Certificate of Incorporation - Birch Telecom Inc.
RESTATED
CERTIFICATE OF INCORPORATION
OF
BIRCH TELECOM, INC.
BIRCH TELECOM, INC., a corporation organized and existing under the laws
of the State of Delaware, certifies as follows:
1. The original Certificate of Incorporation of Birch Telecom, Inc. was
filed with the Delaware Secretary of State on December 23, 1996.
2. This Restated Certificate of Incorporation amends and restates the
provisions of the Certificate of Incorporation of this Corporation, and was duly
adopted in accordance with Sections 245 and 228 of the General Corporation Law
of the State of Delaware by the directors and stockholders of the Corporation.
3. The text of the Certificate of Incorporation is amended and restated to
read in its entirety as set forth below:
First: The name of the Corporation is Birch Telecom, Inc. (the
"Corporation").
Second: The address of the Corporation's initial registered office in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle, and the name of its initial registered agent at such address is the
Corporation Service Company.
Third: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
Fourth:
A. The aggregate number of shares which the Corporation shall have authority to
issue shall be 135,000,000 shares, divided into 80,000,000 shares of common
stock ("Common Stock"), and 55,000,000 shares of preferred stock ("Preferred
Stock"). The Preferred Stock shall have a par value of one-tenth of one cent
($.001) each, and the Common Stock shall have a par value of one-tenth of one
cent ($.001) each.
B. The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Restated Certificate of Incorporation, to fix or
alter the dividend rights, dividend rate, conversion rate, voting rights, rights
and terms of redemption (including sinking fund provisions), the redemption
price or prices, the liquidation preferences of any wholly unissued series of
Preferred Stock, and the number of shares constituting any such series and the
designation thereof, or any of them; and to increase or decrease the number of
shares of any series subsequent to the issue of shares of that series, but
1
<PAGE>
not below the number of shares of such series then outstanding. In case the
number of shares of any series shall be so decreased, the shares constituting
such decrease shall resume the status which they had prior to the adoption of
the resolution originally fixing the number of shares of such series.
Of the authorized shares of Preferred Stock, 8,750,000 shares are hereby
designated "Series B Preferred Stock"; 8,500,000 shares are hereby designated
"Series C Preferred Stock"; 3,000,000 shares are hereby designated "Series D
Preferred Stock"; 1,904,898 shares are hereby designated "Series E Preferred
Stock"; and 30,000,000 shares are hereby designated "Series F Preferred Stock."
C. The powers, preferences, rights, restrictions and other matters relating to
the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock are as follows:
(1) Dividends.
(a) Series B Preferred Stock. The holders of Series B Preferred
Stock shall be entitled to receive dividends in cash at the rate of
fifteen percent (15%) per annum on an amount equal to $1.52 plus all
unpaid dividends accrued on such shares of Series B Preferred Stock, on
each outstanding share of Series B Preferred Stock (as adjusted for any
stock dividends, combinations, splits and the like with respect to such
shares), when and as declared by the Board of Directors out of the funds
legally available for that purpose. Such dividends shall be cumulative
from the date of issuance of the Series B Preferred Stock, whether or not
earned, whether or not funds of the Corporation are legally available for
the payment of dividends and whether or not declared by the Board, but
such dividends shall be payable only when, as, and if declared by the
Board. So long as any shares of Series B Preferred Stock shall be
outstanding, no dividend, whether in cash, stock or property, shall be
paid or declared, nor shall any other distribution be made, on any shares
of Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock or Common Stock, nor shall more than 2,225,000 shares of Series C
Preferred Stock or any shares of Series D Preferred Stock or Common Stock
be purchased, redeemed or otherwise acquired for value by the Corporation
(except for acquisitions of Common Stock by the Corporation pursuant to
agreements which permit the Corporation to repurchase such shares upon
termination of services to the Corporation or in exercise of the
Corporation's right of first refusal upon a proposed transfer) until all
dividends set forth in this Section (1)(a) on the Series B Preferred Stock
shall have been paid or declared and set apart.
(b) Series C Preferred Stock. The holders of Series C Preferred
Stock shall be entitled to receive dividends in cash at the rate of ten
percent (10%) per annum on an amount equal to $1.52 on each outstanding
share of Series C Preferred Stock (as adjusted for any stock dividends,
combinations, splits and the like with respect to such shares), when and
as declared by the Board of Directors out of funds legally available for
that purpose. Notwithstanding anything to the contrary herein, such
dividends shall be payable only when, as and if declared by the Board of
Directors and shall not be cumulative. So long as any shares of Series C
Preferred Stock shall be outstanding, no dividend, whether in cash, stock
or property, shall be paid or declared, nor shall any other distribution
be made, on any shares of Common Stock, nor shall any shares of Common
Stock be purchased, redeemed or
2
<PAGE>
otherwise acquired for value by the Corporation (except for acquisitions
of Common Stock by the Corporation pursuant to agreements which permit the
Corporation to repurchase such shares upon termination of services to the
Corporation or in exercise of the Corporation's right of first refusal
upon a proposed transfer) until all dividends set forth in this Section
(1)(b) on the Series C Preferred Stock shall have been paid or declared
and set apart.
(c) Series D Preferred Stock. The holders of Series D Preferred
Stock shall be entitled to receive dividends in cash at the rate of
fifteen percent (15%) per annum on an amount equal to $4.50 plus all
unpaid dividends accrued on such shares of Series D Preferred Stock, on
each outstanding share of Series D Preferred Stock (as adjusted for any
stock dividends, combinations, splits and the like with respect to such
shares), when and as declared by the Board of Directors out of the funds
legally available for that purpose. Such dividends shall be cumulative
from the date of issuance of the Series D Preferred Stock, whether or not
earned, whether or not funds of the Corporation are legally available for
the payment of dividends and whether or not declared by the Board, but
such dividends shall be payable only when, as, and if declared by the
Board. So long as any shares of Series D Preferred Stock shall be
outstanding, no dividend, whether in cash, stock or property, shall be
paid or declared, nor shall any other distribution be made, on any shares
of Series B Preferred Stock (other than in shares of Series E Preferred
Stock), Series C Preferred Stock, Series E Preferred Stock or Common
Stock, nor shall more than 2,225,000 shares of Series C Preferred Stock or
any shares of Series B Preferred Stock or Common Stock be purchased,
redeemed or otherwise acquired for value by the Corporation (except for
acquisitions of Common Stock by the Corporation pursuant to agreements
which permit the Corporation to repurchase such shares upon termination of
services to the Corporation or in exercise of the Corporation's right of
first refusal upon a proposed transfer) until all dividends set forth in
this Section (1)(c) on the Series D Preferred Stock shall have been paid
or declared and set apart.
(d) Series E Preferred Stock. The holders of Series E Preferred
Stock shall be entitled to receive dividends in cash at the rate of
fifteen percent (15%) per annum on an amount equal to $4.50 plus all
unpaid dividends accrued on such shares of Series E Preferred Stock, on
each outstanding share of Series E Preferred Stock (as adjusted for any
stock dividends, combinations, splits and the like with respect to such
shares), when and as declared by the Board of Directors out of the funds
legally available for that purpose. Such dividends shall be cumulative
from the date of issuance of the Series E Preferred Stock, whether or not
earned, whether or not funds of the Corporation are legally available for
the payment of dividends and whether or not declared by the Board, but
such dividends shall be payable only when, as, and if declared by the
Board. So long as any shares of Series E Preferred Stock shall be
outstanding, no dividend, whether in cash, stock or property, shall be
paid or declared, nor shall any other distribution be made, on any shares
of Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock or Common Stock, nor shall more than 2,225,000 shares of Series C
Preferred Stock or any shares of Series B Preferred Stock, Series D
Preferred Stock or Common Stock be purchased, redeemed or otherwise
acquired for value by the Corporation (except for acquisitions of Common
Stock by the Corporation pursuant to agreements which permit the
Corporation to repurchase such shares upon termination of services to the
Corporation or in exercise of the Corporation's
3
<PAGE>
right of first refusal upon a proposed transfer) until all dividends set
forth in this Section (1)(d) on the Series E Preferred Stock shall have
been paid or declared and set apart.
