RESTATED CERTIFICATE OF INCORPORATION
OF
RARE MEDIUM GROUP, INC.
(pursuant to Section 245 of the
Delaware General Corporation Law)
RARE MEDIUM GROUP, INC., a Delaware corporation (the
"Company"), the original Certificate of Incorporation of which was filed with
the Secretary of State of the State of Delaware on August 15, 1985 under the
name International Cogeneration Corporation, HEREBY CERTIFIES AS FOLLOWS:
This Restated Certificate of Incorporation hereby restates
and inte grates, without further amendment, pursuant to Section 245 of the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code, the Company's Certificate of Incorporation, as amended to date.
There is no discrepancy between the terms of this Restated Certificate of
Incorporation and the terms of the Company's Certificate of Incorporation, as
amended to date. The text of this Restated Certificate of Incorporation, as so
restated, is as follows:
FIRST: The name of the Company is Rare Medium Group, Inc.
SECOND: The address of the Company's registered office in the
State of Delaware is Corp. Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle 19801. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The purpose of the Company is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares which the Company
shall have authority to issue shall be:
Three Hundred Ten Million (310,000,000) shares, consisting of
Two Hundred Million (200,000,000) shares of Common Stock, with a par value of
One Cent ($0.01) per share, One Hundred Million
(100,000,000) shares of Non-Voting Common Stock, with a par value of
One Cent ($0.01) per share, and Ten Million (10,000,000) shares of
Preferred Stock, with a par value of One Cent ($0.01) per share. The
Board of Directors, in its sole direction, shall have full and complete
authority, by resolutions, from time to time, to establish one or more
series or classes to issue shares of Preferred Stock, and to fix,
determine and vary the voting rights, designations, preferences,
restrictions, qualifications, privileges, limitations, options,
conversion rights and other special rights of each series or class of
Preferred Stock, including, but not limited to, dividend rates and
manner of payment, preferential amounts payable upon voluntary or
involuntary liquida tion, voting rights, conversion rights, redemption
prices, terms and conditions and sinking fund and stock purchase
prices, terms and conditions.
Pursuant to the authority expressly granted to and vested in
the Board of Directors of the Company (the "Board of Directors") by the
provisions of this Restated Certificate of Incorporation of the Company
(the "Restated Certificate of Incorporation"), there is hereby created,
out of the 10,000,000 shares of Preferred Stock, par value $0.01 per
share, of the Company authorized and unissued in Article Fourth of this
Restated Certificate of Incorporation (the "Preferred Stock"), a series
of Preferred Stock consisting of 2,000,000 shares, which series shall
have the following powers, designations, prefer ences and relative,
participating, optional or other rights, and the following
qualifications, limitations and restrictions (in addition to any
powers, designations, preferences and relative, participating, optional
or other rights, and any qualifications, limitations and restrictions,
set forth in this Restated Certificate of Incorporation which are
applicable to the Preferred Stock):
1. Designation of Amount. The 2,000,000 shares of Preferred
Stock shall be designated the "Series A Convertible Preferred Stock" (the
"Series A Preferred Stock") and the authorized number of shares constituting
such series shall be 2,000,000.
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2. Dividends.
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(a) The holders of the then outstanding shares of Series A
Preferred Stock will be entitled to receive, when, as and if declared by the
Board of Directors out of funds of the Company legally available therefor,
cumulative dividends, accruing on a daily basis from the Original Issuance Date
through and including the date on which such dividends are paid at the annual
rate of (A) 7.50% from the Original Issuance Date through June 30, 2002 and (B)
thereafter, 4.65% (in either case, the "Applicable Rate"), of the Liquidation
Preference (as hereinafter defined) per share of the Series A Preferred Stock,
payable in arrears on the last day of each of December, March, June and
September, commencing on June 30, 1999; provided that: (i) if any such payment
date is not a Business Day then such dividend shall be payable on the next
Business Day, and (ii) accumulated and unpaid dividends for any prior quarterly
period may be paid at any time. Such dividends shall be deemed to accrue on the
Series A Preferred Stock from the Original Issuance Date and be cumulative
whether or not earned or declared and whether or not there are profits, surplus
or other funds of the Company legally available for the payment of dividends.
The term "Business Day" means a day other than a Saturday, Sunday or day on
which banking institutions in New York are authorized or required to remain
closed. The term "Original Issuance Date" means, with respect to the Series A
Preferred Stock, the first date of issuance, i.e., June 4, 1999, and, with
respect to any Additional Securities (as hereinafter defined), the date upon
which they are issued or, if not issued, the applicable dividend payment date on
which the Additional Securities were to have been issued.
(b) On any dividend payment date occurring on or prior to June
30, 2002, the Company shall pay a dividend on such Series A Preferred Stock
through the issuance of additional shares of Series A Preferred Stock
("Additional Securities"). On any dividend payment date occurring after June 30,
2002 and on or prior to June 30, 2004, the Company shall pay a dividend on such
Series A Preferred Stock through the issuance of Additional Securities, provided
that at the option of either the holders of a majority of the then outstanding
shares of Series A Preferred Stock (the "Requisite Holders") or the Company, the
Company shall pay the dividends in whole in cash. In the event the Company or
the Requisite Holders, as the case may be, elect to have such dividends paid in
cash, they shall provide the other party written notice of such election not
less than ten days prior to the applicable dividend payment date. On any
dividend payment date occurring after June 30, 2004, all dividends on such
Series A Preferred Stock shall be paid in cash. Shares of
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Series A Preferred Stock issued in payment of dividends shall be valued at all
times at $100 per share and each such share shall be issued with a detachable
ten-year warrant (each a "Series 1-A Warrant") that entitles its holder to
purchase from the Company thirteen and one-half (13.5) shares of the Company's
common stock, par value $0.01 per share (the "Common Stock"). The number of
Additional Securities that are issued to the holders of the Series A Preferred
Stock under this paragraph (b) will be the number obtained by dividing (i) the
total dollar amount of cumulative dividends due and payable on the applicable
dividend payment date by (ii) the Liquidation Preference, provided, that the
Company shall not be required to issue fractional shares of Series A Preferred
Stock, but in lieu thereof shall pay in cash the portion of any dividend payable
in shares of Series A Preferred Stock that would otherwise require the issuance
of a fractional share, provided further, that in any such case, the Company
shall issue the holders fractional Series 1-A Warrants in an amount appropriate
to reflect the fractional share of Series A Preferred Stock.
(c) Holders of shares of the Series A Preferred Stock shall be
entitled full cumulative dividends, as herein provided, on the Series A
Preferred Stock and no additional amounts. Except as set forth in paragraph (f)
below, no interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series A Preferred Stock that
may be in arrears.
