SEC Filings

S-4/A
TIME WARNER INC. filed this Form S-4/A on 03/24/2000
Entire Document
 


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                                                                     Exhibit 3.7

          CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
             AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
                   RIGHTS, AND QUALIFICATIONS, LIMITATIONS OR
                       RESTRICTIONS THEREOF, OF SERIES I
                          CONVERTIBLE PREFERRED STOCK

                                       OF

                              AOL TIME WARNER INC.
                                _______________

             Pursuant to Section 151 of the General Corporation Law
                            of the State of Delaware
                                _______________


          AOL Time Warner Inc. (the "Corporation"), a corporation organized and
existing by virtue of the General Corporation Law of the State of Delaware (the
"DGCL"), does hereby certify that the following resolution was duly adopted by
action of the Board of Directors of the Corporation (the "Board of Directors")
at a meeting duly held on [              ], 2000.

          RESOLVED that pursuant to the authority expressly granted to and
vested in the Board of Directors by the provisions of Section 2 of Article IV of
the Restated Certificate of Incorporation of the Corporation, as amended from
time to time (the "Certificate of Incorporation"), and Section 151(g) of the
DGCL, the Board of Directors hereby creates, from the authorized shares of
Preferred Stock, par value $0.10 per share ("Preferred Stock"), of the
Corporation authorized to be issued pursuant to the Certificate of
Incorporation, a series of Preferred Stock,
 and hereby fixes the voting powers,
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, of the shares
of such series as follows:

          The series of Preferred Stock hereby established shall consist of
700,000 shares designated as Series I Convertible Preferred Stock. The rights,
preferences and limitations of such series shall be as follows:

          1.  Definitions.  As used herein, the following terms shall have the
              -----------
indicated meanings:

          1.1  "Accrued Dividend Amount" shall mean the aggregate amount of
accrued and unpaid dividends on a share of Series I Stock to and including the
Conversion Date,

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except that if the Conversion Date shall occur after a Record Date and prior to
a related Dividend Payment Date, the Accrued Dividend Amount shall not include
any accrued and unpaid dividends for the period from and after the most recent
Dividend Payment Date.

          1.2  "Board of Directors" shall mean the Board of Directors of the
Corporation or, with respect to any action to be taken by the Board of
Directors, any committee of the Board of Directors duly authorized to take such
action.

          1.3  "Capital Stock" shall mean any and all shares of corporate stock
of a Person (however designated and whether representing rights to vote, rights
to participate in dividends or distributions upon liquidation or otherwise with
respect to such Person, or any division or subsidiary thereof, or any joint
venture, partnership, corporation or other entity).

          1.4  "Certificate" shall mean the certificate of the voting powers,
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, of Series I
Convertible Preferred Stock filed with respect to this resolution with the
Secretary of State of the State of Delaware pursuant to Section 151 of the DGCL.

          1.5  "Change of Control" and "Change of Control Date" shall have the
following meanings:  "Change of Control" shall mean the occurrence of one or
both of the following events:  (a) individuals who would constitute a majority
of the members of the Board of Directors elected at any meeting of stockholders
or by written consent (without regard to any members of the Board of Directors
elected pursuant to the terms of any series of Preferred Stock) shall be elected
to the Board of Directors and the election or the nomination for election by the
Corporation's stockholders of such directors was not approved by a vote of at
least a majority of the directors in office immediately prior to such election
(in which event "Change of Control Date" shall mean the date of such election)
or (b) a Person or group of Persons acting in concert as a partnership, limited
partnership, syndicate or other group within the meaning of Rule 13d-3 under the
Exchange Act (the "Acquiring Person") shall, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases, share repurchases
or redemptions or otherwise, have become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the outstanding
shares of 

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Common Stock (in which event "Change of Control Date" shall mean the date of the
event resulting in such 40% ownership).

          1.6  "Closing Price" of the Common Stock shall mean the last reported
sale price of the Common Stock (regular way) as shown on the Composite Tape of
the NYSE, or, in case no such sale takes place on such day, the  average of the
closing bid and asked prices on the NYSE, or, if the Common Stock is not listed
or admitted to trading on  the NYSE, on the principal national securities
exchange on  which such stock is listed or admitted to trading, or, if it is not
listed or admitted to trading on any national securities exchange, the last
reported sale price of the Common Stock, or, in case no such sale takes place on
such  day, the average of the closing bid and asked prices, in either case as
reported by NASDAQ.

          1.7  "Common Dividend Deficiency" shall be applicable in the event
that a Conversion Date shall fall after a record date and prior to the related
payment date for a regularly scheduled cash dividend on the Common Stock (the
"Common Dividend Payment Date"), and in such event shall mean the product of (i)
the Conversion Rate, (ii) the amount per share of Common Stock of the regularly
scheduled cash dividend for which the record date has been set but a payment
date has not yet occurred and (iii) a fraction (A) the numerator of which is the
number of calendar days from and excluding the Conversion Date (or in the event
the Conversion Date falls after a Record Date and on or prior to a related
Dividend Payment Date, from and excluding the Dividend Payment Date) to and
including the Common Dividend Payment Date and (B) the denominator of which is
91 (provided that such fraction shall not be greater than one (1)).

          1.8  "Common Dividend Excess" shall be applicable in all circumstances
where a Common Dividend Deficiency is not applicable, and in such event shall
mean the product of (i) the Conversion Rate, (ii) the regular quarterly cash
dividend per share, if any, paid by the Corporation on the Common Stock (the
"Historical Dividend") on the most recent dividend payment date for the Common
Stock (the "Prior Dividend Payment Date") occurring during the four months
immediately preceding the Conversion Date and (iii) a fraction (A) the numerator
of which is the number of calendar days from and excluding (1) the Prior
Dividend Payment Date to and including (2) the Conversion Date (or in the event
the Conversion Date falls after a Record Date and on or prior to a related
Dividend Payment Date, to and including the Dividend Payment Date) and

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(B) the denominator of which is 91 days (provided that in no event shall the
fraction be greater than one (1)).

          1.9  "Common Stock" shall mean the class of Common Stock, par value
$0.01 per share, of the Corporation authorized at the date of the Certificate,
or any other class of stock resulting from (x) successive changes or
reclassifications of such Common Stock consisting of changes in par value, or
from par value to no par value, (y) a subdivision or combination or (z) any
other changes for which an adjustment is made under Section 3.6(a), and in any
such case including any shares thereof authorized after the date of the
Certificate, together with any associated rights to purchase other securities of
the Corporation that are at the time represented by the certificates
representing such shares of Common Stock.

          1.10 "Conversion Date" shall have the meaning set forth in
Section 3.5 hereof.

          1.11 "Conversion Price" at any time shall mean the Liquidation Value
per share divided by the Conversion Rate in effect at such time (rounded to the
nearest one hundredth of a cent).

          1.12 "Conversion Rate" shall have the meaning set forth in
Section 3.1 hereof.

          1.13 "Converting Holder" shall have the meaning set forth in
Section 3.5 hereof.

          1.14 "Corporation" shall mean AOL Time Warner Inc., a Delaware
corporation, and any of its successors by operation of law, including by merger,
consolidation or sale or conveyance of all or substantially all of its property
and assets.

          1.15 "Current Market Price" of the Common Stock on any date shall mean
the average of the daily Closing Prices per share of the Common Stock for the
five (5) consecutive Trading Days ending on the Trading Day immediately
preceding the applicable record date, conversion date, redemption date or
exchange date referred to in Section 3 or Section 4.

          1.16 "Dividend Payment Date" shall have the meaning set forth in
Section 2.1 hereof.

          1.17 "DGCL" shall mean the General Corporation Law of the State
of Delaware.

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          1.18 "Exchange Act" shall mean Securities Exchange Act of 1934,
as amended.

          1.19 "Exchange Price" shall have the meaning set forth in Section
4.1 hereof.

          1.20 "Junior Stock" shall mean the Common Stock, the Series LMC Stock,
the Series LMCN-V Stock and the shares of any other class or series of Capital
Stock of the Corporation that, by the terms of the Certificate of Incorporation
or of the instrument by which the Board of Directors, acting pursuant to
authority granted in the Certificate of Incorporation, shall fix the relative
rights, preferences and limitations thereof, shall be junior to the Series I
Stock in respect of the right to receive dividends or to participate in any
distribution of assets other than by way of dividends.

          1.21 "Liquidation Value" shall have the meaning set forth in
Section 7.1 hereof.

          1.22 "Merger Agreement" shall mean the Amended and Restated Agreement
and Plan of Merger dated as of January 10, 2000, among AOL Time Warner Inc.,
America Online, Inc., Time Warner Inc., America Online Merger Sub Inc. and Time
Warner Merger Sub Inc., as such agreement may be amended from time to time in
accordance with its terms.