(e) Series F Preferred Stock. The holders of Series F Preferred
Stock shall be entitled to receive dividends in cash at the rate of
fifteen percent (15%) per annum on an amount equal to the purchase price
for such shares (the "Purchase Price") plus all unpaid dividends accrued
on such shares of Series F Preferred Stock, on each outstanding share of
Series F Preferred Stock (as adjusted for any stock dividends,
combinations, splits and the like with respect to such shares), payable on
March 31, June 30, September 30 and December 31 of each year, when and as
declared by the Board of Directors out of the funds legally available for
that purpose. Such dividends shall be cumulative from the date of issuance
of the Series F Preferred Stock, whether or not earned, whether or not
funds of the Corporation are legally available for the payment of
dividends and whether or not declared by the Board, but such dividends
shall be payable only when, as, and if declared by the Board. The Purchase
Price for the Series F Preferred Stock is $4.50 per share for the initial
purchase of 13,333,334 shares by BTI Ventures L.L.C. or its affiliates
("BTI"). In addition, BTI retains the option (the "Option") to acquire
5,263,158 shares of Series F Preferred Stock at a Purchase Price of $4.75
per share and 5,000,000 shares of Series F Preferred Stock at a Purchase
Price of $5.00 per share. So long as any shares of Series F Preferred
Stock shall be outstanding, no dividend, whether in cash or property,
shall be paid or declared, nor shall any other distribution be made, on
any shares of Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Common Stock or any other class
or series of capital stock of the Corporation, nor shall more than
2,225,000 shares of Series C Preferred or any shares of Series B Preferred
Stock, Series D Preferred Stock, Common Stock or any other class or series
of capital stock of the Corporation be purchased, redeemed or otherwise
acquired for value by the Corporation (except for the redemption of the
Series E Preferred Stock or acquisitions of Common Stock by the
Corporation pursuant to agreements which permit the Corporation to
repurchase such shares upon termination of services to the Corporation)
until all dividends set forth in this Section (1)(e) on the Series F
Preferred Stock shall have been paid or declared and set apart. In
addition to the 15% quarterly dividend payable on the Series F Preferred
Stock, the shares of Series F Preferred Stock shall be entitled to receive
the amount of any cash or non-cash dividends or distributions declared and
paid on the shares of Common Stock, as if the shares of Series F Preferred
Stock had been converted immediately prior to the record date for the
payment of such dividend or distribution.
(2) Liquidation Rights.
(a) Series F Preferred Stock. Upon any liquidation, dissolution, or
winding up of the Corporation, and before any distribution or payment
shall be made to the holders of Series B Preferred Stock, Series C
Preferred Stock or Common Stock, the holders of Series F Preferred Stock
shall be entitled to be paid out of the assets of the Corporation an
amount equal to the greater of (i) the sum of (a) the applicable Purchase
Price per share of Series F Preferred Stock (as adjusted for any stock
dividends, combinations, splits and the like with respect to such shares)
plus (b) an amount equal to all unpaid dividends accrued on such shares of
Series F Preferred Stock to the date of payment of such preference,
whether or not earned, whether or not funds of the Corporation are legally
available for the payment of
4
<PAGE>
dividends and whether or not such dividends have been declared by the
Board; or (ii) the amount the holders of Series F Preferred Stock would
have received upon liquidation, dissolution or winding up of the
Corporation had such shares of Series F Preferred Stock and all shares of
Series D Preferred Stock and Series E Preferred Stock been converted to
Common Stock immediately prior to such liquidation, dissolution or winding
up (such greater amount, the "Series F Liquidation Preference"), for each
share of Series F Preferred Stock held by them. If the assets of the
Corporation shall be insufficient to make payment in full to all holders
of Series F Preferred Stock, Series E Preferred Stock and Series D
Preferred Stock of the liquidation preference set forth in Sections (2)(a)
through (c), inclusive, then such assets shall be distributed among the
holders of Series F Preferred Stock, Series E Preferred Stock and Series D
Preferred Stock at the time outstanding ratably in proportion to the full
amounts to which they would otherwise be respectively entitled.
(b) Series E Preferred Stock. Upon any liquidation, dissolution, or
winding up of the Corporation, and before any distribution or payment
shall be made to the holders of Series B Preferred Stock, Series C
Preferred Stock or Common Stock, the holders of Series E Preferred Stock
shall be entitled to be paid out of the assets of the Corporation an
amount equal to the greater of (i) the sum of (a) $4.50 per share of
Series E Preferred Stock (as adjusted for any stock dividends,
combinations, splits and the like with respect to such shares) plus (b) an
amount equal to all unpaid dividends accrued on such shares of Series E
Preferred Stock to the date of payment of such preference, whether or not
earned, whether or not funds of the Corporation are legally available for
the payment of dividends and whether or not such dividends have been
declared by the Board; or (ii) the amount the holders of Series E
Preferred Stock would have received upon liquidation, dissolution or
winding up of the Corporation had such shares of Series E Preferred Stock
and all shares of Series D Preferred Stock and Series F Preferred Stock
been converted to Common Stock immediately prior to such liquidation,
dissolution or winding up (such greater amount, the "Series E Liquidation
Preference"), for each share of Series E Preferred Stock held by them. If
the assets of the Corporation shall be insufficient to make payment in
full to all holders of Series F Preferred Stock, Series E Preferred Stock
and Series D Preferred Stock of the liquidation preference set forth in
Sections (2)(a) through (c), inclusive, then such assets shall be
distributed among the holders of Series F Preferred Stock, Series E
Preferred Stock and Series D Preferred Stock at the time outstanding
ratably in proportion to the full amounts to which they would otherwise be
respectively entitled.
(c) Series D Preferred Stock. Upon any liquidation, dissolution, or
winding up of the Corporation, and before any distribution or payment
shall be made to the holders of Series B Preferred Stock, Series C
Preferred Stock or Common Stock, the holders of Series D Preferred Stock
shall be entitled to be paid out of the assets of the Corporation an
amount equal to the greater of (i) the sum of (a) $4.50 per share of
Series D Preferred Stock (as adjusted for any stock dividends,
combinations, splits and the like with respect to such shares) plus (b) an
amount equal to all unpaid dividends accrued on such shares of Series D
Preferred Stock to the date of payment of such preference, whether or not
earned, whether or not funds of the Corporation are legally available for
the payment of dividends and whether or not such dividends have been
declared by the Board; or (ii) the amount the holders of Series D
Preferred Stock would have received upon liquidation, dissolution or
5
<PAGE>
winding up of the Corporation had such shares of Series D Preferred Stock
and all shares of Series E Preferred Stock and Series F Preferred Stock
been converted to Common Stock immediately prior to such liquidation,
dissolution or winding up (such greater amount the "Series D Liquidation
Preference"), for each share of Series D Preferred Stock held by them. If
the assets of the Corporation shall be insufficient to make payment in
full to all holders of Series F Preferred Stock, Series E Preferred Stock
and Series D Preferred Stock of the liquidation preference set forth in
Sections (2)(a)-(c), then such assets shall be distributed among the
holders of Series F Preferred Stock, Series E Preferred Stock and Series D
Preferred Stock at the time outstanding ratably in proportion to the full
amounts to which they would otherwise be respectively entitled.
