(2) If on any date after August 15, 2002, the closing price (as
defined in this paragraph (g)(A)(2)) of the Class A Common Stock has equaled
or exceeded 135% of the then current Conversion Price, as hereinafter
provided, for at least 20 out of 30 consecutive Market Days (as defined
below), then the Company shall have the right, for up to five Market Days
after any such date, to cause all the Series A Preferred Stock to convert
into such number of fully paid and nonassessable shares of Class A Common
Stock (calculated as to each conversion to the nearest 1/10 of a share) as
equals the Liquidation Preference divided by the Conversion Price determined
as hereinafter provided, in effect at the time of conversion. The Company
may exercise such right by sending written notice of such exercise to the
Transfer Agent whenever the conversion will automatically occur. The Series
A Preferred Stock shall convert on the date such notice is received by the
Transfer Agent, and the Conversion Price shall be the Conversion Price in
effect on such date. For the purposes of this paragraph (g)(A)(2),
(x)"Market Day" means a day on which the Nasdaq National Market (or the
principal national securities market or exchange on which the Class A Common
Stock is then listed or admitted for trading) is open for the transaction of
business and (y) the "closing price" with respect to the Class A Common Stock
on any
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<PAGE>
Market Day means the last sale price on such Market Day or, if no such
sale takes pace on such Market Day, the average of the reported high bid and
low ask prices on such Market Day, in each case on the Nasdaq National Market
(or the principal national securities market or exchange on which the Class A
Common Stock is then listed or admitted for trading).
(3) The price at which Class A Common Stock shall be delivered upon
conversion (herein called the "Conversion Price") shall be initially $29.06
per share of Class A Common Stock. The Conversion Price shall be adjusted in
certain instances as provided in paragraph (g)(D) or paragraph (g)(H).
(B) In order to exercise the conversion privilege provided for in
paragraph (g)(A)(1), the Holder of any share of Series A Preferred Stock to
be converted shall surrender the certificate for such share of Series A
Preferred Stock, duly endorsed or assigned to the Company or in blank, at the
office of the Transfer Agent or at any office or agency of the Company
maintained for that purpose, accompanied by written notice to the Company in
the form of Exhibit A that the Holder elects to convert such share of Series
A Preferred Stock or, if fewer than all the shares of Series A Preferred
Stock represented by a single share certificate are to be converted, the
number of shares represented thereby to be converted. Such notice shall also
contain the office or the address to which the Company should deliver shares
of Class A Common Stock issuable upon conversion (and any other payments or
certificates related thereto). Upon any conversion of Series A Preferred
Stock pursuant to paragraph (g)(A)(2), the Company will promptly notify the
Holders thereof and will deliver shares of Class A Common Stock issuable upon
such conversion to the office or address specified by such Holders.
Holders of shares of Series A Preferred Stock at the close of business
on a Record Date will be entitled to receive the dividend payable on such
shares on the corresponding Dividend Payment Date notwithstanding the
conversion of such shares following such Record Date and prior to such
Dividend Payment Date. However, shares of Series A Preferred Stock
surrendered for conversion during the period between the close of business on
any Record Date and the opening of business on the corresponding Dividend
Payment Date (except shares converted after the issuance of a notice of
redemption with respect to a redemption date during such period, which will
be entitled to such dividend) must be accompanied by payment of an amount
equal to the dividend payable on such shares on such Dividend Payment Date.
A Holder of shares of Series A Preferred Stock on a Record Date who (or whose
transferee) tenders any such shares for conversion into shares of Class A
Common Stock on such Dividend Payment Date (or where shares of Series A
Preferred Stock are automatically converted during such period) will receive
the dividend payable by the Company on such shares of Series A Preferred
Stock on such date, and the converting Holder need not include payment of the
amount of such dividend upon surrender of shares of Series A Preferred Stock
for conversion. Except as provided above, the Company will make no payment
or allowance for unpaid dividends, whether or not in arrears, on
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<PAGE>
converted shares or the dividends on the shares of Class A Common Stock
issued upon such conversion.
Shares of Series A Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day (x) of
surrender of such shares of Series A Preferred Stock for conversion in
accordance with the foregoing provisions or (y) in the case of an automatic
conversion, the Transfer Agent receives the appropriate notice from the
Company, and at such time the rights of the Holders of such shares of Series
A Preferred Stock as Holders shall cease, and the person or persons entitled
to receive the Class A Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Class A Common Stock
at such time. As promptly as practicable on or after the conversion date, the
Company shall issue and shall deliver to such office or agency as the
converting Holder shall have designated in its written notice to the Company
a certificate or certificates for the number of full shares of Class A Common
Stock issuable upon conversion, together with payment in lieu of any fraction
of a share, as provided in paragraph (g)(C) hereof.
In the case of any conversion of fewer than all the shares of Series A
Preferred Stock evidenced by a certificate, upon such conversion the Company
shall execute and the Transfer Agent shall authenticate and deliver to the
Holder thereof (at the address designated by such Holder), at the expense of
the Company, a new certificate or certificates representing the number of
unconverted shares of Series A Preferred Stock.
(C) No fractional shares of Class A Common Stock shall be issued upon
the conversion of a share of Series A Preferred Stock. If more than one
share of Series A Preferred Stock shall be surrendered for conversion at one
time by the same Holder, the number of full shares of Class A Common Stock
which shall be issuable upon conversion thereof shall be computed on the
basis of the aggregate shares of Series A Preferred Stock so surrendered.
Instead of any fractional share of Class A Common Stock which would otherwise
be issuable upon conversion of any share of Series A Preferred Stock, the
Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the last sales price of a share of Class A
Common Stock on the Nasdaq National Market (or the principal national
securities exchange or other securities market on which the Class A Common
Stock is then being traded) on the last Trading Day immediately preceding the
day of conversion.