          1.23 "NASDAQ" shall mean the Nasdaq Stock Market.

          1.24 "Net Dividend Amount" shall have the meaning set forth in
Section 3.1 hereof.

          1.25 "NYSE" shall mean the New York Stock Exchange, Inc.

          1.26 "Parity Stock" shall mean the Series E Stock, the Series F Stock,
the Series J Stock and the shares of any other class or series of Capital Stock
of the Corporation that, by the terms of the Certificate of Incorporation or of
the instrument by which the Board of Directors, acting pursuant to authority
granted in the Certificate of Incorporation, shall fix the relative rights,
preferences and limitations thereof, shall, in the event that the stated
dividends thereon are not paid in full, be entitled to share ratably with the
Series I Stock in the payment of dividends, including accumulations, if any, in
accordance with the sums that would be payable on such shares if all dividends
were declared and paid in full, or

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shall, in the event that the amounts payable thereon on liquidation are not paid
in full, be entitled to share ratably with the Series I Stock in any
distribution of assets other than by way of dividends in accordance with the
sums that would be payable in such distribution if all sums payable were
discharged in full; provided, however, that the term "Parity Stock" shall be
                    --------  -------
deemed to refer (i) in Section 2.2 hereof, to any stock that is Parity Stock in
respect of dividend rights; (ii) in Section 7 hereof, to any stock that is
Parity Stock in respect of the distribution of assets; and (iii) in Sections 6.2
and 6.3 hereof, to any stock that is Parity Stock in respect of either dividend
rights or the distribution of assets and that, pursuant to the Certificate of
Incorporation or any instrument in which the Board of Directors, acting pursuant
to authority granted in the Certificate of Incorporation, shall so designate, is
entitled to vote with the holders of Series I Stock.

          1.27 "Person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.

          1.28 "Preferred Stock" shall mean the class of Preferred Stock, par
value $0.10 per share, of the Corporation authorized at the date of the
Certificate, including any shares thereof authorized after the date of the
Certificate.

          1.29 "Pro Rata Portion" shall have the meaning set forth in
Section 5.6 hereof.

          1.30 "Pro Rata Repurchase" shall mean the purchase of shares of Common
Stock by the Corporation or by any of its subsidiaries, whether for cash or
other property or securities of the Corporation, which purchase is subject to
Section 13(e) of the Exchange Act or is made pursuant to an offer made available
to all holders of Common Stock, but excluding any purchase made in open market
transactions that satisfies the conditions of clause (b) of Rule 10b-18 under
the Exchange Act or has been designed (as reasonably determined by the Board of
Directors) to prevent such purchase from having a material effect on the trading
market of the Common Stock.  The "Effective Date" of a Pro Rata Repurchase shall
mean the applicable expiration date (including all extensions thereof) of any
tender or exchange offer that is a Pro Rata Repurchase or the date of purchase
with respect to any Pro Rata Repurchase that is not a tender or exchange offer.

          1.31 "Record Date" shall have the meaning set forth in Section
2.1 hereof.

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          1.32 "Redemption Price" shall have the meaning set forth in
Section 4.1 hereof.


          1.33 "Redemption Rescission Event" shall mean the occurrence of (a)
any general suspension of trading in, or limitation on prices for, securities on
the principal national securities exchange on which shares of Common Stock are
registered and listed for trading (or, if shares of Common Stock are not
registered and listed for trading on any such exchange, in the over-the-counter
market) for more than six-and-one-half (6-1/2) consecutive trading hours, (b)
any decline in either the Dow Jones Industrial Average or the Standard & Poor's
Index of 400 Industrial Companies (or any successor index published by Dow Jones
& Company, Inc.  or Standard & Poor's Corporation) by either (i) an amount in
excess of 10%, measured from the close of business on any Trading Day to the
close of business on the next succeeding Trading Day during the period
commencing on the Trading Day preceding the day notice of any redemption of
shares of this Series is given (or, if such notice is given after the close of
business on a Trading Day, commencing on such Trading Day) and ending at the
earlier of (x) the time and date fixed for redemption in such notice and (y) the
time and date at which the Corporation shall have irrevocably deposited funds
with a designated bank or trust company pursuant to Section 4.4 or (ii) an
amount in excess of 15% (or, if the time and date fixed for redemption is more
than 15 days following the date on which notice of redemption is given, 20%),
measured from the close of business on the Trading Day preceding the day notice
of such redemption is given (or, if such notice is given after the close of
business on a Trading Day, from such Trading Day) to the close of business on
any Trading Day on or prior to the earlier of the dates specified in clauses (x)
and (y) above, (c) a declaration of a banking moratorium or any suspension of
payments in respect of banks by Federal or state authorities in the United
States or (d) the commencement of a war or armed hostilities or other national
or international calamity directly or indirectly involving the United States
that in the reasonable judgment of the Corporation could have a material adverse
effect on the market for the Common Stock.

          1.34 "Rescission Date" shall have the meaning set forth in
Section 4.5 hereof.

          1.35 "Senior Stock" shall mean the shares of any class or series of
Capital Stock of the Corporation that, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors, acting

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pursuant to authority granted in the Certificate of Incorporation, shall fix the
relative rights, preferences and limitations thereof, shall be senior to the
Series I Stock in respect of the right to receive dividends or to participate in
any distribution of assets other than by way of dividends.

          1.36 "Series E Stock" shall mean the series of Preferred Stock
authorized and designated as Series E Convertible Preferred Stock at the date of
the Certificate, including any shares thereof authorized and designated after
the date of the Certificate.

          1.37 "Series F Stock" shall mean the series of Preferred Stock
authorized and designated as Series F Convertible Preferred Stock at the date of
the Certificate, including any shares thereof authorized and designated after
the date of the Certificate.

          1.38 "Series I Stock" and "this Series" shall mean the series of
Preferred Stock authorized and designated as the Series I Convertible Preferred
Stock, including any shares thereof authorized and designated after the date of
the Certificate.

          1.39 "Series J Stock" shall mean the series of Preferred Stock
authorized and designated as Series J Convertible Preferred Stock at the date of
the Certificate, including any shares thereof authorized and designated after
the date of the Certificate.

          1.40 "Series LMC Stock" shall mean the, series of Series Common Stock
authorized and designated as Series LMC Common Stock at the date of the
Certificate, including any shares thereof authorized and designated after the
date of the Certificate.

          1.41 "Series LMCN-V Stock" shall mean the series of Series Common
Stock authorized and designated as Series LMCN-V Common Stock at the date of the
Certificate, including any shares thereof authorized and designated after the
date of the Certificate.

          1.42 "Surrendered Shares" shall have the meaning set forth in
Section 3.5 hereof.

          1.43 "Trading Day" shall mean, so long as the Common Stock is listed
or admitted to trading on the NYSE, a day on which the NYSE is open for the
transaction of business, or, if the Common Stock is not listed or admitted to
trading on the NYSE, a day on which the principal

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national securities exchange on which the Common Stock is listed is open for the
transaction of business, or, if the Common Stock is not so listed or admitted
for trading on any national securities exchange, a day on which NASDAQ is open
for the transaction of business.

          2.  Cash Dividends.
              --------------

          2.1   The holders of the outstanding Series I Stock shall be entitled
to receive quarter-annual dividends, as and when declared by the Board of
Directors out of funds legally available therefor.  Each quarter-annual dividend
shall be an amount per share equal to, in the case of each Dividend Payment Date
(as defined below), an amount per $100 of Liquidation Value of Series I Stock
equal to the product of (1) the Conversion Rate and (2) the aggregate per share
amount of regularly scheduled dividends paid in cash on the Common Stock during
the period from but excluding the immediately preceding Dividend Payment Date to
and including such Dividend Payment Date.  All dividends shall be payable in
cash on or about the first day of March, June, September and December in each
year, beginning on the first such date that is more than 15 days after the date
of issuance of the relevant shares of Series I Stock, as fixed by the Board of
Directors, or such other dates as are fixed by the Board of Directors (each a
"Dividend Payment Date"), to the holders of record of Series I Stock at the
close of business on or about the Trading Day next preceding such first day of
March, June, September and December as the case may be, as fixed by the Board of
Directors, or such other dates as are fixed by the Board of Directors (each a
"Record Date"). Dividends on the Series I Stock (determined as to amount as
provided herein) shall accrue to the extent, but only to the extent, that
regularly scheduled cash dividends are declared by the Board of Directors on the
Common Stock with a payment date after the Dividend Payment Date next preceding
the date of original issuance of such Series I Stock.  All dividends that accrue
in accordance with the foregoing provisions shall be cumulative from and after
the day immediately succeeding the date of issuance of the relevant shares of
Series I Stock.  The amount payable to each holder of record on any Dividend
Payment Date shall be rounded to the nearest cent.