(d) Series B Preferred Stock. Upon any liquidation, dissolution, or
winding up of the Corporation, and after the payment of the full
liquidation preference of the Series F Preferred Stock as set forth in
Section 2(a) above, the Series E Preferred Stock as set forth in Section
2(b) above, and the Series D Preferred Stock as set forth in Section
(2)(c) above, and before any distribution or payment shall be made to the
holders of Series C Preferred Stock or Common Stock, the holders of Series
B Preferred Stock shall be entitled to be paid out of the assets of the
Corporation an amount equal to the sum of (i) $1.52 for each share of
Series B Preferred Stock held by them (as adjusted for any stock
dividends, combinations, splits and the like with respect to such shares)
plus (ii) an amount equal to all unpaid dividends accrued on such shares
of Series B Preferred Stock to the date of payment of such preference,
whether or not earned, whether or not funds of the Corporation are legally
available for the payment of dividends and whether or not such dividends
have been declared by the Board (the "Series B Liquidation Preference"),
for each share of Series B Preferred Stock held by them. If the remaining
assets of the Corporation shall be insufficient to make payment in full to
all holders of Series B Preferred Stock of the liquidation preference set
forth in this Section (2)(d), then such remaining assets shall be
distributed among the holders of Series B Preferred Stock at the time
outstanding ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.
(e) Series C Preferred Stock. Upon any liquidation, dissolution, or
winding up of the Corporation, and after the payment of the full
liquidation preference of the Series F Preferred Stock as set forth in
Section 2(a) above, the Series E Preferred Stock as set forth in Section
2(b) above, and the Series D Preferred Stock as set forth in Section
(2)(c) above and the Series B Preferred Stock as set forth in Section
(2)(d) above, and before any distribution or payment shall be made to the
holders of Common Stock, the holders of Series C Preferred Stock shall be
entitled to be paid out of the assets of the Corporation an amount equal
to the sum of (i) $1.52 per share of Series C Preferred Stock (as adjusted
for any stock dividends, combinations, splits and the like with respect to
such shares), plus (ii) an amount equal to all declared and unpaid
dividends for each share of Series C Preferred Stock held by them (the
"Series C Liquidation Preference"). If the remaining assets of the
Corporation shall be insufficient to make payment in full to all holders
of Series C Preferred Stock of the liquidation preference set forth in
this Section (2)(e), then such remaining assets shall be distributed among
the holders of Series C Preferred Stock at the time outstanding ratably in
proportion to the full amounts to which they would otherwise be
respectively entitled.
6
<PAGE>
(f) Common Stock. Upon any liquidation, dissolution, or winding up
of the Corporation, and after the payment in full of the Series F
Liquidation Preference, Series E Liquidation Preference, Series D
Liquidation Preference, the Series B Liquidation Preference and the Series
C Liquidation Preference, then the remaining assets of the Corporation
legally available for distribution, if any, shall be distributed ratably
to the holders of the Common Stock.
(g) Deemed Liquidations. The following events will be deemed a
liquidation under this section: (i) consolidation, reorganization, share
exchange, recapitalization, business combination, merger or similar
transaction involving the Corporation in which the stockholders of the
Corporation immediately prior to such transaction in the aggregate cease
to own at least 50% of the voting securities of the entity surviving or
resulting from such transaction (or the ultimate parent thereof), or any
transaction or series of related transactions in which in excess of 50% of
the Corporation's voting power is transferred (in any case, an
"Acquisition"), but not including the purchase of Series F Preferred Stock
by BTI; and (ii) the sale, lease, transfer or other disposition of all or
substantially all of the assets of the Corporation (an "Asset Transfer").
(h) Payments in Property. Whenever the distribution provided for in
this Section (2) shall be payable in securities or other property other
than cash, the value of that distribution shall be the fair market value
of those securities or other property.
(i) Determinations of Fair Market Value. Whenever a determination of
fair market value is required under this Restated Certificate of
Incorporation, the fair market value shall be determined based upon the
price that would be paid by a willing buyer of the assets or shares at
issue, in a sale process designed to attract all possible participants and
to maximize value. The determination of fair market value shall be made
(i) by the Board of Directors or (ii) if a majority in interest of the
Series F Preferred Stock object to such determination by the Board of
Directors, by a nationally recognized investment banking firm mutually
agreeable to the Corporation and a majority in interest of the shares of
Series F Preferred Stock. The fees and expenses of such investment banking
firm shall be paid by the Corporation.
(3) Voting Rights.
(a) Series B, C, D, E and F Preferred Stock. Except as set forth in
Sections (3)(b) and (3)(c), the holders of Series B Preferred Stock shall
be entitled to cast one vote for each share of Series B Preferred Stock
held by them on an as-converted basis, the holders of Series C Preferred
Stock shall be entitled to cast one vote for each share of Series C
Preferred Stock held by them on an as-converted basis, the holders of
Series D Preferred Stock shall be entitled to cast one vote for each share
of Series D Preferred Stock held by them on an as-converted basis, the
holders of Series E Preferred Stock shall be entitled to cast one vote for
each share of Series E Preferred Stock held by them on an as-converted
basis, and the holders of Series F Preferred Stock shall be entitled to
cast one vote for each share of Series F Preferred Stock held by them on
an as-converted basis. Such votes shall be cast together with those cast
by the holders of Common Stock and not as a separate class, except as
otherwise provided herein or required by applicable law. The Series B
Preferred Stock, the
7
<PAGE>
Series C Preferred Stock, the Series D Preferred Stock, the Series E
Preferred Stock and the Series F Preferred Stock shall not have cumulative
voting rights.
(b) Restrictions and Limitations.
(i) So long as the outstanding shares of Series B Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock
represent at least five percent (5%) or more of the outstanding
shares of Common Stock of the Corporation (on an as-converted to
Common Stock basis), the approval by the vote or written consent of
the holders of at least a majority of the then outstanding shares of
Series B Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, voting together as a single class, shall be
necessary for effecting or validating the following actions:
(A) Any action that results in the payment or
declaration of a dividend on any shares of Common Stock; or
(B) The purchase or other acquisition (or payment into
or set aside for a sinking fund for such purpose) of any
Series C Preferred Stock or Common Stock; provided, however,
that this restriction shall not apply to: (x) the repurchase
of shares of Common Stock by the Corporation pursuant to
agreements which permit the Corporation to repurchase such
shares upon termination of services to the Corporation; or (y)
the exercise of the Corporation's right of first refusal with
the approval of the Board of Directors upon a proposed
transfer.
(ii) So long as the outstanding shares of Series B Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock,
represents at least five percent (5%) or more of the outstanding
shares of Common Stock of the Corporation (on an as-converted to
Common Stock basis), the approval by the vote or written consent of
the holders of at least seventy-five percent (75%) of the then
outstanding shares of Series B Preferred Stock, Series D Preferred
Stock, and Series E Preferred Stock, voting together as a single
class, shall be necessary for effecting or validating the following
actions:
(A) Any amendment, alteration, or repeal of any
provision of the Restated Certificate of Incorporation or
Bylaws of the Corporation (including the filing of a
Certificate of Designation), that adversely affects the voting
powers, preferences or other special rights or privileges,
qualifications, limitations, or restrictions of the Series B
Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock, or
(B) Any amendment, alteration, or repeal of Section
(3)(b)(i) or Section 3(b)(ii).