(D) The Conversion Price shall be adjusted from time to time by the
Company as follows, each a "Conversion Price Adjustment Event" (the variables
have the definitions set forth in paragraph (g)(D)(7) below):
(1) If the Company shall make any redemption payment or payment of a
dividend or other distribution payable in shares of Class A Common Stock to
all holders of any class of Capital Stock of the Company, other than the
issuance of shares of Class A Common Stock in connection with the payment (1)
in redemption for, of dividends on, or
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<PAGE>
the conversion of, the Series A Preferred Stock or (2) to all Holders of the
Series A Preferred Stock based upon the number of shares of Class A Common
Stock into which the Series A Preferred Stock is then convertible. The
Conversion Price in effect immediately prior to such event shall be adjusted
pursuant to the formula: X/Y multiplied by CP=ACP.
(2) If the Company shall make any issuance to all holders of shares
of Class A Common Stock of rights, options or warrants entitling them to
subscribe for or purchase shares of Class A Common Stock or securities
convertible into or exchangeable for shares of Class A Common Stock at an
exercise price that is less than the closing price of a share of Class A
Common Stock on the Nasdaq National Market (or the principal national
securities exchange or other securities market on which the Class A Common
Stock is then being traded) on the last Trading Day immediately preceding the
date of issuance of such rights, options or warrants; provided, however, that
no adjustment will be made with respect to such a distribution if the Holder
of shares of the Series A Preferred Stock would be entitled to receive such
rights, options or warrants upon conversion at any time of shares of the
Series A Preferred Stock into Class A Common Stock and provided, further,
that if such rights, options or warrants are only exercisable upon the
occurrence of certain triggering events, then the Conversion Price will not
be adjusted until such triggering events occur. The Conversion Price in
effect immediately prior to such event shall be adjusted pursuant to the
formula: X/(X+U((ClosePrice-EP)/ClosePrice)) multiplied by CP=ACP. If any
options, warrants or other rights of the nature described in this paragraph
(g)(D)(2) ("Rights") expire without exercise or conversion, the Conversion
Price will be readjusted to the Conversion Price which would otherwise be in
effect had the adjustment made upon the issuance of such Rights been made on
the basis of delivery of only the number of shares of Class A Common Stock
actually delivered upon the exercise or conversion of such Rights.
(3) In the case of any subdivision, combination or reclassification
of the Class A Common Stock. The Conversion Price in effect immediately
prior to such event shall be adjusted pursuant to the formula: X/Y multiplied
by CP=ACP.
(4) If the Company shall make any distribution consisting exclusively
of cash, excluding any cash distributed in a transaction for which paragraph
(g)(D)(12) below is applicable (which specifies that no anti-dilution
adjustment shall be made), to all holders of shares of Class A Common Stock
(which distribution is not also being made to the Holders of Series A
Preferred Stock based on the number of shares of Class A Common Stock into
which the Series A Preferred Stock is then convertible) in an aggregate
amount that, combined together with (1) all other such cash distributions
made within the then-preceding 12 months in respect of which no adjustment
has been made and (2) any cash and the fair market value of other
consideration paid or payable in respect of any tender offer by the Company
or any of its subsidiaries for shares of Class A Common Stock concluded
within the then-preceding 12 months in respect of which no adjustment has
been made, exceeds 15% of the Company's Pre-Distribution Market
Capitalization (as defined in paragraph (g)(D)(7) below). The Conversion
Price in effect immediately prior to such event shall be adjusted pursuant to
the formula: CP- (CP multiplied by ((Cash-15%
15
<PAGE>
PDMC)/PDMC))=ACP. There will be no adjustment to the Conversion Price if
(Cash-15% PDMC) is less than or equal to zero.
(5) In the case of the completion of a tender or exchange offer made
by the Company or any of its subsidiaries for shares of Class A Common Stock
that involves an aggregate consideration that, together with (1) any cash and
other consideration payable in a tender or exchange offer by the Company or
any of its subsidiaries for shares of Class A Common Stock expiring within
the then-preceding 12 months in respect of which no adjustment has been made
and (2) the aggregate amount of any such cash distributions referred to in
paragraph (g)(D)(4) above to all holders of shares of Class A Common Stock
within the then-preceding 12 months in respect of which no adjustments have
been made, exceeds 15% of the Company's Post-Tender Market Capitalization (as
defined in paragraph (g)(D)(7) below). If the foregoing event occurs and if
the tender offer price or exchange offer price per share of Class A Common
Stock is greater than the closing price of the Class A Common Stock on the
Trading Day immediately succeeding the Expiration Time, the Conversion Price
in effect immediately prior to such event shall be adjusted pursuant to the
formula: CP multiplied by ((EX multiplied by TotSh)/(TPur + (NetSh multiplied
by EX))) = ACP. There will be no adjustment to the Conversion Price if the
tender offer price or exchange offer price per share of Class A Common Stock
is less than or equal to EX or if TOff is not greater than 15% of PTMC.
(6) If the Company shall make a distribution to all holders of Class A
Common Stock (which distribution is not also being made to the Holders of the
Series A Preferred Stock based on the number of shares of Class A Common
Stock into which the Series A Preferred Stock is then convertible) consisting
of evidences of indebtedness, shares of Capital Stock of the Company other
than Class A Common Stock or assets, including securities, but excluding
those dividends and those issuances of rights, options, warrants and other
distributions for which an adjustment to the Conversion Price as referred to
above is applicable (other than in connection with a merger effected solely
to reflect a change in the jurisdiction of incorporation of the Company).
The Conversion Price in effect immediately prior to such event shall be
adjusted pursuant to the formula: CP-(Value/#Sh)=ACP.