          2.2  Except as hereinafter provided in this Section 2.2, unless all
dividends on the outstanding shares of Series I Stock and any Parity Stock that
shall have accrued and become payable as of any date shall have been paid, or
declared and funds set apart for payment thereof, no dividend or other
distribution (payable other than in shares of Junior Stock) shall be paid to the
holders of

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Junior Stock or Parity Stock, and no shares of Series I Stock, Parity Stock or
Junior Stock shall be purchased, redeemed or otherwise acquired by the
Corporation or any of its subsidiaries (except by conversion into or exchange
for Junior Stock), nor shall any monies be paid or made available for a
purchase, redemption or sinking fund for the purchase or redemption of any
Series I Stock, Junior Stock or Parity Stock. When dividends are not paid in
full upon the shares of this Series and any Parity Stock, all dividends declared
upon shares of this Series and all Parity Stock shall be declared pro rata so
that the amount of dividends declared per share on this Series and all such
Parity Stock shall in all cases bear to each other the same ratio that accrued
dividends per share on the shares of this Series and all such Parity Stock bear
to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on this Series that may
be in arrears.

          2.3  In case the Corporation shall at any time distribute (other than
a distribution in liquidation of the Corporation) to the holders of its shares
of Common Stock any assets or property, including debt or equity securities of
the Corporation (other than Common Stock subject to a distribution or
reclassification covered by Section 3.6(a)) or of any other Person (including
common stock of such Person) or cash (but excluding regularly scheduled cash
dividends payable on shares of Common Stock), or in case the Corporation shall
at any time distribute (other than a distribution in liquidation of the
Corporation) to such holders rights, options or warrants to subscribe for or
purchase shares of Common Stock (including shares held in the treasury of the
Corporation), or rights, options or warrants to subscribe for or purchase any
other security or rights, options or warrants to subscribe for or purchase any
assets or property (in each case, whether of the Corporation or otherwise, but
other than any distribution of rights to purchase securities of the Corporation
if the holder of shares of this Series would otherwise be entitled to receive
such rights upon conversion of shares of this Series for Common Stock; provided,
                                                                       --------
however, that if such rights are subsequently redeemed by the Corporation, such
-------
redemption shall be treated for purposes of this Section 2.3 as a cash dividend
(but not a regularly scheduled cash dividend) on the Common Stock), the
Corporation shall simultaneously distribute such assets, property, securities,
rights, options or warrants pro rata to the holders of Series I Stock on the
record date fixed for determining holders of Common Stock entitled to
participate in such distribution (or, if no such record date shall be
established, the effective time thereof) in an

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amount equal to the amount that such holders of Series I Stock would have been
entitled to receive had their shares of Series I Stock been converted into
Common Stock immediately prior to such record date (or effective time). In the
event of a distribution to holders of Series I Stock pursuant to this Section
2.3, such holders shall be entitled to receive fractional shares or interests
only to the extent that holders of Common Stock are entitled to receive the
same. The holders of Series I Stock on the applicable record date (or effective
time) shall be entitled to receive in lieu of such fractional shares or
interests the same consideration as is payable to holders of Common Stock with
respect thereto. If there are no fractional shares or interests payable to
holders of Common Stock, the holders of Series I Stock on the applicable record
date (or effective time) shall receive in lieu of such fractional shares or
interests the fair value thereof as determined by the Board of Directors.

          2.4  If a distribution is made in accordance with the provisions of
Section 2.3, anything in Section 3 to the contrary notwithstanding, no
adjustment pursuant to Section 3 shall be effected by reason of the distribution
of such assets, property, securities, rights, options or warrants or the
subsequent modification, exercise, expiration or termination of such securities,
rights, options or warrants.

          2.5  In the event that the holders of Common Stock are entitled to
make any election with respect to the kind or amount of securities or other
property receivable by them in any distribution that is subject to Section 2.3,
the kind and amount of securities or other property that shall be distributable
to the holders of the Series I Stock shall be based on (i) the election, if any,
made by the record holder (as of the date used for determining the holders of
Common Stock entitled to make such election) of the largest number of shares of
Series I Stock in writing to the Corporation on or prior to the last date on
which a holder of Common Stock may make such an election or (ii) if no such
election is timely made, an assumption that such holder failed to exercise any
such rights (provided that if the kind or amount of securities or other property
is not the same for each nonelecting holder, then the kind and amount of
securities or other property receivable by holders of the Series I Stock shall
be based on the kind or amount of securities or other property receivable by a
plurality of shares held by the nonelecting holders of Common Stock).
Concurrently with the mailing to holders of Common Stock of any document
pursuant to which such holders may make an election of the type referred to in
this Section, the

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Corporation shall mail a copy thereof to the record holders of the Series I
Stock as of the date used for determining the holders of record of Common Stock
entitled to such mailing.

          3.  Conversion Rights.
              -----------------

          3.1  Each holder of a share of this Series shall have the right at any
time or as to any share of this Series called for redemption or exchange, at any
time prior to the close of business on the date fixed for redemption or exchange
(unless the Corporation defaults in the payment of the Redemption Price or fails
to exchange the shares of this Series for the applicable number of shares of
Common Stock and any cash portion of the Exchange Price or exercises its right
to rescind such redemption pursuant to Section 4.5, in which case such right
shall not terminate at the close of business on such date), to convert such
share into (i) a number of shares of Common Stock equal to 6.24792 shares of
Common Stock for each share of this Series, subject to adjustment as provided in
this Section 3 (such rate, as so adjusted from time to time, is herein called
the "Conversion Rate") plus (ii) a number of shares of Common Stock equal to

               (A)  (1) the Accrued Dividend Amount minus (2) the Common
                                                    -----
     Dividend Excess, if applicable, or plus (3) the Common Dividend Deficiency,
                                        ----
     if applicable (the "Net Dividend Amount"), divided by
                                                ------- --

               (B)  the Closing Price of the Common Stock on the last Trading
     Day prior to the Conversion Date;

provided, however, that in the event that the Net Dividend Amount is a negative
--------  -------
number, the number of shares deliverable upon conversion of a share of Series I
Stock shall be equal to

               (I)  the number of shares determined pursuant to clause (i) minus

               (II)  a number of shares equal to (x) the absolute value of the
     Net Dividend Amount divided by (y) the Closing Price of the Common Stock on
                         ----------
     the last Trading Day prior to the Conversion Date;

and provided further that, in the event that the Net Dividend Amount is a
-------------------------
positive number, the Corporation shall have the right to deliver cash equal to
the Net Dividend Amount or any portion thereof, in which case its obligation to
deliver shares of Common Stock pursuant to clause (ii)

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shall be reduced by a number of shares equal to (x) the aggregate amount of cash
so delivered divided by (y) the Closing Price of the Common Stock on the last
             ------- --
Trading Day prior to the Conversion Date, unless the Corporation shall deliver
cash equal to the entire Net Dividend Amount, in which case its entire
obligation under clause (ii) shall be discharged. The obligations of the
Corporation to issue the Common Stock or make the cash payments provided by this
Section 3.1 shall be absolute whether or not any accrued dividend by which such
issuance or payment is measured has been declared by the Board of Directors and
whether or not the Corporation would have adequate surplus or net profits to pay
such dividend if declared or is otherwise restricted from making such dividend.

          3.2  Except as provided in this Section 3, no adjustments in respect
of payments of dividends on shares surrendered for conversion or any dividend on
the Common Stock issued upon conversion shall be made upon the conversion of any
shares of this Series (it being understood that if the Conversion Date for
shares of Series I Stock occurs after a Record Date and on or prior to a
Dividend Payment Date, the holder of record on such Record Date shall be
entitled to receive the dividend payable with respect to such shares on the
related Dividend Payment Date pursuant to Section 2.1 hereof).

          3.3  The Corporation may, but shall not be required to, in connection
with any conversion of shares of this Series, issue a fraction of a share of
Common Stock, and if the Corporation shall determine not to issue any such
fraction, the Corporation shall, subject to Section 3.6(c), make a cash payment
(rounded to the nearest cent) equal to such fraction multiplied by the Closing
Price of the Common Stock on the last Trading Day prior to the Conversion Date.

          3.4  Any holder of shares of this Series electing to convert such
shares into Common Stock shall surrender the certificate or certificates for
such shares at the office of the transfer agent or agents therefor (or at such
other place as the Corporation may designate by notice to the holders of shares
of this Series) during regular business hours, duly endorsed to the Corporation
or in blank, or accompanied by instruments of transfer to the Corporation or in
blank, or in form satisfactory to the Corporation, and shall give written notice
to the Corporation at such office that such holder elects to convert such shares
of this Series.  The Corporation shall, as soon as practicable (subject to
Section 3.6(d)) after such deposit of certificates for shares of this Series,
accompanied by the written notice above prescribed, issue

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and deliver at such office to the holder for whose account such shares were
surrendered, or to his nominee, certificates representing the number of shares
of Common Stock and the cash, if any, to which such holder is entitled upon such
conversion.