(iii) So long as the outstanding shares of Series F Preferred
Stock represents at least five percent (5%) or more of the
outstanding shares of Common Stock of the Corporation (on an
as-converted to Common Stock basis), the approval by the vote or
written consent of the holders of at least seventy-five percent
(75%)
8
<PAGE>
of the then outstanding shares of Series F Preferred Stock shall be
necessary for effecting or validating the following actions with
respect to the Corporation:
(A) Any amendment, alteration, or repeal of any
provision of the Restated Certificate of Incorporation or
Bylaws of the Corporation (including the filing of a
Certificate of Designation), that adversely affects the voting
powers, preferences or other special rights or privileges,
qualifications, limitations, or restrictions of the Series F
Preferred Stock;
(B) Any authorization, creation, or increase in the
authorized number of any class or series of capital stock
ranking senior to or on parity with the Series F Preferred
Stock as to dividends, voting rights or liquidation, or any
issuance of any shares of such class or series of capital
stock (or any securities convertible into, or exchangeable or
exerciseable for such shares);
(C) Any payment of any cash or non-cash dividends or
other distributions with respect to its capital stock;
(D) Any reclassification, combination, split,
subdivision, redemption, repurchase or other acquisition of
any shares of capital stock (except for (x) acquisitions of
Common Stock by the Corporation pursuant to agreements which
permit the Corporation to repurchase such shares upon the
termination of services to the Corporation or in exercise of
the Corporation's right of first refusal upon a proposed
transfer, (y) any redemption of the Series E Preferred Stock
pursuant to Section (5)(b) and (z) the redemption by the
Corporation of up to 2,225,000 shares of Series C Preferred
Stock);
(E) Any agreement by the Corporation or its stockholders
regarding an Acquisition or an Asset Transfer (as defined in
Section 2(g));
(F) Any acquisition of assets or securities of any other
person or entity, except for acquisitions involving cash with
an aggregate value of less than five percent (5%) of the
Corporation's assets for any single acquisition or series of
related transactions;
(G) Any joint venture or similar profit sharing
arrangement involving material assets or the payment or
receipt of more than five percent (5%) of the Corporation's
assets;
(H) Any liquidation, dissolution or winding up of the
Corporation; or
(I) An amendment, alteration, or repeal of this Section
(3)(b).
(c) Election of Board of Directors.
9
<PAGE>
(i) For so long as at least 6,666,667 shares of Series F Preferred
Stock remain outstanding (subject to adjustment for any stock split,
reverse stock split and the like), the holders of Series F Preferred
Stock, voting as a separate class, shall be entitled to elect that number
of directors to the Corporation's Board of Directors equal to (A) the
authorized size of the Corporation's Board of Directors, multiplied by (B)
(I) the total number of shares of the Corporation's Common Stock
represented by the shares of Series F Preferred Stock then outstanding (on
an as-converted basis), divided by (II) the total number of shares of the
Corporation's Common Stock then outstanding (assuming conversion of all
Preferred Stock then outstanding), rounding up so that the nominees of the
holders of Series F Preferred Stock will not represent less than such
proportionate interest in (B) above, at each meeting or pursuant to each
consent of the Corporation's shareholders for the election of directors;
provided, however, that for purposes of this Section (3)(c)(i) only, the
calculation of the total number of shares outstanding shall exclude any
equity securities issued by the Company after the Series F Original Issue
Date (other than the shares issued pursuant to the Option) if at such time
(x) BTI has not exercised any part of the Option and the outstanding
shares of Series F Preferred Stock represent twenty percent (20%) or more
of the outstanding Common Stock of the Company (on an as-converted to
Common Stock basis), or (y) BTI has exercised any part of the Option and
the outstanding shares of Series F Preferred Stock represent thirty
percent (30%) or more of the outstanding Common Stock of the Company (on
an as-converted to Common Stock basis). Only the holders of the Series F
Preferred Stock shall be entitled to remove from office such directors or
to fill any vacancy caused by the resignation, death or removal of such
directors.
(ii) For so long as at least 8,532,394 shares of Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock remain outstanding (subject to adjustment for any stock
split, reverse stock split and the like), the holders of Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock, voting together as a single class, shall be
entitled to elect two (2) members of the Board of Directors at each
meeting or pursuant to each consent of the Corporation's shareholders for
the election of directors, and only the holders of the of Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock, voting together a single class, shall be
entitled to remove from office such directors or to fill any vacancy
caused by the resignation, death or removal of such directors.
(iii) For so long as the conditions set forth in 3(c)(i) and (ii)
are satisfied the holders of Common Stock, voting as a separate class,
shall be entitled to elect one (1) member of senior management of the
Corporation to the Board of Directors at each meeting or pursuant to each
consent of the Corporation's shareholders for the election of directors,
and only the holders of the Common Stock shall be entitled to remove from
office such director and to fill any vacancy caused by the resignation,
death or removal of such director.
(iv) Except as provided in 3(c)(i), (ii) and (iii) above, the
holders of Common
10
<PAGE>
Stock and Preferred Stock, voting together as a single class, shall be
entitled to elect all members of the Board of Directors.
(4) Conversion Rights. The holders of the Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock shall have the following rights with
respect to the conversion of the Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and
Series F Preferred Stock into shares of Common Stock (the "Conversion
Rights"):
(a) Optional Conversion. Subject to and in compliance with the
provisions of this Section (4), any shares of Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series F Preferred
Stock may, at the option of the holder, be converted at any time into
fully paid and nonassessable shares of Common Stock. Subject to and in
compliance with the provisions of this Section (4), any shares of Series E
Preferred Stock may, at the option of the holder, be converted at any time
after October 1, 1999 into fully paid and nonassessable shares of Common
Stock. The number of shares of Common Stock to which a holder of Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, or Series F Preferred Stock shall be entitled
upon conversion shall be the product obtained by multiplying the
applicable Preferred Stock Rate then in effect (determined as provided in
Section (4)(c)) by the number of shares of Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, or Series F Preferred Stock being converted by such holder.
(b) Automatic Conversion. Subject to and in compliance with the
provisions of this Section (4), all outstanding shares of Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock shall be
automatically converted into shares of Common Stock immediately prior to
the closing of a firmly underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock for the account of
the Company in which the gross proceeds to the Corporation (before
underwriting discounts, commissions and fees) are at least $60,000,000.
The number of shares of Common Stock to which a holder of Series B
Preferred Stock shall be entitled upon conversion shall be the product
obtained by multiplying the applicable Preferred Stock Rate then in effect
by the number of shares of Series B Preferred Stock being converted by
such holder. The number of shares of Common Stock to which a holder of
Series C Preferred Stock shall be entitled upon conversion shall be the
product obtained by multiplying the applicable Preferred Stock Rate then
in effect by the number of shares of Series C Preferred Stock being
converted by such holder. The number of shares of Common Stock to which a
holder of Series D Preferred Stock shall be entitled upon conversion shall
be the product obtained by multiplying the applicable Preferred Stock Rate
then in effect by the number of shares of Series D Preferred Stock being
converted by such holder. The number of shares of Common Stock to which a
holder of Series E Preferred Stock shall be entitled upon conversion shall
be the product obtained by multiplying the applicable Preferred Stock Rate
then in effect by the number of shares of Series E Preferred Stock being
converted by such holder. The number of shares of Common Stock to which a
holder of Series F Preferred Stock shall be entitled upon conversion shall
be the product obtained by multiplying the applicable Preferred Stock Rate
then in effect by the
11
<PAGE>
number of shares of Series F Preferred Stock being converted by such
holder.
(c) Preferred Stock. The conversion rate of the applicable series of
Preferred Stock in effect at any time for conversion of the Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, or Series F Preferred Stock (the "Preferred
Stock Rate") shall be the quotient obtained by dividing the Original Issue
Price of the applicable series of Preferred Stock by the applicable
Preferred Stock Price, calculated as provided in Section (4)(d). The
"Original Issue Price" for the Series B Preferred Stock and Series C
Preferred Stock shall initially equal $1.52 per share. The "Original Issue
Price" of the Series D Preferred Stock and Series E Preferred Stock shall
initially equal $4.50 per share. The "Original Issue Price" of the Series
F Preferred Stock shall initially equal the Purchase Price with respect to
each share.
(d) Conversion Price. The conversion price for the applicable series
of Preferred Stock shall initially be the Original Issue Price of the
applicable series of Preferred Stock (the "Preferred Stock Price"). Such
initial Preferred Stock Price shall be adjusted from time to time after
the Series F Original Issue Date (as defined below) in accordance with
this Section (4). All references to the Preferred Stock Price herein shall
mean the Preferred Stock Price as applicable and as so adjusted.