(7) Variables. In the preceding descriptions, the variables have the
---------
following definitions:
"U" equals the number of shares of Class A Common Stock underlying all
rights, options or warrants issued to holders of Class A Common Stock
pursuant to paragraph (g)(D)(2) above entitling such holders to subscribe for
or purchase shares of Class A Common Stock or securities convertible into or
exchangeable for shares of Class A Common Stock issued in the Conversion
Price Adjustment Event;
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<PAGE>
"X" equals the total number of shares of Class A Common Stock
outstanding immediately prior to the Conversion Price Adjustment Event
(excluding unexercised options, warrants or rights);
"Y" equals the total number of shares of Class A Common Stock
outstanding immediately after the Conversion Price Adjustment Event
(excluding unexercised options, warrants or rights);
"Cash" equals the sum of (a) any distribution consisting exclusively
of cash (excluding any cash distributed upon a merger or consolidation to
which paragraph (g)(D)(12) below applies) to all holders of shares of Class A
Common Stock (which distribution is not also being made to the Holders of
Series A Preferred Stock based upon the number of shares of Class A Common
Stock into which the Series A Preferred Stock is then convertible) and (b)
all other such all-cash distributions made within the then-preceding 12
months in respect of which no adjustment has been made and (c) any cash and
the fair market value of other consideration (as determined by the Board of
Directors in good faith an pursuant to a resolution) paid or payable in
respect of any tender offer by the Company or any of its subsidiaries for
shares of any class of Common Stock concluded within the then-preceding 12
months in respect of which no adjustment has been made pursuant to paragraph
(g)(D)(4);
"ClosePrice" means, with respect to any date, the last sales price of
a share of Class A Common Stock on the Nasdaq National Market (or the
principal national securities exchange or other securities market on which
the Class A Common Stock is then being traded) on the last Trading Day
immediately preceding such date;
"EP" equals the exercise price or other consideration to be paid by
the holder upon the conversion or exchange of "U";
"EX" equals the closing price of the Class A Common Stock on the
Trading Day immediately succeeding the Expiration Time;
"Expiration Time" means, with respect to a tender or exchange offer
giving rise to a Conversion Price Adjustment Event pursuant to paragraph
(g)(D)(5), the last time that tenders of shares of Class A Common Stock could
have been made pursuant to the terms of such tender or exchange offer (as the
same may be amended);
"Market Value" means, as of any date, the average of the daily closing
prices of the Class A Common Stock for the five consecutive Trading Days
ending on the last Trading Day immediately prior to such date. The closing
price for each Trading Day shall be the last sales price on the Nasdaq
National Market (or the principal national securities exchange or other
securities market on which the Class A Common Stock is then being traded);
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<PAGE>
"NetSh" means a number of shares of Class A Common Stock equal to (a)
TotSh minus (b) Purchased Shares;
"PDMC" or "Pre-Distribution Market Capitalization" means, with respect
to a Conversion Price Adjustment Event pursuant to paragraph (g)(D)(4), an
amount equal to the product of (a) the ClosePrice of the Class A Common Stock
as of the record date with respect to the distribution constituting such
Conversion Price Adjustment Event multiplied by (b) the number of shares of
Class A Common Stock outstanding at the close of business on the record date
for such distribution;
"PTMC" or "Post-Tender Market Capitalization" means, with respect to a
Conversion Price Adjustment Event pursuant to paragraph (g)(D)(5), an amount
equal to the product of (a) EX multiplied by (b) TotSh;
"Purchased Shares" means, in connection with a tender or exchange
offer giving rise to a Conversion Price Adjustment Event pursuant to
paragraph (g)(D)(5), the number of shares of Class A Common Stock accepted
(up to any maximum number of such shares specified in the terms of such
tender or exchange offer) and validly tendered and not withdrawn as of the
Expiration Time;
"#Sh" equals the number of shares of Class A Common Stock receiving
the distribution contemplated in paragraph (g)(D)(6);
"TOff" equals the sum of (a) the aggregate consideration paid by the
Company or any of its subsidiaries for shares of Class A Common Stock in a
tender or exchange offer made by the Company or any of its subsidiaries for
shares of Class A Common Stock and (b) any cash or other consideration
payable in a tender or exchange offer by the Company or any of its
subsidiaries for shares of Class A Common Stock expiring within the then-
preceding 12 months in respect of which no adjustment has been made and (c)
the aggregate amount of any such all-cash distributions referred to in
paragraph (g)(D)(4) to all holders of shares of Class A Common Stock within
the then-preceding 12 months in respect of which no adjustments have been
made;
"TotSh" equals the total number of shares of Class A Common Stock
outstanding (including any shares tendered in the tender or exchange offer)
at the Expiration Time;
"TPur" equals the product of (a) the fair market value (as determined
by the Board of Directors in good faith pursuant to a resolution) of the
consideration payable for one share of Class A Common Stock under the terms
of the tender or exchange offer giving rise to a Conversion Price Adjustment
Event pursuant to paragraph (g)(D)(5) multiplied by (b) Purchased Shares;
"Value" equals the aggregate fair market value of the distribution
described in paragraph (g)(D)(6), as determined in good faith by the Board of
Directors of the Company;
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<PAGE>
"CP" equals the Conversion Price immediately prior to the Conversion
Price Adjustment Event;
"ACP" equals the Conversion Price immediately after the Conversion
Price Adjustment Event.
An adjustment made pursuant to paragraph (g)(D) shall become
effective: (A) in the case of a Conversion Price Adjustment Event described
in paragraph (g)(D)(1), (2), (4) or (6), immediately following the close of
business on the record date for the determination of holders of Class A
Common Stock entitled to participate in such event; or (B) in the case of a
Conversion Price Adjustment Event described in paragraph (g)(D)(3), the close
of business on the day upon which such corporate action becomes effective; or
(C) in the case of a Conversion Price Adjustment Event described in paragraph
(g)(D)(5), the close of business on the Trading Day immediately succeeding
the Expiration Time of such tender offer or exchange offer.
(8) De Minimis Adjustments. No adjustment in the Conversion Price
----------------------
shall be required (a) unless such adjustment would require an increase or
decrease of at least 1% in such price or (b) with respect to rights, options
or warrants issued pursuant to the Company's employee benefit plans;
provided, however, that any adjustments which by reason of paragraph
(g)(D)(8)(a) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
paragraph (g)(D)(8) shall be made by the Company and shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
No adjustment need be made for a change in the par value or no par value of
the Class A Common Stock.
(9) Reductions in Conversion Price. The Company shall be entitled to
------------------------------
make such reductions in the Conversion Price, in addition to those required
by this paragraph (g)(D), as the Company in its discretion shall determine to
be advisable in order that any stock dividends, subdivision of shares,
distribution of rights to purchase stock or securities or distribution of
securities convertible into or exchangeable for stock hereafter made by the
Company to its stockholders shall not be taxable to the recipients. In the
event the Company elects to make such a reduction in the Conversion Price,
the Company will comply with the requirements of Rule 14e-1 under the
Exchange Act, and any other securities laws and regulations thereunder if and
to the extent that such laws and regulations are applicable in connection
with the reduction of the Conversion Price. Whenever the Conversion Price is
so decreased, the Company shall mail to Holders of record of shares of Series
A Preferred Stock a notice of the decrease at least 15 days before the date
the decreased Conversion Price takes effect, and such notice shall state the
decreased Conversion Price.