          3.5  Conversion shall be deemed to have been made as of the date (the
"Conversion Date") that certificates for the shares of this Series to be
converted, and the written notice prescribed in Section 3.4 are received by the
transfer agent or agents for this Series; and the Person entitled to receive the
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such Common Stock on such date. Notwithstanding anything to
the contrary contained herein, in the event the Corporation shall have rescinded
a redemption of shares of this Series pursuant to Section 4.5, any holder of
shares of this Series that shall have surrendered shares of this Series for
conversion following the day on which notice of the subsequently rescinded
redemption shall have been given but prior to the close of business on the later
of (a) the Trading Day next succeeding the date on which public announcement of
the rescission of such redemption shall have been made and (b) the Trading Day
on which the notice of rescission required by Section 4.5 is deemed given
pursuant to Section 8.2 (a "Converting Holder"), may rescind the conversion of
such shares surrendered for conversion by (i) properly completing a form
prescribed by the Corporation and mailed to holders of shares of this Series
(including Converting Holders) with the Corporation's notice of rescission,
which form shall provide for the certification by any Converting Holder
rescinding a conversion on behalf of any beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of shares of this Series that the beneficial
ownership (within the meaning of such Rule) of such shares shall not have
changed from the date on which such shares were surrendered for conversion to
the date of such certification and (ii) delivering such form to the Corporation
no later than the close of business on that date which is ten (10) Trading Days
following the date on which the Corporation's notice of rescission is deemed
given pursuant to Section 8.2.  The delivery of such form by a Converting Holder
shall be accompanied by (x) any certificates representing shares of Common Stock
issued to such Converting Holder upon a conversion of shares of this Series that
shall be rescinded by the proper delivery of such form (the "Surrendered
Shares"), (y) any securities, evidences of indebtedness or assets (other than
cash) distributed by the Corporation to such Converting Holder by reason of such
Converting Holder's being a record holder of Surrendered Shares and (z) payment

<PAGE>
 
                                                                              15

in New York Clearing House funds or other funds acceptable to the Corporation of
an amount equal to the sum of (I) any cash such Converting Holder may have
received in lieu of the issuance of fractional shares upon conversion and (II)
any cash paid or payable by the Corporation to such Converting Holder by reason
of such Converting Holder being a record holder of Surrendered Shares.  Upon
receipt by the Corporation of any such form properly completed by a Converting
Holder and any certificates, securities, evidences of indebtedness, assets or
cash payments required to be returned or made by such Converting Holder to the
Corporation as set forth above, the Corporation shall instruct the transfer
agent or agents for shares of Common Stock and shares of this Series to cancel
any certificates representing Surrendered Shares (which Surrendered Shares shall
be deposited in the treasury of the Corporation) and reissue certificates
representing shares of this Series to such Converting Holder (which shares of
this Series shall be deemed to have been outstanding at all times during the
period following their surrender for conversion).  The Corporation shall, as
promptly as practicable, and in no event more than five (5) Trading Days,
following the receipt of any such properly completed form and any such
certificates, securities, evidences of indebtedness, assets or cash payments
required to be so returned or made, pay to the Converting Holder or as otherwise
directed by such Converting Holder any dividend or other payment made on such
shares during the period from the time such shares shall have been surrendered
for conversion to the rescission of such conversion.  All questions as to the
validity, form, eligibility (including time or receipt) and acceptance of any
form submitted to the Corporation to rescind the conversion of shares of this
Series, including questions as to the proper completion or execution of any such
form or any certification contained therein, shall be resolved by the
Corporation, whose determination shall be final and binding.  The Corporation
shall not be required to deliver certificates for shares of Common Stock while
the stock transfer books for such stock or for this Series are duly closed for
any purpose or during any period commencing at a Redemption Rescission Event and
ending at either (i) the time and date at which the Corporation's right of
rescission shall expire pursuant to Section 4.5 if the Corporation shall not
have exercised such right or (ii) the close of business on that day which is ten
(10) Trading Days following the date on which notice of rescission pursuant to
Section 4.4 is deemed given pursuant to Section 8.2 if the Corporation shall
have exercised such right of rescission, but certificates for shares of Common
Stock shall be delivered as soon as practicable after the opening of such books
or the expiration of such period.

<PAGE>
 
                                                                              16

          3.6  The Conversion Rate shall be adjusted from time to time as
follows for events occurring after the effective time of the transactions
contemplated by the Merger Agreement:

               (a)  In case the Corporation shall, at any time or from time to
     time while any of the Series I Stock is outstanding, (i) pay a dividend in
     shares of its Common Stock, (ii) combine its outstanding shares of Common
     Stock into a smaller number of shares, (iii) subdivide its outstanding
     shares of Common Stock or (iv) reclassify (other than by way of a merger
     that is subject to Section 3.7) its shares of Common Stock, then the
     Conversion Rate in effect immediately before such action shall be adjusted
     so that immediately following such event the holders of the Series I Stock
     shall be entitled to receive upon conversion or exchange thereof the kind
     and amount of shares of Capital Stock of the Corporation that they would
     have owned or been entitled to receive upon or by reason of such event if
     such shares of Series I Stock had been converted or exchanged immediately
     before the record date (or, if no record date, the effective date) for such
     event (it being understood that any distribution of cash or of Capital
     Stock (other than Common Stock), including any distribution of Capital
     Stock (other than Common Stock) that shall accompany a reclassification of
     the Common Stock, shall be subject to Section 2.3 rather than this Section
     3.6(a)).  An adjustment made pursuant to this Section 3.6(a) shall become
     effective retroactively immediately after the record date in the case of a
     dividend or distribution and shall become effective retroactively
     immediately after the effective date in the case of a subdivision,
     combination or reclassification.  For the purposes of this Section 3.6(a),
     in the event that the holders of Common Stock are entitled to make any
     election with respect to the kind or amount of securities receivable by
     them in any transaction that is subject to this Section 3.6(a) (including
     any election that would result in all or a portion of the transaction
     becoming subject to Section 2.3), the kind and amount of securities that
     shall be distributable to the holders of the Series I Stock shall be based
     on (i) the election, if any, made by the record holder (as of the date used
     for determining the holders of Common Stock entitled to make such election)
     of the largest number of shares of Series I Stock in writing to the
     Corporation on or prior to the last date on which a holder of Common Stock
     may make such an election or (ii) if no such

<PAGE>
 
                                                                              17

     election is timely made, an assumption that such holder failed to exercise
     any such rights (provided that if the kind or amount of securities is not
     the same for each nonelecting holder, then the kind and amount of
     securities receivable shall be based on the kind or amount of securities
     receivable by a plurality of nonelecting holders of Common Stock).
     Concurrently with the mailing to holders of Common Stock of any document
     pursuant to which such holders may make an election of the type referred to
     in this Section, the Corporation shall mail a copy thereof to the record
     holders of the Series I Stock as of the date used for determining the
     holders of record of Common Stock entitled to such mailing.

               (b)  In case a Change of Control shall occur, the Conversion Rate
     in effect immediately prior to the Change of Control Date shall be
     increased (but not decreased) by multiplying such rate by a fraction as
     follows: (i) in the case of a Change of Control specified in Section
     1.5(a), a fraction in which the numerator is the Conversion Price prior to
     adjustment pursuant hereto and the denominator is the Current Market Price
     of the Common Stock at the Change of Control Date, (ii) in the case of a
     Change of Control specified in Section 1.5(b), the greater of the following
     fractions: (x) a fraction the numerator of which is the highest price per
     share of Common Stock paid by the Acquiring Person in connection with the
     transaction giving rise to the Change of Control or in any transaction
     within six months prior to or after the Change of Control Date (the
     "Highest Price"), and the denominator of which is the Current Market Price
     of the Common Stock as of the date (but not earlier than six months prior
     to the Change of Control Date) on which the first public announcement is
     made by the Acquiring Person that it intends to acquire or that it has
     acquired 40% or more of the outstanding shares of Common Stock (the
     "Announcement Date") or (y) a fraction the numerator of which is the
     Conversion Price prior to adjustment pursuant hereto and the denominator of
     which is the Current Market Price of the Common Stock on the Announcement
     Date and (iii) in the case where there co-exists a Change of Control
     specified in both Section 1.5(a) and Section 1.5(b), the greatest of the
     fractions determined pursuant to clauses (i) and (ii).  Such adjustment
     shall become effective immediately after the Change of Control Date and
     shall be made, in the case of clauses (ii) and (iii) above, successively
     for six months thereafter in the event and at the time of any increase in
     the Highest Price after

<PAGE>
 
                                                                              18

     the Change of Control Date; provided, however, that no such successive
                                 --------  -------
     adjustment shall be made with respect to the Conversion Rate of the shares
     of this Series in respect of any event occurring after the Conversion Date.