(d) If dividends are not paid in full, or declared in full and
sums set apart for the payment thereof, upon the shares of Series A Preferred
Stock and the shares of any other series of Preferred Stock ranking on a parity
as to dividends with the Series A Preferred Stock ("Parity Stock"), all
dividends declared upon shares of Series A Preferred Stock and upon all Parity
Stock shall be paid or declared pro rata so that in all cases the amount of
dividends paid or declared per share on the Series A Preferred Stock and such
Parity Stock shall bear to each other the same ratio that unpaid accumulated
dividends per share, including dividends accrued or in arrears, if any, on the
shares of Series A Preferred Stock and such other shares of Parity Stock, bear
to each other. Unless and until full cumulative dividends on the shares of
Series A Preferred Stock in respect of all past quarterly dividend periods have
been paid, and the full amount of dividends on the shares of Series A Preferred
Stock in respect of the then current quarterly dividend period shall have been
or are contemporane ously declared in full and sums set aside for the payment
thereof, (i) no dividends shall be paid or declared or set aside for payment or
other distribution upon the Common Stock, or any other capital stock of the
Company ranking junior to the Series A Preferred Stock as to dividends (together
with the Common Stock, "Junior
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Stock"), other than in shares of, or warrants or rights to acquire, Junior
Stock; and (ii) no shares of Junior Stock or Parity Stock shall be redeemed,
retired, purchased or otherwise acquired for any consideration (or any payment
made to or available for a sinking fund for the redemption of any such shares)
by the Company or any Subsid iary of the Company (except by conversion into or
exchange for shares of Junior Stock). For the purposes hereof, a "Subsidiary"
shall mean any corporation, associa tion or other business entity (i) at least
50% of the outstanding voting securities of which are at the time owned or
controlled by the Company; or (ii) with respect to which the Company possesses,
directly or indirectly, the power to direct or cause the direction of the
affairs or management of such person. Holders of shares of Series A Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or shares of capital stock, in excess of full accrued and cumulative dividends
as herein provided.
The terms "accrued dividends," "dividends accrued" and
"dividends in arrears," whenever used herein with reference to shares of Series
A Preferred Stock shall be deemed to mean an amount which shall be equal to
dividends thereon at the Applicable Rate per share for the respective series
from the date or dates on which such dividends commence to accrue to the end of
the then current quarterly dividend period for such Preferred Stock (or, in the
case of redemption, to the date of redemp tion), whether or not earned or
declared and whether or not assets for the Company are legally available
therefor, and if full dividends are not declared or paid (whether in cash or in
Additional Securities), then such dividends shall cumulate, with additional
dividends thereon, compounded quarterly, at the Applicable Rate, for each
quarterly period during which such dividends remain unpaid, less the amount of
all such dividends paid, or declared in full and sums set aside for the payment
thereof, upon such shares of Preferred Stock.
(e) The amount of any dividends per share of Series A
Preferred Stock for any full quarterly period shall be computed by multiplying
the Applicable Rate for such quarterly dividend period by the Liquidation
Preference per share and dividing the result by four. Dividends payable on the
shares of Series A Preferred Stock for any period less than a full quarterly
dividend period shall be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed for any period less than one
month.
(f) In the event any dividends are declared with respect to
the Common Stock, the holders of the Series A Preferred Stock as of the record
date established by the Board of Directors for such dividend shall be entitled
to receive as
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additional dividends (the "Additional Dividends") an amount (whether in the form
of cash, securities or other property) equal to the amount (and in the form) of
the dividends that such holder would have received had the Series A Preferred
Stock been converted into Common Stock as of the date immediately prior to the
record date of such dividend, such Additional Dividends to be payable on the
payment date of the dividend established by the Board of Directors (the
"Additional Dividend Payment Date"). The record date for any such Additional
Dividends shall be the record date for the applicable dividend, and any such
Additional Dividends shall be payable to the persons in whose name this Series A
Preferred Stock is registered at the close of business on the applicable record
date.
3. Liquidation Preference. In the event of a liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of Series A Preferred Stock then outstanding shall be entitled to
receive out of the available assets of the Company, whether such assets are
stated capital or surplus of any nature, an amount on such date equal to $100
per share of Series A Preferred Stock (the "Liquidation Preference") plus the
amount of any accrued and unpaid dividends as of such date, calculated pursuant
to Section 2 hereinabove. Such payment shall be made before any payment shall be
made or any assets distributed to the holders of any class or series of the
Common Stock or any other class or series of the Company's capital stock ranking
junior as to liquidation rights to the Series A Preferred Stock. If upon any
such liquidation, dissolution or winding up of the Company the assets available
for payment of the Liquidation Preference are insufficient to permit the
payment to the holders of the Series A Preferred Stock of the full preferential
amounts described in this paragraph, then all the remaining available assets
shall be distributed among the holders of the then outstanding Series A
Preferred Stock pro rata according to the number of then outstanding shares of
Series A Preferred Stock held by each holder thereof. No event that constitutes
a Change of Control (as defined in Section 5(b) below) shall be considered a
liquidation, dissolution or winding up of the Company for purposes of this
Section 3 (unless in connection therewith the liquidation of the Company is
specifically approved).
4. Mandatory Redemption. On June 30, 2012 (the "Redemption
Date"), the Company shall redeem for cash all shares of Series A Preferred Stock
that are then outstanding and any shares of Series A Preferred Stock then
issuable in respect of accrued but unpaid dividends, in each case, at a
redemption price per share equal to the Liquidation Preference thereof plus the
amount of any accrued and unpaid dividends as of such date ("Redemption Price").
Not more than sixty (60) nor less than thirty (30) days prior to the Redemption
Date, notice by first class mail,
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postage prepaid, shall be given to each holder of record of the Series A
Preferred Stock, at such holder's address as it shall appear upon the stock
transfer books of the Company on such date. Each such notice of redemption shall
be irrevocable and shall specify the date that is the Redemption Date, the
Redemption Price, the identification of the shares to be redeemed, the place or
places of payment and that payment will be made upon presentation and surrender
of the certificate(s) evidencing the shares of Series A Preferred Stock to be
redeemed and that dividends on the shares of the Series A Preferred Stock cease
to accrue on the Redemption Date. On or after the Redemption Date, each holder
of shares of Series A Preferred Stock shall surrender the certificate evidencing
such shares to the Company at the place designated in such notice and shall
thereupon be entitled to receive payment of the Redemption Price in the manner
set forth in the notice. If, on the Redemption Date, funds in cash in an amount
sufficient to pay the aggregate Redemption Price for all outstanding shares of
Series A Preferred Stock shall be available therefor and shall have been
irrevocably set aside and deposited with a bank or trust company in trust for
purposes of payment of such Redemption Price, then, notwithstanding that the
certificates evidencing any shares so called for redemption shall not have been
surrendered, the shares shall no longer be deemed outstanding, the holders
thereof shall cease to be stockholders, and all rights whatsoever with respect
to the shares so called for redemption (except the right of the holders to
receive the Redemption Price upon surrender of their certificates therefor)
shall terminate. If at the Redemption Date, the Company does not have sufficient
funds legally available to redeem all the outstanding shares of Series A
Preferred Stock, the Company shall take all measures permitted under the
Delaware General Corporation Law to increase the amount of its capital and
surplus legally available, and the Company shall purchase as many shares of
Series A Preferred Stock as it may legally redeem, ratably from the holders
thereof in proportion to the number of shares held by them, and shall thereafter
from time to time, as soon as it shall have funds available therefor, redeem as
many shares of Series A Preferred Stock as it legally may until it has redeemed
all of the outstanding shares of Series A Preferred Stock.
5. Optional Redemption.
-------------------
(a) Change of Control. In the event that any Change of Control
(as hereinafter defined) shall occur at any time while any shares of Series A
Preferred Stock are outstanding, the Requisite Holders shall have the right to
give notice that they are exercising a Change of Control election (a "Change of
Control Election"), with respect to all or any number of such holders' shares of
Series A Preferred Stock, during the period (the "Exercise Period") beginning on
the 20th day and ending on
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the 90th day after the date of such Change of Control. Upon any such election,
the Company shall redeem for cash each of such holders' shares (including any
shares then issuable in respect of accrued but unpaid dividends) for which such
an election is made, to the extent permitted by applicable law, at the
Redemption Price.