(10) Decreases in Conversion Price. The Company from time to time may
-----------------------------
decrease the Conversion Price by an amount determined by the Board of
Directors and described in a notice as hereinafter provided for any period of
time if the period is at least
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<PAGE>
20 days and if the decrease is irrevocable during such period. Whenever the
Conversion Price is so decreased, the Company shall mail to Holders of record
of shares of Series A Preferred Stock a notice of the decrease at least 15
days before the date the decreased Conversion Price takes effect, and such
notice shall state the decreased Conversion Price and the period it will be
in effect.
(11) Distribution of Rights, Options or Warrants. In the event that,
-------------------------------------------
after the issuance of the Series A Preferred Stock, the Company distributes
rights, options or warrants (other than those referred to in paragraph
(g)(D)(2) above) pro rata to all holders of shares of Class A Common Stock,
so long as any such rights, options or warrants have not expired or been
redeemed by the Company, the Holder of any shares of Series A Preferred Stock
surrendered for conversion will be entitled to receive upon such conversion,
in addition to the shares of Class A Common Stock then issuable upon such
conversion (the "Conversion Shares"), a number of rights, options or warrants
to be determined as follows:
(a) if such conversion occurs on or prior to the date (a "Distribution
Date") for the distribution to the holders of rights, options or warrants of
separate certificates evidencing such rights, options or warrants, the same
number of rights, options or warrants to which a holder of a number of shares
of Class A Common Stock equal to the number of Conversion Shares is entitled
at the time of such conversion in accordance with the terms and provisions
applicable to the rights, options or warrants; and
(b) if such conversion occurs after such Distribution Date, the same
number of rights, options or warrants to which a holder of the number of
shares of Class A Common Stock into which such Series A Preferred Stock was
convertible immediately prior to such Distribution Date would have been
entitled on such Distribution Date in accordance with the terms and
provisions of and applicable to the rights, options or warrants.
(12) Merger or Consolidation. (a) In case of:
-----------------------
(i) any merger or consolidation of the Company with or into another
Person (other than a consolidation or merger in which the Company is the
resulting or continuing Person and which does not result in any
reclassification or exchange of Class A Common Stock outstanding immediately
prior to the merger or consolidation for cash, securities or other property
of another Person); or
(ii) any sale, transfer or other disposition to another Person of all
or substantially all of the assets of the Company (other than the sale,
transfer, assignment or distribution of shares of Capital Stock or assets to
a subsidiary of the Company) computed on a consolidated basis; or
(iii) any statutory exchange of securities with another Person,
other than in connection with a merger or acquisition,
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<PAGE>
(any of the events described in this paragraph (g)(D)(12)(a) being referred
to as a "Transaction"), there will be no adjustment to the Conversion Price
and each share of Series A Preferred Stock then outstanding shall, without
the consent of any Holder of Series A Preferred Stock (except as expressly
required by applicable law), become convertible only into the kind and amount
of shares of stock or other securities (of the Company or another issuer),
cash or other property receivable upon such Transaction by a holder of the
number of shares of Class A Common Stock into which such share of Series A
Preferred Stock could have been converted immediately prior to the effective
date of such Transaction, assuming such holder of Class A Common Stock failed
to exercise his rights of election, if any, as to the kind of amount of
securities, cash or other property receivable upon such Transaction.
(b) The provisions of this paragraph (g)(D)(12) similarly shall apply
to successive Transactions. The provisions of this paragraph (g)(D)(12)
shall be the sole right of Holders of Series A Preferred Stock in connection
with any Transaction (and the provisions of paragraph (g)(H) to the extent
applicable) and, except as expressly provided by applicable law and paragraph
(f), such Holders shall have no separate vote thereon.
(13) Notice of Adjustment. Whenever the Conversion Price is adjusted
--------------------
as provided in this paragraph (g)(D) or paragraph (g)(H), the Company shall
promptly file with the Transfer Agent an Officers' Certificate setting of the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment. Promptly after delivery of such
certificate, the Company shall prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the date on
which each adjustment becomes effective and shall mail such notice of such
adjustment of the Conversion Price to each Holder of Series A Preferred Stock
as such Holder's last address appearing on the register of holders maintained
for that purpose within 20 days of the effective date of such adjustment.
Failure to deliver such notice shall not affect the legality or validity of
any such adjustment.
(14) Deferred Issuance. In any case in which this paragraph (g)(D)
-----------------
provides that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event
issuing to the Holder of any share of Series A Preferred Stock converted
after such record date and before the occurrence of such event the additional
Class A Common Stock issuable upon such conversion by reason of the
adjustment required by such event over and about the Class A Common Stock
issuable upon such conversion before giving effect to such adjustment.
(15) Treasury Stock. For purposes of this paragraph (g)(D), the
--------------
number of share of Class A Common Stock at any time outstanding shall not
include shares held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of
Class A Common Stock. The Company shall not pay any dividend or make any
distribution on Class A Common Stock held in the treasury of the Company.
21
<PAGE>
(E) In case:
(1) the Company shall declare a dividend (or any other distribution)
on its Class A Common Stock payable otherwise than in cash out of its earned
surplus; or
(2) the Company shall authorize the granting to all holders of its
Class A Common Stock of rights or warrants to subscribe for or purchase any
shares of Capital Stock of any class or of any other rights; or
(3) of any reclassification of the Class A Common Stock of the Company
(other than a subdivision or combination of its outstanding Class A Common
Stock), or of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or the
sale or transfer of all or substantially all the assets of the Company; or
(4) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed with the Transfer Agent and at each
office or agency maintained for the purpose of conversion of the Series A
Preferred Stock, and shall cause to be mailed to all Holders at their last
addresses as they shall appear in the Series A Preferred Stock Register, at
least 20 days (or 10 days in any case specified in clause (1) or (2) above)
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, rights or warrants, or, if a record is not to be taken, the
date as of which the holders of Class A Common Stock of record to be entitled
to such dividend, distribution, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Class A
Common Stock of record shall be entitled to exchange their Class A Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. Failure to give the notice required by this
paragraph (g)(E) or any defect therein shall not affect the legality or
validity of any dividend, distribution, right, warrant, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding
up, or the vote upon any such action.