               (c)  The Corporation shall be entitled to make such additional
     adjustments in the Conversion Rate, in addition to those required by
     subsections 3.6(a) and 3.6(b), as shall be necessary in order that any
     dividend or distribution in Common Stock or any subdivision,
     reclassification or combination of shares of Common Stock referred to
     above, shall not be taxable to the holders of Common Stock for United
     States Federal income tax purposes so long as such additional adjustments
     pursuant to this Section 3.6(c) do not decrease the Conversion Rate.

               (d)  In any case in which this Section 3.6 shall require that any
     adjustment be made effective as of or retroactively immediately following a
     record date, the Corporation may elect to defer (but only for five (5)
     Trading Days following the occurrence of the event that necessitates the
     filing of the statement referred to in Section 3.6(f)) issuing to the
     holder of any shares of this Series converted after such record date (i)
     the shares of Common Stock and other Capital Stock of the Corporation
     issuable upon such conversion over and above (ii) the shares of Common
     Stock and other Capital Stock of the Corporation issuable upon such
     conversion on the basis of the Conversion Rate prior to adjustment;

     provided, however, that the Corporation shall deliver to such holder a due
     --------  -------
     bill or other appropriate instrument evidencing such holder's right to
     receive such additional shares upon the occurrence of the event requiring
     such adjustment.

               (e)  All calculations under this Section 3 shall be made to the
     nearest cent, one-hundredth of a share or, in the case of the Conversion
     Rate, one hundred-thousandth.  Notwithstanding any other provision of this
     Section 3, the Corporation shall not be required to make any adjustment of
     the Conversion Rate unless such adjustment would require an increase or
     decrease of at least 1.00000% of such Conversion Rate.  Any lesser
     adjustment shall be carried forward and shall be made at the time of and
     together with the next subsequent adjustment that, together with any
     adjustment or adjustments so carried forward, shall amount to an increase
     or decrease of at least 1.00000% in such rate.  Any adjustments under

<PAGE>
 
                                                                              19

     this Section 3 shall be made successively whenever an event requiring such
     an adjustment occurs.

               (f)  Whenever an adjustment in the Conversion Rate is required,
     the Corporation shall forthwith place on file with its transfer agent or
     agents for this Series a statement signed by a duly authorized officer of
     the Corporation, stating the adjusted Conversion Rate determined as
     provided herein. Such statements shall set forth in reasonable detail such
     facts as shall be necessary to show the reason for and the manner of
     computing such adjustment.  Promptly after the adjustment of the Conversion
     Rate, the Corporation shall mail a notice thereof to each holder of shares
     of this Series.

               (g)  In the event that at any time as a result of an adjustment
     made pursuant to this Section 3, the holder of any share of this Series
     thereafter surrendered for conversion shall become entitled to receive any
     shares of Capital Stock of the Corporation other than shares of Common
     Stock, the conversion rate of such other shares so receivable upon
     conversion of any such share of this Series shall be subject to adjustment
     from time to time in a manner and on terms as nearly equivalent as
     practicable to the provisions with respect to Common Stock contained in
     subparagraphs (a) through (f) and (h) of this Section 3.6, and the
     provisions of Sections 3.1 through 3.5 and 3.7 through 3.10 shall apply on
     like or similar terms to any such other shares and the determination of the
     Board of Directors as to any such adjustment shall be conclusive.

               (h)  No adjustment shall be made pursuant to this Section 3.6 (i)
     if the effect thereof would be to reduce the Conversion Price below the par
     value of the Common Stock or (ii) subject to Section 3.6(c) hereof, with
     respect to any share of Series I Stock that is converted, prior to the time
     such adjustment otherwise would be made.

          3.7  In case, after the effective time of the transactions
contemplated by the Merger Agreement, of (a) any consolidation or merger to
which the Corporation is a party, other than a merger or consolidation in which
the Corporation is the surviving or continuing corporation and that does not
result in any reclassification of, or change (other than a change in par value
or from par value to no par value or from no par value to par value, or as a
result of a subdivision or combination) in, outstanding shares of

<PAGE>
 
                                                                              20

Common Stock or (b) any sale or conveyance of all or substantially all of the
property and assets of the Corporation, then lawful provision shall be made as
part of the terms of such transaction whereby the holder of each share of Series
I Stock shall have the right thereafter, during the period such share shall be
convertible or exchangeable, to convert such share into or have such share
exchanged for the kind and amount of shares of stock or other securities and
property receivable upon such consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock into which such shares of this
Series could have been converted or exchanged immediately prior to such
consolidation, merger, sale or conveyance, subject to adjustment that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 3 (based on (i) the election, if any, made in writing to the
Corporation by the record holder (as of the date used for determining holders of
Common Stock entitled to make such election) of the largest number of shares of
Series I Stock on or prior to the last date on which a holder of Common Stock
may make an election regarding the kind or amount of securities or other
property receivable by such holder in such transaction or (ii) if no such
election is timely made, an assumption that such holder failed to exercise any
such rights (provided that if the kind or amount of securities or other property
is not the same for each nonelecting holder, then the kind and amount of
securities or other property receivable shall be based upon the kind and amount
of securities or other property receivable by a plurality of the nonelecting
holders of Common Stock)). In the event that any of the transactions referred to
in clause (a) or (b) involve the distribution of cash (or property other than
equity securities) to a holder of Common Stock, lawful provision shall be made
as part of the terms of the transaction whereby the holder of each share of
Series I Stock on the record date fixed for determining holders of Common Stock
entitled to receive such cash or property (or if no such record date is
established, the effective date of such transaction) shall be entitled to
receive the amount of cash or property that such holder would have been entitled
to receive had such holder converted his shares of Series I Stock into Common
Stock immediately prior to such record date (or effective date) (based on the
election or nonelection made by the record holder of the largest number of
shares of Series I Stock, as provided above). Concurrently with the mailing to
holders of Common Stock of any document pursuant to which such holders may make
an election regarding the kind or amount of securities or other property that
will be receivable by such holder in any transaction described in clause (a) or
(b) of the first sentence of this Section 3.7, the Corporation

<PAGE>
 
                                                                              21

shall mail a copy thereof to the holders of the Series I Stock as of the date
used for determining the holders of record of Common Stock entitled to such
mailing. The Corporation shall not enter into any of the transactions referred
to in clause (a) or (b) of the preceding sentence unless effective provision
shall be made in the certificate or articles of incorporation or other
constituent documents of the Corporation or the entity surviving the
consolidation or merger, if other than the Corporation, or the entity acquiring
the Corporation's assets, as the case may be, so as to give effect to the
provisions set forth in this Section 3.7. The provisions of this Section 3.7
shall apply similarly to successive consolidations, mergers, sales or
conveyances. For purposes of this Section 3.7 the term "Corporation" shall refer
to the Corporation (as defined in Section 1.14) as constituted immediately prior
to the merger, consolidation or other transaction referred to in this Section.

          3.8  The Corporation shall at all times reserve and keep available,
free from preemptive rights, out of its authorized but unissued stock, for the
purpose of effecting the conversion of the shares of this Series, such number of
its duly authorized shares of Common Stock (or, if applicable, any other shares
of Capital Stock of the Corporation) as shall from time to time be sufficient to
effect the conversion of all outstanding shares of this Series into such Common
Stock (or such other shares of Capital Stock) at any time (assuming that, at the
time of the computation of such number of shares, all such Common Stock (or such
other shares of Capital Stock) would be held by a single holder); provided,
                                                                  --------
however, that nothing contained herein shall preclude the Corporation from
-------
satisfying its obligations in respect of the conversion of the shares by
delivery of purchased shares of Common Stock (or such other shares of Capital
Stock) that are held in the treasury of the Corporation.  All shares of Common
Stock (or such other shares of Capital Stock of the Corporation) that shall be
deliverable upon conversion of the shares of this Series shall be duly and
validly issued, fully paid and nonassessable.  For purposes of this Section 3,
any shares of Common Stock at any time outstanding shall not include shares held
in the treasury of the Corporation.