(b) As used herein, "Change of Control" means the occurrence of any of
the following events:
(1) the acquisition by any individual, entity or
group other than Apollo Management, L.P. or its affiliates (a
"Person"), or any Holder (as such term is defined in the
Amended and Restated Securities Purchase Agreement (the
"Agreement") dated as of June 4, 1999 among the Company,
Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV,
L.P. and AIF IV/RRRR LLC), including any "person" within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), of
beneficial ownership within the meaning of Rule 13d-3 promul
gated under the Exchange Act, of more than 50% of either (i)
the then outstanding shares of Common Stock (the "Outstanding
Company Common Stock") or (ii) the combined voting power of
the then outstanding securities of the Company entitled to
vote generally in the election of directors (the "Outstanding
Company Voting Securities"); excluding, however, the
following: (A) any acquisition directly from the Company of
Common Stock (excluding any acquisition resulting from an
exercise, conversion or exchange privilege unless the security
being so exercised, converted or exchanged was acquired
directly from the Company), (B) any acquisition of Common
Stock by the Company, (C) any acquisition of Common Stock by
an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company or (D) any acquisition of Common Stock by any
corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (3) of this Section
5(b);
(2) a majority of the individuals who, as of the
Original Issuance Date of the Series A Preferred Stock,
constitute the members of the Board of Directors not elected
by the holders of Series A Preferred Stock (the "Incumbent
Board") cease for any reason to serve on such Board of
Directors; provided that any individual who becomes
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a director of the Company subsequent to such Original Issuance
Date, whose election, or nomination for election by the Com
pany's stockholders, was approved by the vote of at least a
majority of the directors then comprising the Incumbent Board
shall be deemed a member of the Incumbent Board; and provided
further, that any individual who was initially elected as a
director of the Company as a result of an actual or threatened
election contest, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act, or any
other actual or threatened solicitation of proxies or consents
by or on behalf of any Person other than the Board of
Directors shall not be deemed a member of the Incumbent Board;
or
(3) approval by the stockholders of the Company of a
reorganization, merger or consolidation of the Company or sale
or other disposition of all or substantially all of the assets
of the Company (a "Corporate Transaction"); excluding,
however, a Corporate Transaction pursuant to which (i) the
individuals or entities who are the beneficial owners,
respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to
such Corporate Transaction will beneficially own, directly or
indirectly, more than 50% of, respectively, the out standing
shares of common stock, and the combined voting power of the
outstanding securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such
transaction owns 100% of the Outstanding Company Common Stock
or all or substantially all of the Company's assets either
directly or indirectly) in substantially the same proportions
relative to each other as their ownership, immediately prior
to such Corporate Transaction, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as
the case may be, (ii) no Person (other than: the Company; any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company; the corporation resulting from such Corporate
Transaction; and any Person which beneficially owned,
immediately prior to such Corporate Transaction, directly or
indirectly, 30% or more of the Outstanding Company Common
Stock or the Outstanding Company Voting Securities, as the
case may be) will beneficially own, directly or indirectly,
30% or
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more of, respectively, the outstanding shares of common stock
of the corporation resulting from such Corporate Transaction
or the com bined voting power of the outstanding securities of
such corporation entitled to vote generally in the election of
directors and (iii) individuals who were members of the
Incumbent Board will continue to serve as members of the board
of directors of the corporation resulting from such Corporate
Transaction.
(c) On or before the tenth (10th) day after a Change of
Control, the Company shall mail to all holders of record of the Series A
Preferred Stock at their respective addresses as the same shall appear on the
books of the Company as of such date, a notice disclosing (i) the Change of
Control, (ii) the Redemption Price per share of the Series A Preferred Stock
applicable hereunder, (iii) the determination of the Requisite Holders to
exercise a Change of Control Election (or the date on which such a determination
is scheduled to be made) and (iv) the procedure which the holder must follow to
exercise the redemption right provided above. To exercise the Change of Control
Election, if applicable, a holder of the Series A Preferred Stock must deliver
during the Exercise Period written notice to the Company (or an agent designated
by the Company for such purpose) of the holder's exercise of the Change of
Control Election, accompanied by each certificate evidencing shares of the
Series A Preferred Stock with respect to which the Change of Control Election is
being exercised, duly endorsed for transfer. On or prior to the fifth (5th)
business day after receipt of delivery of such written notice, the Company shall
accept for payment all shares of Series A Preferred Stock properly surrendered
to the Company (or an agent designated by the Company for such purpose) during
the Exercise Period for redemption in connection with the exercise of the Change
of Control Election and shall cause payment to be made in cash for such shares
of Series A Preferred Stock. If at the time of any Change of Control, the
Company does not have sufficient capital and surplus legally available to
purchase all of the outstanding shares of Series A Preferred Stock, the Company
shall take all measures permitted under the Delaware General Corporation Law to
increase the amount of its capital and surplus legally available, and the
Company shall offer in its written notice of such Change of Control to purchase
as many shares of Series A Preferred Stock as it has capital and surplus legally
available therefor, ratably from the holders thereof in proportion to the total
number of shares tendered, and shall thereafter from time to time, as soon as it
shall have capital and surplus legally available therefor, offer to purchase as
many shares of Series A Preferred Stock as it has capital and surplus available
therefor until it has offered to purchase all of the outstanding shares of
Series A Preferred Stock.
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(d) Optional Redemption by Company. (A) At any time (i) after
June 30, 2004 or (ii) after June 30, 2002 if the closing price of the Common
Stock quoted on the NASDAQ National Market System (or the primary national
securities exchange on which the Common Stock is then listed) on each of the
preceding thirty (30) trading days is greater than $12.00 per share (the
"Redemption Threshold"), the Company may, upon sixty (60) days notice, redeem
all, but not less than all, of the then outstanding shares of Series A Preferred
Stock (including shares issuable in respect of accrued but unpaid dividends) for
cash in an amount per share equal to 103% of the Redemption Price.
(B) The Redemption Threshold is subject to adjustment from
time to time, in the event of any increase or decrease by way of a subdivision
or split-up of the outstanding shares of Common Stock or any decrease by way of
a combination of the outstanding shares of Common Stock into a smaller number of
shares of Common Stock. In any such case, an appropriate adjustment shall be
made to the Redemption Threshold in a manner and on terms that effect the intent
of paragraph (A) above.
(e) Status of Redeemed Shares. Any shares of Series A
Preferred Stock which shall at any time have been redeemed pursuant to Section 4
or 5 hereof shall, after such redemption, have the status of authorized but
unissued shares of Preferred Stock, without designation as to series.
6. Voting Rights. Except as otherwise provided by applicable
law and in addition to any voting rights provided by law, the holders of Series
A Preferred Stock:
i. shall be entitled to vote together with the holders
of the Common Stock as a single class on all matters
submitted for a vote of holders of Common Stock
(except for matters submitted to the holders of
Common Stock in connection with the transaction
contemplated by the Agreement);
ii. shall have such other voting rights as are specified
in the Certificate of Incorporation or as otherwise
provided by Delaware law; and
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iii. shall be entitled to receive notice of any
stockholders' meeting in accordance with the
Certificate of Incorporation and By-laws of the
Company.
Each share of Series A Preferred Stock shall entitle the
holder thereof to cast 0.875 votes for each whole vote that such holder would be
entitled to cast had such holder converted its Series A Preferred Stock into
shares of Common Stock as of the date immediately prior to the record date for
determining the stockholders of the Company eligible to vote on any such matter;
provided that the total voting power of the holders of the Series A Preferred
Stock shall in no event exceed the voting power of 2,120,000 shares of Common
Stock prior to the obtaining of stockholder approval (the "Stockholder
Approval") for the transactions pursuant to which the Series A Preferred Stock
was issued, as contemplated by the Agreement, and shall in no event exceed the
voting power of 9,750,000 shares of Common Stock in the event Stockholder
Approval is obtained.
(b) In addition to the other voting rights set forth herein,
for so long as the Apollo Stockholders (as such term is defined below)
beneficially own not less than 100,000 shares of Series A Preferred Stock, the
following provisions shall apply:
The holders of Series A Preferred Stock shall have the
exclusive right, voting separately as a single class, to elect
one person to serve on the Board of Directors (such director
is referred to as a "Preferred Stock Director"); provided,
that if the size of the Board of Directors shall be increased,
then the holders of Series A Preferred Stock shall have the
right to elect that number of Preferred Stock Directors such
that the number of Preferred Stock Directors divided by the
total number of members of the Board of Directors (the
"Preferred Director Percent age") is at least equal to the
Preferred Director Percentage immediately prior to the
increase in the size of the Board of Directors (without
regard to any vacancy that shall exist from time to time). On
or after the date of Stockholder Approval (if such approval is
obtained), the holders of Series A Preferred Stock shall have
the right to elect two Preferred Stock Directors. In any such
election the holders of Series A Preferred Stock shall be
entitled to cast one vote per share of Series A Preferred
Stock held of record on the record date for the determination
of the holders of Series A Preferred Stock entitled to vote on
such election. The initial Preferred Stock Director shall be
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appointed by the Board of Directors on the Original Issuance
Date to serve until his or her successor is duly elected; in
the event Stockholder Approval is obtained, the second
Preferred Stock Director shall be appointed immediately after
Stockholder Approval to serve until his or her successor is
duly elected; and thereafter the Preferred Stock Directors
shall be elected at the same time as other members of the
Board of Directors. A Preferred Stock Director may only be
removed by the vote of the Requisite Holders, at a vote of the
then outstanding shares of Series A Preferred Stock, voting as
a single class, at a meeting called for such purpose. If for
any reason a Preferred Stock Director shall resign or
otherwise be removed from the Board of Directors, then his or
her replacement shall be a person elected by the holders of
the Series A Preferred Stock, in accordance with the voting
procedures set forth in this Section 6(b). The Preferred Stock
Directors shall be appointed by the Board of Directors to
serve on each committee of the Board of Directors in the same
proportions that the number of Preferred Stock Directors bears
to the total number of directors then comprising the Board of
Directors.
(c) So long as any Series A Preferred Stock remains
outstanding, the Company shall not, without the written consent or affirmative
vote of the Requisite Holders, at a meeting of the holders called for that
purpose, amend, alter or repeal, whether by merger, consolidation, combination,
reclassification or otherwise, the Certificate of Incorporation, By-Laws of the
Company or any provision thereof (including the adoption of a new provision
thereof) which would adversely affect the voting power of the Series A Preferred
Stock or any other rights or privileges of the holders of the Series A Preferred
Stock hereunder.
7. Conversion Rights.
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(a) General. Subject to and upon compliance with the
provisions of this Section 7, the holders of the shares of Series A Preferred
Stock shall be entitled, at their option, at any time prior to the date fixed
for redemption of such shares, to convert all or any such shares of Series A
Preferred Stock into a number of fully paid and non-assessable shares
(calculated as to each conversion to the nearest 1/100th of a share) of Common
Stock. The number of shares of Common Stock to which a holder of Series A
Preferred Stock shall be entitled upon conversion shall be determined by
dividing (x) the Liquidation Preference of such Series A Preferred Stock
(including shares issuable in respect of accrued but unpaid dividends), plus the
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amount of any accrued but unpaid dividends as of the Conversion Date by (y) the
Conversion Price in effect at the close of business on the Conversion Date
(determined as provided in this Section 7).
(b) Conversion Price. The conversion price (the "Conversion
Price") shall initially be $7.00 per share of Common Stock, subject to
adjustment from time to time in accordance with Section 7(d).
(c) Fractions of Shares. No fractional share of Common Stock
shall be issued upon conversion of shares of Series A Preferred Stock. If more
than one share of Series A Preferred Stock shall be surrendered for conversion
at one time by the same holder, the number of full shares of Common Stock to be
issued and which shall be computed on the basis of the aggregate number of
shares of Series A Preferred Stock so surrendered. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of any
shares of Series A Preferred Stock, the Company shall pay a cash adjustment in
respect of such fractional share in an amount equal to the product of such
fraction multiplied by the Fair Market Value (as hereinafter defined) of one
share of Common Stock on the Conversion Date (as hereinafter defined).
(d) Adjustments to Conversion Price. The Conversion Price
shall be subject to adjustment from time to time as follows:
i. Upon Issuance of Common Stock. If the Company shall,
at any time or from time to time after the Original
Issuance Date, issue any shares of Common Stock,
options to purchase or rights to subscribe for Common
Stock, securities by their terms convertible into or
exchangeable for Common Stock, or options to purchase
or rights to subscribe for such convertible or
exchangeable securities, other than Additional
Securities, Series B Preferred Stock or Excluded
Stock, without consideration or for consideration
per share less than either (x) the Conversion Price
or (y) the Fair Market Value of the Common Stock, in
effect immediately prior to the issuance of such
Common Stock or securities, then such Conversion
Price shall forthwith be lowered to a price equal to
the price obtained by multiplying:
14
(A) the Conversion Price in effect
immediately prior to the issuance
of such Common Stock or securities
by
(B) a fraction of which (x) the
denominator shall be the number of
shares of Common Stock outstanding
on a fully-diluted basis
immediately after such issuance and
(y) the numerator shall be the sum
of (i) the number of shares of
Common Stock outstanding on a
fully-diluted basis immediately
prior to the date of such issuance
and (ii) the number of additional
shares of Common Stock which the
aggregate consideration for the
number of shares of Common Stock so
offered would purchase at the
greater of the Conversion Price or
the Fair Market Value per share of
Common Stock.
For purposes of this Section 7(d), "fully diluted basis" shall
be determined in accordance with the treasury method of GAAP.
ii. Upon Acquisition of Common Stock. If the Company or
any Subsidiary shall, at any time or from time to
time after the Original Issuance Date, directly or
indirectly, redeem, purchase or otherwise acquire
any shares of Common Stock, options to purchase or
rights to subscribe for Common Stock, securities by
their terms convertible into or exchangeable for
Common Stock (other than shares of Series A Preferred
Stock or Series B Preferred Stock that are redeemed
according to their terms), or options to purchase or
rights to subscribe for such convertible or
exchangeable securities, for a consideration per
share greater than the Fair Market Value (plus, in
the case of such options, rights, or securities, the
additional consideration required to be paid to the
Company upon exercise, conversion or exchange) for
shares of Common Stock in effect immediately prior to
such event, then the Conversion Price shall forthwith
be lowered to a price equal to the price obtained by
multiplying:
15
(A) the Conversion Price in effect
immediately prior to such event by
(B) a fraction of which (x) the
denominator shall be the Fair Market
Value per share of Common Stock
immediately prior to such event and
(y) the numerator shall be the
result of dividing:
(a) (1) the product of (A) the
number of shares of Common Stock
outstanding on a fully-diluted basis
and (B) the Fair Market Value per
share of Common Stock, in each case
immediately prior to such event,
minus (2) the aggregate
consideration paid by the Company in
such event (plus, in the case of
such options, rights, or convertible
or exchangeable securi ties, the
aggregate additional consideration
to be paid by the Company upon
exercise, conversion or exchange),
by
(b) the number of shares of Common
Stock outstanding on a fully-diluted
basis immediately after such event.
iii. For the purposes of any adjustment of a Conversion
Price pursuant to paragraphs (i) and (ii) of this
Section 7(d), the following provisions shall be
applicable:
(1) In the case of the issuance of Common Stock for
cash in a public offering or private placement, the
consideration shall be deemed to be the amount of cash paid
therefor before deducting therefrom any discounts, commissions
or placement fees payable by the Company to any underwriter or
placement agent in connection with the issuance and sale
thereof.
(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the Fair
Market Value thereof as determined in accordance with the
Appraisal Procedure.
16
(3) In the case of the issuance of options to
purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common
Stock, or options to purchase or rights to subscribe for such
convertible or exchangeable securities, except for Additional
Securities, Shares of Series B Preferred Stock or options to
acquire Excluded Stock:
(a) the aggregate maximum number of
shares of Common Stock deliverable
upon exercise of such options to
purchase or rights to subscribe for
Common Stock shall be deemed to
have been issued at the time such
options or rights were issued and
for a consideration equal to the
consideration (determined in the
manner provided in subparagraphs
(1) and (2) above), if any,
received by the Company upon the
issu ance of such options or rights
plus the minimum purchase price
provided in such options or rights
for the Common Stock covered
thereby;
(b) the aggregate maximum number of
shares of Common Stock deliverable
upon conversion of or in exchange
of any such convertible or
exchangeable securities or upon the
exercise of options to purchase or
rights to subscribe for such
convertible or exchangeable
securities and subsequent
conversion or exchange thereof
shall be deemed to have been issued
at the time such securities,
options, or rights were issued and
for a consideration equal to the
consideration received by the
Company for any such securities and
related options or rights
(excluding any cash received on
account of accrued interest or
accrued dividends), plus the
additional consideration, if any,
to be received by the Company upon
the conversion or exchange of such
securities or the exercise of any
related options or rights (the
consideration in each case
17
to be determined in the manner
provided in paragraphs (1) and (2)
above) and
(c) on any change in the number of
shares or exer cise price of Common
Stock deliverable upon exercise of
any such options or rights or con
versions of or exchanges for such
securities, other than a change
resulting from the anti-dilution
provisions thereof, the applicable
Conversion Price shall forthwith
be readjusted to such Conversion
Price as would have been obtained
had the adjustment made upon the
issuance of such options, rights or
securities not converted prior to
such change or options or rights
related to such securities not
converted prior to such change been
made upon the basis of such change.
(d) No further adjustment of the
Conversion Price adjusted upon the
issuance of any such options,
rights, convertible securities or
exchangeable securities shall be
made as a result of the actual
issuance of Common Stock on the
exercise of any such rights or
options or any conversion or
exchange of any such securities.
iv. Upon Stock Dividends, Subdivisions or Splits. If, at
any time after the Original Issuance Date, the number
of shares of Common Stock outstanding is increased by
a stock dividend payable in shares of Common Stock or
by a subdivision or split-up of shares of Common
Stock, then, following the record date for the
determination of holders of Common Stock entitled to
receive such stock dividend, or to be affected by
such subdivision or split-up, the Conversion Price
shall be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of
Series A Preferred Stock shall be increased in
proportion to such increase in outstanding shares.
18
v. Upon Combinations. If, at any time after the Original
Issuance Date, the number of shares of Common Stock
outstanding is decreased by a combination of the
outstanding shares of Common Stock into a smaller
number of shares of Common Stock, then, following the
record date to determine shares affected by such
combination, the Conversion Price shall be
appropriately increased so that the number of shares
of Common Stock issuable on conversion of each share
of Series A Preferred Stock shall be decreased in
proportion to such decrease in outstanding shares.
vi. Upon Reclassifications, Reorganizations,
Consolidations or Mergers. In the event of any
capital reorganization of the Company, any
reclassification of the stock of the Company (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 stock dividend or subdivision, split-up
or combination of shares), or any consolidation or
merger of the Company with or into another
corporation (where the Company is not the surviving
corporation or where there is a change in or
distribution with respect to the Common Stock), each
share of Series A Preferred Stock shall after such
reorganization, reclassification, consolidation, or
merger be convertible into the kind and number of
shares of stock or other securities or property of
the Company or of the successor corporation resulting
from such consolidation or surviving such merger, if
any, to which the holder of the number of shares of
Common Stock deliverable (immediately prior to the
time of such reorganization, reclassification,
consolidation or merger) upon conversion of such
Series A Preferred Stock would have been entitled
upon such reorganization, reclassification,
consolidation or merger. The provisions of this
clause shall similarly apply to successive
reorganizations, reclassifications, consolidations,
or mergers.
vii. Deferral in Certain Circumstances. In any case in
which the provisions of this Section 7(d) shall
require that an adjustment shall become effective
immediately after a record date of an event, the
Company may defer until the occurrence of such event
(1) issuing to the holder of any Series A Preferred
Stock
19
converted after such record date and before the
occurrence of such event the shares of capital stock
issuable upon such conversion by reason of the
adjustment required by such event and issuing to such
holder only the shares of capital stock issuable upon
such conversion before giving effect to such
adjustments, and (2) paying to such holder any amount
in cash in lieu of fractional share of capital stock
pursuant to Section 7(c) above; provided, however,
that the Company shall deliver to such holder an
appropriate instrument or due bills evidencing such
holder's right to receive such additional shares and
such cash.
viii. Other Anti-Dilution Provisions. If the Company has
issued or issues any securities on or after the
Original Issuance Date containing provisions
protecting the holder or holders thereof against
dilution in any manner more favorable to such holder
or holders thereof than those set forth in this
Section 7(d), such provisions (or any more favorable
portion thereof) shall be deemed to be incorporated
herein as if fully set forth in this Restated
Certificate of Incorporation and, to the extent
inconsistent with any provision of this Restated
Certificate of Incorporation shall be deemed to be
substituted therefor.
ix. Appraisal Procedure. In any case in which the
provisions of this Section 7(d) shall necessitate
that the Appraisal Procedure be utilized for purposes
of determining an adjustment to the Conversion Price,
the Company may defer until the completion of the
Appraisal Procedure and the determination of the
adjustment (1) issuing to the holder of any share of
Series A Preferred Stock converted after the date of
the event that requires the adjustment and before
completion of the Appraisal Procedure and the
determination of the adjustment, the shares of
capital stock issuable upon such conversion by reason
of the adjustment required by such event and issuing
to such holder only the shares of capital stock
issuable upon such conversion before giving effect to
such adjustment and (2) paying to such holder any
amount in cash in lieu of a fractional share of
capital stock pursuant to Section 7(c) above;
provided, however, that the Company shall deliver to
such
20
holder an appropriate instrument or due bills
evidencing such holder's right to receive such
additional shares and such cash.
x. Exceptions. Section 7(d) shall not apply to (i) any
issuance of Common Stock upon exercise of any
warrants or options (A) outstanding on the Original
Issuance Date of the Series A Preferred Stock or (B)
awarded to employees or directors of the Company
pursuant to an employee stock option plan or stock
incentive plan approved by the Board of Directors;
(ii) any issuance of securities by the Company in
underwritten public offerings; and (iii) repurchases
by the Company of Common Stock approved by the Board
of Directors (collectively, the "Excluded Stock").
Notwithstanding the foregoing, in the case of shares of Series
A Preferred Stock called for redemption, conversion rights will expire at the
close of business on the last Business Day preceding any redemption date unless
the Company defaults in making the payment due upon redemption.
(e) Exercise of Conversion Privilege. In order to exercise the
conversion privilege, the holder of any share of Series A Preferred Stock shall
surrender such Series A Preferred Stock, duly endorsed or assigned to the
Company in blank, at any office or agency of the Company maintained for such
purpose, accompanied by written notice to the Company at such office or agency
that the holder elects to convert such Series A Preferred Stock or, if less than
the entire amount thereof is to be converted, the portion thereof to be
converted.
Series A Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day (the "Conversion
Date") of surrender of such shares of Series A Preferred Stock for conversion in
accordance with the foregoing provisions, and at such time the rights of the
holders of such shares of Series A Preferred Stock as holder shall cease, and
the Person or Persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such Common Stock as and after such time. As promptly as practicable on or after
the Conversion Date, the Company shall issue and shall deliver at any office or
agency of the Company maintained for the surrender of Series A Preferred Stock a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share, as provided in Section 7(c).
21
In the case of any Series A Preferred Stock which is converted
in part only, upon such conversion the Company shall execute and deliver a new
share of Series A Preferred Stock of authorized denomination in aggregate
principal amount equal to the unconverted portion of the principal amount of
such share of Series A Preferred Stock.
(f) Notice of Adjustment of Conversion Price. Whenever
the Conversion Price is adjusted as herein provided:
i. the Company shall compute the adjusted Conversion
Price in accordance with Section 7(d) and shall
prepare a certificate signed by the Treasurer or
Chief Financial Officer of the Company setting forth
the adjusted Conversion Price and showing in
reasonable detail the facts upon which such
adjustment is based, and such certificate shall
forthwith be filed at each office or agency
maintained for such purpose or conversion of shares
of Series A Preferred Stock; and
ii. a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion
Price shall forthwith be prepared by the Company, and
as soon as practicable after it is prepared, such
notice shall be mailed by the Company at its expense
to all holders at their last addresses as they shall
appear in the stock register.
(g) Notice of Certain Corporate Action.
In case:
(a) the Company shall take an action or an event
shall occur, that would require a Conversion Price adjustment
pursuant to Section 7(d); or
(b) the Company shall grant to the holders of its
Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class;
(c) of any reclassification of the Common Stock
(other than a subdivision or combination of the
outstanding shares of Com-
22
mon Stock), or of any consolidation, merger or share
exchange to which the Company is a party and for which
approval of any stockholders of the Company is required, or
of the sale or transfer of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the Company or any Subsidiary shall commence a
tender offer for all or a portion of the outstanding shares of
Common Stock (or shall amend any such tender offer to change
the maximum number of shares being sought or the amount or
type of consideration being offered therefor);
then the Company shall cause to be filed at each office or agency maintained for
such purpose, and shall cause to be mailed to all holders at their last
addresses as they shall appear in the stock register, at least 30 days prior to
the applicable record, effective or expiration date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or granting of rights or warrants, or, if a record
is not to be taken, the date as of which the holders of Common Stock of record
who will be entitled to such dividend, distribution, rights or warrants are to
be determined, (y) the date on which such reclassification, consolidation,
merger, share exchange, sale, transfer, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up, or (z) the date on which such tender
offer commenced, the date on which such tender offer is scheduled to expire
unless extended, the consideration offered and the other material terms thereof
(or the material terms of the amendment thereto). Such notice shall also set
forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action on the Conversion Price and the number, kind
or class of shares or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon conversion of
the Series A Preferred Stock. Neither the failure to give any such notice nor
any defect therein shall affect the legality or validity of any action described
in clauses (a) through (e) of this Section 7(g).
23
(h) Company to Reserve Common Stock.
The Company shall at all times reserve and keep available,
free from preemptive rights, out of the authorized but unissued Common Stock or
out of the Common Stock held in treasury, for the purpose of effecting the
conversion of Series A Preferred Stock, the full number of shares of Common
Stock then issuable upon the conversion of all outstanding shares of Series A
Preferred Stock.
Before taking any action that would cause an adjustment
reducing the conversion price below the then par value (if any) of the shares of
Common Stock deliverable upon conversion of the Series A Preferred Stock, the
Company will take any corporate action that, in the opinion of its counsel, is
necessary in order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock at such adjusted conversion price.
(i) Taxes on Conversions.
The Company will pay any and all original issuance, transfer,
stamp and other similar taxes that may be payable in respect of the issue or
delivery of shares of Common Stock on conversion of Series A Preferred Stock
pursuant hereto. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the holder of
the share(s) of Series A Preferred Stock to be converted, and no such issue or
delivery shall be made unless and until the Person requesting such issue has
paid to the Company the amount of any such tax, or has established to the
satisfaction of the Company that such tax has been paid.
(j) Cancellation of Converted Series A Preferred Stock.
All Series A Preferred Stock delivered for conversion shall be
delivered to the Company to be canceled.
(k) Certain Definitions.
As used in this Section 7, the following terms shall have the
following respective meanings:
"Appraisal Procedure" if applicable, shall mean the following
procedure to determine the fair market value, as to any security, for purposes
of the
24
definition of "Fair Market Value" or the fair market value, as to any other
property (in either case, the "valuation amount"). So long as Apollo Investment
Fund IV, L.P. or any of its affiliates (the "Apollo Stockholders") beneficially
own sufficient shares of Series A Preferred Stock to constitute the Requisite
Holders, the valuation amount shall be determined in good faith jointly by the
Board of Directors and the Requisite Holders; provided, however, that if such
parties are not able to agree on the valuation amount within a reasonable period
of time (not to exceed twenty (20) days), the valuation amount shall be
determined by an investment banking firm of national recognition, which firm
shall be reasonably acceptable to the Board of Directors and the Requisite
Holders. If the Board of Directors and the Requisite Holders are unable to agree
upon an acceptable investment banking firm within ten (10) days after the date
either party proposed that one be selected, the investment banking firm will be
selected by an arbitrator located in New York City, New York, selected by the
American Arbitration Association (or if such organization ceases to exist, the
arbitrator shall be chosen by a court of competent jurisdiction). The arbitrator
shall select the investment banking firm (within ten (10) days of his
appointment) from a list, jointly prepared by the Board of Directors and the
Requisite Holders, of not more than six investment banking firms of national
standing in the United States, of which no more than three may be named by the
Board of Directors and no more than three may be named by the Requisite Holders.
The arbitrator may consider, within the ten-day period allotted, arguments from
the parties regarding which investment banking firm to choose, but the selection
by the arbitrator shall be made in its sole discretion from the list of six. The
Board of Directors and the Requisite Holders shall submit their respective
valuations and other relevant data to the investment banking firm, and the
investment banking firm shall as soon as practicable thereafter make its own
determination of the valuation amount. The final valuation amount for purposes
hereof shall be the average of the two valuation amounts closest together, as
determined by the investment banking firm, from among the valuation amounts
submitted by the Company and the Requisite Holders and the valuation amount
calculated by the investment banking firm. The determination of the final
valuation amount by such investment-banking firm shall be final and binding upon
the parties. The Company shall pay the fees and expenses of the investment
banking firm and arbitrator (if any) used to determine the valuation amount. If
required by any such investment banking firm or arbitrator, the Company shall
execute a retainer and engagement letter containing reasonable terms and
conditions, including, without limitation, customary provisions concerning the
rights of indemnification and contribution by the Company in favor of such
investment banking firm or arbitrator and its officers, directors, partners,
employees, agents and affiliates. If the Apollo
25
Stockholders no longer constitute the Requisite Holders, the valuation amount
shall be determined in good faith by the Board of Directors.
"Fair Market Value" means, as to any security, the Twenty Day
Average of the average closing prices of such security's sales on all domestic
securities exchanges on which such security may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ National Market System
as of 4:00 P.M., New York City time, on such day, or, if on any day such
security is not quoted in the NASDAQ National Market System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau, Incorporated, or any
similar or successor organization (and in each such case excluding any trades
that are not bona fide, arm's length transactions). If at any time such security
is not listed on any domestic securities exchange or quoted in the NASDAQ
National Market System or the domestic over-the-counter market, the "Fair Market
Value" of such security shall be the fair market value thereof as determined in
accordance with the Appraisal Procedure, using any appropriate valuation method,
assuming an arms-length sale to an independent party. In determining the fair
market value of any class or series of Common Stock, a sale of all of the issued
and outstanding Common Stock will be assumed, without giving regard to the lack
of liquidity of such stock due to any restrictions (contractual or otherwise)
applicable thereto or any discount for minority interests and assuming the
conversion or exchange of all securities then outstanding that are convertible
into or exchangeable for Common Stock and the exercise of all rights and
warrants then outstanding and exercisable to purchase shares of such stock or
securities convertible into or exchangeable for shares of such stock; provided,
however that such assumption will not include those securities, rights and
warrants convertible into Common Stock where the conversion, exchange or
exercise price per share is greater than the fair market value; provided,
further, however, that fair market value shall be determined with regard to the
relative priority of each class or series of Common Stock (if more than one
class or series exists.) "Fair Market Value" means with respect to property
other than securities, the "fair market value" determined in accordance with the
Appraisal Procedure.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the Ameri-
26
can Institute of Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board, which are in effect from time to
time.
"Twenty Day Average" means, with respect to any prices and in
connection with the calculation of Fair Market Value, the average of such prices
over the twenty Business Days ending on the Business Day immediately prior to
the day as of which "Fair Market Value" is being determined.
8. Preemptive Rights. Holders of shares of Series A Preferred
Stock will have the right to purchase their pro rata portions of any future
private placements by the Company of equity or equity-linked securities, other
than (i) securities issued pursuant to the exercise of options or warrants
currently outstanding, options awarded to employees or directors of the Company
after the date hereof pursuant to currently existing employee incentive plans,
and options hereinafter issued under new employee incentive plans approved by
the Board of Directors and by the Apollo Stockholders and (ii) securities issued
as consideration in acquisitions by the Company.
9. Limitations. In addition to any other rights provided by
applicable law, so long as any shares of Series A Preferred Stock are
outstanding, the Company shall not, without the affirmative vote, or the written
consent as provided by law, of the Requisite Holders, at a vote of the holders
of Series A Preferred Stock, voting separately as a class,
(a) create, authorize or issue any class, series or shares of
Preferred Stock (other than Additional Securities issued pursuant to Section
2(b) hereof and Series B Preferred Stock issued as dividends) or any other class
of capital stock ranking either as to payment of dividends or distribution of
assets upon liquidation (i) prior to the Series A Preferred Stock, or (ii) on a
parity with the Series A Preferred Stock, or (iii) junior to the Series A
Preferred Stock, if such junior securities may be redeemed, in any circumstance,
on or prior to the Redemption Date; or
(b) change the preferences, rights or powers with respect to
the Series A Preferred Stock so as to affect the Series A Preferred Stock
adversely.
10. Dividend Received Deduction. For federal income tax
purposes, the Company shall report distributions on the Series A Preferred Stock
as dividends, to the extent of the Company's current and accumulated earnings
and profits (as determined for federal income tax purposes).
27
11. Event of Non-Compliance. Whenever an Event of Non-
Compliance (as hereinafter defined) shall have occurred and be continuing, the
holders of Series A Preferred Stock shall have the exclusive right, voting
separately as a class, to elect a sufficient number of additional directors such
that the Preferred Stock Directors constitute a majority of the Board of
Directors, at the Company's next annual meeting of stockholders and at each
subsequent annual meeting of stockholders; provided, however, that if such
voting rights shall become vested more than 90 days or less than 20 days before
the date prescribed for such meeting of stockholders, thereupon the holders of
the shares of Series A Preferred Stock shall be entitled to exercise their
voting rights at a special meeting of the holders of Series A Preferred Stock as
hereinafter set forth. At elections for Preferred Stock Directors, each holder
of Series A Preferred Stock shall be entitled to one vote for each share of
Series A Preferred Stock held. Upon the vesting of such right of the holders of
Series A Preferred Stock, the maximum authorized number of members of the Board
of Directors shall automatically be increased by such number as is required for
the Preferred Stock Directors to constitute a majority of the Board of Directors
and the vacancies so created shall be filled by vote of the holders of
outstanding Series A Preferred Stock as hereinabove set forth. The right of
holders of Series A Preferred Stock, voting separately as a class, to elect
members of the Board of Directors as aforesaid shall continue until such time as
all Events of Non-Compliance shall have been cured, at which time such rights
shall terminate, except as herein or by law expressly provided, subject to
revesting in the event of each and every subsequent Event of Non-Compliance.
Whenever such voting right shall have vested, such right may be exercised
initially either, as provided above, at a special meeting of the holders of
Series A Preferred Stock called as hereinafter provided, or at any annual
meeting of stockholders held for the purpose of electing directors, and
thereafter at such meetings or by the written consent of such holders pursuant
to Section 228 of the Delaware General Corporation Law. The Preferred Stock
Directors elected pursuant to Section 11 shall serve until the next annual
meeting of stockholders of the Company or until their respective successors
shall be elected and shall qualify. Any director elected by the holders of
Series A Preferred Stock may be removed by, and shall not be removed otherwise
than by, the vote of the Requisite Holders, at a vote of the then outstanding
shares of Series A Preferred Stock, voting as a separate class, at a meeting
called for such purpose or by written consent as permitted by law and the
Certificate of Incorporation and By-Laws of the Company. If the office of any
Preferred Stock Director becomes vacant by reason of death, resignation,
retirement, disqualification or removal from office or otherwise, such vacancy
shall be filled by the holders of Series A Preferred Stock voting as a class as
herein
28
provided. Upon any termination of the right of the holders of Series A Preferred
Stock to vote for directors as herein provided, the term of office of the
Preferred Stock Director then in office shall terminate immediately. Whenever
the terms of office of a Preferred Stock Director shall so terminate and the
special voting powers vested in the holders of Series A Preferred Stock shall
have expired, the number of directors shall be such number as may be provided
for pursuant to the By-Laws of the Company irrespective of any increase made
pursuant to the provisions of this Section 11, and such Preferred Stock Director
or Directors shall forthwith resign or the holders of Series A Preferred Stock
shall promptly vote, or act by written consent, to remove such Preferred Stock
Director or Directors pursuant to the procedures set forth above.
The term "Event of Non-Compliance" shall mean (A) any breach
by the Company of any of its agreements and covenants set forth (i) in Section
7.12, Section 8.2 or Article 9 of the Agreement, (ii) in Sections 2, 4, 5, 6, 7
or 8 of Article Fourth of this Restated Certificate of Incorporation, or (B) any
obligation of the Company, whether as principal, guarantor, surety or other
obligor, for the payment of indebtedness for borrowed money in excess of
$10,000,000 (i) shall become or shall be declared due and payable prior to the
expressed maturity thereof, or (ii) shall not be paid when due or within any
grace period for the payment thereof, and such default shall remain uncured for
15 days, or (C) the Common Stock shall no longer be listed for trading on a
United States national securities exchange or the NASDAQ National Market
(provided, that such Event of Non-Compliance shall be deemed to be cured
immediately on the date upon which the Common Stock is again listed for trading
on a United States national securities exchange or the NASDAQ National Market).
FIFTH: The name and mailing address of the incorporator is
International Cogeneration Corporation, a Nevada corporation, with principal
offices at 320 Walnut Street, Suite 105, Philadelphia, Pennsylvania 19106. The
powers of the incorporator terminated upon the filing of the original
Certificate of Incorporation of the Company on August 15, 1985.
SIXTH: Election of directors need not be by written ballot.
SEVENTH: The Board of Directors is authorized to adopt, amend
or repeal By-Laws of the Company.
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EIGHTH: The following provisions are inserted to limit the
liability of directors and officers of the Company to the full extent of the law
allowable and for the conduct of the affairs of the Company, and it is expressly
provided that they are intended to be in furtherance and not in limitation or
exclusion of the powers conferred by law:
(a) No director shall be personally liable to the Company or
its stockholders for monetary damages for breach of his or her fiduciary duty as
a director, except (i) for any breach of the director's duty of loyalty to the
Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) for
paying a dividend or approving a stock repurchase which is illegal under section
174 of Title 8 of the Delaware Code relating to the Delaware General Corporation
Law; or (iv) for any transaction from which the director derived an improper
personal benefit.
(b) No contract or other transaction between the Company and
any other firm or corporation shall be affected or invalidated by reason of the
fact that any one or more of the directors or officers of this Company is or are
interested in, or is a member, stockholder, director or officer or are members,
stockholders, directors or officers, individually or jointly, may be a party or
parties to, or may be interested in, any contract or transaction of this Company
or in which this Company with any person or persons, firm, association or
corporation, shall be affected or invalidated by reason of the fact that any
director or officer or officers of this Company is a party, or are parties to,
or interested, such contract, act of transaction, or in any way connected, with
such person or persons, firms, association or corporation, and each and every
person who may become a director or officer of this Company is relieved from any
liability that might otherwise exist from thus contracting with this Company
for the benefit of himself or any firm, association, or corporation in which he
may be in any way interested.
(c) Subject to such restrictions and regulations contained in
by- laws adopted by the stockholders, the Board of Directors may make, alter,
amend and rescind the by-laws, and may provide therein for the appointment of an
executive committee from their own members, to exercise all or any of the powers
of the board, which may be amended or repealed, at any time, by the
stockholders.
(d) The Board of Directors shall have power, in its
discretion, to provide for and to pay for directors rendering unusual or
exceptional services to the Company special compensation appropriate to the
value of such services.
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(e) By resolution duly adopted by the holders of not less than
a majority of the shares of stock then issued and outstanding and entitled to
vote at any regular or special meeting of the stockholders of the Company duly
called and held as provided in the by-laws of the Company, any director or
directors of the Company may be removed from office at any time or times, with
or without cause. The Board of Directors may at any time remove any officers of
the Company with or without cause.
(f) The Company may indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Company) by reason
of the fact that he is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amount paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding, if he acted in good
faith in a manner he reasonably believed to be in or not opposed to the best
interest of the Company, and with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company, and with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(g) The Company may indemnify each person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of the
Company, partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interest of the Company, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Company unless and only to the extent that the
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court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other Court shall deem proper.
(h) To the extent that a director, officer, employee or agent
of the Company has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to herein or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(i) Any indemnification under paragraphs herein (unless
ordered by a Court) shall be made by the Company upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said paragraphs. Such determination shall be made (1) by the Board of Directors
by a majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (3)
by the stockholders.
(j) The Company may pay expenses incurred by defending a civil
or criminal action, suit or proceeding in advance of the final disposition of
such action, suit or proceeding in the manner provided herein upon receipt of
any undertaking by or on behalf of the director, officer, employee or agent to
repay such amount if it shall be ultimately determined that he is not entitled
to be indemnified by the Company as authorized in this section.
The indemnification and advancement of expenses provided for
herein shall, unless otherwise provided when authorized or ratified, continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
(k) The indemnification and advancement of expenses provided
herein or granted pursuant to this provision shall not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or of
any disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
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(l) The Company may purchase and maintain insurance on behalf
of any person who is or was serving the Company in any capacity referred to
hereinabove against any liability asserted against him and incurred by him in
such capacity, or arising out of his status as such, whether or not the Company
would have the power to indemnify him against such liability under the
provisions herein.
(m) The provisions herein shall be applicable to all claims,
action, suits, or proceedings made or commenced after the adoption hereof,
whether arising from acts or omissions to act occurring before or after the
adoption hereof.
NINTH: The Board of Directors shall be divided into three
classes, each composed of as nearly equal a number of directors as the then
total number of directors constituting the entire Board of Directors permits
with the term of office of one class expiring each year. At the 1999 Annual
Meeting of Stockholders, directors of the first class shall be elected to hold
office for a term expiring at the next succeeding Annual Meeting of
Stockholders, directors of the second class shall be elected to hold office for
a term expiring at the second succeeding Annual Meeting of Stockholders, and
directors of the third class shall be elected to hold office for a term expiring
at the third succeeding Annual Meeting of Stockholders. Subject to the
foregoing, at each Annual Meeting of Stockholders the successors to the class of
directors whose term shall then expire shall be elected to hold office for a
term expiring at the third succeeding Annual Meeting of Stockholders. Directors
shall serve for their respective terms except in the event of their earlier
death, resignation or removal, and until their successors are duly elected and
shall qualify. Newly created directorships, resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, removal from office,
disqualification or other cause, may be filled by a majority vote of the
directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the Annual Meeting of Stockholders at
which the term of office of the class to which they have been elected expires.
No decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
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IN WITNESS WHEREOF, the Company has caused this Restated
Certificate of Incorporation to be executed this ____ day of February, 2000.
RARE MEDIUM GROUP, INC.
By:
-----------------------------------
Name: Glenn S. Meyers
Title: Chairman, President and
Chief Executive Officer
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