(e) Mechanics of Conversion. Each holder of Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, or Series F Preferred Stock who desires to convert the
same into shares of Common Stock pursuant to this Section (4) shall
surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or any transfer agent for the Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, or Series F Preferred Stock, and shall give written
notice to the Corporation at such office that such holder elects to
convert the same. Such notice shall state the number of shares of Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, or Series F Preferred Stock being converted.
Thereupon, the Corporation shall promptly issue and deliver at such office
to such holder a certificate or certificates for the number of shares of
Common Stock to which such holder is entitled. Such conversion shall be
deemed to have been made at the close of business on the date of such
surrender of the certificates representing the shares of Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, or Series F Preferred Stock to be converted, and
the person entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder of
such shares of Common Stock on such date.
(f) Adjustment for Stock Splits and Combinations. If the Corporation
shall at any time or from time to time after August 5, 1999 (the "Series F
Original Issue Date") effect a subdivision of the outstanding Common Stock
without a corresponding subdivision of the Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, or Series F Preferred Stock, the Preferred Stock Price for each
series of Preferred Stock in effect immediately before that subdivision
shall be proportionately decreased. Conversely, if the Corporation shall
at any time or from time to time after the Series F Original Issue Date
combine the outstanding shares of Common Stock into a smaller number of
shares without a corresponding combination of the Series B Preferred
Stock, Series C Preferred Stock, Series
12
<PAGE>
D Preferred Stock, Series E Preferred Stock, or Series F Preferred Stock,
the Preferred Stock Price for each series of Preferred Stock in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this Section (4)(f) shall become effective at the close
of business on the date the subdivision or combination becomes effective.
(g) Adjustment for Common Stock Dividends and Distributions. If the
Corporation at any time or from time to time makes, or fixes a record date
for the determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in additional shares of Common
Stock, in each such event the Preferred Stock Price of each applicable
series of Preferred Stock that is then in effect shall be decreased as of
the time of such issuance or, in the event such record date is fixed, as
of the close of business on such record date, by multiplying the Preferred
Stock Price for each applicable series of Preferred Stock then in effect
by a fraction (i) the numerator of which is the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, and (ii) the
denominator of which is the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of Common
Stock issuable in payment of such dividend or distribution; provided,
however, that if such record date is fixed and such dividend is not fully
paid or if such distribution is not fully made on the date fixed therefor,
the applicable Preferred Stock Price shall be recomputed accordingly as of
the close of business on such record date and thereafter the applicable
Preferred Stock Price shall be adjusted pursuant to this Section (4)(g) to
reflect the actual payment of such dividend or distribution.
(h) Adjustments for Other Dividends and Distributions. If the
Corporation at any time or from time to time makes, or fixes a record date
for the determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in securities of the Corporation
other than shares of Common Stock, in each such event provision shall be
made so that the holders of the Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and
Series F Preferred Stock shall receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of other securities of the Corporation which they would have
received had their Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, or Series F Preferred
Stock been converted into Common Stock on the date of such event and had
they thereafter, during the period from the date of such event to and
including the conversion date, retained such securities receivable by them
as aforesaid during such period, subject to all other adjustments called
for during such period under this Section (4)(h) with respect to the
rights of the holders of the Preferred Stock or with respect to such other
securities by their terms.
(i) Adjustment for Reclassification, Exchange and Substitution. If
at any time or from time to time after the Series F Original Issue Date,
the Common Stock issuable upon the conversion of the Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock and Series F Preferred Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an Acquisition
or Asset Transfer as defined in Section (2)(g) or a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section
(4)), in any such event
13
<PAGE>
each holder of Series B Preferred Stock, Series C Preferred Stock, Series
D Preferred Stock, Series E Preferred Stock and Series F Preferred Stock
shall have the right thereafter to convert such stock into the kind and
amount of stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, or Series F Preferred Stock could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with
respect to such other securities or property by the terms thereof.
(j) Reorganizations, Mergers, Consolidations or Sales of Assets. If
at any time or from time to time after the Series F Original Issue Date,
there is a capital reorganization of the Common Stock, merger,
consolidation or sale of assets (other than an Acquisition or Asset
Transfer as defined in Section (2)(g) or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided
for elsewhere in this Section (4)), as a part of such capital
reorganization, merger, consolidation or sale of assets, provision shall
be made so that the holders of the Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and
Series F Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock and Series F Preferred
Stock the number of shares of stock or other securities or property of the
Corporation or third party entity to which a holder of the number of
shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization, merger, consolidation or sale of
assets, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section (4) with respect to
the rights of the holders of Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock after the capital reorganization, merger, consolidation or
sale of assets to the end that the provisions of this Section (4)
(including adjustment of the Preferred Stock Price then in effect and the
number of shares issuable upon conversion of the Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Series F Preferred Stock) shall be applicable after that event
and be as nearly equivalent as practicable.
(k) Sale of Shares Below Preferred Stock Price.
(i) If at any time or from time to time after the Series F
Original Issue Date, the Corporation issues or sells, or is deemed
by the express provisions of this Section (4)(k) to have issued or
sold, Additional Shares of Common Stock (as defined in Section
(4)(k)(iv) below), other than as a dividend or other distribution on
any class of stock as provided in Section (4)(g) above, and other
than a subdivision or combination of shares of Common Stock as
provided in Section (4)(f) above, for an Effective Price (as defined
in Section (4)(k)(iv) below) less than the then effective Preferred
Stock Price with respect to the applicable series of Preferred
Stock, then and in each such case the then existing Preferred Stock
Price with respect to the applicable series of Preferred Stock shall
be reduced, as of the opening of business on the date of such issue
or sale, to a price determined by multiplying the applicable
Preferred Stock Price by a fraction (i) the numerator of which shall
be (A) the number of shares of Common Stock
14
<PAGE>
deemed outstanding (as defined below) immediately prior to such
issue or sale, plus (B) the number of shares of Common Stock which
the aggregate consideration received (as defined in Section
(4)(k)(ii) below) by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such
applicable Preferred Stock Price, and (ii) the denominator of which
shall be the number of shares of Common Stock deemed outstanding (as
defined below) immediately prior to such issue or sale plus the
total number of Additional Shares of Common Stock so issued. For the
purposes of the preceding sentence, the number of shares of Common
Stock deemed to be outstanding as of a given date shall be the sum
of (A) the number of shares of Common Stock actually outstanding,
(B) the number of shares of Common Stock into which the then
outstanding shares of Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock and Series
F Preferred Stock could be converted if fully converted on the day
immediately preceding the given date, and (C) the number of shares
of Common Stock which could be obtained through the exercise or
conversion of all other rights, options and convertible securities
on the day immediately preceding the given date.
(ii) For the purpose of making any adjustment required under
this Section (4)(k), the consideration received by the Corporation
for any issue or sale of securities shall (A) to the extent it
consists of cash, be computed at the net amount of cash received by
the Corporation after deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the
Corporation in connection with such issue or sale but without
deduction of any expenses payable by the Corporation, (B) to the
extent it consists of property other than cash, be computed at the
fair value of that property as determined in good faith by the Board
of Directors, and (C) if Additional Shares of Common Stock,
Convertible Securities (as defined in Section (4)(k)(iii) below) or
rights or options to purchase either Additional Shares of Common
Stock or Convertible Securities are issued or sold together with
other stock or securities or other assets of the Corporation for a
consideration which covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good
faith by the Board of Directors to be allocable to such Additional
Shares of Common Stock, Convertible Securities or rights or options.