          3.9  If any shares of Common Stock or other shares of Capital Stock of
the Corporation that would be issuable upon conversion of shares of this Series
hereunder require registration with or approval of any governmental authority
before such shares may be issued upon conversion, the Corporation will in good
faith and as expeditiously as possible cause such shares to be duly registered
or

<PAGE>
 
                                                                              22

approved, as the case may be. The Corporation will use commercially reasonable
efforts to list the shares of (or depositary shares representing fractional
interests in) Common Stock or other shares of Capital Stock of the Corporation
required to be delivered upon conversion of shares of this Series prior to such
delivery upon the principal national securities exchange upon which the
outstanding Common Stock or such other shares of Capital Stock is listed at the
time of such delivery.

          3.10 The Corporation shall pay any and all issue or other taxes that
may be payable in respect of any issue or delivery of shares of Common Stock or
other shares of Capital Stock of the Corporation on conversion of shares of this
Series pursuant hereto.  The Corporation shall not, however, be required to pay
any tax that is payable in respect of any transfer involved in the issue or
delivery of Common Stock or such other shares of Capital Stock in a name other
than that in which the shares of this Series so converted were registered, and
no such issue or delivery shall be made unless and until the Person requesting
such issue has paid to the Corporation the amount of such tax, or has
established, to the satisfaction of the Corporation, that such tax has been
paid.

          3.11 In case of (i) the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, (ii) any Pro Rata Repurchase or
(iii) any action triggering an adjustment to the Conversion Rate pursuant to
this Section 3, then, in each case, the Corporation shall cause to be filed with
the transfer agent or agents for the Series I Stock, and shall cause to be
mailed, first-class postage prepaid, to the holders of record of the outstanding
shares of Series I Stock, at least fifteen (15) days prior to the applicable
record date for any such transaction (or if no record date will be established,
the effective date thereof), a notice stating (x) the date, if any, on which a
record is to be taken for the purpose of any such transaction (or if no record
date will be established, the date as of which holders of record of Common Stock
entitled to participate in such transaction are determined), and (y) the
expected effective date thereof.  Failure to give such notice or any defect
therein shall not affect the legality or validity of the proceedings described
in this Section 3.11.

          4.  Redemption or Exchange.
              ----------------------

          4.1  (a)  The Corporation may, at its sole option, subject to Section
2.2 hereof, from time to time, redeem, out of funds legally available therefor,
or, as

<PAGE>
 
                                                                              23

provided below, exchange shares of Common Stock for, all (or in the case of
Section 4.1(b)(i), any part) of the outstanding shares of this Series. The
redemption price for each share of this Series called for redemption pursuant to
clause (i) of Section 4.1(b) shall be the Liquidation Value together with an
amount equal to the accrued and unpaid dividends to the date fixed for
redemption (hereinafter collectively referred to as the "Redemption Price"). The
exchange price for each share of this Series called for exchange pursuant to
clause (ii) of Section 4.1(b) shall be a number of shares of Common Stock equal
to the Conversion Rate, together with, at the option of the Corporation, either
(x) cash or (y) a number of shares of Common Stock, valued at the Closing Price
on the Trading Day immediately preceding the date fixed for exchange, equal, in
either case, to the aggregate amount of accrued and unpaid dividends on the
Series I Stock to the date fixed for exchange (provided that any dividends that
are in arrears must be paid in cash) (hereinafter collectively referred to as
the "Exchange Price").

               (b) On the date fixed for redemption or exchange the Corporation
     shall, at its option, effect either

               (i)   a redemption of the shares of this Series to be redeemed by
     way of payment, out of funds legally available therefor, of cash equal to
     the aggregate Redemption Price for the shares of this Series then being
     redeemed;

               (ii)  an exchange of the shares of this Series for the Exchange
     Price in shares of Common Stock (provided that the Corporation (A) shall be
                                      --------
     entitled to deliver cash (1) in lieu of any fractional share of Common
     Stock (determined in a manner consistent with Section 3.3) and (2) equal to
     accrued and unpaid dividends to the date fixed for exchange in lieu of
     shares of Common Stock and (B) shall be required to deliver cash in respect
     of any dividends that are in arrears); or

               (iii) any combination thereof with respect to each share of this
     Series called for redemption or exchange.

               (c) Notwithstanding clauses (ii) and (iii) of Section 4.1(b), the
     Corporation shall be entitled to effect an exchange of shares of Series I
     Stock for Common Stock or other shares of Capital Stock of the Corporation
     only to the extent that duly and

<PAGE>
 
                                                                              24

     validly issued, fully paid and nonassessable shares of Common Stock (or
     such other shares of Capital Stock) shall be available for issuance
     (including delivery of previously issued shares of Common Stock held in the
     Corporation's treasury on the date fixed for exchange). The Corporation
     shall comply with Sections 3.9 and 3.10 with respect to shares of Common
     Stock or other shares of Capital Stock of the Corporation that would be
     issuable upon exchange of shares of this Series. Certificates for shares of
     Common Stock issued in exchange for surrendered shares of this Series
     pursuant to this Section 4.1 shall be made available by the Corporation not
     later than the fifth Trading Day following the date for exchange.

          4.2  In the event that fewer than all the outstanding shares of this
Series are to be redeemed pursuant to Section 4.1(b)(i), the number of shares to
be redeemed from each holder of shares of this Series shall be determined by the
Corporation by lot or pro rata or by any other method as may be determined by
the Board of Directors in its sole discretion to be equitable, and the
certificate of the Corporation's Secretary or an Assistant Secretary filed with
the transfer agent or transfer agents for this Series in respect of such
determination by the Board of Directors shall be conclusive.

          4.3  In the event the Corporation shall redeem or exchange shares of
this Series pursuant to Section 4.1, notice of such redemption or exchange shall
be given by first class mail, postage prepaid, mailed not less than fifteen (15)
nor more than sixty (60) days prior to the date fixed for redemption or
exchange, as the case may be, to each record holder of the shares to be redeemed
or exchanged, at such holder's address as the same appears on the books of the
Corporation.  Each such notice shall state: (i) whether the shares of this
Series are to be redeemed or exchanged; (ii) the time and date as of which the
redemption or exchange shall occur; (iii) the total number of shares of this
Series to be redeemed or exchanged and, if fewer than all the shares held by
such holder are to be redeemed, the number of such shares to be redeemed from
such holder; (iv) the Redemption Price or the Exchange Price, as the case may
be; (v) that shares of this Series called for redemption or exchange may be
converted at any time prior to the time and date fixed for redemption or
exchange (unless the Corporation shall, in the case of a redemption, default in
payment of the Redemption Price or, in the case of an exchange, fail to exchange
the shares of this Series for the applicable number of shares of Common Stock
and any cash portion of the Exchange Price or shall exercise its right to

<PAGE>
 
                                                                              25

rescind such redemption pursuant to Section 4.5, in which case such right of
conversion shall not terminate at such time and date); (vi) the applicable
Conversion Price and Conversion Rate; (vii) the place or places where
certificates for such shares are to be surrendered for payment of the Redemption
Price, in the case of redemption, or for delivery of certificates representing
the shares of Common Stock and the payment of any cash portion of the Exchange
Price, in the case of exchange; and (viii) that dividends on the shares of this
Series to be redeemed or exchanged will cease to accrue on such redemption or
exchange date.

          4.4  If notice of redemption or exchange shall have been given by the
Corporation as provided in Section 4.3, dividends on the shares of this Series
so called for redemption or exchange shall cease to accrue, such shares shall no
longer be deemed to be outstanding, and all rights of the holders thereof as
stockholders with respect to shares so called for redemption or exchange (except
(i) in the case of redemption, the right to receive from the Corporation the
Redemption Price without interest and in the case of exchange, the right to
receive from the Corporation the Exchange Price without interest and (ii) the
right to convert such shares in accordance with Section 3) shall cease
(including any right to receive dividends otherwise payable on any Dividend
Payment Date that would have occurred after the time and date of redemption or
exchange) either (i) in the case of a redemption or exchange pursuant to Section
4.1, from and after the time and date fixed in the notice of redemption or
exchange as the time and date of redemption or exchange (unless the Corporation
shall (x) in the case of a redemption, default in the payment of the Redemption
Price, (y) in the case of an exchange, fail to exchange the applicable number of
shares of Common Stock and any cash portion of the Exchange Price or (z)
exercise its right to rescind such redemption pursuant to Section 4.5, in which
case such rights shall not terminate at such time and date) or (ii) if the
Corporation shall so elect and state in the notice of redemption or exchange,
from and after the time and date (which date shall be the date fixed for
redemption or exchange or an earlier date not less than fifteen (15) days after
the date of mailing of the redemption or exchange notice) on which the
Corporation shall irrevocably deposit with a designated bank or trust company
doing business in the Borough of Manhattan, City and State of New York, as
paying agent, money sufficient to pay at the office of such paying agent, on the
redemption date, the Redemption Price, in the case of redemption, or
certificates representing the shares of Common Stock to be so exchanged and any
cash portion of the