(F) The company shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued shares of Class A
Common Stock (or out of its authorized shares of Class A Common Stock held in
the treasury of the Company), for the purpose of effecting the conversion of
the Series A Preferred Stock, the full number of shares of Class A Common
Stock then issuable upon the conversion of all outstanding shares of Series A
Preferred Stock.
22
<PAGE>
(G) The Company will pay any and all document, stamp or similar issue
or transfer taxes that may be payable in respect of the issue or delivery of
Class A Common Stock on conversion of the Series A Preferred Stock pursuant
hereto. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of
shares of Class A Common Stock in a name other than that of the Holder of the
share of Series A Preferred Stock or the shares of Series A Preferred Stock
to be converted, and no such issue or delivery shall be made unless and until
the Person requesting such issue has paid to the Company the amount of any
such tax, or has established to the satisfaction of the Company that such tax
has been paid.
(H) (1) Notwithstanding any other provision in the preceding
paragraphs to the contrary, if any Change in Control occurs then the
Conversion Price in effect shall be adjusted immediately after such Change in
Control as described below. In addition, in the event of a Common Stock
Change in Control (as defined in this paragraph (g)(H)), each share of the
Series A Preferred Stock shall be convertible solely into common stock of the
kind received by holders of Class A Common Stock as the result of such Common
Stock Change in Control. For purposes of calculating any adjustment to be
made pursuant to this paragraph in the event of a Change in Control,
immediately after such Change in Control:
(A) in the case of a Non-Stock Change in Control (as defined in this
paragraph (g)(H)), the Conversion Price, subject to the provisions of
paragraph (g)(I), shall thereupon become the lower of (x) the Conversion
Price in effect immediately prior to such Non-Stock Change in Control, but
after giving effect to any other prior adjustments, and (y) the result
obtained by multiplying the greater of the Applicable Price (as defined in
this paragraph (g)(H)) or the then applicable Reference Market Price (as
defined in this paragraph (g)(H)) by a fraction of which the numerator shall
be $250.00 and the denominator shall be the then current Optional Redemption
Price per share; or, prior to August 15, 2002, an amount per share determined
by the Company in its sole discretion, after consultation with an investment
banking firm, to be the equivalent of the hypothetical Optional Redemption
Price that would have been applicable if the Series A Preferred Stock had
been redeemable during such period; and
(B) in the case of a Common Stock Change in Control, the Conversion
Price in effect immediately prior to such Common Stock Change in Control, but
after giving effect to any prior adjustments, shall thereupon be adjusted by
multiplying such Conversion Price by a fraction, of which the numerator shall
be the Purchaser Stock Price (as defined in this paragraph (g)(H)) and the
denominator shall be the Applicable Price; provided, however, that in the
-------- -------
event of a Common Stock Change in Control in which (x) 100% of the value of
the consideration received by a holder of Class A Common Stock is common
stock of the successor, acquiror, or other third party (and cash, if any, is
paid with respect to any fractional interest in such common stock resulting
from such Common Stock Change in Control) and (y) all of the Class A Common
Stock will have been exchanged for, converted into, or acquired for, common
stock (and cash with respect to fractional interests) of the successor,
acquiror or other third party, the Conversion Price in effect immediately
prior to
23
<PAGE>
such Common Stock Change in Control shall thereupon be adjusted by
multiplying such Conversion Price by a fraction, of which the numerator shall
be one (1) and the denominator shall be the number of shares of common stock
of the successor, acquiror, or other third party received by a holder of one
share of Class A Common Stock as a result of such Common Stock Change in
Control.
(2) For purposes of this paragraph (H), the following terms shall have
the meanings indicated:
"Applicable Price" means (i) in the event of a Non-Stock Change in
Control in which the holders of the Class A Common Stock receive only cash,
the amount of cash received by the holder of one share of Class A Common
Stock and (ii) in the event of any other Non-Stock Change in Control or any
Common Stock Change in Control, the average of the closing bid prices for the
Class A Common Stock during the ten Trading Days prior to and including the
Record Date for the determination of the holders of Class A Common Stock
entitled to receive cash, securities, property or other assets in connection
with such Non-Stock Change in Control or Common Stock Change in Control or,
if there is no such Record Date, the date upon which the holders of the Class
A Common Stock shall have the right to receive such cash, securities,
property or other assets, in each case, as adjusted in good faith by the
Board of Directors to appropriately reflect any of the events referred to in
paragraph (g)(D)(1) through (6).
"Common Stock Change in Control" means any Change in Control in which
more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Class A
Common Stock consists of common stock that for each of the ten consecutive
Trading Days referred to in the definition of "Applicable Price" has been
admitted for listing or admitted for listing subject to notice of issuance on
a national securities exchange or quoted on the Nasdaq National Market;
provided, however, that a Change in Control shall not be a Common Stock
-------- -------
Change in Control unless either (i) the Company continues to exist after the
occurrence of such Change in Control and the outstanding shares of Series A
Preferred Stock continue to exist as outstanding shares of Series A Preferred
Stock, or (ii) not later than the occurrence of such Change in Control, the
outstanding shares of Series A Preferred Stock are converted into or
exchanged for shares of convertible preferred stock of a corporation
succeeding to the business of the Company, which convertible preferred stock
has powers, preferences and relative, participating, optional or other
rights, and qualifications, limitations and restrictions, substantially
similar to those of the Series A Preferred Stock.
"Non-Stock Change in Control" means any Change in Control other than a
Common Stock Change in Control.
"Purchaser Stock Price" means, with respect to any Common Stock Change
in Control, the product of (i) the number of shares of common stock received
in such Common Stock Change of Control for each share of Class A Common
Stock, and (ii) the average of
24
<PAGE>
the per share closing bid prices for the common stock received in such Common
Stock Change in Control for the ten consecutive Trading Days prior to and
including the Record Date for the determination of the holders of Class A
Common Stock entitled to receive such common stock, or if there is no such
Record Date, the date upon which the holders of the Class A Common Stock
shall have the right to receive such common stock, in each case, as adjusted
in good faith by the Board of Directors to appropriately reflect any of the
events referred to in paragraph (g)(D)(1) through (6); provided, however,
-------- -------
that if no such closing bid prices exist, then the Purchaser Stock Price
shall be set at a price determined in good faith by the Board of Directors of
the Company.
"Reference Market Price" shall initially mean $15.75 (which is an
amount equal to 66-2/3% of the reported last sale price of the Class A Common
Stock on the Nasdaq National Market on August 5, 1999), and in the event of
any adjustment to the Conversion Price other than as a result of a Change in
Control, the Reference Market Price shall also be adjusted so that the ratio
of the Reference Market Price to the Conversion Price after giving effect to
any such adjustment shall always be the same as the ratio of $15.75 to the
initial Conversion Price set forth in paragraph (g)(A)(3).
(I) If, as a result of the operation of paragraph (g)(H)(1)(A), the
cumulative number of shares of Class A Common Stock issued or issuable upon
conversion of the Series A Preferred Stock, after giving effect to the
adjustments described in paragraph (g)(H)(1)(A) and all prior conversions of
Series A Preferred Stock, would exceed a number (the "Threshold Number")
equal to 20% of the outstanding shares of Class A Common Stock as of the
Issue Date, then until and unless the Company obtains the approval of its
common stockholders for the issuance of any shares of Class A Common Stock in
excess of the Threshold Number, the Conversion Price shall be adjusted
pursuant to paragraph (g)(H)(1)(A) to that price that would entitle the
Holders of Series A Preferred Stock to receive in the aggregate, upon
conversion of all the Series A Preferred Stock (including all prior
conversions of Series A Preferred Stock), no more than the Threshold Number
of shares of Class A Common Stock. If, as a result of the operation of the
preceding sentence, the adjustments required by operation of paragraph
(g)(H)(1)(A) in the Conversion Price is limited because appropriate
stockholder approval has not been obtained, the Company agrees for the
benefit of the Holders of Series A Preferred Stock to seek, as promptly as
reasonably practicable, the requisite approval of its common stockholders for
the full adjustment of the Conversion Price as required by operation of
paragraph (g)(H)(1)(A) (without giving effect to the preceding sentence).
(h) Reissuance of Series A Preferred Stock. Shares of Series A Preferred
--------------------------------------
Stock that have been issued and reacquired in any manner, including shares
purchased, redeemed, converted or exchanged, shall not be reissued as shares of
Series A Preferred Stock and shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized and unissued
shares of Preferred Stock undesignated as to series and may be redesignated and
reissued as part of any series of Preferred Stock; provided, however, that so
-------- -------
long as any shares of Series A Preferred Stock are outstanding, any issuance of
such shares may be in compliance with
25
<PAGE>
the terms hereof. Upon any such reacquisitions, the number of shares of Series A
Preferred Stock authorized pursuant to this Certificate of Designations shall be
reduced by the number of shares so acquired.
(i) Business Day. If any payment, redemption or exchange shall be required
------------
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(j) Limitation on Mergers and Asset Sales. The Company may, without the
-------------------------------------
consent of any Holder of Series A Preferred Stock, consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its assets
as an entirety to, any Person, provided that: (1) the successor, transferee or
lessee (if not the Company) is organized and existing under the laws of the
United States of America or any State thereof or the District of Columbia and
the Series A Preferred Stock shall be converted into or exchanged for and shall
become shares of such successor, transferee or lessee, having in respect of such
successor, transferee, or lessee substantially the same powers, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the Series A Preferred
Stock had immediately prior to such transaction; and (2) the Company delivers to
the Transfer Agent an Officers' Certificate and an Opinion of Counsel stating
that such consolidation, merger or transfer complies with this Certificate of
Designations. In the event of any consolidation or merger or conveyance,
transfer or lease of all or substantially all of the assets of the Company that
is permitted pursuant to this paragraph (j), the successor resulting from such
consolidation or into which the Company is merged or the transferee or lessee to
which such conveyance, transfer or lease is made, will succeed to, and be
substituted for, and may exercise every right and power of, the Company with
respect to the Series A Preferred Stock, and thereafter, except in the case of a
lease, the predecessor (if still in existence) shall be released from its
obligations and covenants with respect to the Series A Preferred Stock.
(k) Certain Definitions. As used in this Certificate of Designations, the
-------------------
following terms shall have the following meanings (and (1) terms defined in the
singular have comparable meanings when used in the plural and vice versa, (2)
"including" means including without limitation, (3) "or" is not exclusive and
(4) an accounting term not otherwise defined has the meaning assigned to it in
accordance with United States generally accepted accounting principles as in
effect on the Issue Date and all accounting calculations will be determined in
accordance with such principles), unless the content otherwise requires:
"Business Day" means each day which is not a Legal Holiday.
------------
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether now outstanding or
issued after the Issue Date, including all Common Stock and Preferred Stock.
26
<PAGE>
"Change in Control" or "Change of Control" means: (i) the sale, lease,
----------------- -----------------
transfer, conveyance other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act), (ii) the adoption of a plan relating to the liquidation,
dissolution or winding-up of the Company, (iii) the consummation of any
transaction (including any merger or consolidation) the result of which is
that any "person" (as defined above) other than any Permitted Holder (as
defined below), becomes the beneficial owner (as determined in accordance
with Rules 13d-3 and 13d-5 under the Exchange Act, except that a person will
be deemed to have beneficial ownership of all shares that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the Voting
Stock of the Company or (iv) the first day on which a majority of the members
of the Board of Directors (excluding the directors elected pursuant to
paragraph (f)) are not Continuing Directors. "Permitted Holders" means IES
Industries, Inc. and its successors and assigns, Clark E. McLeod, Mary E.
McLeod and Richard Lumpkin, and foundations and trusts controlled by any of
the foregoing individuals and entities and their affiliates (other than the
Company and its subsidiaries) of each of the foregoing.
"Class A Common Stock" means the Company's Class A common stock, par
--------------------
value $0.01 per share.
"Common Stock" means the Company's common stock, including but not
------------
limited to, the Class A Common Stock.
"Continuing Directors" means, as of any date of determination,
--------------------
individuals who on the Issue Date constituted the Board of Directors
(together with any new directors whose election by the Board of Directors or
whose nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the members of the Board of Directors then in
office who either were members of the Board of Directors on the Issue Date or
whose election or nomination for election was previously so approved).
"Dividend Period" means such period between two consecutive Dividend
---------------
Payment Dates and the period from the Issue Date to the first Dividend
Payment Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Holders" means the registered holders from time to time of the Series
-------
A Preferred Stock.
"Issue Date" means the date on which the Series A Preferred Stock is
----------
initially issued.
27
<PAGE>
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
-------------
institutions are not required to be open in the State of New York.
"Officer" means the Chairman of the Board of Directors, the President,
-------
any Vice President, the Treasurer, the Secretary or any Assistant Secretary
of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
---------------------
"Opinion of Counsel" means a written opinion from legal counsel who is
------------------
acceptable to the Transfer Agent. The counsel may be an employee of or
counsel to the Company or the Transfer Agent.
"person" or "Person" means any individual, corporation, partnership,
------ ------
joint venture, limited liability company, association, joint-stock company,
trust, unincorporated organization, governmental or any agency or political
subdivision thereof or any other entity.
"Preferred Stock" means, with respect to any Person, any and all
---------------
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference stock,
whether now outstanding or issued after the Issue Date, including all series
and classes of such preferred or preference stock.
"SEC" or "Commission" means the Securities and Exchange Commission.
--- ----------
"Securities Act" means the Securities Act of 1933.
--------------
"Subsidiary" means with respect to any Person, any corporation,
----------
association or other business entity of which Voting Stock representing more
than 50% of the voting power of shares of outstanding Voting Stock is owned,
directly or indirectly, by such Person, or one or more other Subsidiaries of
such Person.
"Transfer Agent" means the transfer agent for the Series A Preferred
--------------
Stock appointed by the Company, which initially shall be Norwest Bank
Minnesota, N.A.
"Voting Stock" of a corporation means all classes of Capital Stock of
------------
such corporation then outstanding and normally entitled to vote in the
election of directors.
(l) SEC Reports and Reports to Holders. So long as any shares of Series A
----------------------------------
Preferred Stock remain outstanding, the Company will file with the SEC (whether
or not the Company is required to do so) all such reports and other information
as the Company would be required to file with the SEC pursuant to Section 13(a)
or 15(d) of the Exchange Act. Upon the written request of a Holder of Series A
Preferred Stock, the Company will supply to such Holder, at no cost to such
Holder, copies of such reports or other information.
28
<PAGE>
IN WITNESS WHEREOF, said McLeodUSA Incorporated has caused this Certificate
of Designations to be signed by Stephen C. Gray, its President and Chief
Operating Officer, this 6th day of August, 1999.
McLEODUSA INCORPORATED
By
--------------------------------------------
Name: Stephen C. Gray
Title: President and Chief Operating Officer
29
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series A Preferred Stock)
The undersigned hereby irrevocably elects to convert (the "Conversion") shares
of 6.75% Series A Cumulative Convertible Preferred Stock (the "Series A
Preferred Stock"), represented by stock certificate No(s). _____ (the "Series A
Preferred Stock Certificates") into shares of Class A common stock ("Class A
Common Stock") of McLeodUSA Incorporated (the "Company") according to the
conditions of the Certificate of Designations, Preferences and Rights of the
Series A Preferred Stock (the "Certificate of Designations"), as of the date
written below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates. No fee will be
charged to the holder for any conversion, except for transfer taxes, if any. A
copy of each Series A Preferred Stock Certificate is attached hereto (or
evidence of loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Class A Common Stock issuable to the undersigned
upon conversion of the Series A Preferred Stock shall be made pursuant to
registration of the Class A Common Stock under the Securities Act of 1933 (the
"Act"), or pursuant to any exemption from registration under the Act.
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Certificate of Designations.
A-1
<PAGE>
Date of Conversion: ___________
Applicable Conversion Price: ________
Number of shares of Convertible
Preferred Stock to be Converted: ______
Number of shares of
Class A Common Stock to be Issued: _________
Signature: ________________
Name: ___________________
Address:** _______________
Fax No.: _________________
*The Company is not required to issue shares of Class A Common Stock until the
original Series A Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Company or its Transfer
Agent. The Company shall issue and deliver shares of Class A Common Stock to an
overnight courier not later than three business days following receipt of the
original Series A Preferred Stock Certificate(s) to be converted.
**Address where shares of Class A Common Stock and any other payments or
certificates shall be sent by the Company.
A-2
<PAGE>
EXHIBIT 4.1
FORM OF SERIES A PREFERRED STOCK
FACE OF SECURITY
Certificate Number Number of Shares of Series A
Preferred Stock
[ ] [ ]
CUSIP NO.: 582266201
6.75% Series A Cumulative Convertible Preferred Stock
(par value $0.01 per share)
(liquidation preference $250.00 per share)
of
McLeodUSA Incorporated
McLeodUSA Incorporated, a Delaware corporation (the "Company"), hereby
certifies that [ ] (the "Holder") is the registered owner of fully paid and
non-assessable preferred securities of the Company designated the 6.75% Series A
Cumulative Convertible Preferred Stock (par value $0.01 per share) (liquidation
preference $250.00 per share) (the "Series A Preferred Stock"). The shares of
Series A Preferred Stock are transferable on the books and records of the
Registrar, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer. The designations,
rights, privileges, restrictions, preferences and other terms and provisions of
the Series A Preferred Stock represented hereby are issued and shall in all
respects be subject to the provisions of the Certificate of Designations of the
Powers, Preferences and Relative, Participating, Optional and Other Special
Rights of 6.75% Series A Cumulative Convertible Preferred Stock and
Qualifications, Limitations and Restrictions Thereof dated August [__], 1999, as
the same may be amended from time to time (the "Certificate of Designations").
Capitalized terms used herein but not defined shall have the meaning given them
in the Certificate of Designations. The Company will provide a copy of the
Certificate of Designations to a Holder without charge upon written request to
the Company at its principal place of business.
<PAGE>
Reference is hereby made to select provisions of the Series A Preferred
Stock set forth on the reverse hereof, and to the Certificate of Designations,
which select provisions and the Certificate of Designations shall for all
purposes have the same effect as if set forth at this place.
Upon receipt of this certificate, the Holder is bound by the Certificate of
Designations and is entitled to the benefits thereunder.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
2
<PAGE>
IN WITNESS WHEREOF, the Company has executed this certificate this [ ]
day of [ ], [ ].
McLEODUSA INCORPORATED
By
-------------------------
Name:
Title:
[Seal]
By
-------------------------
Name:
Title:
3
<PAGE>
REVERSE OF SECURITY
Dividends on each share of Series A Preferred Stock shall be payable at a
rate per annum set forth in the face hereof or as provided in the Certificate of
Designations. Dividends may be paid in cash or in shares of Class A Common
Stock of the Company, at the option of the Company.
The shares of Series A Preferred Stock shall be redeemable as provided in
the Certificate of Designations and in the Restated Certificate of
Incorporation. The shares of Series A Preferred Stock shall be convertible into
the Company's Class A Common Stock in the manner and according to the terms set
forth in the Certificate of Designations.
As required under Delaware law, the Company shall furnish to any Holder
upon request and without charge, a full summary statement of the designations,
voting rights, preferences, limitations and special rights of the shares of each
class or series authorized to be issued by the Company so far as they have been
fixed and determined and the authority of the Board of Directors to fix and
determine the designations, voting rights, preferences, limitations and special
rights of the classes and series of shares of the Company.
4
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares
of Series A Preferred Stock evidenced hereby to:
-------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
agent to transfer the shares of Series A Preferred Stock evidenced hereby on the
books of the Transfer Agent and Registrar. The agent may substitute another to
act for him or her.
Date:_______________________
Signature:____________________________
(Sign exactly as your name appears on the other side of this Series A Preferred
Stock Certificate)
Signature Guarantee:/1/
--------------------------------------------------------
- -------------------------
/1/ (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
5
<PAGE>
Exhibit 5.1
[HOGAN & HARTSON L.L.P. LETTERHEAD]
August 9, 1999
Board of Directors
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW, P.O. Box 3177
Cedar Rapids, IA 52406-3177
Ladies and Gentlemen:
We are acting as special counsel to McLeodUSA Incorporated, a Delaware
corporation (the "Company"), in connection with its registration statement on
Form S-3, as amended (File No. 333-82851) (the "Registration Statement"), filed
with the Securities and Exchange Commission relating to the proposed public
offering of up to $1,750,000,000 in aggregate amount of one or more classes or
series of the Company's securities, which securities may be offered and sold by
the Company from time to time as set forth in a prospectus and one or more
supplements thereto, all of which form a part of the Registration Statement.
This opinion letter is rendered in connection with the proposed public
offering of up to 1,150,000 shares (the "Shares") of the Company's 6.75% Series
A cumulative convertible preferred stock, par value $.01 (the "Series A
Preferred Stock"), as described in the Registration Statement. This opinion
letter is furnished to you at your request to enable you to fulfill the
requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. Section
229.601(b)(5), in connection with the Registration Statement.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. The Amended and Restated Certificate of Incorporation of the
Company, as certified by the Secretary of State of the State of
Delaware on May 13, 1999 (the "Amended and Restated
Certificate"), the Certificate of Amendment of Amended and
Restated Certificate of Incorporation of the Company, as
certified by the Secretary of State of the State of Delaware on
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May 13, 1999 (the "Certificate of Amendment"), the Certificate of
Change of Registered Agent and Registered Office of the Company,
as certified by the Secretary of State of the State of Delaware
on May 13, 1999 (together with the Amended and Restated
Certificate and the Certificate of Amendment, the "Certificate of
Incorporation") as certified by the Secretary of the Company on
the date hereof as being complete, accurate and in effect).
3. The Amended and Restated Bylaws of the Company, as certified by
the Secretary of the Company on the date hereof as being
complete, accurate and in effect (the "Bylaws").
4. The Certificate of Designation relating to the Series A Preferred
Stock (the "Certificate of Designation") as certified by the
Secretary of the Company on the date hereof as being complete,
accurate and in effect.
6. The Underwriting Agreement among the Company and Salomon Smith
Barney Inc., Goldman, Sachs & Co., and Morgan Stanley & Co.
Incorporated dated August 6, 1999.
7. Resolutions of the Board of Directors of the Company adopted by
unanimous written consent on August 3, 1999, as certified by the
Secretary of the Company on the date hereof as being complete,
accurate, and in effect, relating to the issuance and sale of the
Shares and arrangements in connection therewith.
8. Resolutions of the Pricing Committee of the Board of Directors of
the Company adopted by unanimous written consent on August 6,
1999, as certified by the Secretary of the Company on the date
hereof as being complete, accurate, and in effect, relating to
the issuance and sale of the Shares and arrangements in
connection therewith.
In our examination of the aforesaid documents, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
accuracy and completeness of all documents submitted to us, the authenticity of
all original documents, and the conformity to authentic original documents of
all documents submitted to us as copies (including telecopies). This opinion
letter is given, and all statements herein are made, in the context of the
foregoing.
This opinion letter is based as to matters of law solely on Delaware
corporate law. We express no opinion herein as to any other laws, statutes,
regulations or ordinances.
Based upon, subject to and limited by the foregoing, we are of the
opinion that following (i)
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filing of the Certificate of Designation with the Secretary of State of the
State of Delaware and (ii) receipt by the Company of the consideration for the
Shares specified in the resolutions of the Board of Directors of the Company
and the Underwriting Agreement, the Shares will be validly issued, fully paid,
and nonassessable.
This opinion letter has been prepared for your use in connection with
the Registration Statement and speaks as of the date hereof. We assume no
obligation to advise you of any changes in the foregoing subsequent to the
delivery of this opinion letter.
Very truly yours,
/s/ HOGAN & HARTSON L.L.P.
HOGAN & HARTSON L.L.P.