(iii) For the purpose of the adjustment required under this
Section (4)(k), if the Corporation issues or sells any rights or
options for the purchase of, or stock or other securities
convertible into, Additional Shares of Common Stock (such
convertible stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such
Additional Shares of Common Stock is less than the applicable
Preferred Stock Price, in each case the Corporation shall be deemed
to have issued at the time of the issuance of such rights or options
or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to
have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any,
received by the Corporation for the issuance of such rights or
options or Convertible Securities, plus, in the case of such rights
or options, the minimum amounts of consideration, if any, payable to
the Corporation upon the exercise of such rights or options, plus,
in the case of Convertible Securities, the minimum amounts of
consideration, if any, payable to the Corporation
15
<PAGE>
(other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion thereof;
provided that if in the case of Convertible Securities the minimum
amounts of such consideration cannot be ascertained, but are a
function of antidilution or similar protective clauses, the
Corporation shall be deemed to have received the minimum amounts of
consideration without reference to such clauses; provided further
that if the minimum amount of consideration payable to the
Corporation upon the exercise or conversion of rights, options or
Convertible Securities is reduced over time or on the occurrence or
non-occurrence of specified events other than by reason of
antidilution adjustments, the Effective Price shall be recalculated
using the figure to which such minimum amount of consideration is
reduced; provided further that if the minimum amount of
consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities is
subsequently increased, the Effective Price shall be again
recalculated using the increased minimum amount of consideration
payable to the Corporation upon the exercise or conversion of such
rights, options or Convertible Securities. No further adjustment of
the applicable Preferred Stock Price, as adjusted upon the issuance
of such rights, options or Convertible Securities, shall be made as
a result of the actual issuance of Additional Shares of Common Stock
on the exercise of any such rights or options or the conversion of
any such Convertible Securities. If any such rights or options or
the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, the
applicable Preferred Stock Price as adjusted upon the issuance of
such rights, options or Convertible Securities shall be readjusted
to the applicable Preferred Stock Price which would have been in
effect had an adjustment been made on the basis that the only
Additional Shares of Common Stock so issued were the Additional
Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such
Convertible Securities, and such Additional Shares of Common Stock,
if any, were issued or sold for the consideration actually received
by the Corporation upon such exercise, plus the consideration, if
any, actually received by the Corporation for the granting of all
such rights or options, whether or not exercised, plus the
consideration received for issuing or selling the Convertible
Securities actually converted, plus the consideration, if any,
actually received by the Corporation (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities)
on the conversion of such Convertible Securities, provided that such
readjustment shall not apply to prior conversions of Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, or Series F Preferred Stock.
(iv) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued by the Corporation or deemed to be issued
pursuant to this Section (4)(k), whether or not subsequently
reacquired or retired by the Corporation other than (A) shares of
Series E Preferred Stock,; (B) shares of Common Stock issued upon
conversion of the Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, or Series
F Preferred Stock; (C) Common Stock and/or options, warrants or
other Common Stock purchase rights, and the Common Stock issued
pursuant to such options, warrants or other rights to employees,
officers or directors of, or consultants or advisors to the
Corporation or any subsidiary
16
<PAGE>
pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board; (D) shares of Common
Stock issued pursuant to the exercise of options, warrants or
convertible securities outstanding as of the Series F Original Issue
Date; and (E) warrants to purchase Common Stock, and the Common
Stock issued pursuant to such warrants, that are issued to holders
of the Senior Notes due 2008 issued by the Corporation pursuant to
an indenture between the Corporation and Norwest Bank, N.A. (the
"Senior Notes"). The "Effective Price" of Additional Shares of
Common Stock shall mean the quotient determined by dividing the
total number of Additional Shares of Common Stock issued or sold, or
deemed to have been issued or sold by the Corporation under this
Section (4)(k), into the aggregate consideration received, or deemed
to have been received by the Corporation for such issue under this
Section (4)(k), for such Additional Shares of Common Stock.
(l) Certificate of Adjustment. In each case of an adjustment or
readjustment of the applicable Preferred Stock Price for the number of
shares of Common Stock or other securities issuable upon conversion of the
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, or Series F Preferred Stock, if the
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, or Series F Preferred Stock is then
convertible pursuant to this Section (4), the Corporation, at its expense,
shall compute such adjustment or readjustment in accordance with the
provisions hereof and prepare a certificate showing such adjustment or
readjustment, and shall mail such certificate, by first class mail,
postage prepaid, to each registered holder of Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, or Series F Preferred Stock at the holder's address as shown in the
Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (i) the consideration
received or deemed to be received by the Corporation for any Additional
Shares of Common Stock issued or sold or deemed to have been issued or
sold, (ii) the Preferred Stock Price at the time in effect, (iii) the
number of Additional Shares of Common Stock and (iv) the type and amount,
if any, of other property which at the time would be received upon
conversion of the Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, or Series F Preferred
Stock.
(m) Notices of Record Date. Upon (i) any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend
or other distribution, or (ii) any Acquisition (as defined in Section
(2)(g)) or other capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the
Corporation, any merger or consolidation of the Corporation with or into
any other corporation, or any Asset Transfer (as defined in Section
(2)(g)), or any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, the Corporation shall mail to each holder
of Preferred Stock at least twenty (20) calendar days prior to the record
date specified therein a notice specifying (A) the date on which any such
record is to be taken for the purpose of such dividend or distribution and
a description of such dividend or distribution, (B) the date on which any
such Acquisition, reorganization, reclassification, transfer,
consolidation, merger, Asset Transfer, dissolution, liquidation or winding
up is expected to become effective, and (C) the date, if any, that is to
be fixed as to when the holders of record of Common Stock (or other
securities) shall be entitled
17
<PAGE>
to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up.
(n) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, or Series F
Preferred Stock. All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, or Series F Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result
in the issuance of any fractional share. If, after the aforementioned
aggregation, the conversion would result in the issuance of any fractional
share, the Corporation shall, in lieu of issuing any fractional share, pay
cash equal to the product of such fraction multiplied by the Common
Stock's fair market value (as determined in accordance with Section
(2)(i)) on the date of conversion.
(o) Reservation of Stock. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common
Stock such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding shares of Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock and Series F Preferred Stock and the exercise of
all outstanding options and warrants of the Corporation. If at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock or the
exercise of all outstanding options and warrants, the Corporation will
take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock
to such number of shares as shall be sufficient for such purposes.
(p) Notices. Any notice required by the provisions of this Section
(4) shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed
telex or facsimile if sent during normal business hours of the recipient;
if not, then on the next business day, (iii) five (5) business days after
having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (iv) one (1) business day after deposit
with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing
on the books of the Corporation.
(q) Payment of Taxes. The Corporation will pay all taxes (other than
taxes based upon income) and other governmental charges that may be
imposed with respect to the issue or delivery of shares of Common Stock
upon conversion of shares of Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, or Series F
Preferred Stock, excluding any tax or other charge imposed in connection
with any transfer involved in the issue and delivery of shares of Common
Stock in a name other than that in which the shares of Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, or Series F Preferred Stock so converted were registered.
18
<PAGE>
(5) Redemption.
(a) Series F Preferred Stock.
(i) Generally. In the event of (a) a breach by the Corporation of
any of the terms of this Restated Certificate of Incorporation, the Bylaws
of the Corporation, or the Amended and Restated Purchaser's Rights
Agreement, dated July 2, 1999 by and among the Corporation and certain
holders of its capital stock, as the same may be amended from time to time
(including in connection with the issuance of Series F Preferred Stock),
which has a material adverse effect on the holders of the Series F
Preferred Stock that is not cured within fifteen (15) days of receipt of
written notice by the Corporation from a holder of Series F Preferred
Stock, or (b) the voluntary resignation (other than due to death or
disability) prior to February 10, 2001 of (i) David E. Scott or (ii) any
two of Jeffrey D. Shackelford, Bradley A. Moline, or Gregory C. Lawhon
within six (6) months of one another (in the case of (a) or (b), a
"Redemption Event"), a majority in interest of the Series F Preferred
Stock may elect to demand in writing ("Redemption Demand") the redemption
of all or any portion of the shares of Series F Preferred Stock, from any
source of funds legally available therefor, at a redemption price per
share (the "Series F Redemption Price") equal to the amount of the Series
F Liquidation Preference. The redemption under this Section (5)(a) shall
take place on a date (the "Series F Redemption Date") that is no later
than thirty (30) days after the receipt by the Corporation of the
Redemption Demand.
(ii) Indenture Restriction. Notwithstanding the foregoing, the
Corporation shall not be obligated to redeem the shares of Series F
Preferred Stock for cash pursuant to Section (5)(a)(i), if such redemption
or the existence of the redemption provision would violate the terms of
the Indenture, dated as of June 23, 1998, by and between the Corporation
and Norwest Bank Minnesota, National Association (as trustee), as amended,
pursuant to which the Senior Notes were issued, until 91 days after the
date on which the Senior Notes mature. If the Corporation is unable to
redeem the Series F Preferred Stock for cash as set forth above, a
majority in interest of the Series F Preferred Stock may elect to receive
shares of Common Stock with a fair market value (as determined in
accordance with Section (2)(i)) equal to the Series F Redemption Price.
(iii) Procedure. At least 15 days prior to a Series F Redemption
Date, written notice shall be mailed, first class postage prepaid, to each
holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Series F Preferred
Stock to be redeemed, at the address last shown on the records of the
Corporation for such holder, notifying such holder of the redemption to be
effected, specifying the number of shares to be redeemed from such holder,
the Series F Redemption Date, the Series F Redemption Price, whether or
not the Corporation may redeem the shares for cash, or if not, the number
of shares of Common Stock issuable in lieu of cash as set forth in Section
(5)(a)(ii) above, the place at which payment or delivery may be obtained
and calling upon such holder to surrender to the Corporation, in the
manner and at the place designated, his
19
<PAGE>
certificate or certificates representing the shares to be redeemed (the
"Series F Company Redemption Notice"). Except as provided in Section
(5)(c), on or after the applicable Series F Redemption Date, each holder
of Series F Preferred Stock to be redeemed shall surrender to the
Corporation the certificate or certificates representing such shares, in
the manner and at the place designated in the Series F Redemption Notice,
and thereupon the Series F Redemption Price of such shares (in cash or
shares of Common Stock, as applicable) shall be payable to the order of
the person whose name appears on such certificate or certificates as the
owner thereof and each surrendered certificate shall be canceled. In the
event less than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed
shares.
(iv) Deposit of Redemption Price or Shares of Common Stock. Subject
to the provisions set forth above, on or prior to each Series F Redemption
Date, the Corporation shall deposit the Series F Redemption Price of all
shares of Series F Preferred Stock designated for redemption in the Series
F Redemption Notice and not yet redeemed with a bank or trust corporation
as a trust fund for the benefit of the respective holder or holders of the
shares designated for redemption and not yet redeemed, with irrevocable
instructions and authority to the bank or trust corporation to pay the
Series F Redemption Price for such shares to their respective holder or
holders on or after the applicable Series F Redemption Date upon receipt
of notification from the Corporation that such holder has surrendered his
share certificate to the Corporation pursuant to Section (5)(a)(iii). As
of the applicable Series F Redemption Date, the deposit shall constitute
full payment of the shares to the holder or holders, and from and after
the applicable Series F Redemption Date the shares so called for
redemption shall be redeemed and shall be deemed to be no longer
outstanding, and the holder or holders thereof shall cease to be
stockholders with respect to such shares and shall have no rights with
respect thereto except the rights to receive from the bank or trust
corporation payment of the Series F Redemption Price of the shares,
without interest, upon surrender of their certificates therefor. The
balance of any moneys deposited by the Corporation pursuant to this
Section (5)(a)(iv) remaining unclaimed at the expiration of two years
following the applicable Series F Redemption Date shall thereafter be
returned to the Corporation upon its request expressed in a resolution of
its Board of Directors. In the event that the Corporation must issue new
shares of Common Stock instead of cash pursuant to the provisions set
forth in Section (5)(a)(ii), shares of Common Stock shall be delivered to
the bank or trust corporation in lieu of such cash.
(b) Series E Preferred Stock.
(i) Generally. The Corporation, at any time and from time to time
(each a "Series E Redemption Date"), may redeem all or any portion of the
shares of Series E Preferred Stock, from any source of funds legally
available therefor, at a redemption price per share (the "Series E
Redemption Price") equal to (A) $4.50 per share for shares of Series E
Preferred Stock redeemed pursuant to a Series E Redemption Date occurring
on or before October 1, 1999, or (B) the Series E Liquidation Preference
for shares of Series E Preferred Stock redeemed pursuant to
20
<PAGE>
a Series E Redemption Date occurring after October 1, 1999.
(ii) Procedure. On each Series E Redemption Date, written notice
shall be mailed, first class postage prepaid, to each holder of record (at
the close of business on the business day next preceding the day on which
notice is given) of the Series E Preferred Stock to be redeemed, at the
address last shown on the records of the Corporation for such holder,
notifying such holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, the Series E Redemption
Date and the Series E Redemption Price (the "Series E Company Redemption
Notice").
(iii) Deposit of Redemption Price. As of the applicable Series E
Redemption Date, the Corporation shall deposit the Series E Redemption
Price of all shares of Series E Preferred Stock designated for redemption
in the Series E Redemption Notice with a bank or trust corporation as a
trust fund for the benefit of the respective holder or holders of the
shares designated for redemption, with irrevocable instructions and
authority to the bank or trust corporation to pay to the holders of record
of the Series E Preferred Stock to be redeemed As of the applicable Series
E Redemption Date, the deposit shall constitute full payment of the shares
to the holder or holders, and from and after the applicable Series E
Redemption Date the shares so called for redemption shall be redeemed and
shall be deemed to be no longer outstanding, and the holder or holders
thereof shall cease to be stockholders with respect to such shares and
shall have no rights with respect thereto except the rights to receive
from the bank or trust corporation payment of the Series E Redemption
Price of the shares, without interest. The balance of any moneys deposited
by the Corporation pursuant to this Section (5)(b)(iii) remaining
unclaimed at the expiration of two years following the applicable Series E
Redemption Date shall thereafter be returned to the Corporation upon its
request expressed in a resolution of its Board of Directors.
(c) Rights of Redeemed Stock; Default.
(i) From and after the applicable Redemption Date, unless there
shall have been a default in payment of the applicable Redemption Price
(in cash or shares of Common Stock, as applicable), all rights of the
holders of shares of Preferred Stock designated for redemption in the
Company Redemption Notice as holders of Series E Preferred Stock or Series
F Preferred Stock, as applicable (except the right to receive the
applicable Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, and
such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever.
(ii) If the Corporation fails to redeem for any reason, including,
but not limited to, the insufficiency of funds legally available for the
redemption of shares, the total number of shares of Preferred Stock to be
redeemed on such Redemption Date, those funds which are legally available
will be used to redeem the maximum possible number of such shares ratably
among the holders of such shares to be
21
<PAGE>
redeemed based upon their holdings of Series E Preferred Stock or
Series F Preferred Stock, as applicable. The shares of Preferred
Stock not redeemed shall remain outstanding and be entitled to all
the rights and preferences provided herein or, with respect to the
Series F Preferred Stock, may be otherwise converted into shares of
Common Stock pursuant to the provisions set forth in Section
(5)(a)(ii). At any time thereafter when additional funds of the
Corporation are legally available for the redemption such shares of
Preferred Stock such funds will immediately be used to redeem the
balance of the shares which the Corporation has become obliged to
redeem on any applicable Redemption Date, but which it has not
redeemed.
(6) Increasing Common Stock. Subject to the provisions of this
Restated Certificate of Incorporation, the number of authorized shares of
Common Stock may be increased or decreased (but not below the number of
shares of Common Stock then outstanding, issuable upon the conversion of
the Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, Series F Preferred Stock and any other
convertible securities of the Corporation, and issuable upon the exercise
of all outstanding options and warrants), by the affirmative vote of the
holders of a majority of the Common Stock and Preferred Stock, voting
together as a single class.
(7) No Reissuance of Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock or Series F
Preferred Stock. No share or shares of Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, or
Series F Preferred Stock acquired by the Corporation by reason of
redemption, purchase, or otherwise shall be reissued, and all such shares
shall be canceled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.
Fifth: The number of directors which shall constitute the whole Board of
Directors of the Corporation shall be no less than seven (7) nor more than
eleven (11), which number shall be fixed by the Board of Directors of the
Corporation from time to time.
Sixth: The Board of Directors shall have power to make, and from time to
time alter, amend, or repeal the Bylaws of the Corporation; provided, however,
that (a) the stockholders shall have the paramount power to alter, amend and
repeal the Bylaws or adopt new Bylaws, exercisable by a majority vote of the
stockholders present in person or by proxy at any annual or special meeting of
stockholders, and (b) if and to the extent the stockholders exercise such power,
the Board of Directors shall not thereafter suspend, alter, amend or repeal the
Bylaws, or portions thereof, adopted by the stockholders, unless, in adopting
such Bylaws, or portions thereof, the stockholders otherwise provide.
Seventh: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under the provisions of Section 174 of the Delaware
General Corporation Law and
22
<PAGE>
amendments thereto, or (d) for any transaction from which the director derived
an improper personal benefit. If the Delaware General Corporation Law is amended
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. No amendment, repeal or adoption of any
provision of this Restated Certificate of Incorporation inconsistent with this
Article Seventh shall apply or have any effect on the liability of any director
of the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment, repeal, or adoption of any inconsistent
provision.
Eighth: The directors of the Corporation need not be elected by written
ballot.
Ninth:
(a) Subject only to the exclusions set forth in paragraph (c) of this
Article Ninth, the Corporation shall hold harmless and indemnify, to the fullest
extent permitted by applicable law as it presently exists or may hereafter be
amended, each director or officer of the Corporation (each, an "Indemnitee")
against any and all liability and loss suffered and expenses (including
attorneys' fees), judgments, fines, excise taxes assessed with respect to any
employee benefit plan, or penalties and amounts paid in settlement actually and
reasonably incurred by Indemnitee in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Corporation), to
which Indemnitee is, was or at any time becomes a party, or is threatened to be
made a party, by reason of the fact that Indemnitee is, was or at any time
becomes a director or officer of the Corporation, or is, or was serving, or at
any time serves at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise.
(b) The expenses (including attorneys' fees) actually and reasonably
incurred by Indemnitee in defending any proceeding and any judgments, fines or
amounts to be paid in settlement shall be advanced by the Corporation at the
request of the Indemnitee and upon delivery to the Corporation of an undertaking
by such Indemnitee to repay all amounts so advanced if it shall ultimately be
determined that Indemnitee was not entitled to be indemnified or was not to be
fully indemnified.
(c) No indemnity pursuant to this Article Ninth shall be paid by the
Corporation (i) for which payment is actually made to Indemnitee under a valid
and collectible insurance policy, except in respect of any excess beyond the
amount of payment under such insurance; (ii) for which Indemnitee is indemnified
by the Corporation pursuant to applicable law or otherwise than pursuant to this
Article Ninth; (iii) for an accounting of profits made from the purchase or sale
by Indemnitee of securities of the Corporation within the meaning of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any state statutory law or common law; (iv) on account of
Indemnitee's conduct which is finally adjudged by a court to have been knowingly
fraudulent, deliberately dishonest or willful misconduct; or (v) if a final
decision by a court having jurisdiction in the matter shall determine that such
indemnity is not lawful.
23
<PAGE>
(d) All obligations of the Corporation contained herein shall continue
during the period Indemnitee is a director or officer of the Corporation (or is,
or was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise) and
shall continue thereafter so long as Indemnitee shall be subject to any possible
claim or threatened, pending or completed action, suit or proceeding, whether
civil, criminal or investigative, by reason of the fact that Indemnitee was a
director or officer of the Corporation or serving in any other capacity referred
to herein.
(e) Promptly after receipt by Indemnitee of notice of the commencement of
any action, suit or proceeding, Indemnitee will, if a claim in respect thereof
is to be made against the Corporation under this Article Ninth, notify the
Corporation of the commencement thereof; but the omission so to notify the
Corporation will not relieve it from any liability which it may have to
Indemnitee otherwise than under this Article Ninth. With respect to any such
action, suit or proceeding as to which Indemnitee notifies the Corporation of
the commencement thereof, the Corporation will be entitled to participate
therein at its own expense.
(f) Except as otherwise provided below, to the extent that it may wish,
the Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof with counsel reasonably
satisfactory to the Indemnitee. After notice from the Corporation to Indemnitee
of its election so to assume the defense thereof, the Corporation will not be
liable to Indemnitee under this Article Ninth for any legal or other expenses
subsequently incurred by Indemnitee in connection with the defense thereof other
than reasonable costs of investigation or as otherwise provided below.
Indemnitee shall have the right to employ its counsel in such action, suit or
proceeding, but the fees and expenses of such counsel, incurred after notice
from the Corporation of its assumption of the defense thereof, shall be at the
expense of Indemnitee unless (i) the employment of counsel by Indemnitee has
been authorized by the Corporation, (ii) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Corporation and
Indemnitee in the conduct of the defense of such, subject to the approval of the
Corporation, which approval shall not be unreasonably withheld, or (iii) the
Corporation shall not in fact have employed counsel to assume the defense of
such action, in each of which cases the fees and expenses of counsel shall be at
the expense of the Corporation. The Corporation shall not be entitled to assume
the defense of any action, suit or proceeding brought by or on behalf of the
Corporation or as to which Indemnitee shall have made the conclusion provided
for in (ii) above.
(g) The Corporation shall not be liable to indemnify Indemnitee under this
Article Ninth for any amounts paid in settlement of any action or claim effected
without its written consent. The Corporation shall not settle any action or
claim in any manner which would impose any penalty or limitation on Indemnitee
without Indemnitee's written consent. Neither the Corporation nor Indemnitee
will unreasonably withhold their consent to any proposed settlement.
(h) In the event Indemnitee is required to bring any action to enforce
rights or to collect moneys due under this Article Ninth and is successful in
such action, the Corporation shall promptly
24
<PAGE>
reimburse Indemnitee for all of Indemnitee's reasonable fees and expenses in
bringing and pursuing such action.
(i) The provisions of this Article Ninth shall inure to the benefit of and
be enforceable by the Indemnitee's personal or legal representatives, executors,
administrators, heirs, devises and legatees.
(j) The Corporation shall have power to purchase and maintain insurance,
at its expense, on behalf of any person who is or was an officer, director,
employee or agent of the Corporation or a subsidiary thereof, or is or was
serving at the request of the Corporation as an officer, director, partner,
member, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including any employee benefit plan, against
any expense, liability or loss asserted against such person and incurred by such
person in any such capacity, or arising out of such person's status as such,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Bylaws, the provisions of this
Article Ninth or the Delaware General Corporation Law.
(k) The indemnification provided by this Article Ninth shall not be deemed
exclusive of any other rights to which a person seeking indemnification may be
entitled under any statute, the Bylaws, other provisions of this Restated
Certificate of Incorporation, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and
as to action in any other capacity while holding such office, and shall continue
as to a person who has ceased to be an officer or director of the Corporation or
a subsidiary thereof or an officer, director, partner, member, employee, trustee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, including any employee benefit plan, and shall inure to the benefit
of the heirs, executors and administrators of such person.
(l) This Article Ninth may be hereafter amended or repealed; provided,
however, that no amendment or repeal shall reduce, terminate, or otherwise
adversely affect the right of a person entitled to obtain indemnification
hereunder with respect to acts or omissions of such person occurring prior to
the effective date of such amendment or repeal.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
executed on behalf of the Corporation this 17th day of March, 2000.
BIRCH TELECOM, INC.
By: /s/ Gregory C. Lawhon
________________________________________
Gregory C. Lawhon, Senior Vice President
25