<PAGE>
 
                                                                              26

Exchange Price, in the case of an exchange. Any money or certificates so
deposited with any such paying agent that shall not be required for such
redemption or exchange because of the exercise of any right of conversion or
otherwise shall be returned to the Corporation forthwith. Upon surrender (in
accordance with the notice of redemption or exchange) of the certificate or
certificates for any shares of this Series to be so redeemed or exchanged
(properly endorsed or assigned for transfer, if the Corporation shall so require
and the notice of redemption or exchange shall so state), such shares shall be
redeemed or exchanged by the Corporation at the Redemption Price or the Exchange
Price, as applicable, as set forth in Section 4.1 (unless the Corporation shall
have exercised its right to rescind such redemption pursuant to Section 4.5). In
case fewer than all the shares represented by any such certificate are to be
redeemed, a new certificate shall be issued representing the unredeemed shares
(or fractions thereof as provided in Section 8.4), without cost to the holder
thereof, together with the amount of cash, if any, in lieu of fractional shares
other than those issuable in accordance with Section 8.4. Subject to applicable
escheat laws, any moneys so set aside by the Corporation in the case of
redemption and unclaimed at the end of one year from the redemption date shall
revert to the general funds of the Corporation, after which reversion the
holders of such shares so called for redemption or exchange shall look only to
the general funds of the Corporation for the payment of the Redemption Price or
the Exchange Price, as applicable, without interest. Any interest accrued on
funds so deposited shall be paid to the Corporation from time to time.

          4.5  In the event that a Redemption Rescission Event shall occur
following any day on which a notice of redemption shall have been given pursuant
to Section 4.3 but at or prior to the earlier of (a) the time and date fixed for
redemption as set forth in such notice of redemption and (b) the time and date
at which the Corporation shall have irrevocably deposited funds or certificates
with a designated bank or trust company pursuant to Section 4.4, the Corporation
may, at its sole option, at any time prior to the earliest of (i) the close of
business on that day which is two (2) Trading Days following such Redemption
Rescission Event, (ii) the time and date fixed for redemption as set forth in
such notice and (iii) the time and date on which the Corporation shall have
irrevocably deposited such funds with a designated bank or trust company,
rescind the redemption to which such notice of redemption shall have related by
making a public announcement of such rescission (the date on which such

<PAGE>
 
                                                                              27

public announcement shall have been made being hereinafter referred to as the
"Rescission Date"). The Corporation shall be deemed to have made such
announcement if it shall issue a release to the Dow Jones News Service, Reuters
Information Services or any successor news wire service. From and after the
making of such announcement, the Corporation shall have no obligation to redeem
shares of this Series called for redemption pursuant to such notice of
redemption or to pay the redemption price therefor and all rights of holders of
shares of this Series shall be restored as if such notice of redemption had not
been given. The Corporation shall give notice of any such rescission by one of
the means specified in Section 8.2 as promptly as practicable, but in no event
later than the close of business on that date which is five (5) Trading Days
following the Rescission Date to each record holder of shares of this Series at
the close of business on the Rescission Date and to any other Person or entity
that was a record holder of shares of this Series and that shall have
surrendered shares of this Series for conversion following the giving of notice
of the subsequently rescinded redemption. Each notice of rescission shall (w)
state that the redemption described in the notice of redemption has been
rescinded, (x) state that any Converting Holder shall be entitled to rescind the
conversion of shares of this Series surrendered for conversion following the day
on which notice of redemption was given but prior to the close of business on
the later of (1) the Trading Day next succeeding the date on which public
announcement of the rescission of such redemption shall have been made and (2)
the Trading Day on which the Corporation's notice of rescission is deemed given
pursuant to Section 8.2, (y) be accompanied by a form prescribed by the
Corporation to be used by any Converting Holder rescinding the conversion of
shares so surrendered for conversion (and instructions for the completion and
delivery of such form, including instructions with respect to payments that may
be required to accompany such delivery shall be in accordance with Section 3.5)
and (z) state that such form must be properly completed and received by the
Corporation no later than the close of business on a date that shall be ten (10)
Trading Days following the date of the mailing of such notice of rescission is
deemed given pursuant to Section 8.2.

          4.6  The shares of this Series shall not be subject to the provisions
of Section 5 of Article IV of the Certificate of Incorporation.

<PAGE>
 
                                                                              28

          5.  Pro Rata Repurchase.
              -------------------

          5.1  Upon a Pro Rata Repurchase, each holder of shares of this Series
shall have the right to require that the Corporation repurchase, out of funds
legally available therefor, a Pro Rata Portion (as defined below) of the shares
of such holder, or any lesser number requested by the holder, at a price per
share equal to the highest price per share of Common Stock paid in the Pro Rata
Repurchase multiplied by the Conversion Rate then in effect plus an amount equal
to the accrued but unpaid dividends on such shares to the date of repurchase.

          5.2  At any time prior to or within thirty (30) days following any Pro
Rata Repurchase, the Corporation shall mail a notice to each holder of shares of
this Series stating:

               (a)  that a Pro Rata Repurchase will occur or has occurred and
     that such holder will have (upon such Pro Rata Repurchase) or has the right
     to require the Corporation to repurchase such holder's shares in an amount
     not in excess of the Pro Rata Portion at a repurchase price in cash
     determined as set forth above plus an amount equal to accrued and unpaid
     dividends, if any, to the date of repurchase;

               (b)  the repurchase date for the Series I Stock (which shall be
     no earlier than fifteen (15) days nor later than sixty (60) days from the
     date such notice is mailed); and

               (c)  the instructions determined by the Corporation, consistent
     with this Section, that a holder must follow in order to have its shares
     repurchased.

          5.3  Holders electing to have any shares repurchased will be required
to surrender such shares, with an appropriate form duly completed, to the
Corporation at the address specified in the notice at least five (5) days prior
to the repurchase date.  Holders will be entitled to withdraw their election if
the Corporation receives, not later than three (3) days prior to the repurchase
date, a telegram, telex, facsimile transmission or letter setting forth the name
of the holder, the certificate numbers of the shares delivered for purchase by
the holder and a statement that such holder is withdrawing his election to have
such shares repurchased.  Holders will have such additional withdrawal and other
rights as may be required pursuant to applicable law.

<PAGE>
 
                                                                              29

          5.4  On the repurchase date, the Corporation shall (i) pay the
repurchase price plus an amount equal to accrued and unpaid dividends as
provided in Section 5.1, if any, to the holders entitled thereto and (ii) issue
to such holders any equity securities of the Corporation (other than Common
Stock) that would at the time be issuable upon conversion of the shares of
Series I Stock that are then being repurchased pursuant hereto.

          5.5  The Board of Directors will not approve any tender or exchange
offer by the Corporation or a third party for shares of Common Stock or
recommend that the holders of Common Stock accept any offer or tender their
shares into any offer unless a Pro Rata Portion of the shares of this Series of
all holders are entitled to be tendered into such offer at a price not less than
the price per share for shares of Common Stock pursuant to such offer multiplied
by the Conversion Rate then in effect plus an amount equal to accrued but unpaid
dividends on such shares to the date of payment for such shares in such tender
or exchange offer.

          5.6  For purposes hereof, "Pro Rata Portion" with respect to the
shares of this Series held by any holder shall mean all the shares of this
Series then owned by such holder times a fraction, the numerator of which is the
number of outstanding shares of Common Stock (a) purchased in the applicable Pro
Rata Repurchase or (b) for which a tender or exchange offer referred to in
Section 5.5 is made, as the case may be, and the denominator of which is the
number of outstanding shares of Common Stock immediately prior to such Pro Rata
Repurchase or the commencement of such tender or exchange offer, as the case may
be.

          6.  Voting.  The shares of this Series shall have no voting rights
              ------
except as required by law or as set forth below.

          6.1  Each share of this Series shall be entitled to vote together with
holders of the shares of Common Stock (and any other class or series that may
similarly be entitled to vote with the shares of Common Stock) as a single class
upon all matters upon which holders of Common Stock are entitled to vote.  In
any such vote, the holders of this Series shall be entitled to six (6) votes per
$100 of Liquidation Value of Series I Stock, subject to adjustment at the same
time and in the same manner as each adjustment of the Conversion Rate pursuant
to Section 3, so that the holders of this Series shall be entitled following
such adjustment to the number of votes equal to the number

<PAGE>
 
                                                                              30

of votes such holders were entitled to under this Section 6.1 immediately prior
to such adjustment multiplied by a fraction (x) the numerator of which is the
Conversion Rate as adjusted pursuant to Section 3 and (y) the denominator of
which is the Conversion Rate immediately prior to such adjustment.

          6.2  (a)  So long as any shares of this Series remain outstanding,
unless a greater percentage shall then be required by law, the Corporation shall
not, without the affirmative vote at a meeting or the written consent with or
without a meeting of the holders of shares of this Series representing at least
66-2/3% of the aggregate voting power of shares of this Series then outstanding
(i) authorize any Senior Stock or reclassify (by merger, consolidation or
otherwise) any Junior Stock or Parity Stock as Senior Stock, (ii) merge into or
consolidate with any Person where the surviving or continuing corporation will
have any authorized Senior Stock other than Capital Stock corresponding to
shares of Senior Stock existing immediately before such merger or consolidation
or (iii) amend, alter or repeal (by operation of law or otherwise) any of the
provisions of the Certificate or the Certificate of Incorporation, so as in any
such case to adversely affect the voting powers, designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions of the shares of this Series.

               (b)  No consent of holders of shares of this Series shall be
required for (i) the creation of any indebtedness of any kind of the
Corporation, (ii) the authorization or issuance of any class of Junior Stock or
Parity Stock, (iii) the authorization, designation or issuance of additional
shares of Series I Stock or (iv) subject to Section 6.2(a), the authorization or
issuance of any other shares of Preferred Stock.

          6.3  (a)  If and whenever at any time or times dividends payable on
shares of this Series shall have been in arrears and unpaid in an aggregate
amount equal to or exceeding the amount of dividends payable thereon for six
quarterly dividend periods, then the number of directors constituting the Board
of Directors shall be increased by two and the holders of shares of this Series,
together with the holders of any shares of any Parity Stock as to which in each
case dividends are in arrears and unpaid in an aggregate amount equal to or
exceeding the amount of dividends payable thereon for six quarterly dividend
periods, shall have the exclusive right, voting separately

<PAGE>
 
                                                                              31

as a class with such other series, to elect two directors of the Corporation.

          (b) Such voting right may be exercised initially either by written
consent or at a special meeting of the holders of the Preferred Stock having
such voting right, called as hereinafter provided, or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at each
such annual meeting until such time as all dividends in arrears on the shares of
this Series shall have been paid in full and all dividends payable on the shares
of this Series on four subsequent consecutive Dividend Payment Dates shall have
been paid in full on such dates or funds shall have been set aside for the
payment thereof, at which time such voting right and the term of the directors
elected pursuant to Section 6.3(a) shall terminate.

          (c) At any time when such voting right shall have vested in holders of
shares of such series of Preferred Stock described in Section 6.3(a), and if
such right shall not already have been exercised by written consent, a proper
officer of the Corporation may call, and, upon the written request, addressed to
the Secretary of the Corporation, of the record holders of shares representing
ten percent (10%) of the voting power of the shares then outstanding of such
Preferred Stock having such voting right, shall call, a special meeting of the
holders of such Preferred Stock having such voting right.  Such meeting shall be
held at the earliest practicable date upon the notice required for annual
meetings of stockholders at the place for holding annual meetings of
stockholders, or, if none, at a place designated by the Board of Directors.
Notwithstanding the provisions of this Section 6.3(c), no such special meeting
shall be called during a period within 60 days immediately preceding the date
fixed for the next annual meeting of stockholders.

          (d) At any meeting held for the purpose of electing directors at which
the holders of such Preferred Stock shall have the right to elect directors as
provided herein, the presence in Person or by proxy of the holders of shares
representing more than fifty percent (50%) in voting power of the then
outstanding shares of such Preferred Stock having such right shall be required
and shall be sufficient to constitute a quorum of such class for the election of
directors by such class.

          (e) Any director elected by holders of Preferred Stock pursuant to the
voting right created under this Section 6.3 shall hold office until the next
annual

<PAGE>
 
                                                                              32

meeting of stockholders (unless such term has previously terminated pursuant to
Section 6.3(b)) and any vacancy in respect of any such director shall be filled
only by vote of the remaining director, by the holders of such Preferred Stock,
entitled to elect such director or directors by written consent or at a special
meeting called in accordance with the procedures set forth in Section 6.3(c),
or, if no special meeting is called or written consent executed, at the next
annual meeting of stockholders. Upon any termination of such voting right,
subject to applicable law, the term of office of all directors elected by
holders of such Preferred Stock voting separately as a class pursuant to this
Section 6.3 shall terminate.

          (f) In exercising the voting rights set forth in this Section 6.3,
each share of this Series shall have a number of votes equal to its Liquidation
Value.

          7.  Liquidation Rights.
              ------------------

          7.1  Upon the dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of this
Series shall be entitled to receive out of the assets of the Corporation
available for distribution to stockholders, in preference to the holders of, and
before any payment or distribution shall be made on, Junior Stock, the amount of
$100 per share (the "Liquidation Value"), plus an amount equal to all accrued
and unpaid dividends to the date of final distribution.

          7.2  Neither the sale, exchange or other conveyance (for cash, shares
of stock, securities or other consideration) of all or substantially all the
property and assets of the Corporation nor the merger or consolidation of the
Corporation into or with any other corporation into or with the Corporation,
shall be deemed to be a dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this Section 7.

          7.3  After the payment to the holders of the shares of this Series of
full preferential amounts provided for in this Section 7, the holders of this
Series as such shall have no right or claim to any of the remaining assets of
the Corporation.

          7.4  In the event the assets of the Corporation available for
distribution to the holders of shares of this Series upon any dissolution,
liquidation or winding up of the Corporation, whether voluntary or involuntary,
shall be insufficient to pay in full all amounts to which such holders are
entitled pursuant to

<PAGE>
 
                                                                              33

Section 7.1, no such distribution shall be made on account of any shares of any
Parity Stock upon such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account of the shares of
this Series, ratably, in proportion to the full distributable amounts for which
holders of all Parity Stock are entitled upon such dissolution, liquidation or
winding up.

          8.  Other Provisions.
              ----------------

          8.1  All notices from the Corporation to the holders shall be given by
one of the methods specified in Section 8.2.  With respect to any notice to a
holder of shares of this Series required to be provided hereunder, neither
failure to give such notice, nor any defect therein or in the transmission
thereof, to any particular holder shall affect the sufficiency of the notice or
the validity of the proceedings referred to in such notice with respect to the
other holders or affect the legality or validity of any distribution, right,
warrant, reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or the vote upon any such action. Any
notice that was mailed in the manner herein provided shall be conclusively
presumed to have been duly given whether or not the holder receives the notice.

          8.2  All notices and other communications hereunder shall be deemed
given (i) on the first Trading Day following the date received, if delivered
personally, (ii) on the Trading Day following timely deposit with an overnight
courier service, if sent by overnight courier specifying next day delivery and
(iii) on the first Trading Day that is at least five days following deposit in
the mails, if sent by first class mail to (x) a holder at its last address as it
appears on the transfer records or registry for the Series I Stock and (y) the
Corporation at the following address (or at such other address as the
Corporation shall specify in a notice pursuant to this Section):  AOL Time
Warner Inc., 75 Rockefeller Plaza, New York, New York 10019, Attention:  General
Counsel.

          8.3  Any shares of this Series that have been converted, redeemed,
exchanged or otherwise acquired by the Corporation shall, after such conversion,
redemption, exchange or acquisition, as the case may be, be retired and promptly
cancelled and the Corporation shall take all appropriate action to cause such
shares to obtain the status of authorized but unissued shares of Preferred
Stock, without designation as to series, until such shares are once more
designated as part of a particular series by the Board of Directors.  The
Corporation may cause a certificate

<PAGE>
 
                                                                              34

setting forth a resolution adopted by the Board of Directors that none of the
authorized shares of this Series are outstanding to be filed with the Secretary
of State of the State of Delaware. When such certificate becomes effective, all
matters set forth in the Certificate with respect to the Series I Stock shall be
eliminated from the Certificate of Incorporation and the shares of Preferred
Stock designated hereby as Series I Stock shall have the status of authorized
and unissued shares of Preferred Stock and may be reissued as part of any new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors.

          8.4  The shares of this Series shall be issuable in whole shares or,
if authorized by the Board of Directors, in any fraction of a whole share so
authorized or any integral multiple of such fraction.

          8.5  The Corporation shall be entitled to recognize the exclusive
right of a Person registered on its records as the holder of shares of this
Series, and such record holder shall be deemed the holder of such shares for all
purposes.

          8.6  All notice periods referred to in the Certificate shall commence
on the date of the mailing of the applicable notice.

          8.7  Certificates for shares of this Series shall bear such legends as
the Corporation shall from time to time deem appropriate.

          IN WITNESS WHEREOF, AOL Time Warner Inc. has caused this certificate
to be signed this [  ]th day of [             ], 2000.



                              AOL TIME WARNER INC.,

                              by
                                -------------------------------
                                Name:
                                Title: