<PAGE>
Exhibit 3.1
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 12:30 PM 04/08/1999
991137670 - 2535465
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EARTHWATCH INCORPORATED
--------------------
EarthWatch Incorporated, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, hereby
certifies as follows:
First: The name of the corporation is EarthWatch Incorporated.
Second: The corporation's original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on August 21, 1995.
Third: The Amended and Restated Certificate of Incorporation of this
corporation has been duly adopted by the Board of Directors of the corporation
in accordance with Sections 141, 242 and 245 of the General Corporation Law of
the State of Delaware.
Fourth: The Certificate of Incorporation as amended to date shall be
amended and restated in full as follows:
I
The name of the Corporation is EarthWatch Incorporated (the
"Corporation").
-----------
II
The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle; and
the registered agent at such address is The Corporation Trust Company.
III
The purposes for which the Corporation is organized and its powers are
as follows:
<PAGE>
1. To engage in the transaction of all lawful business or pursue any
other lawful purpose or purposes for which a corporation may be organized under
the General Corporation Law of the State of Delaware (the "DGCL").
----
2. To have, enjoy, and exercise all of the rights, powers, and
privileges conferred upon corporations organized pursuant to Delaware law,
whether now or hereafter in effect, and whether or not herein specifically
mentioned.
IV
1. The Corporation is authorized to issue a total of One Hundred
Forty-five Million (145,000,000) shares, which shall consist of (i) One Hundred
Million (100,000,000) shares of common stock, par value of $0.001 per share
("Common Stock"), and (ii) Forty-five Million (45,000,000) shares of preferred
stock, with a par value of $0.001 per share. Effective as of the time this
Amended and Restated Certificate of Incorporation (the "Restated Certificate")
--------------------
is filed with the Secretary of State of the State of Delaware (the "Effective
---------
Time"), each share of the Corporation's Common Stock, par value $0.001, issued
----
and outstanding immediately prior to the Effective Time shall automatically and
without any action on the part of the respective holders thereof, be
reclassified into .210 shares of 8.5% Cumulative Convertible Redeemable
Preferred Stock Due 2009, Series C, par value $0.001, as described herein (the
"Series C Preferred Stock"); each share of the Corporation's Series A Preferred
------------------------
Stock, par value $0.001, issued and outstanding immediately prior to the
Effective Time shall automatically and without any action on the part of the
respective holders thereof, be reclassified into .441 shares of Series C
Preferred Stock; each share of the Corporation's Series B Preferred Stock, par
value $0.001, issued and outstanding immediately prior to the Effective Time
shall automatically and without any action on the part of the respective holders
thereof, be reclassified into .441 shares of Series C Preferred Stock, each
share of the Corporation's Series C Preferred Stock par value $0.001, issued
and outstanding immediately prior to the Effective Time shall automatically and
without any action on the part of the respective holders thereof, be
reclassified into .441 shares of Series C Preferred Stock, and each share of the
Corporation's Series D Preferred Stock, par value $0.001, issued and outstanding
immediately prior to the Effective Time shall automatically and without any
action on the part of the respective holders thereof, be converted into .441
shares of Series C Preferred Stock; provided, however, the Corporation shall
issue no fractional shares of such Series C Preferred Stock, but shall instead
pay to any stockholder who would be entitled to receive a fractional share as a
result of the actions set forth herein a sum in cash equal to the fair market
value of such fractional share.
-2-
<PAGE>
The designations, powers, preferences and relative participating,
optional or other special rights and the qualifications, limitations and
restrictions thereof in respect of the capital stock of the Corporation are as
follows:
Cumulative voting in the election of directors of the Corporation
shall not be permitted.
COMMON STOCK
Each holder of record of shares of Common Stock shall be entitled to
vote at all meetings of the stockholders and shall have one vote for each share
held by such holder of record.
Subject to the prior rights of the holders of all classes or series of
stock at the time outstanding having prior rights as to dividends, the holders
of shares of Common Stock shall be entitled to receive, when and as declared by
the Board of Directors of the Corporation (the "Board of Directors"), out of the
------------------
assets of the Corporation legally available therefor, such dividends as may be
declared from time to time by the Board of Directors.
Subject to the prior rights of creditors of the Corporation and the
holders of all classes or series of stock at the time outstanding having prior
rights as to distributions upon liquidation, dissolution or winding up of the
Corporation, in the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of shares of Common
Stock shall be entitled to receive their ratable and proportionate share of the
remaining assets of the Corporation.
PREFERRED STOCK
The Board of Directors is hereby expressly authorized, subject to any
limitations prescribed by law, to provide for the issuance of the shares of
Preferred Stock in one or more series, and by filing a Restated Certificate
pursuant to the applicable law of the State of Delaware (hereinafter referred to
as a "Preferred Stock Designation"), to establish from time to time the number
---------------------------
of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof. Each such class or series
of Preferred Stock shall have such voting powers, full or limited, or no voting
powers, and such preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof as
shall be stated in such resolution providing for the issuance of such class or
series of Preferred Stock as may be adopted from time to time by the Board of
Directors prior to the issuance of any shares thereof pursuant to the authority
hereby expressly vested in it, all in accordance with the laws of the State of
Delaware
-3-
<PAGE>
The powers, preferences and relative, participating, optional and
other special rights of each class or series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other Series at any time outstanding.
A. Designation of Series and Number of Shares. Three series of
------------------------------------------
Preferred Stock are created hereby: Ten Million (10,000,000) shares of 7%
Cumulative Convertible Redeemable Preferred Stock Due 2009, Series A, par value
$0.001 per share (the "Series A Preferred Stock"); (ii) Ten Million (10,000,000)
------------------------
shares of 7% Cumulative Convertible Redeemable Preferred Stock Due 2009,
Series B, par value $0.001 per share (the "Series B Preferred Stock"); and (iii)
Twenty-five Million (25,000,000) shares of Series C Preferred Stock. The shares
of the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock may be referred to collectively as the "Preferred Stock." All series of
---------------
Preferred Stock in existence prior to the Effective Time shall no longer exist
as of and following the Effective Time, and all outstanding shares thereof as of
immediately prior to the Effective Time shall be converted as of the Effective
Time into shares of Series C Preferred Stock as provided for above. All Shares
of Preferred Stock shall be fully paid and nonassesable.
B. Rights, & Preferences and Restrictions of the Series A Preferred
----------------------------------------------------------------
Stock. The Series A Preferred Stock shall have the voting, preferences and
-----
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof as follows:
1. Designation. The series of preferred stock established hereby
-----------
shall be designated the "7% Cumulative Convertible Redeemable Preferred Stock
due 2009, Series A" (and shall be referred to herein as the "Series A Preferred
------------------
Stock") and the authorized number of shares of Series A Preferred Stock shall be
-----
Ten Million (10,000,000) shares.
2. Rank. The Series A Preferred Stock shall, with respect to
----
dividend distributions and distributions upon the voluntary or involuntary
liquidation, winding up and dissolution of the Corporation, rank (i) senior to
all classes of Common Stock of the Corporation and each other class of capital
stock or series of preferred stock hereafter created which is not Senior Stock
or Parity Stock (such other class or series, including the Series C Preferred
Stock, being referred to herein as "Junior Stock"), (ii) pari passu with any
------------
Parity Stock and (iii) junior to any Senior Stock.
3. Dividends.
----------
(a) Beginning on the Original Issue Date and ending on the third
anniversary of the earlier to occur of (i) receipt by the Corporation of
the FCC Approval and (ii) October 31, 1999, the Holders shall be entitled
to
-4-
<PAGE>
receive, whether or not dividends are declared by the Board out of funds of the
Corporation, cumulative preferential dividends from the Original Issue Date of
the Series A Preferred Stock at an annual rate equal to 7% (the "Dividend Rate")
-------------
of the Liquidation Preference in effect from time to time and no more. During
such period, dividends may be paid, at the Corporation's option, in cash or by
the issuance of additional shares of Series A Preferred Stock (including
fractional shares) having an aggregate Liquidation Preference equal to the
amount of such dividends. The issuance of such additional shares of Series A
Preferred Stock will constitute "payment" of the related dividend for all
purposes of the Certificate of Designations; provided, however, that, the
-------- -------
Corporation shall pay the same form of dividends and in the same proportion
(i.e., either cash or additional shares, as the case may be, at its sole
discretion) hereunder, to the extent it pays dividends, on each Dividend Payment
Date on each of the Series A Preferred Stock, the Series B Preferred Stock and
the Series C Preferred Stock.
(b) Beginning on the first day after the third anniversary of the
earlier to occur of (i) receipt by the Corporation of the FCC Approval and (ii)
October 31, 1999, the Holders shall be entitled to receive, when, as and if
declared by the Board, but only out of funds legally available therefor,
distributions in the form of cash dividends on each share of Series A Preferred
Stock at an annual rate equal to 7% of the Liquidation Preference in effect from
time to time and no more.
(c) All dividends shall be cumulative, whether or not declared, on a
daily basis from the Original Issue Date and shall be payable quarterly in
arrears on each Dividend Payment Date commencing on June 30, 1999. Each dividend
shall be payable with respect to Series A Preferred Stock held by Holders of
record as they appear on the stock books of the Corporation on each Dividend
Record Date. Dividends shall cease to accumulate in respect of shares of Series
A Preferred Stock on the Redemption Date of such shares.
(d) Dividends payable under subsection (a) above on the Series A
Preferred Stock will accrue whether or not the Corporation has earnings or
profits, whether or not there are funds legally available for the payment of
such dividends and whether or not dividends are declared. Dividends will
accumulate to the extent they are not paid on the Dividend Payment Date for the
period to which they relate.
(e) If any dividend payable on any Dividend Payment Date under
subsection (b) above is not declared or paid in full in cash on such Dividend
Payment Date then, to the extent of legally available funds therefor, the
Liquidation Preference of each share shall be increased on such Dividend
-5-
<PAGE>
Payment Date by an amount (the "Accrued Dividend Amount") equal to the product
-----------------------
of (A) the amount payable as dividends on such share on such Dividend Payment
Date that is not paid in cash divided by the total amount payable as dividends
on such share on such Dividend Payment Date, and (B) one-quarter (or, if the
Original Issue Date was less than 90 days prior to the applicable Dividend
Payment Date, a fraction the numerator of which is the number of days elapsed
from the Original Issue Date to the applicable Dividend Payment Date and the
denominator of which is 360) of the Accrued Dividend Rate times the then
Liquidation Preference. The amount of the dividend otherwise payable in cash
that is so added to the Liquidation Preference shall be deemed for all purposes
to have been paid in full in cash, shall not be deemed to be arrearages or in
arrears and shall not accumulate. In the event that the Board of the Corporation
determines that any portion of the Accrued Dividend Amount may not be so added
to the Liquidation Preference because of the lack of legally available funds
therefor (such portion, the "Default Dividends"), the Corporation shall give
-----------------
notice thereof to the Holders of record as of the applicable Dividend Payment
Date within twenty (20) Business Days after such Dividend Payment Date and any
portion of the Accrued Dividend Amount not so added to the Liquidation
Preference because of the lack of legally available funds therefor shall be
accumulated and payable in cash. Any Default Dividends shall thereafter accrue
dividends at an annual rate equal to the Accrued Dividend Rate. Any such
determination by the Board shall be final and binding on all Holders. Except as
expressly stated above, no amounts shall accrue or be payable in respect of any
dividend payment on the Series A Preferred Stock which may be in arrears.
(f) Dividends on account of arrears for any past Dividend Period
(including without limitation any Default Dividends, but not including any
Accrued Dividend Amounts) may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to Holders of record on such
date, not more than forty-five (45) days prior to the payment thereof, as may be
fixed by the Board.
(g) So long as any shares of the Series A Preferred Stock are
outstanding, the Corporation shall not declare, pay or set apart for payment any
dividend on any Junior Stock or make any payment on account of, or set apart for
payment money for a sinking or other similar find for, the purchase, redemption
or other retirement of, any Junior Stock, or any warrants, rights, calls or
options exercisable for any Junior Stock or make any distribution in respect
thereof, either directly or indirectly, and whether in cash, obligations or
shares of the Corporation or other property (other than dividends, payments,
purchases, acquisitions, redemptions, retirements or distributions in Junior
Stock) and shall not permit any Subsidiary of the Corporation directly or
indirectly to do any of the same in respect of such
-6-
<PAGE>
Junior Stock (other than dividends, payments, purchases, acquisitions,
redemptions, retirements or distributions in Junior Stock) unless and until all
------
accumulated and unpaid dividends on the Series A Preferred Stock have been paid
in full, and the Corporation is not in default of any of its obligations under
Section 5.
(h) Unless and until all dividend arrearages on the Series A
Preferred Stock have been paid in full, all dividends declared by the
Corporation upon shares of Series A Preferred Stock or Parity Stock shall be
declared pro rata with respect to all shares of Series A Preferred Stock and
Parity Stock then outstanding so that the amounts of any dividends declared per
share on the Series A Preferred Stock and such Parity Stock bear the same ratio
to each other at the time of declaration as all accrued and unpaid dividends on
the Series A Preferred Stock and the Parity Stock bear to each other.
(i) The Corporation shall take all actions required or permitted
under the DGCL to permit the payment of dividends on the Series A Preferred
Stock, including, without limitation, through the revaluation of its assets in
accordance with the DGCL, to make or keep funds legally available for the
payment of dividends.
(j) Dividends payable on the Series A Preferred Stock for any period
less than a year shall be computed on the basis of a 360-day year of twelve 30-
day months and the actual number of days elapsed in the period for which
payable.
4. Liquidation Preference.
-----------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the Holders of
shares of Series A Preferred Stock then outstanding shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders an amount in cash equal to the then Liquidation Preference, for
each share outstanding, plus an amount in cash equal to accumulated and unpaid
dividends thereon (including without limitation Default Dividends) to the date
fixed for liquidation, dissolution or winding up, and no more, before any
payment shall be made or any assets distributed to the holders of any Junior
Stock, provided, however, that the Holders of the Series A Preferred Stock shall
-------- -------
not be entitled to receive any amount upon the voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation until
the holders of any Senior Stock shall have received all amounts and
distributions to which they are entitled thereupon. Except as provided in the
preceding sentence, Holders of Series A Preferred Stock shall not be entitled to
any distribution in the event of any
-7-
<PAGE>
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation. If the assets of the Corporation are not
sufficient to pay in full the liquidation payments payable to the holders
of outstanding shares of the Series A Preferred Stock and any Parity Stock,
then the holders of all such shares shall share ratably in such
distribution of assets in accordance with the amounts which would be
payable on such distribution if the amount to which the holders of
outstanding shares of Series A Preferred Stock and any Parity Stock are
entitled were paid in full.
(b) For the purposes of this Section 4, neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Corporation nor the consolidation or merger of the Corporation with or into
one or more corporations shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation.
5. Mandatory Redemption. The Corporation shall redeem on March 31,
--------------------
2009 (the "Redemption Date"), from any source of funds legally available
---------------
therefor, all outstanding shares of Series A Preferred Stock at a redemption
price per share equal to the then Liquidation Preference per share (the
"Mandatory Redemption Price"), plus an amount in cash equal to all accumulated
--------------------------
and unpaid dividends per share (including an amount in cash equal to a prorated
dividend for any partial Dividend Period). The Corporation will not be required
to make sinking fund payments with respect to the Series A Preferred Stock. The
Series A Preferred Stock shall not be redeemable at the option of the
Corporation prior to the Redemption Date.
6. Conversion.
----------
(a) Optional Conversion. Except as set forth in Section 6(c) below, upon
-------------------
and following the earlier to occur of (i) receipt by the Corporation of the FCC
Approval and (ii) October 31, 1999 and until the third anniversary of the
earlier to occur of (i) and (ii), the Holder of each share of Series A Preferred
Stock shall have the right, at the option of such Holder, to convert such shares
into shares of Common Stock, on and subject to the terms and conditions
hereinafter set forth. Subject to the provisions for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall be convertible into such
number (calculated as to each conversion to the nearest 1/100th of a share) of
fully paid and nonassessable shares of Common Stock as is obtained by dividing
(i) the sum of the then Liquidation Preference plus the amount of accumulated
and unpaid dividends thereon, including the amount of any Default Dividends and
any dividends accumulated thereon by (ii) the Conversion Price, both as in
effect at the date any share or shares of Series A Preferred
-8-
<PAGE>
Stock are surrendered for conversion. The Series A Preferred Stock shall not be
convertible prior to the earlier to occur of (i) receipt by the Corporation of
the FCC Approval and (ii) October 31, 1999 or after the third anniversary of the
earlier to occur of (i) and (ii).
(b) Conversion Procedure.
--------------------
(i) In order to exercise the conversion privilege, the Holder of any
shares of Series A Preferred Stock to be converted in whole or in part
shall surrender the certificate representing such shares of Series A
Preferred Stock (the "Series A Preferred Stock Certificate") at the office
------------------------------------
or agency then maintained by the Corporation for the transfer of the Series
A Preferred Stock, and shall give written notice of conversion in the form
provided on the Series A Preferred Stock Certificate (or such other notice
which is acceptable to the Corporation) to the Corporation at such office
or agency that the Holder elects to convert such shares of Series A
Preferred Stock represented by the Series A Preferred Stock Certificate so
surrendered or the portion thereof specified in said notice into shares of
Common Stock. Such notice shall also state the name or names (with
addresses) in which the certificate or certificates for shares of Common
Stock which shall be issuable upon such conversion shall be issued, and
shall be accompanied by transfer taxes, if required. Each Series A
Preferred Stock Certificate surrendered for conversion shall, unless the
shares issuable on conversion are to be issued in the same name as the
registration of such Series A Preferred Stock Certificate, be duly endorsed
by, or be accompanied by instruments of transfer in form satisfactory to
the Corporation duly executed by, the Holder or such Holder's duly
authorized attorney.
(ii) As promptly as practicable after the surrender of such Series A
Preferred Stock Certificate and the receipt of such notice and funds, if
any, as aforesaid, the Corporation shall issue and shall deliver at such
office or agency to such Holder, or on his written order, a certificate or
certificates for the number of shares of Common Stock issuable upon the
conversion of such shares of Series A Preferred Stock represented by the
Series A Preferred Stock Certificate so surrendered or portion thereof in
accordance with the provisions of this Section 6. In case less than all of
the shares of Series A Preferred Stock represented by a Series A Preferred
Stock Certificate surrendered for conversion are to be converted, the
Corporation shall deliver to or upon the written order of the Holder of
such Series A Preferred Stock Certificate a new Series A Preferred Stock
Certificate representing the shares of
-9-
<PAGE>
Series A Preferred Stock not converted. If a Holder fails to notify the
Corporation of the number of shares of Series A Preferred Stock which such
Holder wishes to convert, such Holder shall be deemed to have elected to
convert all shares represented by the certificate or certificates
surrendered for conversion.
(iii) Each conversion shall be deemed to have been effected on the
date on which such Series A Preferred Stock Certificate shall have been
surrendered and such notice shall have been received by the Corporation, as
aforesaid, and the person in whose name any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion shall be
deemed to have become on said date the holder of record of the shares
represented thereby; provided, however, that the person effecting any such
-------- -------
surrender on any date when the stock books of the Corporation shall be
closed shall constitute the person in whose name the certificates are to be
issued as the record holder thereof for all purposes on the next succeeding
day on which such stock books are open, but such conversion shall be at the
Conversion Price as in effect on the date upon which such Series A
Preferred Stock Certificate shall have been surrendered.
(iv) All shares of Series A Preferred Stock that shall have been
surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such shares, including the
rights, if any, to receive notices and to vote, shall forthwith cease,
except only the right of the Holders thereof, subject to the provisions of
this Section 6, to receive shares of Common Stock in exchange therefor.
(v) No payments or adjustments in respect of dividends on shares of
Series A Preferred Stock surrendered for conversion (except as expressly
provided herein in the case of Default Dividends) or on account of any
dividend on the Common Stock issued upon conversion shall be made upon the
conversion of any shares of Series A Preferred Stock.
(c) Automatic Conversion. Upon and following the earlier to occur of (i)
--------------------
receipt by the Corporation of the FCC Approval and (ii) October 31, 1999 and
until the third anniversary of the earlier to occur of (i) and (ii), upon the
earlier to occur of (1) an Initial Public Offering, the public offering price of
which is at least $35,000,000 in the aggregate and (2) the listing of the Common
Stock on the New York Stock Exchange, Inc. or the American Stock Exchange, Inc,
or the trading of the Common Stock on the Nasdaq National Market ("NASDAQ"), if
------
the Market Price
-10-
<PAGE>
(as hereinafter defined) of the Common Stock shall on any day be at a level such
that, if all the outstanding shares of Series A Preferred Stock were converted
into the number of shares of Common Stock into which such Series A Preferred
Stock is convertible pursuant to this Section 6, and such shares of Common Stock
were then sold at the Market Price, the proceeds of such sale would exceed by at
least 20% the amount determined by multiplying the number of outstanding shares
of Series A Preferred Stock by the Conversion Price (which amount shall be
subject to equitable adjustment wherever there shall occur a stock split,
combination, reclassification or other similar event involving the Series A
Preferred Stock), then all outstanding shares of Series A Preferred Stock shall
be converted automatically into the number of shares of Common Stock into which
such shares are convertible pursuant to this Section 6 as of immediately prior
to the occurrence of such event, without further action by the Holders and
whether or not the certificates representing such shares are surrendered to the
Corporation or its Transfer Agent for the Common Stock, provided that all
declared and unpaid dividends on such shares of Series A Preferred Stock shall
first have been paid in full. The "Market Price" of the Common Stock shall be
------------
the average of the reported last sales prices on an exchange or on NASDAQ for
the Common Stock on each of the twenty (20) preceding Trading Days on which a
reported sale of the Common Stock took place. The Series A Preferred Stock shall
not be automatically converted pursuant to this Section 6(c) prior to the
earlier to occur of (i) receipt by the Corporation of the FCC Approval and (ii)
October 31, 1999 or after the third anniversary of the earlier to occur of (i)
and (ii).
(d) Adjustment of Conversion Price. The Conversion Price at which a share
------------------------------
of Series A Preferred Stock is convertible into Common Stock shall be subject to
adjustment from time to time as follows:
(i) [Intentionally omitted.]
(ii) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall
otherwise issue, shares of Common Stock or securities convertible or
exercisable into shares of Common Stock or rights or warrants entitling the
holders thereof to subscribe for or purchase shares of Common Stock
(including without limitation shares, securities or rights or warrants
issued in connection with the High Yield Financing or the issuance or
exercise of options pursuant to the New Equity Plan (and related
agreements)), the Conversion Price in effect at the close of business on
the date fixed for the determination of stockholders entitled to receive
such securities, rights or warrants or for such issuance shall be reduced
by
-11-
<PAGE>
multiplying such Conversion Price by a fraction of which the numerator
shall be the number of Fully-Diluted Shares represented by shares of
Series C Preferred Stock and Common Stock outstanding at the close of
business on the date fixed for such determination and the denominator
shall be such number of Fully Diluted Shares plus the number of shares
of Common Stock so issued, offered for subscription or purchase or
issuable upon conversion or exercise of the securities included in
such issuance, dividend or other distribution, such reduction to
become effective immediately prior to the opening of business on the
day following the date fixed for such determination or for such
issuance; provided, however, that no such adjustment shall be made
-------- -------
upon (A) the issuance and sale and subscription for and purchase of
714,286 shares of Series C Preferred Stock by Ball Technologies
Holdings Corp. on the terms and conditions set forth in the Recap
Agreement; (B) the issuance of shares of Series C Preferred Stock to
all holders thereof as payment of a dividend in accordance with
Section 3(a) of the Series C Preferred Stock Certificate of
Designations; (C) the issuance of shares of Common Stock upon
conversion of shares of Preferred Stock; or (D) the issuance of shares
of Common Stock or Series C Preferred Stock, or securities convertible
or exercisable into shares of Common Stock or Series C Preferred
Stock, in connection with (1) the exercise of options pursuant to the
Existing Stock Option Plan, (2) the exercise of the Odetics Warrant,
(3) the Waterstone Agreement or (4) the conversion or exercise of any
other convertible or derivative security the grant or issuance of
which security previously resulted in a reduction of the Conversion
Price hereunder ((A) through (D), collectively, the "Dilution
Exceptions"). Notwithstanding anything in this subparagraph (ii) to
the contrary, the following sentence (and not the previous sentence)
shall apply at any time after successful launch and commercially
viable operation, for a period of 60 consecutive days, of QuickBird 1,
or any successor to such satellite. In case the Corporation shall
issue shares of Common Stock, or securities convertible or exercisable
into shares of Common Stock or rights or warrants entitling the
holders thereof to subscribe for or purchase shares of Common Stock,
at a price per share less than the current Conversion Price on the
date fixed for such issuance (except for any such issuance qualifying
as a Dilution Exception), the Conversion Price in effect at the close
of business on the date fixed for such issuance shall be reduced by
multiplying such Conversion Price by a fraction of which the numerator
shall be the number of Fully-Diluted Shares represented by shares of
Series C Preferred Stock and Common Stock outstanding at the close of
-12-
<PAGE>
business on the day immediately preceding the date fixed for such
issuance plus the number of shares of Common Stock which the aggregate
of the offering price of the total number of shares of Common Stock so
issued, offered for subscription or purchase or issuable upon
conversion or exercise of the securities so issued would purchase at
such Conversion Price and the denominator shall be such number of
Fully-Diluted Shares at the close of business on the day immediately
preceding the date fixed for such issuance plus the total number of
shares of Common Stock so issued, offered for subscription or purchase
or issuable upon conversion or exercise of the securities so issued,
such reduction to become effective immediately prior to the opening of
business on the day following the date fixed for such issuance. For
the purposes of this subparagraph (ii), the number of Fully-Diluted
Shares at any time shall not include shares held in the treasury of
the Corporation. The Corporation shall not issue any rights or
warrants in respect of shares of Common Stock held in the treasury of
the Corporation. For purposes of this subparagraph (ii), the issuance
of rights or warrants to subscribe for or purchase stock or securities
convertible or exchangeable into shares of Common Stock shall be
deemed to be the issuance of rights or warrants to purchase the shares
of Common Stock into which such stock or securities are convertible or
exercisable. In case any securities or rights or warrants referred to
in this subparagraph (ii) in respect of which an adjustment shall have
been made shall expire unexercised within forty-five (45) days after
the same shall have been distributed or issued by the Corporation, the
Conversion Price shall be readjusted at the time of such expiration to
the Conversion Price that would have been in effect if no adjustment
had been made on account of the distribution or issuance of such
expired rights or warrants.
(iii) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the close of business on the day upon
which such subdivision becomes effective shall be proportionately
reduced, and conversely, in case outstanding shares of Common Stock
shall each be combined into a smaller number of shares of Common
Stock, the Conversion Price in effect at the close of business on the
day upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the case may
be, to become effective immediately prior to the opening of business
on the day following the day upon which such subdivision or
combination becomes effective.
-13-
<PAGE>
(iv) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of record of its Common Stock evidences of
its indebtedness, shares of any class or series of capital stock, cash
or assets (including securities, but excluding any securities or
rights or warrants referred to in subparagraph (ii) of this Section
6(d), any dividend or distribution paid exclusively in cash and any
dividend or distribution referred to in subparagraph (i) of this
Section 6(d)), the Conversion Price shall be reduced so that such
price shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this subparagraph (iv) by a
fraction of which the numerator shall be the current market price per
share (determined as provided in subparagraph (vii) of this Section
6(d)) of the Common Stock on the Reference Date less the fair market
value (as determined in good faith by the Board, whose good faith
determination shall be conclusive and described in a resolution of the
Board), on the Reference Date, of such number or amount of the
evidences of indebtedness, shares of capital stock, cash and assets
that is so distributed to a holder of one share of Common Stock and
the denominator shall be such current market price per share of the
Common Stock, such reduction to become effective on the later to occur
of (x) immediately prior to the opening of business on the day
following the Reference Date and (y) the time at which such dividend
or other distribution is unconditionally declared by the Board of the
Corporation. For purposes of this subparagraph (iv), any dividend or
distribution that includes (but is not limited to) shares of Common
Stock, securities convertible or exchangeable into Common Stock or
rights or warrants to subscribe for or purchase shares of Common Stock
shall be deemed instead to be (1) a dividend or distribution of the
evidences of indebtedness, cash, assets or shares of capital stock
other than such shares of Common Stock, such securities convertible or
exchangeable into Common Stock or such rights or warrants (so that any
Conversion Price reduction required by this subparagraph (iv) is made)
immediately followed by (2) a dividend or distribution of such shares
of Common Stock, such securities convertible or exchangeable into
Common Stock or such rights or warrants (so that there is made any
further Conversion Price reduction required by subparagraph (i) or
(ii) of this Section 6(d), except (A) the Reference Date of such
dividend or distribution shall be substituted as "the date fixed for
the determination of stockholders entitled to receive such securities,
rights or warrants or for such issuance" and "the date fixed for such
determination" within the meaning of subparagraphs (i) and (ii) of
this Section 6(d)
-14-
<PAGE>
and (B) any shares of Common Stock included in such dividend or
distribution shall not be included in the "number of Fully-Diluted
Shares represented by shares of Series C Preferred Stock and Common
Stock outstanding at the close of business on the date fixed for such
determination" within the meaning of subparagraph (i) of this Section
6(d)). In case any dividend or other distribution referred to in this
subparagraph (iv)) in respect of which an adjustment shall have been
made shall not be paid or otherwise distributed on the date fixed
therefor (as determined in good faith by the Board of the Corporation
whose good faith determination shall be conclusive), the Conversion
Price shall be readjusted to the Conversion Price that would have been
in effect if no adjustment had been made on account of such dividend
or other distribution. In the event that any shares of Series A
Preferred Stock shall be converted on or after the time at which any
adjustment to the Conversion Price becomes effective pursuant to this
subparagraph (iv) in respect of any dividend or other distribution, no
portion of such dividend or other distribution shall be paid or
distributed (and if so paid or distributed shall not be retained by
any person) in respect of any shares of Common Stock issued upon
conversion thereof, notwithstanding that the date fixed for the
determination of stockholders entitled to receive such dividend or
other distribution may occur on or after the date such adjustment
becomes effective.
(v) In case the Corporation shall pay or make a dividend or other
distribution to holders of record of its Common Stock exclusively in
cash, the Conversion Price shall be reduced so that such price shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subparagraph (v) by a fraction of which
the numerator shall be the current market price per share (determined
as provided in subparagraph (vii) of this Section 6(d)) of the Common
Stock on the Reference Date less the amount of cash so distributed
applicable to one share of Common Stock and the denominator shall be
such current market price per share of the Common Stock, such
reduction to become effective on the later to occur of (x) immediately
prior to the opening of business on the day following the Reference
Date and (y) the time at which such dividend or other distribution is
unconditionally declared by the Board of the Corporation. In case any
dividend or other distribution referred to in this subparagraph (v) in
respect of which an adjustment shall have been made shall not be paid
or otherwise distributed on the date fixed therefor (as determined in
good faith by the Board of the Corporation whose good faith
-15-
<PAGE>
determination shall be conclusive), the Conversion Price shall be
readjusted to the Conversion Price that would have been in effect if
no adjustment had been made on account of such dividend or other
distribution. In the event that any shares of Series A Preferred Stock
shall be converted on or after the time at which any adjustment to the
Conversion Price becomes effective pursuant to this subparagraph in
respect of any dividend or other distribution, no portion of such
dividend or other distribution shall be paid or distributed (and if so
paid or distributed shall not be retained by any person) in respect of
any shares of Common Stock issued upon conversion thereof,
notwithstanding that the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution
may occur on or after the date such adjustment becomes effective.
(vi) If any Fundamental Change shall occur, then, as a condition
of such Fundamental Change, lawful and adequate provisions shall be
made whereby each Holder of a share or shares of Series A Preferred
Stock shall have the right to receive, upon the basis and upon the
terms and conditions specified herein, in lieu of the shares of Common
Stock of the Corporation immediately theretofore receivable upon the
conversion of such share or shares of Series A Preferred Stock such
shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for such number and class of shares of
Common Stock issuable upon conversion of the Series A Preferred Stock
immediately prior to the occurrence of the Fundamental Change. In the
case of any Fundamental Change, appropriate provision shall be made
with respect to the rights and interests of the Holders to the end
that the provisions hereof (including without limitation provisions
for adjustment of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise of any
conversion rights hereunder.
(vii) For the purpose of any computation under subparagraphs (iv)
and (v), the current market price per share of Common Stock on any
date in question shall be deemed to be the average of the daily
Closing Prices for the five (5) consecutive Trading Days prior to and
including the date in question; provided, however, that (1) if the
-------- -------
"ex" date (as hereinafter defined) for any event (other than the
issuance or distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to subparagraph (i), (ii),
(iii), (iv), (v) or (vi) above ("Other Event") occurs after the fifth
-----------
Trading Day prior to the day
-16-
<PAGE>
in question and prior to the "ex" date for the issuance or
distribution requiring such computation (the "Current Event"), the
-------------
Closing Price for each Trading Day prior to the "ex" date for such
Other Event shall be adjusted by multiplying such Closing Price by the
same fraction by which the Conversion Price is so required to be
adjusted as a result of such Other Event, (2) if the "ex" date for any
Other Event occurs after the "ex" date for the Current Event and on or
prior to the date in question, the Closing Price for each Trading Day
on and after the "ex" date for such Other Event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by
which the Conversion Price is so required to be adjusted as a result
of such Other Event, (3) if the "ex" date for any Other Event occurs
on the "ex" date for the Current Event, one of those events shall be
deemed for purposes of determining which of clauses (1) and (2) of
this proviso to apply to have an "ex" date occurring prior to the "ex"
date for the other event but in applying such clause the actual "ex"
date of the other event shall be utilized, and (4) if the "ex" date
for the Current Event is on or prior to the date in question, the
Closing Price for each Trading Day on or after such "ex" date shall be
adjusted after taking into account any adjustment required pursuant to
clause (2) of this proviso, by adding thereto the amount of any cash
and the fair market value on the date in question (as determined in
good faith by the Board in a manner consistent with any determination
of such value for purposes of paragraph (iv) or (v) of this Section
6(d), whose determination shall be conclusive and described in a
resolution of the Board) of such number or amount of the securities,
rights, warrants, evidences of indebtedness, shares of capital stock
or assets being distributed to a holder of one share of Common
Stock. For purposes of this subparagraph, the term "ex" date, (1) when
used with respect to any issuance or distribution, means the first
date on which the Common Stock trades regular way on the relevant
exchange or in the relevant market from which the Closing Price was
obtained without the right to receive such issuance or distribution,
and (2) when used with respect to any subdivision or combination of
shares of Common Stock, means the first date on which the Common Stock
trades regular way on such exchange or in such market after the time
at which such subdivision or combination becomes effective.
(viii) In case a tender or exchange offer made by the Corporation
or any Subsidiary of the Corporation for all or any portion of the
Corporation's Common Stock shall expire and result in the acquisition
by the Corporation of shares of Common Stock
-17-
<PAGE>
pursuant thereto and such tender or exchange offer shall involve the
payment by the Corporation or such Subsidiary of consideration per
share of Common Stock having a fair market value (as determined in
good faith by the Board, whose good faith determination shall be
conclusive and described in a resolution of the Board) at the last
time (the "Expiration Time") tenders or exchanges may be made pursuant
---------------
to such tender or exchange offer (as it shall have been amended) that
exceeds the current market price per share of the Common Stock on the
Trading Day next succeeding the Expiration Time, the Conversion Price
shall be reduced so that such price shall equal the price determined
by multiplying the Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this
subparagraph (viii) by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding (including any tendered
or exchanged shares) at the Expiration Time multiplied by the current
market price per share of the Common Stock on the Trading Day next
succeeding the Expiration Time and the denominator shall be the sum of
(x) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders as a result of the Corporation's
or Subsidiary's acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares so
accepted, up to any such maximum, being referred to as the "Purchased
---------
Shares") and (y) the product of the number of shares of Common Stock
------
outstanding (less any Purchased Shares) at the Expiration Time and the
current market price per share of the Common Stock on the Trading Day
next succeeding the Expiration Time, such reduction to become
effective immediately prior to the opening of business on the day
following the Expiration Time. For the purpose of any computation
under this subparagraph (viii) of this Section 6(d), the current
market price per share of Common Stock on any date in question shall
be deemed to be the average of the daily Closing Prices for such date
in question and the next two (2) succeeding Trading Days; provided,
--------
however, that if the "ex" date for any Other Event occurs after the
-------
Expiration Time for the tender or exchange offer requiring such
computation and on or prior to the second Trading Day following the
date in question, the Closing Price for each Trading Day on after
the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such
other event.
-18-
<PAGE>
(e) Conversion Price Adjustment Deferred. Notwithstanding the
------------------------------------
foregoing provisions of this Section 6, (i) no adjustment in the number of
shares of Common Stock into which any share of Series A Preferred Stock is
convertible shall be required unless such adjustment would require an
increase or decrease in such number of shares of at least 1% and (ii) no
adjustment in the Conversion Price shall be required unless such adjustment
would require an increase or decrease in the Conversion Price of at least
$.01 per share; provided, however,that any adjustments which by reason of
-------- -------
this paragraph (e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 6 shall be made to the nearest cent or the nearest 1/100th of
a share, as the case may be.
(f) Adjustment Report. Whenever any adjustment is required in the
-----------------
Conversion Price or the shares into which any share of Series A Preferred
Stock is convertible, the Corporation shall forthwith (i) file with each
office or agency then maintained by the Corporation for the transfer of the
Series A Preferred Stock a statement describing in reasonable detail the
adjustment and the method of calculation used and (ii) cause a notice of
such adjustment, setting forth the adjusted Conversion Price and the
calculation thereof to be mailed to the Holders of record of shares of
Series A Preferred Stock at their respective addresses as shown on the
stock books of the Corporation. The certificate of any independent firm of
public accountants of recognized standing selected by the Board certifying
to the Board the correctness of any computation under this Section 6 shall
be evidence of the correctness of such computation.
(g) Notice of Certain Events. In the event that:
------------------------
(i) the Corporation shall take action to make any distribution
to the holders of its Common Stock;
(ii) the Corporation shall take action to offer for subscription
pro rata to the holders of its Common Stock any securities of any
kind;
(iii) the Corporation shall take action to accomplish any capital
reorganization, reclassification of the capital stock of the
Corporation (other than a subdivision, split or combination of its
Common Stock), consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the Corporation is
required, or sale or transfer of all or substantially all of the
assets of the Corporation; or
-19-
<PAGE>
(iv) the Corporation shall take any action to accomplish a
voluntary or involuntary dissolution, liquidation or winding-up of the
Corporation;
then the Corporation shall (A) in case of any such distribution or
subscription rights, at least twenty (20) days prior to the date or
expected date on which the stock books of the Corporation shall close or a
record shall be taken for the determination of holders entitled to such
distribution or subscription rights, and (B) in the case of any such
reorganization, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up, at least twenty (20) days prior to
the date or expected date when the same shall be consummated, cause written
notice thereof to be mailed to each Holder of shares of Series A Preferred
Stock at his address as shown on the stock books of the Corporation. Such
notice in accordance with the foregoing clause (A) shall also specify, in
the case of any such distribution or subscription rights, the date or
expected date on which the holders of Common Stock shall be entitled
thereto, and such notice in accordance with the foregoing clause (B) shall
also specify the date or expected date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-
up, as the case may be.
(h) Common Stock. For the purposes of this Section 6, the term
------------
"Common Stock" shall mean (i) the Common Stock or (ii) any other class of
stock resulting from successive changes or reclassifications, of such
Common Stock consisting solely of changes in par value or from no par value
to par value, or from par value to no par value. In the event that at any
time as a result of an adjustment made pursuant to the provisions of
Section 6(d), the Holder of any share of Series A Preferred Stock
thereafter surrendered for conversion shall become entitled to receive any
shares of the Corporation other than shares of Common Stock, thereafter the
number of such other shares so receivable upon conversion of any share of
Series A Preferred Stock 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 the Common Stock contained in Section 6(d), and
the other provisions of this Section 6 with respect to the Common Stock
shall apply on like terms to any such other shares.
(i) Fractional Shares. The Corporation shall not be required to issue
-----------------
fractional shares of Common Stock upon the conversion of any 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 issuable upon conversion thereof
-20-
<PAGE>
shall be computed on the basis of the aggregate number of shares so
surrendered. If any fractional interest in a share of Common Stock would be
deliverable upon the conversion of any shares of Series A Preferred Stock,
the Corporation may pay, in lieu thereof, in cash the Closing Price thereof
as of the Business Day immediately preceding the date of such conversion.
(j) Reservation of Shares. 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 or redemption
of the shares of Series A Preferred Stock, such number of its duly
authorized shares of Common Stock (or treasury shares as provided below) as
shall from time to time be sufficient for the conversion of all outstanding
shares of Series A Preferred Stock into Common Stock at any time. The
Corporation shall, from time to time and in accordance with the DGCL, cause
the authorized number of shares of Common Stock to be increased if the
aggregate of the number of authorized shares of Common Stock remaining
unissued and the issued shares of such Common Stock reserved for issuance
in any other connection shall not be sufficient for the conversion of all
outstanding shares of Series A Preferred Stock into Common Stock at any
time.
(k) Additional Conversion Price Adjustments. The Corporation may make
---------------------------------------
such reductions in the Conversion Price, in addition to those required by
Section 6(d), as it considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes. The
Corporation from time to time may reduce the Conversion Price by any amount
for any period of time if the period is at least twenty (20) days, the
reduction is irrevocable during the period and the Board of the Corporation
shall have made a determination that such reduction would be in the best
interest of the Corporation, which determination shall be conclusive.
Whenever the Conversion Price is reduced pursuant to the preceding
sentence, the Corporation shall mail to Holders of record of the Series A
Preferred Stock a notice of the reduction at least fifteen (15) days prior
to the date the reduced Conversion Price takes effect, and such notice
shall state the reduced Conversion Price and the period it will be in
effect.
7. Voting Rights.
-------------
(a) Upon and following the earlier to occur of (i) receipt by the
Corporation of the FCC Approval and (ii) October 31, 1999, for so long as
any shares of the Series A Preferred Stock are outstanding, each share of
Series A Preferred Stock shall entitle the Holder thereof to notice of and
to
-21-
<PAGE>
vote, in person or by proxy, at any special or annual meeting of
stockholders, on all matters entitled to be voted on by holders of Common
Stock and any other series or class of Voting Stock (as defined in Section
7(b)) voting together as a single class with all other shares entitled to
vote thereon. With respect to any such vote, each share of Series A
Preferred Stock shall entitle the Holder thereof to cast a number of votes
equal to the product of (A) the A Vote Ratio and (B) the number of votes
that such Holder would be entitled to cast had such Holder converted such
share of Series A Preferred Stock into shares of Common Stock as of the
record date for determining the stockholders of the Corporation eligible to
vote on any such matters (regardless of whether such shares of Series A
Preferred Stock are actually then convertible). Prior to the earlier to
occur of (i) receipt by the Corporation of the FCC Approval and (ii)
October 31, 1999, no Holder of shares of Series A Preferred Stock shall be
entitled to vote hereunder.
(b) The term "Voting Stock" means any class or classes of capital
------------
stock, or securities convertible into or exchangeable for any class of
capital stock of the Corporation pursuant to which the holders thereof have
the general power under ordinary circumstances to vote with respect to the
election of at least a majority of the Board, irrespective of whether or
not, at the time, stock of any other class or classes shall have, or might
have, voting power by reason of the happening of any contingency.
(c) Upon and following the earlier to occur of (i) receipt by the
Corporation of the FCC Approval and (ii) October 31, 1999, for so long as
any shares of the Series A Preferred Stock are outstanding and held of
record by any Initial Holder, the Initial Holders which at that time hold
of record at least a majority of the outstanding shares of Series A
Preferred Stock then held by all Initial Holders shall have the right to
elect two Directors to the Board. Prior to the earlier to occur of (i)
receipt by the Corporation of the FCC Approval and (ii) October 31, 1999,
the Initial Holders shall have the right to elect two Directors to the
Board, none of which must be an Independent Director. The Initial Holders
shall have the right to transfer, at their sole discretion, in whole or in
part, their right to elect Directors under this Section 7(c) to their
Permitted Transferees (such Permitted Transferees, the "Special Permitted
-----------------
Transferee"); in such event, and solely with respect to the right to elect
----------
the specific number of Directors so transferred, the term "Initial Holder"
in the two preceding sentences shall be replaced everywhere it appears with
the term "Special Permitted Transferee." In no event shall the Initial
Holders and their Special Permitted Transferees have the right hereunder to
elect, in the aggregate, more than two Directors to the Board. The Initial
Holders and their Special Permitted Transferees may choose to leave vacant
for any period of
-22-
<PAGE>
time any seat on the Board to which they have the right to elect a Director
pursuant to this Section 7(c).
(d) So long as any shares of Series A Preferred Stock are outstanding
and held of record by any Initial Holder or its Permitted Transferees, in
addition to any vote or consent of the Board required by law or by the
Corporation's Certificate of Incorporation, the affirmative vote or consent
of a majority of the Directors elected by the Initial Holders or their
Permitted Transferees pursuant to Section 7(c) above shall be necessary for
effecting or validating:
(i) the amendment of the Certificate of Incorporation, Bylaws or
other organizational documents of the Corporation, including any and
all certificates of designations of any series of preferred stock of
the Company, or the amendment, termination or waiver of any provision
under the Recap Agreement or the Stockholders' Agreement,
(ii) other than with respect to shares of Series C Preferred
Stock, securities convertible or exercisable into shares of Series C
Preferred Stock or rights or warrants entitling the holders thereof to
subscribe for and purchase shares of Series C Preferred Stock issued
in connection with the High-Yield Financing, shares of Common Stock
and Preferred Stock issued pursuant to the Recap Agreement (including
any shares reclassified upon filing of the Amended and Restated
Certificate of Incorporation of the Company and conversion of any
shares issued in accordance with the Recap Agreement or reclassified
upon filing of the Amended and Restated Certificate of Incorporation
of the Company) and shares of Common Stock issued in connection with
an Initial Public Offering or the issuance of securities pursuant to
the Waterstone Agreement or the exercise of the Odetics Warrant or the
exercise of options pursuant to the Existing Stock Option Plan (and
related agreements) or the grant or exercise of options pursuant to
the New Equity Plan (and related agreements), such grant or exercise
under the New Equity Plan, together with all prior grants or exercises
under the New Equity Plan since the Closing Date, representing in the
aggregate no more than 15% of the Fully-Diluted Shares as of the
Closing Date, the issuance, delivery or sale of any shares or equity
interests, or any options, warrants, conversion or other rights to
purchase any such shares or equity interests, or any securities
convertible into or exchangeable for such shares or equity interests,
or the issuance of any other security in respect of or in lieu of or
in substitution for shares or equity interests, or the entry into any
agreements restricting the transfer of,
-23-
<PAGE>
or affecting the rights of holders of shares or equity interests, the
granting of any preemptive or anti-dilutive rights to any holder of
any class of securities, or the granting of registration rights with
respect to any class of securities;
(iii) except for the High Yield Financing, the incurrence of any
indebtedness for borrowed money, the making of any guarantee of any
such indebtedness, the issuance or sale of any debt securities or the
prepayment or refinancing of any indebtedness for borrowing money, in
each case in excess of $25 million in the aggregate;
(iv) the replacement of the Corporation's independent auditors
or the making of any material change in any method of financial
accounting or accounting practice, except for any such change required
by reason of a concurrent change in generally accepted accounting
principles; and
(v) the entry into any agreement with respect to the foregoing.
(e) In any case in which the Holders of Series A Preferred Stock
shall be entitled to vote as a separate class pursuant to this Section 7 or
pursuant to Delaware law, each Holder of Series A Preferred Stock shall be
entitled to one vote for each share of Series A Preferred Stock then held.
8. Proxies, Voting Agreements, etc. Except for the Stockholders'
------------------------------
Agreement, no Holder shall deposit into a voting trust or grant any proxies or
powers of attorney or enter into a voting agreement with respect to any shares
of Series A Preferred Stock.
9. Reissuance of Series A Preferred Stock. Shares of Series A
--------------------------------------
Preferred Stock that have been issued and reacquired in any manner, including
shares surrendered to the Corporation upon conversion, and shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the laws of
Delaware) have the status of authorized and unissued shares of preferred stock
undesignated as to series and may not be re-designated and reissued as part of
any series of preferred stock.
10. Business Day. If any payment or redemption shall be required by
------------
the terms hereof to be made on a day that is not a Business Day, such payment or
redemption shall be made on the immediately succeeding Business Day.
-24-
<PAGE>
11. Headings of Sections. The headings of the various Sections hereof are
----------------------
for convenience of reference only and shall not affect the interpretation of any
of the provisions hereof.
12. Severability of Provisions. If any right, preference or limitation of
----------------------------
the Series A Preferred Stock set forth in this Certificate of Designations (as
such Certificate may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule or law or public policy, all
other rights, preferences and limitations set forth in this Certificate of
Designations (as so amended) which can be given effect without the invalid,
unlawful or unenforceable right, preference or limitation shall, nevertheless,
remain in full force and effect, and no right, preference or limitation herein
set forth shall be deemed dependent upon any other such right, preference or
limitation unless so expressed herein.
13. Notice. All notices and other communications provided for or
------
permitted to be given to the Corporation hereunder shall be made by hand
delivery, next day air courier or certified first-class mail to the Corporation
at its principal executive offices at 1900 Pike Road, Longmont, Colorado 80501-
6700, Attention: Secretary.
14. Amendments. This Article IV, Section B may be amended without notice
----------
to or the consent of any Holder to cure any ambiguity, defect or inconsistency
or to make any other amendment provided that any such amendment does not
adversely affect the rights of any Holder. Any provisions of this Article IV,
Section B may also be amended by the Corporation with the vote or written
consent of Holders representing a majority of the outstanding shares of Series A
Preferred Stock.
The Corporation will, so long as any shares of Series A Preferred Stock
are outstanding, maintain an office or agency where such shares may be presented
for registration or transfer and where such shares may be presented for
conversion and redemption,
15. Definitions. As used in this Article IV, Section B of the Amended and
-----------
Restated Certificate of Incorporation of the Company, the following terms shall
have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the context
otherwise requires:
(a) "Accrued Dividend Amount" has the meaning set forth in Article IV,
-----------------------
Section B(3)(b).
(b) "Accrued Dividend Rate" means an annual rate equal to 7%.
---------------------
-25-
<PAGE>
(c) "A Vote Ratio" means 0.65.
------------
(d) "Closing Date" shall have the meaning set forth in the Recap
------------
Agreement.
(e) "Conversion Price" means (i) $1.83 or (ii) if FCC Approval is
----------------
received by the Corporation on or prior to October 31, 1999, $3.50, each as
adjusted pursuant to Article IV, Section B(6).
(f) "Default Dividends" has the meaning set forth in Article IV,
-----------------
Section B(3)(e).
(g) "Divdend Payment Date" means March 31, June 30, September 30 and
--------------------
December 31 of each year.
(h) "Dividend Period" means the Initial Dividend Period and, thereafter,
---------------
each Quarterly Dividend Period.
(i) "Dividend Rate" has the meaning set forth in Article IV, Section
-------------
B(3)(a).
(j) "Dividend Record Date" means a day fifteen (15) days preceding the
--------------------
Dividend Payment Date.
(k) "Fundamental Change" means, with respect to the Corporation, the
------------------
occurrence of any transaction to which the Corporation is a party
(including without limitation any recapitalization or reclassification of
the Common Stock (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 of the Common Stock), any consolidation of the
Corporation with, or merger of the Corporation into, any other person, any
merger of another person into the Corporation (other than a merger which
does not result in a reclassification, conversion, exchange or cancellation
of outstanding shares of Common Stock of the Corporation) or any sale or
transfer of all or substantially all of the assets of the Corporation or
any compulsory share exchange) pursuant to which all Common Stock is
converted into the right to receive other securities, cash or other
property.
(1) "Holder" means a record holder of shares of Series A Preferred
------
Stock.
(m) "Independent Director" means a director of the Corporation who
--------------------
(apart from such directorship) (i) is not a current or former officer or
employee of the Corporation or any Affiliate of the Corporation, (ii) is
not a current or former director, officer or employee of any Holder or any
-26-
<PAGE>
Affiliate of such Holder, (iii) did not in either of the last two completed
calendar years receive, and is not an officer, director, employee,
stockholder holding more than 10% of the voting interest of partner or
Affiliate of any entity that in either of such entity's two most recent
fiscal years received, more than 10% of such person or entity's total
income from either the Corporation or the party designating such director
for election to the Board.
(n) "Initial Dividend Period" means the dividend period commencing on
-----------------------
the Original Issue Date and ending on the second Dividend Payment Date to
occur thereafter .
(o) "Initial Holder" means ITT.
--------------
(p) "Junior Stock" has the meaning set forth in Article IV, Section
------------
B(2).
(q) "Liquidation Preference" means, initially, $3.50 per share of
----------------------
Series A Preferred Stock subject to increase as provided under Article IV,
Section B(3)(e) hereof and, thereafter if so increased, means the
Liquidation Preference as so increased.
(r) "Original Issue Date" means the date upon which the Series A
--------------------
Preferred Stock is originally issued by the Corporation.
(s) "Parity Stock" means any class or series of stock, including the
------------
Series B Preferred Stock the terms of which provide that it is entitled to
participate pari passu with the Series A Preferred Stock with respect to any
dividend or distribution or upon liquidation, dissolution or winding-up of
the Corporation.
(t) "Quarterly Dividend Period" means the quarterly period commencing
-------------------------
on each March 31, June 30, September 30 and December 31 and ending on each
Dividend Payment Date, respectively.
(u) "Redemption Date" has the meaning set forth in Article IV, Section
---------------
B(5).
(v) "Reference Date" means, with respect to any dividend or other
--------------
distribution, the Trading Day prior to the date on which the Common Stock
first trades in its principal market with a Closing Price that reflects the
absence of a right to receive such dividend or other distribution.
(w) "Senior Stock" means any class or series of stock the terms of
------------
which provide that it is entitled to a preference to the Series A Preferred
-27-
<PAGE>
Stock with respect to any dividend or distribution or upon voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation.
(x) "Series A Preferred Stock Certificate" has the meaning set forth
------------------------------------
in Article IV, Section B(6)(b).
(y) "Special Permitted Transferee" has the meaning set forth in Article
----------------------------
IV, Section B(7)(c).
C. Rights. Preferences and Restrictions of the Series B Preferred
--------------------------------------------------------------
Stock. The Series B Preferred Stock shall have the voting, preferences and
-----
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, as follows:
1. Designation. The series of preferred stock established hereby shall
-----------
be designated the "70% Cumulative Convertible Redeemable Preferred Stock due
2009, Series B" (and shall be referred to herein as the "Series B Preferred
------------------
Stock") and the authorized number of shares of Series B Preferred Stock shall be
-----
Ten Million (10,000,000) shares.
2. Rank. The Series B Preferred Stock shall, with respect to dividend
-----
distributions and distributions upon the voluntary or involuntary liquidation,
winding up and dissolution of the Corporation, rank (i) senior to all classes of
Common Stock of the Corporation and each other class of capital stock or series
of preferred stock hereafter created which is not Senior Stock or Parity Stock
(such other class or series, including the Series C Preferred Stock, being
referred to herein as "Junior Stock"), (ii) pari passu with any Parity Stock and
------------
(iii) junior to any Senior Stock.
3. Dividend.
---------
(a) Beginning on the Original Issue Date and ending an the third
anniversary of the earlier to occur of (i) receipt by the Corporation of the
FCC Approval and (ii) October 31, 1999, the Holders shall be entitled to
receive, whether or not dividends are declared by the Board out of funds of
the Corporation, cumulative preferential dividends from the Original Issue
Date of the Series B Preferred Stock at an annual rate equal to 7% (the
"Dividend Rate") of the Liquidation Preference in effect from time to time
and no more. During such period, dividends may be paid, at the Corporation's
option, in cash or by the issuance of additional shares of Series B
Preferred Stock (including fractional shares) having an aggregate
Liquidation Preference equal to the amount of such dividends. The issuance
of such additional shares of Series B Preferred Stock will constitute
"payment" of the related dividend for all purposes of the Certificate of
Designations; provided, however, that, the Corporation shall
-------- -------
-28-
<PAGE>
pay the same form of dividends and in the same proportion (i.e., either cash
or additional shares, as the case may be, at its sole discretion) hereunder,
to the extent it pays dividends, on each Dividend Payment Date on each of
the Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock.
(b) Beginning on the first day after the third anniversary of the
earlier to occur of (i) receipt by the Corporation of the FCC Approval and
(ii) October 31, 1999, the Holders shall be entitled to receive, when, as
and if declared by the Board, but only out of funds legally available
therefor, distributions in the form of cash dividends on each share of
Series B Preferred Stock at an annual rate equal to 7% of the Liquidation
Preference in effect from time to time and no more.
(c) All dividends shall be cumulative, whether or not declared, on a
daily basis from the Original Issue Date and shall be payable quarterly in
arrears on each Dividend Payment Date commencing on June 30, 1999. Each
dividend shall be payable with respect to Series B Preferred Stock held by
Holders of record as they appear on the stock books of the Corporation on
each Dividend Record Date. Dividends shall cease to accumulate in respect of
shares of Series B Preferred Stock on the Redemption Date of such shares.
(d) Dividends payable under subsection (a) above on the Series B
Preferred Stock will accrue whether or not the Corporation has earnings or
profits, whether or not there are funds legally available for the payment of
such dividends and whether or not dividends are declared. Dividends will
accumulate to the extent they are not paid on the Dividend Payment Date for
the period to which they relate.
(e) If any dividend payable on any Dividend Payment Date under
subsection (b) above is not declared or paid in fall in cash on such
Dividend Payment Date then, to the extent of legally available funds
therefor, the Liquidation Preference of each share shall be increased on
such Dividend Payment Date by an amount (the "Accrued Dividend Amount")
-----------------------
equal to the product of (A) the amount payable as dividends on such share on
such Dividend Payment Date that is not paid in cash divided by the total
amount payable as dividends on such share on such Dividend Payment Date, and
(B) one-quarter (or, if the Original Issue Date was less than 90 days prior
to the applicable Dividend Payment Date, a fraction the numerator of which
is the number of days elapsed from the Original Issue Date to the applicable
Dividend Payment Date and the denominator of which is 360) of the Accrued
Dividend Rate times the then Liquidation Preference. The amount of the
dividend otherwise payable in cash that is so added to the Liquidation
Preference shall be deemed for all purposes to have been paid
-29-
<PAGE>
in full in cash, shall not be deemed to be arrearages or in arrears and
shall not accumulate. In the event that the Board of the Corporation
determines that any portion of the Accrued Dividend Amount may not be so
added to the Liquidation Preference because of the lack of legally available
funds therefor (such portion, the "Default Dividend"), the Corporation shall
----------------
give notice thereof to the Holders of record as of the applicable Dividend
Payment Date within twenty (20) Business Days after such Dividend Payment
Date and any portion of the Accrued Dividend Amount not so added to the
Liquidation Preference because of the lack of legally available funds
therefor shall be accumulated and payable in cash. Any Default Dividends
shall thereafter accrue dividends at an annual rate equal to the Accrued
Dividend Rate. Any such determination by the Board shall be final and
binding on all Holders. Except as expressly stated above, no amounts shall
accrue or be payable in respect of any dividend payment on the Series B
Preferred Stock which may be in arrears.
(f) Dividends on account of arrears for any past Dividend Period
(including without limitation any Default Dividends, but not including any
Accrued Dividend Amounts) may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to Holders of record on such
date, not more than forty-five (45) days prior to the payment thereof, as
may be fixed by the Board.
(g) So long as any shares of the Series B Preferred Stock are
outstanding, the Corporation shall not declare, pay or set apart for payment
any dividend on any Junior Stock or make any payment on account of, or set
apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of any Junior Stock, or any
warrants, rights, calls or options exercisable for any Junior Stock or make
any distribution in respect thereof, either directly or indirectly, and
whether in cash, obligations or shares of the Corporation or other property
(other than dividends, payments, purchases, acquisitions, redemptions,
retirements or distributions in Junior Stock) and shall not permit any
Subsidiary of the Corporation directly or indirectly to do any of the same
in respect of such Junior Stock (other than dividends, payments, purchases,
acquisitions, redemptions, retirements or distributions in Junior Stock)
unless and until all accumulated and unpaid dividends on the Series B
------
Preferred Stock have been paid in full, and the Corporation is not in
default of any of its obligations under Section 5.
(h) Unless and until all dividend arrearages on the Series B Preferred
Stock have been paid in full, all dividends declared by the Corporation upon
shares of Series B Preferred Stock or Parity Stock shall be declared pro
rata with respect to all shares of Series B Preferred Stock and Parity Stock
then outstanding so that the amounts of any dividends
-30-
<PAGE>
declared per share on the Series B Preferred Stock and such Parity Stock
bear the same ratio to each other at the time of declaration as all accrued
and unpaid dividends on the Series B Preferred Stock and the Parity Stock
bear to each other.
(i) The Corporation shall take all actions required or permitted under
the DGCL to permit the payment of dividends on the Series B Preferred Stock,
including, without limitation, through the revaluation of its assets in
accordance with the DGCL, to make or keep funds legally available for the
payment of dividends.
(j) Dividends payable on the Series B Preferred Stock for any period
less than a year shall be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed in the period for which
payable.
4. Liquidation Preference.
----------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the Holders of
shares of Series B Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution to its
stockholders an amount in cash equal to the then Liquidation Preference, for
each share outstanding, plus an amount in cash equal to accumulated and
unpaid dividends thereon (including without limitation Default Dividends) to
the date fixed for liquidation, dissolution or winding up, and no more,
before any payment shall be made or any assets distributed to the holders of
any Junior Stock; provided, however, that the Holders of the Series B
-------- -------
Preferred Stock shall not be entitled to receive any amount upon the
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation until the holders of any Senior Stock shall have
received all amounts and distributions to which they are entitled thereupon.
Except as provided in the preceding sentence, Holders of Series B Preferred
Stock shall not be entitled to any distribution in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation. If the assets of the Corporation are not
sufficient to pay in full the liquidation payments payable to the holders of
outstanding shares of the Series B Preferred Stock and any Parity Stock,
then the holders of all such shares shall share ratably in such distribution
of assets in accordance with the amounts which would be payable on such
distribution if the amount to which the holders of outstanding shares of
Series B Preferred Stock and any Parity Stock are entitled were paid in
full.
(b) For the purposes of this Section 4, neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
-31-
<PAGE>
other consideration) of all or substantially all of the property or assets
of the Corporation nor the consolidation or merger of the Corporation with
or into one or more corporations shall be deemed to be a voluntary at
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation.
5. Mandatory Redemption. The Corporation shall redeem on March 31, 2009
--------------------
(the "Redemption Date"), from any source of funds legally available
---------------
therefor, all outstanding shares of Series B Preferred Stock at a redemption
price per share equal to the then Liquidation Preference per share (the
"Mandatory Redemption Price"), plus an amount in cash equal to all accumulated
--------------------------
and unpaid dividends per share (including an amount in cash equal to a prorated
dividend for any partial Dividend Period). The Corporation will not be required
to make sinking fund payments with respect to the Series B Preferred Stock. The
Series B Preferred Stock shall not be redeemable at the option of the
Corporation prior to the Redemption Date.
6. Conversion.
----------
(a) Optional Conversion. Except as set forth in Section 6(c)
-------------------
below, upon and following the earlier to occur of (i) receipt by the
Corporation of the FCC Approval and (ii) October 31, 1999 and until the
third anniversary of the earlier to occur of (i) and (ii), the Holder of
each share of Series B Preferred Stock shall have the right, at the option
of such Holder, to convert such shares into shares of Common Stock, on and
subject to the terms and conditions hereinafter set forth. Subject to the
provisions for adjustment hereinafter set forth, each share of Series B
Preferred Stock shall be convertible into such number (calculated as to each
conversion to the nearest 1/100th of a share) of fully paid and
nonassessable shares of Common Stock as is obtained by dividing (i) the sum
of the then Liquidation Preference plus the amount of accumulated and unpaid
dividends thereon, including the amount of any Default Dividends and any
dividends accumulated thereon by (ii) the Conversion Price, both as in
effect at the date any share or shares of Series B Preferred Stock are
surrendered for conversion. The Series B Preferred Stock shall not be
convertible prior to the earlier to occur of (i) receipt by the Corporation
of the FCC Approval and (ii) October 31, 1999 or after the third anniversary
of the earlier to occur of (i) and (ii).
(b) Conversion Procedures.
----------------------
(i) In order to exercise the conversion privilege, the Holder of any
shares of Series B Preferred Stock to be converted in whole or in part shall
surrender the certificate representing such shares of Series B Preferred
Stock (the "Series B Preferred Stock
------------------------
-32-
<PAGE>
Certificate") at the office or agency then maintained by the Corporation
-----------
for the transfer of the Series B Preferred Stock, and shall give written
notice of conversion in the form provided on the Series B Preferred Stock
Certificate (or such other notice which is acceptable to the Corporation)
to the Corporation at such office or agency that the Holder elects to
convert such shares of Series B Preferred Stock represented by the Series B
Preferred Stock Certificate so surrendered or the portion thereof specified
in said notice into shares of Common Stock. Such notice shall also state
the name or names (with addresses) in which the certificate or certificates
for shares of Common Stock which shall be issuable upon such conversion
shall be issued, and shall be accompanied by transfer taxes, if required.
Each Series B Preferred Stock Certificate surrendered for conversion shall,
unless the shares issuable on conversion are to be issued in the same name
as the registration of such Series B Preferred Stock Certificate, be duly
endorsed by, or be accompanied by instruments of transfer in form
satisfactory to the Corporation duly executed by, the Holder or such
Holder's duly authorized attorney.
(ii) As promptly as practicable after the surrender of such Series B
Preferred Stock Certificate and the receipt of such notice and funds, if
any, as aforesaid, the Corporation shall issue and shall deliver at such
office or agency to such Holder, or on his written order, a certificate or
certificates for the number of shares of Common Stock issuable upon the
conversion of such shares of Series B Preferred Stock represented by the
Series B Preferred Stock Certificate so surrendered or portion thereof in
accordance with the provisions of this Section 6. In case less than all of
the shares of Series B Preferred Stock represented by a Series B Preferred
Stock Certificate surrendered for conversion are to be converted, the
Corporation shall deliver to or upon the written order of the Holder of
such Series B Preferred Stock Certificate a new Series B Preferred Stock
Certificate representing the shares of Series B Preferred Stock not
converted. If a Holder fails to notify the Corporation of the number of
shares of Series B Preferred Stock which such Holder wishes to convert,
such Holder shall be deemed to have elected to convert all shares
represented by the certificate or certificates surrendered for conversion.
(iii) Each conversion shall be deemed to have been effected on the
date on which such Series B Preferred Stock Certificate shall have been
surrendered and such notice shall have been received by the Corporation, as
aforesaid, and the person in whose name any certificate or certificates for
shares of Common
-33-
<PAGE>
Stock shall be issuable upon such conversion shall be deemed to have become
on said date the holder of record of the shares represented thereby;
provided, however, that the person effecting any such surrender on any date
-------- -------
when the stock books of the Corporation shall be closed shall constitute
the person in whose name the certificates are to be issued as the record
holder thereof for all purposes on the next succeeding day on which such
stock books are open, but such conversion shall be at the Conversion Price
as in effect on the date upon which such Series B Preferred Stock
Certificate shall have been surrendered.
(iv) All shares of Series B Preferred Stock that shall have been
surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such shares, including the
rights, if any, to receive notices and to vote, shall forthwith cease,
except only the right of the Holders thereof, subject to the provisions of
this Section 6, to receive shares of Common Stock in exchange therefor.
(v) No payments or adjustments in respect of dividends on shares of
Series B Preferred Stock surrendered for conversion (except as expressly
provided herein in the case of Default Dividends) or on account of any
dividend on the Common Stock issued upon conversion shall be made upon the
conversion of any shares of Series B Preferred Stock.
(c) Automatic Conversion. Upon and following the earlier to occur of (i)
-------------------
receipt by the Corporation of the FCC Approval and (ii) October 31, 1999 and
until the third anniversary of the earlier to occur of (i) and (ii), upon the
earlier to occur of (1) an Initial Public Offering, the public offering price of
which is at least $35,000,000 in the aggregate and (2) the listing of the
Common Stock on the New York Stock Exchange, Inc. or the American Stock
Exchange, Inc. or the trading of the Common Stock on the Nasdaq National Market
("NASDAQ"), if the Market Price (as hereinafter defined) of the Common Stock
------
shall on any day be at a level such that, if all the outstanding shares of
Series B Preferred Stock were converted into the number of shares of Common
Stock into which such Series B Preferred Stock is convertible pursuant to this
Section 6, and such shares of Common Stock were then sold at the Market Price,
the proceeds of such sale would exceed by at least 20% the amount determined by
multiplying the number of outstanding shares of Series B Preferred Stock by the
Conversion Price (which amount shall be subject to equitable adjustment wherever
there shall occur a stock split, combination, reclassification or other similar
event involving the Series B Preferred Stock), then all outstanding shares of
Series B Preferred Stock shall be
-34-
<PAGE>
converted automatically into the number of shares of Common Stock into which
such shares are convertible pursuant to this Section 6 as of immediately prior
to the occurrence of such event, without further action by the Holders and
whether or not the certificates representing such shares are surrendered to the
Corporation or its Transfer Agent for the Common Stock, provided that all
declared and unpaid dividends on such shares of Series B Preferred Stock shall
first have been paid in full. The "Market Price" of the Common Stock shall be
the average of the reported last sales prices on an exchange or on NASDAQ for
the Common Stock on each of the twenty (20) preceding Trading Days an which a
reported sale of the Common Stock took place. The Series B Preferred Stock shall
not be automatically converted pursuant to this Section 6(c) prior to the
earlier to occur of (i) receipt by the Corporation of the FCC Approval and (ii)
October 31, 1999 or after the third anniversary of the earlier to occur of (i)
and (ii).
(d) Adjustment of Conversion Price. The Conversion Price at which a share
of Series B Preferred Stock is convertible into Common Stock shall be subject to
adjustment from time to time as follows:
(i) [Intentionally omitted.]
(ii) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall
otherwise issue, shares of Common Stock or securities convertible or
exercisable into shares of Common Stock or rights or warrants entitling the
holders thereof to subscribe for or purchase shares of Common Stock
(including without limitation shares, securities or rights or warrants
issued in connection with the High Yield Financing or the issuance or
exercise of options pursuant to the New Equity Plan (and related
agreements)), the Conversion Price in effect at the close of business on
the date fixed for the determination of stockholders entitled to receive
such securities, rights or warrants or for such issuance shall be reduced
by multiplying such Conversion Price by a fraction of which the numerator
shall be the number of Fully-Diluted Shares represented by shares of Series
C Preferred Stock and Common Stock outstanding at the close of business on
the date fixed for such determination and the denominator shall be such
number of Fully-Diluted Shares plus the number of shares of Common Stock so
issued, offered for subscription or purchase or issuable upon conversion or
exercise of the securities included in such issuance, dividend or other
distribution, such reduction to become effective immediately prior to the
opening of business on the day following the date fixed for such
determination or for such issuance;
-35-
<PAGE>
provided, however, that no such adjustment shall be made upon (A) the
-------- -------
issuance and sale and subscription for and purchase of 714,286 shares of
Series C Preferred Stock by Ball Technologies Holdings Corp. on the terms
and conditions set forth in the Recap Agreement; (B) the issuance of shares
of Series C Preferred Stock to all holders thereof as payment of a dividend
in accordance with Section 3(a) of the Series C Preferred Stock Certificate
of Designations; (C) the issuance of shares Common Stock upon conversion of
shares of Preferred Stock, or (D) the issuance of shares of Common Stock or
Series C Preferred Stock, or securities convertible or exercisable into
shares of Common Stock or Series C Preferred Stock, in connection with (1)
the exercise of options issued pursuant to the Existing Stock Option Plan,
(2) the exercise of the Odetics Warrant, (3) the Waterstone Agreement or
(4) the conversion or exercise of any other convertible or derivative
security the grant or issuance of which security previously resulted in a
reduction of the Conversion Price hereunder ((A) through (D), collectively,
the "Dilution Exceptions"). Notwithstanding anything in this subparagraph
(ii) to the contrary, the following sentence (and not the previous
sentence) shall apply at any time after successful launch and commercially
viable operation, for a period of 60 consecutive days, of QuickBird 1, or
any successor to such satellite. In case the Corporation shall issue shares
of Common Stock, or securities convertible or exercisable into shares of
Common Stock or rights or warrants entitling the holders thereof to
subscribe for or purchase shares of Common Stock, at a price per share less
than the current Conversion Price on the date fixed for such issuance
(except for any such issuance qualifying as a Dilution Exception), the
Conversion Price in effect at the close of business on the date fixed for
such issuance shall be reduced by multiplying such Conversion Price by a
fraction of which the numerator shall be the number of Fully-Diluted Shares
represented by shares of Series C Preferred Stock and Common Stock
outstanding at the close of business on the day immediately preceding the
date fixed for such issuance plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so issued, offered for subscription or purchase or issuable
upon conversion or exercise of the securities so issued would purchase at
such Conversion Price and the denominator shall be such number of Fully-
Diluted Shares at the close of business on the day immediately preceding
the date fixed for such issuance plus the total number of shares of Common
Stock so issued, offered for subscription or purchase or issuable upon
conversion or exercise of the securities so issued, such reduction to
become effective
-36-
<PAGE>
immediately prior to the opening of business on the day following the date
fixed for such issuance. For the purposes of this subparagraph (ii), the
number of Fully-Diluted Shares at any time shall not include shares held in
the treasury of the Corporation. The Corporation shall not issue any rights
or warrants in respect of shares of Common Stock held in the treasury of
the Corporation. For purposes of this subparagraph (ii), the issuance of
rights or warrants to subscribe for or purchase stock or securities
convertible or exchangeable into shares of Common Stock shall be deemed to
be the issuance of rights or warrants to purchase the shares of Common
Stock into which such stock or securities are convertible or exercisable.
In case any securities or rights or warrants referred to in this
subparagraph (ii) in respect of which an adjustment shall have been made
shall expire unexercised within forty-five (45) days after the same shall
have been distributed or issued by the Corporation, the Conversion Price
shall be readjusted at the time of such expiration to the Conversion Price
that would have been in effect if no adjustment had been made on account of
the distribution or issuance of such expired rights or warrants.
(iii) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in
effect at the close of business on the day upon which such subdivision
becomes effective shall be proportionately reduced, and conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the
close of business on the day upon which such combination becomes effective
shall be proportionately increased, such reduction or increase, as the case
may be, to become effective immediately prior to the opening of business
on the day following the day upon which such subdivision or combination
becomes effective.
(iv) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of record of its Common Stock evidences of its
indebtedness, shares of any class or series of capital stock, cash or
assets (including securities, but excluding any securities or rights or
warrants referred to in subparagraph (ii) of this Section 6(d), any
dividend or distribution paid exclusively in cash and any dividend or
distribution referred to in subparagraph (i) of this Section 6(d)), the
Conversion Price shall be reduced so that such price shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the effectiveness of the Conversion Price reduction contemplated by this
subparagraph (iv) by a fraction of which the numerator shall be the current
market
-37-
<PAGE>
price per share (determined as provided in subparagraph (vii) of this
Section 6(d)) of the Common Stock on the Reference Date less the fair
market value (as determined in good faith by the Board, whose good faith
determination shall be conclusive and described in a resolution of the
Board), on the Reference Date, of such number or amount of the evidences of
indebtedness, shares of capital stock, cash and assets that is so
distributed to a holder of one share of Common Stock and the denominator
shall be such current market price per share of the Common Stock, such
reduction to become effective on the later to occur of (x) immediately
prior to the opening of business on the day following the Reference Date
and (y) the time at which such dividend or other distribution is
unconditionally declared by the Board of the Corporation. For purposes of
this subparagraph (iv), any dividend or distribution that includes (but is
not limited to) Common Stock, securities convertible or
exchangeable into shares of Common Stock or rights or warrants to
subscribe for or purchase shares of Common Stock shall be deemed instead to
be (1) a dividend or distribution of the evidences of indebtedness, cash,
assets or shares of capital stock other than such shares of Common Stock,
such securities convertible or exchangeable into Common Stock or
such rights or warrants (so that any Conversion Price reduction required by
this subparagraph (iv) is made) immediately followed by (2) a dividend or
distribution of such shares of Common Stock, such securities convertible or
exchangeable into Common Stock or such rights or warrants (so
that there is made any further Conversion Price reduction required by
subparagraph (i) or (ii) of this Section 6(d), except (A) the Reference
Date of such dividend or distribution shall be substituted as "the date
fixed for the determination of stockholders entitled to receive such
securities, rights or warrants or for such issuance" and "the date fixed
for such determination" within the meaning of subparagraphs (i) and (ii) of
this Section 6(d) and (B) any shares of Common Stock included in such
dividend or distribution shall not be included in the "number of
Fully-Diluted Shares represented by shares of Series C Preferred Stock and
Common Stock outstanding at the close of business on the date fixed for
such determination" within the meaning of subparagraph (i) of this Section
6(d)). In case any dividend or other distribution referred to in this
subparagraph (iv) in respect of which an adjustment shall have been made
shall not be paid or otherwise distributed on the date fixed therefor (as
determined in good faith by the Board of the Corporation whose good faith
determination shall be conclusive), the Conversion Price shall be
readjusted to the Conversion Price that would have been in effect if no
adjustment
-38-
<PAGE>
had been made on account of such dividend or other distribution. In the
event that any shares of Series B Preferred Stock shall be converted on or
after the time at which any adjustment to the Conversion Price becomes
effective pursuant to this subparagraph (iv) in respect of any dividend or
other distribution, no portion of such dividend or other distribution shall
be paid or distributed (and if so paid or distributed shall not be retained
by any person) in respect of any shares of Common Stock issued upon
conversion thereof, notwithstanding that the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution may occur on or after the date such adjustment becomes
effective.
(v) In case the Corporation shall pay or make a dividend or other
distribution to holders of record of its Common Stock exclusively in cash,
the Conversion Price shall be reduced so that such price shall equal the
price determined by multiplying the Conversion Price in effect immediately
prior to the effectiveness of the Conversion Price reduction contemplated
by this subparagraph (v) by a fraction of which the numerator shall be the
current market price per share (determined as provided in subparagraph
(vii) of this Section 6(d)) of the Common Stock on the Reference Date less
the amount of cash so distributed applicable to one share of Common Stock
and the denominator shall be such current market price per share of the
Common Stock, such reduction to become effective on the later to occur of
(x) immediately prior to the opening of business on the day following the
Reference Date and (y) the time at which such dividend or other
distribution is unconditionally declared by the Board of the Corporation.
In case any dividend or other distribution referred to in this subparagraph
(v) in respect of which an adjustment shall have been made shall not be
paid or otherwise distributed on the date fixed therefor (as determined in
good faith by the Board of the Corporation whose good faith determination
shall be conclusive), the Conversion Price shall be readjusted to the
Conversion Price that would have been in effect if no adjustment had been
made on account of such dividend or other distribution. In the event that
any shares of Series B Preferred Stock shall be converted on or after the
time at which any adjustment to the Conversion Price becomes effective
pursuant to this subparagraph in respect of any dividend or other
distribution, no portion of such dividend or other distribution shall be
paid or distributed (and if so paid or distributed shall not be retained by
any person) in respect of any shares of Common Stock issued upon conversion
thereof, notwithstanding that the date fixed for the determination of
stockholders entitled to receive such dividend or
-39-
<PAGE>
other distribution may occur on or after the date such adjustment becomes
effective.
(vi) If any Fundamental Change shall occur, then, as a condition of
such Fundamental Change, lawful and adequate provisions shall be made
whereby each Holder of a share or shares of Series B Preferred Stock shall
have the right to receive, upon the basis and upon the terms and conditions
specified herein, in lieu of the shares of Common Stock of the Corporation
immediately theretofore receivable upon the conversion of such share or
shares of Series B Preferred Stock such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for such
number and class of shares of Common Stock issuable upon conversion of the
Series B Preferred Stock immediately prior to the occurrence of the
Fundamental Change. In the case of any Fundamental Change, appropriate
provision shall be made with respect to the rights and interests of the
Holders to the end that the provisions hereof (including without limitation
provisions for adjustment of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise of any
conversion rights hereunder.
(vii) For the purpose of any computation under subparagraphs (iv) and
(v), the current market price per share of Common Stock on any date in
question shall be deemed to be the average of the daily Closing Prices for
the five (5) consecutive Trading Days prior to and including the date in
question; provided, however, that (1) if the "ex" date (as hereinafter
defined) for any event (other than the issuance or distribution requiring
such computation) that requires an adjustment to the Conversion Price
pursuant to subparagraph (i), (ii), (iii), (iv), (v) or (vi) above "Other
Event") occurs after the fifth Trading Day prior to the day in question and
prior to the "ex" date for the issuance or distribution requiring such
computation (the "Current Event"), the Closing Price for each Trading Day
prior to the "ex" date for such Other Event shall be adjusted by
multiplying such Closing Price by the same fraction by which the Conversion
Price is so required to be adjusted as a result of such Other Event, (2) if
the "ex" date for any Other Event occurs after the "ex" date for the
Current Event and on or prior to the date in question, the Closing Price
for each Trading Day on and after the "ex" date for such Other Event shall
be adjusted by multiplying such Closing Price by the reciprocal of the
fraction by which the Conversion Price is so required to be adjusted as a
result of such Other Event, (3) if the "ex" date for any
-40-
<PAGE>
Other Event occurs on the "ex" date for the Current Event, one of those
events shall be deemed for purposes of determining which of clauses (1) and
(2) of this proviso to apply to have an "ex" date occurring prior to the
"ex" date for the other event but in applying such clause the actual "ex"
date of the other event shall be utilized, and (4) if the "ex" date for
the Current Event is on or prior to the date in question, the Closing Price
for each Trading Day on or after such "ex" date shall be adjusted after
taking into account any adjustment required pursuant to clause (2) of this
proviso, by adding thereto the amount of any cash and the fair market value
on the date in question (as determined in good faith by the Board in a
manner consistent with any determination of such value for purposes of
paragraph (iv) or (v) of this Section 6(d), whose determination shall be
conclusive and described in a resolution of the Board) of such number or
amount of the securities, rights, warrants, evidences of indebtedness,
shares of capital stock or assets being distributed to a holder of one
share of Common Stock. For purposes of this subparagraph, the term "ex"
date, (1) when used with respect to any issuance or distribution, means the
first date on which the Common Stock trades regular way on the relevant
exchange or in the relevant market from which the Closing Price was
obtained without the right to receive such issuance or distribution, and
(2) when used with respect to any subdivision or combination of shares of
Common Stock, means the first date on which the Common Stock trades
regular way on such exchange or in such market after the time at which such
subdivision or combination becomes effective.
(viii) In case a tender or exchange offer made by the Corporation or
any Subsidiary of the Corporation for all or any portion of the
Corporation's Common Stock shall expire and result in the acquisition by
the Corporation of shares of Common Stock pursuant thereto and such tender
or exchange offer shall involve the payment by the Corporation or such
Subsidiary of consideration per share of Common Stock having a fair market
value (as determined in good faith by the Board, whose good faith
determination shall be conclusive and described in a resolution of the
Board) at the last time (the "Expiration Time") tenders or exchanges may
---------------
be made pursuant to such tender or exchange offer (as it shall have been
amended) that exceeds the current market price per share of the Common
Stock on the Trading Day next succeeding the Expiration Time, the
Conversion Price shall be reduced so that such price shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the effectiveness of the Conversion Price
-41-
<PAGE>
reduction contemplated by this subparagraph (viii) by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time
multiplied by the current market price per share of the Common Stock on the
Trading Day next succeeding the Expiration Time and the denominator shall
be the sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders as a result of the
Corporation's or Subsidiary's acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) at the Expiration Time and the
current market price per share of the Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction to become effective
immediately prior to the opening of business on the day following the
Expiration Time. For the purpose of any computation under this subparagraph
(viii) of this Section 6(d), the current market price per share of Common
Stock on any date in question shall be deemed to be the average of the
daily Closing Prices for such date in question and the next two (2)
succeeding Trading Days; provided, however, that if the "ex" date for any
Other Event occurs after the Expiration Time for the tender or exchange
offer requiring such computation and on or prior to the second Trading Day
following the date in question, the Closing Price for each Trading Day on
and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by which
the Conversion Price is so required to be adjusted as a result of such
other event.
(e) Conversion Price Adjustment Deferred. Notwithstanding the foregoing
provisions of this Section 6, (i) no adjustment in the number of shares of
Common Stock into which any share of Series B Preferred Stock is convertible
shall be required unless such adjustment would require an increase or decrease
in such number of shares of at least 1% and (ii) no adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease in the Conversion Price of at least $.01 per share; provided, however,
that any adjustments which by reason of this paragraph (e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 6 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
-42-
<PAGE>
(f) Adjustment Report. Whenever any adjustment is required in the
-----------------
Conversion Price or the shares into which any share of Series B Preferred Stock
is convertible, the Corporation shall forthwith (i) file with each office or
agency then maintained by the Corporation for the transfer of the Series B
Preferred Stock a statement describing in reasonable detail the adjustment and
the method of calculation used and (ii) cause a notice of such adjustment,
setting forth the adjusted Conversion Price and the calculation thereof to be
mailed to the Holders of record of shares of Series B Preferred Stock at their
respective addresses as shown on the stock books of the Corporation. The
certificate of any independent firm of public accountants of recognized standing
selected by the Board certifying to the Board the correctness of any computation
under this Section 6 shall be evidence of the correctness of such computation.
(g) Notice of Certain Events. In the event that:
------------------------
(i) the Corporation shall take action to make any distribution to
the holders of its Common Stock;
(ii) the Corporation shall take action to offer for subscription pro
rata to the holders of its Common Stock any securities of any kind;
(iii) the Corporation shall take action to accomplish any capital
reorganization, reclassification of the capital stock of the Corporation
(other than a subdivision, split or combination of its Common Stock),
consolidation or merger to which the Corporation is a party and for which
approval of any stockholders of the Corporation is required, or sale or
transfer of all or substantially all of the assets of the Corporation; or
(iv) the Corporation shall take any action to accomplish a voluntary
or involuntary dissolution, liquidation or winding-up of the Corporation;
then the Corporation shall (A) in case of any such distribution or subscription
rights, at least twenty (20) days prior to the date or expected date on which
the stock books of the Corporation shall close or a record shall be taken for
the determination of holders entitled to such distribution or subscription
rights, and (B) in the case of any such reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up,
at least twenty (20) days prior to the date or expected date when the same shall
be consummated, cause written notice thereof to be mailed to each Holder of
shares of Series C Preferred Stock at his address as shown on the stock books of
the Corporation. Such
-43-
<PAGE>
notice in accordance with the foregoing clause (A) shall also specify, in the
case of any such distribution or subscription rights, the date or expected date
on which the holders of Common Stock shall be entitled thereto, and such notice
in accordance with the foregoing clause (B) shall also specify the date or
expected date on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up, as the case may be.
(h) Common Stock. For the purposes of this Section 6, the term "Common
------------ ------
Stock" shall mean (i) the Common Stock or (ii) any other class of stock
-----
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value or from no par value to par value, or
from par value to no par value. In the event that at any time as a result of an
adjustment made pursuant to the provisions of Section 6(d), the Holder of any
share of Series B Preferred Stock thereafter surrendered for conversion shall
become entitled to receive any shares of the Corporation other than shares of
Common Stock, thereafter the number of such other shares so receivable upon
conversion of any share of Series B Preferred Stock 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 the Common Stock contained in
Section 6(d), and the other provisions of this Section 6 with respect to the
Common Stock shall apply on like terms to any such other shares.
(i) Fractional Shares. The Corporation shall not be required to issue
-----------------
fractional shares of Common Stock upon the conversion of any Series B Preferred
Stock. If more than one share of Series B Preferred Stock shall be surrendered
for conversion at one time by the same Holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares so surrendered. If any fractional interest in a
share of Common Stock would be deliverable upon the conversion of any shares of
Series B Preferred Stock, the Corporation may pay, in lieu thereof, in cash the
Closing Price thereof as of the Business Day immediately preceding the date of
such conversion.
(j) Reservation of Shares. 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 or redemption of the shares
of Series B Preferred Stock, such number of its duly authorized shares of Common
Stock (or treasury shares as provided below) as shall from time to time be
sufficient for the conversion of all outstanding shares of Series B Preferred
Stock into Common Stock at any
-44-
<PAGE>
time. The Corporation shall, from time to time and in accordance with the DGCL,
cause the authorized number of shares of Common Stock to be increased if the
aggregate of the number of authorized shares of Common Stock remaining unissued
and the issued shares of such Common Stock reserved for issuance in any other
connection shall not be sufficient for the conversion of all outstanding shares
of Series B Preferred Stock into Common Stock at any time.
(k) Additional Conversion Price Adjustments. The Corporation may make
---------------------------------------
such reductions in the Conversion Price, in addition to those required by
Section 6(d), as it considers to be advisable to avoid or diminish any income
tax to holders of Common Stock or rights to purchase Common Stock resulting from
any dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes. The Corporation from time to time
may reduce the Conversion Price by any amount for any period of time if the
period is at least twenty (20) days, the reduction is irrevocable during the
period and the Board of the Corporation shall have made a determination that
such reduction would be in the best interest of the Corporation, which
determination shall be conclusive. Whenever the Conversion Price is reduced
pursuant to the preceding sentence, the Corporation shall mail to Holders of
record of the Series B Preferred Stock a notice of the reduction at least
fifteen (15) days prior to the date the reduced Conversion Price takes effect,
and such notice shall state the reduced Conversion Price and the period it will
be in effect.
7. Voting Rights.
-------------
(a) Upon and following the earlier to occur of (i) receipt by the
Corporation of the FCC Approval and (ii) October 31, 1999, for so long as any
shares of the Series B Preferred Stock are outstanding, each share of Series B
Preferred Stock shall entitle the Holder thereof to notice of and to vote, in
person or by proxy, at any special or annual meeting of stockholders, on all
matters entitled to be voted on by holders of Common Stock and any other series
or class of Voting Stock (as defined in Section 7(b)) voting together as a
single class with all other shares entitled to vote thereon. With respect to any
such vote, each share of Series B Preferred Stock shall entitle the Holder
thereof to cast a number of votes equal to the product of (A) the B Vote Ratio
and (B) the number of votes that such Holder would be entitled to cast had such
Holder converted such share of Series B Preferred Stock into shares of Common
Stock as of the record date for determining the stockholders of the Corporation
eligible to vote on any such matters (regardless of whether such shares of
Series B Preferred Stock are actually then convertible). Prior to the earlier to
occur of (i) receipt by the Corporation of the FCC Approval and (ii) October 31,
1999,
-45-
<PAGE>
no Holder of shares of Series B Preferred Stock shall be entitled to vote
hereunder.
(b) The term "Voting Stock" means any class or classes of capital stock,
------------
or securities convertible into or exchangeable for any class of capital stock,
of the Corporation pursuant to which the holders thereof have the general power
under ordinary circumstances to vote with respect to the election of at least a
majority of the Board, irrespective of whether or not, at the time, stock of any
other class or classes shall have, or might have, voting power by reason of the
happening of any contingency.
(c) Upon and following the earlier to occur of (i) receipt by the
Corporation of the FCC Approval and (ii) October 31, 1999 (but as to MS, in no
event earlier than the HSR Clearance Date), for so long as any shares of the
Series B Preferred Stock are outstanding and held of record by any Initial
Holder, the Initial Holders which at that time hold of record at least a
majority of the outstanding shares of Series B Preferred Stock then held by all
Initial Holders shall have the right to elect four Directors to the Board;
provided, however, that to the extent, and only to the extent, that the initial
-------- -------
Holders shall at any time have the right pursuant to this Section 7(c) to elect
at least three Directors to the Board, then the Initial Holders shall be
required to cause a certain number of such Directors to be Independent
Directors, such number to be equal to the excess, if any, of (A) the number of
Directors that the Initial Holders shall have the right to elect to the Board
pursuant to this Section 7(c) over (B) two. Special Permitted Transferees shall
not at any time be required to cause any Independent Director to be elected to
the Board. Prior to the earlier to occur of (i) receipt by the Corporation of
the FCC Approval and (ii) October 31, 1999 (but as to MS, in no event earlier
than the MS HSR Clearance Date), each of the Initial Holders shall have the
right to elect one Director to the Board, neither of which must be an
Independent Director. The Initial Holders shall have the right to transfer, at
their sole discretion, in whole or in part, their right to elect Directors under
this Section 7(c) to their Permitted Transferees (such Permitted Transferees,
the "Special Permitted Transferees"); provided, however, that as to MS, such
----------------------------- -------- -------
right shall not accrue prior to the MS HSR Clearance Date; provided further,
-------- -------
that upon such transfer, and solely with respect to the right to elect the
specific number of Directors so transferred, the term "Initial Holder" in the
two preceding sentences shall be replaced everywhere it appears with the term
"Special Permitted Transferee." In no event shall the Initial Holders and their
Special Permitted Transferees have the right hereunder to elect, in the
aggregate, more than four Directors to the Board. The Initial Holders and their
Special Permitted Transferees may choose, and MS is obligated prior to the MS
HSR Clearance Date, to leave vacant for any period of time any
-46-
<PAGE>
seat on the Board to which they have or will have the right to elect a Director
pursuant to this Section 7(c).
(d) So long as any shares of Series B Preferred Stock are outstanding and
held of record by any Initial Holder or its Permitted Transferees, in addition
to any vote or consent of the Board required by law or by the Corporation's
Certificate of Incorporation, the affirmative vote or consent of a majority of
the Directors elected by the Initial Holders or their Permitted Transferees
pursuant to Section 7(c) above shall be necessary for effecting or validating:
(i) the amendment of the Certificate of Incorporation, Bylaws or
other organizational documents of the Corporation, including any and all
certificates of designations of any series of preferred stock of the
Company, or the amendment, termination or waiver of any provision under the
Recap Agreement or the Stockholders' Agreement;
(ii) other than with respect to shares of Series C Preferred Stock,
securities convertible or exercisable into shares of Series C Preferred
Stock or rights or warrants entitling the holders thereof to subscribe for
and purchase shares of Series C Preferred Stock issued in connection with
the High-Yield Financing, shares of Common Stock and Preferred Stock issued
pursuant to the Recap Agreement (including any shares reclassified upon
filing of the Amended and Restated Certificate of Incorporation of the
Company and conversion of any shares issued in accordance with the Recap
Agreement or reclassified upon filing of the Amended and Restated
Certificate of Incorporation of the Company) and shares of Common Stock
issued in connection with an Initial Public Offering or the issuance of
securities pursuant to the Waterstone Agreement or the exercise of the
Odetics Warrant or the exercise of options pursuant to the Existing Stock
Option Plan (and related agreements) or the grant or exercise of options
pursuant to the New Equity Plan (and related agreements), such grant or
exercise under the New Equity Plan, together with all prior grants or
exercises under the New Equity Plan since the Closing Date, representing in
the aggregate no more than 15% of the Fully-Diluted Shares as of the
Closing Date, the issuance, delivery or sale of any shares or equity
interests, or any options, warrants, conversion or other rights to purchase
any such shares or equity interests, or any securities convertible into or
exchangeable for such shares or equity interests, or the issuance of any
other security in respect of or in lieu of or in substitution for shares or
equity interests, or the entry into any agreements restricting the transfer
of,
-47-
<PAGE>
or affecting the rights of holders of shares or equity interests, the
granting of any preemptive or anti-dilutive rights to any holder of any
class of securities, or the granting of registration rights with respect to
any class of securities;
(iii) except for the High Yield Financing, the incurrence of any
indebtedness for borrowed money, the making of any guarantee of any such
indebtedness, the issuance or sale of any debt securities or the prepayment
or refinancing of any indebtedness for borrowing money, in each case in
excess of $25 million in the aggregate;
(iv) the replacement of the Corporation's independent auditors or the
making of any material change in any method of financial accounting or
accounting practice, except for any such change required by reason of a
concurrent change in generally accepted accounting principles; and
(v) the entry into any agreement with respect to the foregoing.
(e) In any case in which the Holders of Series B Preferred Stock shall be
entitled to vote as a separate class pursuant to this Section 7 or pursuant to
Delaware law, each Holder of Series B Preferred Stock shall be entitled to one
vote for each share of Series B Preferred Stock then held.
8. Proxies, Voting Agreements, etc. Except for the Stockholders'
-------------------------------
Agreement, no Holder shall deposit into a voting trust or grant any proxies or
powers of attorney or enter into a voting agreement with respect to any shares
of Series B Preferred Stock.
9. Reissuance of Series B Preferred Stock. Shares of Series B
--------------------------------------
Preferred Stock that have been issued and reacquired in any manner, including
shares surrendered to the Corporation upon conversion, and shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the laws of
Delaware) have the status of authorized and unissued shares of preferred stock
undesignated as to series and may not be redesignated and reissued as part of
any series of preferred stock.
10. Business Day. If any payment or redemption shall be required by
------------
the terms hereof to be made on a day that is not a Business Day, such payment or
redemption shall be made on the immediately succeeding Business Day.
-48-
<PAGE>
11. Headings of Sections. The headings of the various Sections hereof
--------------------
are for convenience of reference only and shall not affect the interpretation of
any of the provisions hereof.
12. Severability of Provisions. If any right, preference or
--------------------------
limitation of the Series B Preferred Stock set forth in this Certificate of
Designations (as such Certificate may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule or law or public
policy, all other rights, preferences and limitations set forth in this
Certificate of Designations (as so amended) which can be given effect without
the invalid, unlawful or unenforceable right, preference or limitation shall,
nevertheless, remain in full force and effect, and no right, preference or
limitation herein set forth shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.
13. Notice. All notices and other communications provided for or
------
permitted to be given to the Corporation hereunder shall be made by hand
delivery, next day air courier or certified first-class mail to the Corporation
at its principal executive offices at 1900 Pike Road, Longmont, Colorado 80501-
6700, Attention: Secretary.
14. Amendments. This Article IV, Section C may be amended without
----------
notice to or the consent of any Holder to cure any ambiguity, defect or
inconsistency or to make any other amendment provided that any such amendment
does not adversely affect the rights of any Holder. Any provisions of this
Article IV, Section C may also be amended by the Corporation with the vote or
written consent of Holders representing a majority of the outstanding shares of
Series B Preferred Stock.
The Corporation will, so long as any shares of Series B Preferred
Stock are outstanding, maintain an office or agency where such shares may be
presented for registration or transfer and where such shares may be presented
for conversion and redemption.
15. Definitions. As used in this Article IV, Section C of the Amended
-----------
and Restated Certificate of Incorporation of the Company, the following terms
shall have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the context
otherwise requires:
(a) "Accrued Dividend Amount" has the meaning set forth in Article
-----------------------
IV, Section C(3)(b).
(b) "Accrued Dividend Rate" means an annual rate equal to 7%.
---------------------
-49-
<PAGE>
(c) "B Vote Ratio" means 1.35.
------------
(d) "Conversion Price" means (i) $1.83 or (ii) if FCC Approval is
----------------
received by the Corporation on or prior to October 31, 1999, $3.50, each as
adjusted pursuant to Article IV, Section C(6).
(e) "Default Dividends" has the meaning set forth in Article IV,
-----------------
Section C(3)(e).
(f) "Dividend Payment Date" means March 31, June 30, September 30 and
---------------------
December 31 of each year.
(g) "Dividend Period" means the Initial Dividend Period and,
---------------
thereafter, each Quarterly Dividend Period.
(h) "Dividend Rate" has the meaning set forth in Article IV, Section
-------------
C(3)(a).
(i) "Dividend Record Date" means a day fifteen (15) days preceding
--------------------
the Dividend Payment Date.
(j) "Fundamental Change" means, with respect to the Corporation, the
------------------
occurrence of any transaction to which the Corporation is a party
(including without limitation any recapitalization or reclassification of
the Common Stock (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 of the Common Stock), any consolidation of the
Corporation with, or merger of the Corporation into, any other person, any
merger of another person into the Corporation (other than a merger which
does not result in a reclassification, conversion, exchange or cancellation
of outstanding shares of Common Stock of the Corporation) or any sale or
transfer of all or substantially all of the assets of the Corporation or
any compulsory share exchange) pursuant to which all Common Stock is
converted into the right to receive other securities, cash or other
property.
(k) "Holder" means a record holder of shares of Series B Preferred
------
Stock.
(l) "Independent Director" means a director of the Corporation who
------------------
(apart from such directorship) (i) is not a current or former officer or
employee of the Corporation or any Affiliate of the Corporation, (ii) is
not a current or former director, officer or employee of any Holder or any
Affiliate of such Holder, (iii) did not in either of the last two completed
calendar years receive, and is not an officer, director, employee,
stockholder holding more than 10% of the voting interest of, partner or
-50-
<PAGE>
Affiliate of any entity that in either of such entity's two most recent
fiscal years received, more than 10% of such person or entity's total
income from either the Corporation or the party designating such director
for election to the Board.
(m) "Initial Dividend Period" means the dividend period commencing on
-----------------------
the Original Issue Date and ending on the second Dividend Payment Date to
occur thereafter.
(n) "Initial Holders" means MS and CapRe.
---------------
(o) "Junior Stock" has the meaning set forth in Article IV, Section
------------
C(2).
(p) "Liquidation Preference" means initially, $3.50 per share of
----------------------
Series B Preferred Stock subject to increase as provided under Article IV,
Section C(3)(e) hereof and, thereafter if so increased, means the
Liquidation Preference as so increased.
(q) "MS HSR Clearance Date" shall have the meaning specified in the
---------------------
Recap Agreement.
(r) "Original Issue Date" means the date upon which the Series B
-------------------
Preferred Stock is originally issued by the Corporation.
(s) "Parity Stock" means any class or series of stock, including the
------------
Series A Preferred Stock, the terms of which provide that it is entitled to
participate pari passu with the Series B Preferred Stock with respect to
any dividend or distribution or upon liquidation, dissolution or winding-up
of the Corporation.
(t) "Quarterly Dividend Period" means the quarterly period commencing
-------------------------
on each March 31, June 30, September 30 and December 31 and ending on each
Dividend Payment Date, respectively.
(u) "Redemption Date" has the meaning set forth in Article IV,
---------------
Section C(5).
(v) "Reference Date" mean%, with respect to any dividend or other
--------------
distribution4 the Trading Day prior to the date on which the Common Stock
first trades in its principal market with a Closing Price that reflects the
absence of a right to receive such dividend or other distribution.
(w) "Senior Stock" means any class or series of stock the terms of
------------
which provide that it is entitled to a preference to the Series B Preferred
-51-
<PAGE>
Stock with respect to any dividend or distribution or upon voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation.
(x) "Series B Preferred Stock Certificate" has the meaning set forth
------------------------------------
in Article IV, Section C(6)(b).
(y) "Special Permitted Transfer" has the meaning set forth in Article
--------------------------
IV, Section C(7)(c).
D. Rights, Preferences and Restrictions of the Series C Preferred
--------------------------------------------------------------
Stock. The Series C Preferred Stock shall have the voting, preferences and
-----
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, as follows:
1. Designation. The series of preferred stock established hereby
-----------
shall be designated the "85% Cumulative Convertible Redeemable Preferred Stock
due 2009, Series C" (and shall be referred to herein as the "Series C Preferred
------------------
Stock") and the authorized number of shares of Series C Preferred Stock shall be
-----
Twenty-five Million (25,000,000) shares.
2. Rank. The Series C Preferred Stock shall, with respect to
----
dividend distributions and distributions upon the voluntary or involuntary
liquidation, winding up and dissolution of the Corporation, rank (i) senior to
all classes of Common Stock of the Corporation and each other class of capital
stock or series of preferred stock hereafter created which is not Senior Stock
or Parity Stock (such other class or series being referred to herein as "Junior
------
Stock"), (ii) pari passu with any Parity Stock and (iii) junior to any Senior
-----
Stock.
3. Dividends.
---------
(a) Beginning on the Original Issue Date and ending on the third
anniversary of the earlier to occur of (i) receipt by the Corporation of
the FCC Approval and (ii) October 31, 1999, the Holders shall be entitled
to receive, whether or not dividends are declared by the Board out of funds
of the Corporation, cumulative preferential dividends from the Original
Issue Date of the Series C Preferred Stock at an annual rate equal to 8.5%
(the "Dividend Rate") of the Liquidation Preference in effect from time to
-------------
time and no more. During such period, dividends may be paid, at the
Corporation's option, in cash or by the issuance of additional shares of
Series C Preferred Stock (including fractional shares) having an aggregate
Liquidation Preference equal to the amount of such dividends. The issuance
of such additional shares of Series C Preferred Stock will constitute
"payment" of the related dividend for all purposes of the Certificate of
Designations; provided, however, that, the Corporation shall pay the same
-------- -------
form of dividends and in the same proportion (i.e., either cash
-52-
<PAGE>
or additional shares, as the case may be, at its sole discretion)
hereunder, to the extent it pays dividends, on each Dividend Payment Date
on each of the Series A Preferred Stock, the Series B Preferred Stock and
the Series C Preferred Stock.
(b) Beginning on the first day after the third anniversary of the
earlier to occur of (i) receipt by the Corporation of the FCC Approval and
(ii) October 31, 1999, the Holders shall be entitled to receive, when, as
and if declared by the Board, but only out of funds legally available
therefor, distributions in the form of cash dividends on each share of
Series C. Preferred Stock at an annual rate equal to 8.5% of the
Liquidation Preference in effect from time to time and no more.
(c) All dividends shall be cumulative, whether or not declared, on a
daily basis from the Original Issue Date and shall be payable quarterly in
arrears on each Dividend Payment Date commencing on June 30, 1999. Each
dividend shall be payable with respect to Series C. Preferred Stock held by
Holders of record as they appear on the stock books of the Corporation on
each Dividend Record Date. Dividends shall cease to accumulate in respect
of shares of Series C Preferred Stock on the Redemption Date of such
shares.
(d) Dividends payable under subsection (a) above on the Series C
Preferred Stock will accrue whether or not the Corporation has earnings or
profits, whether or not there are funds legally available for the payment
of such dividends and whether or not dividends are declared. Dividends will
accumulate to the extent they are not paid on the Dividend Payment Date for
the period to which they relate.
(e) If any dividend payable on any Dividend Payment Date under
subsection (b) above is not declared or paid in full in cash on such
Dividend Payment Date then, to the went of legally available funds
therefor, the Liquidation Preference of each share shall be increased on
such Dividend Payment Date by an amount (the "Accrued Dividend Amount")
-----------------------
equal to the product of (A) the amount payable as dividends on such share
on such Dividend Payment Date that is not paid in cash divided by the total
amount payable as dividends on such share on such Dividend Payment Date,
and (B) one-quarter (or, if the Original Issue Date was less than 90 days
prior to the applicable Dividend Payment Date, a fraction the numerator of
which is the number of days elapsed from the Original Issue Date to the
applicable Dividend Payment Date and the denominator of which is 360) of
the Accrued Dividend Rate times the then Liquidation Preference. The amount
of the dividend otherwise payable in cash that is so added to the
Liquidation Preference shall be deemed for all purposes to have been paid
in full in cash, shall not be deemed to be arrearages or in arrears and
shall
-53-
<PAGE>
not accumulate. In the event that the Board of the Corporation determines
that any portion of the Accrued Dividend Amount may not be so added to the
Liquidation Preference because of the lack of legally available funds
therefor (such portion, the "Default Dividends"), the Corporation shall
-----------------
give notice thereof to the Holders of record as of the applicable Dividend
Payment Date within twenty (20) Business Days after such Dividend Payment
Date and any portion of the Accrued Dividend Amount not so added to the
Liquidation Preference because of the lack of legally available funds
therefor shall be accumulated and payable in cash. Any Default Dividends
shall thereafter accrue dividends at an annual rate equal to the Accrued
Dividend Rate. Any such determination by the Board shall be final and
binding on all Holders. Except as expressly stated above, no amounts shall
accrue or be payable in respect of any dividend payment on the Series C
Preferred Stock which may be in arrears.
(f) Dividends on account of arrears for any past Dividend Period
(including without limitation any Default Dividends, but not including any
Accrued Dividend Amounts) may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to Holders of record on
such date, not more than forty-five (45) days prior to the payment thereof,
as may be fixed by the Board.
(g) So long as any shares of the Series C Preferred Stock are
outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend on any Junior Stock or make any payment on account of,
or set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any Junior Stock, or any
warrants, rights, calls or options exercisable for any Junior Stock or make
any distribution in respect thereof, either directly or indirectly, and
whether in cash obligations or shares of the Corporation or other property
(other than dividends, payments, purchases, acquisitions, redemptions,
retirements or distributions in Junior Stock) and shall not permit any
Subsidiary of the Corporation directly or indirectly to do any of the same
in respect of such Junior Stock (other than dividends, payments, purchases,
acquisitions, redemptions, retirements or distributions in Junior Stock)
unless and until all accumulated and unpaid dividends on the Series C
------
Preferred Stock have been paid in full, and the Corporation is not in
default of any of its obligations under Section 5.
(h) Unless and until all dividend arrearages on the Series C
Preferred Stock have been paid in full, all dividends declared by the
Corporation upon shares of Series C Preferred Stock or Parity Stock shall
be declared pro rata with respect to all shares of Series C Preferred Stock
and Parity Stock then outstanding so that the amounts of any dividends
declared per share on the Series C Preferred Stock and such Parity Stock
-54-
<PAGE>
bear the same ratio to each other at the time of declaration as all accrued
and unpaid dividends on the Series C Preferred Stock and the Parity Stock
bear to each other.
(i) The Corporation shall take all actions required or permitted
under the DGCL to permit the payment of dividends on the Series C Preferred
Stock, including, without limitation, through the revaluation of its assets
in accordance with the DGCL, to make or keep funds legally available for
the payment of dividends.
(j) Dividends payable on the Series C Preferred Stock for any period
less than a year shall be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed in the period for which
payable.
4. Liquidation Preference.
---------------------
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the Holders
of shares of Series C Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Corporation available for distribution to
its stockholders an amount in cash equal to the then Liquidation
Preference, for each share outstanding, plus an amount in cash equal to
accumulated and unpaid dividends thereon (including without limitation
Default Dividends) to the date fixed for liquidation, dissolution or
winding up, and no more, before any payment shall be made or any assets
distributed to the holders of any Junior Stock; provided, however, that the
-------- -------
Holders of the Series C Preferred Stock shall not be entitled to receive
any amount upon the voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation until the holders of any
Senior Stock shall have received all amounts and distributions to which
they are entitled thereupon. Except as provided in the preceding sentence,
Holders of Series C Preferred Stock shall not be entitled to any
distribution in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation. If the assets
of the Corporation are not sufficient to pay in full the liquidation
payments payable to the holders of outstanding shares of the Series C
Preferred Stock and any Parity Stock, then the holders of all such shares
shall share ratably in such distribution of assets in accordance with the
amounts which would be payable on such distribution if the amount to which
the holders of outstanding shares of Series C Preferred Stock and any
Parity Stock are entitled were paid in full.
(b) For the purposes of this Section 4, neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of
-55-
<PAGE>
the Corporation nor the consolidation or merger of the Corporation with or
into one or more corporations shall be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation.
5. Mandatory Redemption. The Corporation shall redeem on March 31,
2009 (the "Redemption Date"), from any source of funds legally available
---------------
therefor, all outstanding shares of Series C Preferred Stock at a redemption
price per share equal to the then Liquidation Preference per share (the
"Mandatory Redemption Price"), plus an amount in cash equal to all accumulated
--------------------------
and unpaid dividends per share (including an amount in cash equal to a prorated
dividend for any partial Dividend Period). The Corporation will not be required
to make sinking fund payments with respect to the Series C Preferred Stock. The
Series C Preferred Stock shall not be redeemable at the option of the
Corporation prior to the Redemption Date.
6. Conversion.
----------
(a) Optional Conversion. Except as set forth in Section 6(c) below,
-------------------
upon and following the earlier to occur of (i) receipt by the Corporation
of the FCC Approval and (ii) October 31, 1999 and until the third
anniversary of the earlier to occur of (i) and (ii), the Holder of each
share of Series C Preferred Stock shall have the right, at the option of
such Holder, to convert such shares into shares of Common Stock, on and
subject to the terms and conditions hereinafter set forth. Subject to the
provisions for adjustment hereinafter set forth, each share of Series C
Preferred Stock Shall be convertible into such number (calculated as to
each conversion to the nearest 1/100th of a share) of fully paid and
nonassessable shares of Common Stock as is obtained by dividing (i) the sum
of the then Liquidation Preference plus the amount of accumulated and
unpaid dividends thereon, including the amount of any Default Dividends and
any dividends accumulated thereon by (ii) the Conversion Price, both as in
effect at the date any share or shares of Series C Preferred Stock are
surrendered for conversion. The Series C Preferred Stock shall not be
convertible prior to the earlier to occur of (i) receipt by the Corporation
of the FCC Approval and (ii) October 31, 1999 or after the third
anniversary of the earlier to occur of (i) and (ii).
(b) Conversion Procedure.
--------------------
(i) In order to exercise the conversion privilege, the Holder of
any shares of Series C Preferred Stock to be converted in whole or in part
shall surrender the certificate representing such shares of Series C
Preferred Stock (the "Series C Preferred Stock Certificate") at the office
or agency then maintained by the
-56-
<PAGE>
Corporation for the transfer of the Series C Preferred Stock, and shall
give written notice of conversion in the form provided on the Series C
Preferred Stock Certificate (or such other notice which is acceptable to
the Corporation) to the Corporation at such office or agency that the
Holder elects to convert such shares of Series C Preferred Stock
represented by the Series C Preferred Stock Certificate so surrendered or
the portion thereof specified in said notice into shares of Common Stock.
Such notice shall also state the name or names (with addresses) in which
the certificate or certificates for shares of Common Stock which shall be
issuable upon such conversion shall be issued, and shall be accompanied by
transfer taxes, if required. Each Series C Preferred Stock Certificate
surrendered for conversion shall, unless the shares issuable on conversion
are to be issued in the same name as the registration of such Series C
Preferred Stock Certificate, be duly endorsed by, or be accompanied by
instruments of transfer in form satisfactory to the Corporation duly
executed by, the Holder or such Holder's duly authorized attorney.
(ii) As promptly as practicable after the surrender of such Series C
Preferred Stock Certificate and the receipt of such notice and funds, if
any, as aforesaid, the Corporation shall issue and shall deliver at such
office or agency to such Holder, or on his written order, a certificate or
certificates for the number of shares of Common Stock issuable upon the
conversion of such shares of Series C Preferred Stock represented by the
Series C Preferred Stock Certificate so surrendered or portion thereof in
accordance with the provisions of this Section 6. In case less than all of
the shares of Series C Preferred Stock represented by a Series C Preferred
Stock Certificate surrendered for conversion are to be converted, the
Corporation shall deliver to or upon the written order of the Holder of
such Series C Preferred Stock Certificate a new Series C Preferred Stock
Certificate representing the shares of Series C Preferred Stock not
converted. If a Holder fails to notify the Corporation of the number of
shares of Series C Preferred Stock which such Holder wishes to convert,
such Holder shall be deemed to have elected to convert all shares
represented by the certificate or certificates surrendered for conversion.
(iii) Each conversion shall be deemed to have been effected on the
date on which such Series C Preferred Stock Certificate shall have been
surrendered and such notice shall have been received by the Corporation, as
aforesaid, and the person in whose name any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall, be
deemed to
-57-
<PAGE>
have become on said date the holder of record of the shares represented
thereby; provided, however, that the person effecting any such surrender on
-------- -------
any date when the stock books of the Corporation shall be closed shall
constitute the person in whose name the certificates are to be issued as
the record holder thereof for all purposes on the next succeeding day on
which such stock books are open, but such conversion shall be at the
Conversion Price as in effect on the date upon which such Series C
Preferred Stock Certificate shall have been surrendered.
(iv) All shares of Series C Preferred Stock that shall have been
surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such shares, including the
rights, if any, to receive notices and to vote, shall forthwith cease,
except only the right of the Holders thereof, subject to the provisions of
this Section 6, to receive shares of Common Stock in exchange therefor.
(v) No payments or adjustments in respect of dividends on shares
of Series C Preferred Stock surrendered for conversion (except as expressly
provided herein in the case of Default Dividends) or on account of any
dividend on the Common Stock issued upon conversion shall be made upon the
conversion of any shares of Series C Preferred Stock.
(c) Automatic Conversion. Upon and following the earlier to occur of (i)
--------------------
receipt by the Corporation of the FCC Approval and (ii) October 31, 1999 and
until the third anniversary of the earlier to occur of (i) and (ii), upon the
earlier to occur of (1) an Initial Public Offering, the public offering price of
which is at least $35,000,000 in the aggregate and (2) the listing of the Common
Stock on the New York Stock Exchange, Inc. or the American Stock Exchange, Inc.
or the trading of the Common Stock on the Nasdaq National Market ("NASDAQ"), if
------
the Market Price (as hereinafter defined) of the Common Stock shall on any day
be at a level such that, if all the outstanding shares of Series A Preferred
Stock were converted into the number of shares of Common Stock into which such
Series A Preferred Stock is convertible pursuant to this Section 6, and such
shares of Common Stock were then sold at the Market Price, the proceeds of such
sale would exceed by at least 20% the amount determined by multiplying the
number of outstanding shares of Series A Preferred Stock by the Conversion Price
(which amount shall be subject to equitable adjustment wherever there shall
occur a stock split, combination, reclassification or other similar event
involving the Series C Preferred Stock), then all outstanding shares of Series C
Preferred Stock shall be converted automatically into the number of shares of
Common Stock into
-58-
<PAGE>
which such shares are convertible pursuant to this Section 6 as of immediately
prior to the occurrence of such event, without further action by the Holders and
whether or not the certificates representing such shares are surrendered to the
Corporation or its Transfer Agent for the Common Stock, provided that all
declared and unpaid dividends on such shares of Series C Preferred Stock shall
first have been paid in full. The "Market Price " of the Common Stock shall be
------ -----
the average of the reported last sales prices on an exchange or on NASDAQ for
the Common Stock on each of the twenty (20) preceding Trading Days on which a
reported sale of the Common Stock took place. The Series C Preferred Stock shall
not be automatically converted pursuant to this Section 6(c) prior to the
earlier to occur of (i) receipt by the Corporation of the FCC Approval and (ii)
October 31, 1999 or after the third anniversary of the earlier to occur of (i)
and (ii).
(d) Adjustment of Conversion Price. The Conversion Price at which a share
------------------------------
of Series C Preferred Stock is convertible into Common Stock shall be subject to
adjustment from time to time as follows:
(i) In case the Corporation shall pay or make a dividend or
other distribution on its Common Stock exclusively in Common Stock or shall
pay or make a dividend or other distribution on any other class or series
of capital stock of the Corporation which includes Common Stock, the
Conversion Price in effect at the close of business on the date fixed for
the determination of stockholders entitled to receive such dividend or
other distribution shall be reduced by multiplying such Conversion Price by
a fraction of which the numerator shall be the number of Fully-Diluted
Shares represented by shares of Series C Preferred Stock and Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of Fully-
Diluted Shares and the total number of shares of Common Stock included in
such dividend or other distribution, such reduction to become effective
immediately prior to the opening of business on the day following the date
fixed for such determination. For the purposes of this subparagraph (i),
the number of shares of Common Stock at any time shall not include shares
held in the treasury of the Corporation, and the Corporation shall not pay
any dividend or make any other distribution on shares of Common Stock held
in the treasury of the Corporation.
(ii) In case the Corporation shall pay or make a dividend or
other distribution on its Common Stock consisting exclusively of, or shall
otherwise issue to all holders of its Common Stock, securities convertible
or exercisable into shares of Common Stock
-59-
<PAGE>
or rights or warrants entitling the holders thereof to subscribe for or
purchase shares of Common Stock at a price per share less than the current
market price per share of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such securities, rights
or warrants, the Conversion Price in effect at the close of business on the
date fixed for such determination shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number
of Fully-Diluted Shares represented by shares of Series C Preferred Stock
and Common Stock outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common
Stock issuable upon conversion or exchange of such securities or so offered
for subscription or purchase would purchase at such current market price
and the denominator shall be the number of Fully-Diluted Shares represented
by shares of Series C Preferred Stock and Common Stock outstanding at the
close of business on the date fixed for such determination plus the number
of shares of Common Stock issuable upon conversion or exchange of such
securities or so offered for subscription or purchase, such reduction to
become effective immediately prior to the opening of business on the day
following the date fixed for such determination. For the purposes of this
subparagraph (ii), the number of Fully-Diluted Shares at any time shall not
include shares held in the treasury of the Corporation. The Corporation
shall not issue any such securities, rights or warrants in respect of
shares of Common Stock held in the treasury of the Corporation. For
purposes of this subparagraph (ii), the issuance of rights or warrants to
subscribe for or purchase stock or securities convertible or exchangeable
into shares of Common Stock shall be deemed to be the issuance of rights or
warrants to purchase the shares of Common Stock into which such stock or
securities are convertible or exercisable at an aggregate offering price
equal to the aggregate offering price of such stock or securities plus the
minimum aggregate amount (if any) payable upon conversion of such stock or
securities into Common Stock. In case any securities or rights or warrants
referred to in this subparagraph (H) in respect of which an adjustment
shall have been made shall expire unexercised within forty-five (45) days
after the same shall have been distributed or issued by the Corporation,
the Conversion Price shall be readjusted at the time of such expiration to
the Conversion Price that would have been in effect if no adjustment had
been made on account of the distribution or issuance of such expired rights
or warrants.
-60-
<PAGE>
(iii) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion
Price in effect at the close of business on the day upon which such
subdivision becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall each be
combined into a smaller number of shares of Common Stock, the Conversion
Price in effect at the close of business on the day upon which such
combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
prior to the opening of business on the day following the day upon which
such subdivision or combination becomes effective.
(iv) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of record of its Common Stock evidences, of its
indebtedness, shares of any class or series of capital stock, cash or
assets (including securities, but excluding any securities, rights or
warrants referred to in subparagraph (ii) of this Section 6(d), any
dividend or distribution paid exclusively in cash and any dividend or
distribution referred to in subparagraph (i) of this Section 6(d)), the
Conversion Price shall be reduced so that such price shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the effectiveness of the Conversion Price reduction contemplated by this
subparagraph (iv) by a fraction of which the numerator shall be the current
market price per share (determined as provided in subparagraph (vii) of
this Section 6(d)) of the Common Stock on the Reference Date less the fair
market value (as determined in good faith by the Board, whose good faith
determination shall be conclusive and described in a resolution of the
Board), on the Reference Date, of such number or amount of the evidences of
indebtedness, shares of capital stock, cash and assets that is so
distributed to a holder of one share of Common Stock and the denominator
shall be such current market price per share of the Common Stock, such
reduction to become effective on the later to occur of (x) immediately
prior to the opening of business on the day following the Reference Date
and (y) the time at which such dividend or other distribution is
unconditionally declared by the Board of the Corporation. For purposes of
this subparagraph (iv), any dividend or distribution that includes (but is
not limited to) shares of Common Stock, securities convertible or
exchangeable into shares of Common Stock or rights or warrants to
subscribe for or purchase shares of Common Stock shall be deemed instead to
be (1) a dividend or distribution of the evidences of indebtedness, cash,
assets or shares of capital stock
-61-
<PAGE>
other than such shares of Common Stock, such securities convertible or
exchangeable into shares of Common Stock or such rights or warrants (so
that any Conversion Price reduction required by this subparagraph (iv) is
made) immediately followed by (2) a dividend or distribution of such shares
of Common Stock, such securities convertible or exchangeable into shares of
Common Stock or such rights or warrants (so that there is made any further
Conversion Price reduction required by subparagraph (i) or (ii) of this
Section 6(d), except (A) the Reference Date of such dividend or
distribution shall be substituted as "the date fixed for the determination
of stockholders entitled to receive such securities, rights or warrants"
and "the date fixed for such determination" within the meaning of
subparagraphs (i) and (ii) of this Section 6(d) and (B) any shares of
Common Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such
determination" within the meaning of subparagraph (i) of this Section
6(d)). In case any dividend or other distribution referred to in this
subparagraph (iv) in respect of which an adjustment shall have been made
shall not be paid or otherwise distributed on the date fixed therefor (as
determined in good faith by the Board of the Corporation whose good faith
determination shall be conclusive), the Conversion Price shall be
readjusted to the Conversion Price that would have been in effect if no
adjustment had been made on account of such dividend or other distribution.
In the event that any shares of Series C Preferred Stock shall be converted
on or after the time at which any adjustment to the Conversion Price
becomes effective pursuant to this subparagraph (iv) in respect of any
dividend or other distribution, no portion of such dividend or other
distribution shall be paid or distributed (and if so paid or distributed
shall not be retained by any person) in respect of any shares of Common
Stock issued upon conversion thereof, notwithstanding that the date fixed
for the determination of stockholders entitled to receive such dividend or
other distribution may occur on or after the date such adjustment becomes
effective.
(v) In case the Corporation shall pay or make a dividend or
other distribution to holders of record of its Common Stock exclusively in
cash, the Conversion Price shall be reduced so that such price shall equal
the price determined by multiplying the Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price reduction
contemplated by this subparagraph (v) by a fraction of which the numerator
shall be the current market price per share (determined as provided in
subparagraph (vii) of this
-62-
<PAGE>
Section 6(c)) of the Common Stock on the Reference Date less the amount of
cash so distributed applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common
Stock, such reduction to become effective on the later to occur of (x)
immediately prior to the opening of business on the day following the
Reference Date and (y) the time at which such dividend or other
distribution is unconditionally declared by the Board of the Corporation.
In case any dividend or other distribution referred to in this subparagraph
(v) in respect of which an adjustment shall have been made shall not be
paid or otherwise distributed on the date fixed therefor (as determined in
good faith by the Board of the Corporation whose good faith determination
shall be conclusive), the Conversion Price shall be readjusted to the
Conversion Price that would have been in effect if no adjustment had been
made on account of such dividend or other distribution. In the event that
any shares of Series C Preferred Stock shall be converted on or after the
time at which any adjustment to the Conversion Price becomes effective
pursuant to this subparagraph in respect of any dividend or other
distribution, no portion of such dividend or other distribution shall be
paid or distributed (and if so paid or distributed shall not be retained by
any person) in respect of any shares of Common Stock issued upon conversion
thereof, notwithstanding that the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution may
occur on or after the date such adjustment becomes effective.
(vi) If any Fundamental Change shall occur, then, as a condition
of such Fundamental Change, lawful and adequate provisions shall be made
whereby each Holder of a share or shares of Series C Preferred Stock shall
have the right to receive, upon the basis and upon the terms and conditions
specified herein, in lieu of the shares of Common Stock of the Corporation
immediately theretofore receivable upon the conversion of such share or
shares of Series C Preferred Stock such shares of stock, securities or
assets, as may be issued or payable with respect to or in exchange for such
number and class of shares of Common Stock issuable upon conversion of the
Series C Preferred Stock immediately prior to the occurrence of the
Fundamental Change. In the case of any Fundamental Change, appropriate
provision shall be made with respect to the rights and interests of the
Holders to the end that the provisions hereof (including without limitation
provisions for adjustment of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock,
securities or
-63-
<PAGE>
assets thereafter deliverable upon the exercise of any conversion rights
hereunder.
(vii) For the purpose of any computation under subparagraphs (ii),
(iv) and (v), the current market price per share of Common Stock on any
date in question shall be deemed to be the average of the daily Closing
Prices for the five (5) consecutive Trading Days prior to and including the
date in question; provided, however, that (1) if the "ex" date (as
-------- -------
hereinafter defined) for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion
Price pursuant to subparagraph (i), (ii), (iii), (iv), (v) or (vi) above
("Other Event") occurs after the fifth Trading Day prior to the day in
-----------
question and prior to the "ex" date for the issuance or distribution
requiring such computation (the "Current Event"), the Closing Price for
-------------
each Trading Day prior to the "ex" date for such Other Event shall be
adjusted by multiplying such Closing Price by the same fraction by which
the Conversion Price is so required to be adjusted as a result of such
Other Event, (2) if the "ex" date for any Other Event occurs after the
"ex" date for the Current Event and on or prior to the date in question,
the Closing Price for each Trading Day on and after the "ex" date for such
Other Event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the Conversion Price is so required to
be adjusted as a result of such Other Event, (3) if the "ex" date for any
Other Event occurs on the "ex" date for the Current Event, one of those
events shall be deemed for purposes of determining which of clauses (1) and
(2) of this proviso to apply to have an "ex" date occurring prior to the
"ex" date for the other event but in applying such clause the actual "ex"
date of the other event shall be utilized, and (4) if the "ex" date for
the Current Event is on or prior to the date in question, the Closing Price
for each Trading Day on or after such "ex" date shall be adjusted after
taking into account any adjustment required pursuant to clause (2) of this
proviso, by adding thereto the amount of any cash and the fair market value
on the date in question (as determined in good faith by the Board in a
manner consistent with any determination of such value for purposes of
paragraph (iv) or (v) of this Section 6(d), whose determination shall be
conclusive and described in a resolution of the Board) of such number or
amount of the securities, rights, warrants, evidences of indebtedness,
shares of capital stock or assets being distributed to a holder of one
share of Common Stock. For purposes of this subparagraph, the term "ex"
date, (1) when used with respect to any issuance or distribution, means the
first
-64-
<PAGE>
date on which the Common Stock trades regular way on the relevant exchange
or in the relevant market from which the Closing Price was obtained without
the right to receive such issuance or distribution, and (2) when used with
respect to any subdivision or combination of shares of Common Stock, means
the first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which such subdivision or
combination becomes effective.
(viii) In case a tender or exchange offer made by the Corporation
or any Subsidiary of the Corporation for all or any portion of the
Corporation's Common Stock shall expire and result in the acquisition by
the Corporation of shares of Common Stock pursuant thereto and such tender
or exchange offer shall involve the payment by the Corporation or such
Subsidiary of consideration per share of Common Stock having a fair market
value (as determined in good faith by the Board, whose good faith
determination shall be conclusive and described in a resolution of the
Board) at the last time (the "Expiration Time") tenders or exchanges may be
---------------
made pursuant to such tender or exchange offer (as it shall have been
amended) that exceeds the current market price per share of the Common
Stock on the Trading Day next succeeding the Expiration Time, the
Conversion Price shall be reduced so that such price shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the effectiveness of the Conversion Price reduction contemplated by this
subparagraph (viii) by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding (including any tendered or
exchanged shares) at the Expiration Time multiplied by the current market
price per share of the Common Stock on the Trading Day next succeeding the
Expiration Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
stockholders as a result of the Corporation's or Subsidiary's acceptance
(up to any maximum specified in the terms of the tender or exchange offer)
of shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
----------------
shares of Common Stock outstanding (less any Purchased Shares) at the
Expiration Time and the current market price per share of the Common Stock
on the Trading Day next succeeding the Expiration Time, such reduction to
become effective immediately prior to the opening of business on the day
following the Expiration Time. For the purpose of any computation under
-65-
<PAGE>
this subparagraph (viii) of this Section 6(d), the current market
price per share of Common Stock on any date in question shall be
deemed to be the average of the daily Closing Prices for such date in
question and the next two (2) succeeding Trading Days; provided,
--------
however, that if the "ex" date for any Other Event occurs after the
-------
Expiration Time for the tender or exchange offer requiring such
computation and on or prior to the second Trading Day following the
date in question, the Closing Price for each Trading Day on and after
the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such
other event.
(e) Conversion Price Adjustment Deferred. Notwithstanding the
------------------------------------
foregoing provisions of this Section 6, (i) no adjustment in the number of
shares of Common Stock into which any share of Series C Preferred Stock is
convertible shall be required unless such adjustment would require an
increase or decrease in such number of shares of at least 1% and (ii) no
adjustment in the Conversion Price shall be required unless such adjustment
would require an increase or decrease in the Conversion Price of at least
$.01 per share; provided, however, that any adjustments which by reason of
-------- -------
this paragraph (d) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 6 shall be made to the nearest cent or the nearest 1/100th of
a share, as the case may be.
(f) Adjustment Report. Whenever any adjustment is required in the
-----------------
Conversion Price or the shares into which any share of Series C Preferred
Stock is convertible, the Corporation shall forthwith (i) file with each
office or agency then maintained by the Corporation for the transfer of the
Series C Preferred Stock a statement describing in reasonable detail the
adjustment and the method of calculation used and (ii) cause a notice of
such adjustment, setting forth the adjusted Conversion Price and the
calculation thereof to be mailed to the Holders of record of shares of
Series C Preferred Stock at their respective addresses as shown on the
stock books of the Corporation. The certificate of any independent firm of
public accountants of recognized standing selected by the Board certifying
to the Board the correctness of any computation under this Section 6 shall
be evidence of the correctness of such computation.
(g) Notice of Certain Events. In the event that:
------------------------
(i) the Corporation shall take action to make any distribution
to the holders of its Common Stock;
-66-
<PAGE>
(ii) the Corporation shall take action to offer for subscription
pro rata to the holders of its Common Stock any securities of any
kind;
(iii) the Corporation shall take action to accomplish any capital
reorganization, reclassification of the capital stock of the
Corporation (other than a subdivision, split or combination of its
Common Stock), consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the Corporation is
required, or sale or transfer of all or substantially all of the
assets of the Corporation; or
(iv) the Corporation shall take any action to accomplish a
voluntary or involuntary dissolution, liquidation or winding-up of the
Corporation,
then the Corporation shall (A) in case of any such distribution or
subscription rights, at least twenty (20) days prior to the date or
expected date on which the stock books of the Corporation shall close or a
record shall be taken for the determination of holders entitled to such
distribution or subscription rights, and (B) in the case of any such
reorganization, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up, at least twenty (20) days prior to
the date or expected date when the same shall be consummated, cause written
notice thereof to be mailed to each Holder of shares of Series C
Preferred Stock at his address as shown on the stock books of the
Corporation. Such notice in accordance with the foregoing clause (A) shall
also specify, in the case of any such distribution or subscription rights,
the date or expected date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause
(B) shall also specify the date or expected date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up, as the case may be.
(h) Common Stock. For the purposes of this Section 6, the term
------------
"Common Stock" shall mean (i) the Common Stock or (ii) any other class of
------------
stock resulting from successive changes or reclassifications of such Common
Stock consisting solely of changes in par value or from no par value to par
value, or from par value to no par value. In the event that at any time as
a result of an adjustment made pursuant to the provisions of Section 6(d),
the Holder of any share of Series C Preferred Stock thereafter surrendered
for conversion shall become entitled to receive any shares of the
Corporation other than shares of Common Stock, thereafter
-67-
<PAGE>
the number of such other shares so receivable upon conversion of any share
of Series C Preferred Stock 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 the Common Stock contained in Section 6(d), and
the other provisions of this Section 6 with respect to the Common Stock
shall apply on like terms to any such other shares.
(i) Fractional Shares. The Corporation shall not be required to issue
-------------------
fractional shares of Common Stock upon the conversion of any Series C
Preferred Stock. If more than one share of Series C Preferred Stock shall
be surrendered for conversion at one time by the same Holder, the number of
full shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares so surrendered. If
any fractional interest in a share of Common Stock would be deliverable
upon the conversion of any shares of Series C Preferred Stock the
Corporation may pay, in lieu thereof, in cash the Closing Price, thereof as
of the Business Day immediately preceding the date of such conversion.
(j) Reservation of Shares. 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
or redemption of the shares of Series C Preferred Stock, such number of its
duly authorized shares of Common Stock (or treasury shares as provided
below) as shall from time to time be sufficient for the conversion of all
outstanding shares of Series C Preferred Stock into Common Stock at any
time. The Corporation shall, from time to time and in accordance with the
DGCL, cause the authorized number of shares of Common Stock to be increased
if the aggregate of the number of authorized shares of Common Stock
remaining unissued and the issued shares of such Common Stock reserved for
issuance in any other connection shall not be sufficient for the conversion
of all outstanding shares of Series C Preferred Stock into Common Stock at
any time.
(k) Additional Conversion Price Adjustment. The Corporation may make
--------------------------------------
such reductions in the Conversion Price, in addition to those required by
Section 6(d), as it considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes. The
Corporation from time to time may reduce the Conversion Price by any amount
for any period of time if the period is at least twenty (20) days, the
reduction is irrevocable during the period and the Board of the Corporation
shall have made a determination that such reduction would be in the best
interest of the Corporation, which determination shall be
-68-
<PAGE>
conclusive. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Corporation shall mail to Holders of record of the
Series C Preferred Stock a notice of the reduction at least fifteen (15)
days prior to the date the reduced Conversion Price takes effect, and such
notice shall state the reduced Conversion Price and the period it will be
in effect.
7. Voting Rights.
-------------
(a) For so long as any shares of the Series C Preferred Stock are
outstanding, each share of Series C Preferred Stock shall entitle the
Holder thereof to notice of and to vote, in person or by proxy, at any
special or annual meeting of stockholders, on all matters entitled to be
voted on by holders of Common Stock and any other series or class of Voting
Stock (as defined in Section 7(b)) voting together as a single class with
all other shares entitled to vote thereon. With respect to any such vote,
each share of Series C Preferred Stock shall entitle the Holder thereof to
cast that number of votes per share as is equal to the number of votes that
such Holder would be entitled to cast had such Holder converted its shares
of Series C Preferred Stock into shares of Common Stock as of the record
date for determining the stockholders of the Corporation eligible to vote
on any such matters (regardless of whether such shares of Series C
Preferred Stock are actually then convertible).
(b) The term "Voting Stock" means any class or classes of capital
------------
stock, or securities convertible into or exchangeable for any class of
capital stock, of the Corporation pursuant to which the holders thereof
have the general power under ordinary circumstances to vote with respect to
the election of at least a majority of the Board, irrespective of whether
or not, at the time, stock of any other class or classes shall have, or
might have, voting power by reason of the happening of any contingency.
(c) In any case in which the Holders of Series C Preferred Stock
shall be entitled to vote as a separate class pursuant to this Section 7 or
pursuant to Delaware law, each Holder of Series C Preferred Stock shall be
entitled to one vote for each share of Series C Preferred Stock then held.
8. Tag-along Rights.
----------------
(a) Tag-along Buyer. In the event that a stockholder or a group of
---------------
stockholders proposes (such party or parties referred to herein as the
"Tag-Along Proposing Party") to sell any shares of Common Stock, Series A
-------------------------
Preferred Stock, Series B Preferred Stock and/or Series C Preferred Stock
owned by it (such shares referred to herein as the "Proposed Shares") in
---------------
one transaction (a "Covered Transaction") such that following such sale
-------------------
shares of Common Stock, Series A Preferred Stock, Series B
-69-
<PAGE>
Preferred Stock and/or Series C Preferred Stock representing more than 3 5%
of the then Fully-Diluted Shares will have been sold to one holder or group
of related holders, then the Tag-along Proposing Party shall first give
written notice (the "Tag-along Notice") to each holder of shares of Series
----------------
C Preferred Stock (for purposes of this Section 8, the "Tag-along Parties")
-----------------
stating that the Tag-along Proposing Party desires to make such sale,
referring to Section 8, specifying the number of Fully-Diluted Shares
represented by the shares proposed to be sold and specifying the per share
price (the "Tag-along Price"), and the material terms pursuant to which
---------------
such sale is proposed to be made (together with the Tag-along Price, the
"Tag-along Terms"), Notwithstanding the foregoing, the provisions of this
---------------
Section 8 shall not apply to any transfer by the Tag-along Proposing Party
to any Affiliate of the Tag-along Proposing Party that agrees to be bound
by the terms of this Agreement.
(b) Exercise of Tag-along Option.
-----------------------------
(i) Option. Upon receipt of the Tag-along Notice, each
------
Tag-along Party shall have the option for five Business Days following
receipt of the Tag-along Notice to participate in the Covered
Transaction with respect to a number of shares (the "Tag-along
---------
Shares") of Series C Preferred Stock held by it equal to the product
------
of (1) the quotient of (A) the aggregate number of Fully-Diluted
Shares represented by the shares to be sold by the Tag-along Proposing
Party in the Covered Transaction divided by (B) the aggregate number
of Fully-Diluted Shares represented by the shares then owned by the
Tag-along Proposing Party and (2) the number of Fully-Diluted Shares
represented by the shares then owned by such Tag-along Party, for at
least 90% of the Tag-along Price and otherwise on the same Tag-along
Terms; provided, however, that in the event that the consideration for
-------- -------
the Proposed Shares consists in whole or in part of securities, then
no Tag-along Party or any other person shall be entitled to any rights
under this Section 8 unless the Proposed Transferee is reasonably
satisfied that such Tag-along Party or other person is an Accredited
Investor.
(ii) Failure to Exercise Option. If the Tag-along Notice shall
--------------------------
be duly given and if a Tag-along Party shall not exercise its option
to sell shares of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock, as the case may be, in the Covered
Transaction, then the Tag-along Proposing Party shall be free, for a
period of thirty days from the fifth Business Day following receipt of
the Tag-along Notice, to sell the Proposed Shares (together with any
Tag-along Shares) to any Proposed
-70-
<PAGE>
Transferee, as long as all of the Proposed Shares are sold at a price
equal to or less than 100% of the Tag-along Price and on all other
material terms not less favorable, in the aggregate, to the Proposed
Transferee than the Tag-along Terms.
(iii) Sale Agreement. Each Tag-along Party electing to sell Tag-
--------------
along Shares (a "Tag-along Seller") agrees to cooperate in
----------------
consummating such a sale, including without limitation by becoming a
party to the sales agreement and all other appropriate related
agreements, delivering at the consummation of such sale, stock
certificates and other instruments for such Series C Preferred Stock,
duly endorsed for transfer, free and clear of all liens and
encumbrances, and voting or consenting in favor of such transaction
(to the extent a vote or consent is required) and taking any other
necessary or appropriate action in furtherance thereof, including
without limitation the execution and delivery of any other appropriate
agreements, certificates, instruments and other documents. The
foregoing notwithstanding, in connection with such sale, a Tag-along
Seller shall not be required to make any representations and
warranties with respect to the Company or the Company's business or
with respect to any other seller. In addition, each Tag-along Seller
shall be severally responsible for its proportionate share of the
expenses of sale incurred by the sellers in connection with such sale
and the customary obligations and liabilities incurred by the sellers
in connection with such sale. The foregoing notwithstanding& (1)
without the written consent of a Tag-along Seller, the amount of such
obligations and liabilities for which such Tag-along Seller shall be
responsible shall not exceed the gross proceeds received by such Tag-
along Seller in such sale and (2) a Tag-along Seller shall not be
responsible for the fraud of any other seller or for any
indemnification obligations and liabilities for breaches of
representations and warranties made by any other seller with respect
to the Tag-along Proposing Party's or such other seller's (i)
ownership of and title to shares of capital stock of the Company, (ii)
organization, (iii) authority and (iv) conflicts and consents.
(iv) Proposed Transferee. "Proposed Transferee" means a
------------------- -------------------
person or group (as defined in Section 13(d)(3) of the 1934 Act),
other than any Tag-along Parties or their Affiliates (whether any such
Affiliate is such prior to or upon consummation of such transfer, but
not solely by virtue of becoming a party to this Agreement), to whom
shares of Common Stock, Series A Preferred Stock, Series B Preferred
Stock and/or Series C Preferred Stock
-71-
<PAGE>
are proposed to be transferred pursuant to the terms of this Section
8.
(v) No Liability. Notwithstanding any other provision
--------------
contained in this Section 8, there shall be no liability on the part
of the Company or the Tag-along Proposing Party in the event that the
sale pursuant to this Section 8 is not consummated for any reason
whatsoever. The decision whether to effect a sale pursuant to this
Section 8 shall be in the sole and absolute discretion of the Tag-
along Proposing Party.
9. Proxies, Voting Agreements, etc. Except for the Stockholders'
-------------------------------
Agreement, no Holder shall deposit into a voting trust or grant any proxies or
powers of attorney or enter into a voting agreement with respect to any shares
of Series C Preferred Stock.
10. Reissuance of Series C Preferred Stock. Shares of Series C
--------------------------------------
Preferred Stock that have been issued and reacquired in any manner, including
shares surrendered to the Corporation upon conversion, and shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the laws of
Delaware) have the status of authorized and unissued shares of preferred stock
undesignated as to series and may not be re-designated and reissued as part of
any series of preferred stock.
11. Business Day. If any payment or redemption shall be required by
------------
the terms hereof to be made on a day that is not a Business Day, such payment or
redemption shall be made on the immediately succeeding Business Day.
12. Headings of Sections. The headings of the various Sections
--------------------
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
13. Severability of Provisions. If any right, preference or
--------------------------
limitation of the Series C Preferred Stock set forth in this Certificate of
Designations (as such Certificate may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule or law or public
policy, all other rights, preferences and limitations set forth in this
Certificate of Designations (as so amended) which can be given effect without
the invalid, unlawful or unenforceable right, preference or limitation shall,
nevertheless, remain in full force and effect, and no right, preference or
limitation herein set forth shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.
-72-
<PAGE>
14. Notice. All notices and other communications provided for or
------
permitted to be given to the Corporation hereunder shall be made by hand
delivery, next day air courier or certified first-class mail to the Corporation
at its principal executive offices at 1900 Pike Road, Longmont, Colorado
80501-6700, Attention: Secretary.
15. Amendments. This Article IV, Section D may be amended by the
----------
Corporation without notice to or the consent of any Holder to cure any
ambiguity, defect or inconsistency provided that any such amendment does not
adversely affect the rights of any Holder; this Article IV, Section D may
otherwise be amended by the Corporation with the vote or written consent of
holders representing a majority of the outstanding shares of Series C Preferred
Stock provided that any such amendment does not adversely affect the rights of
any Holder; and this Certificate of Designations may otherwise be amended by
the Corporation with the vote or written consent of holders representing at
least 80% of the outstanding shares of Series C Preferred Stock.
The Corporation will, so long as any shares of Series C Preferred
Stock are outstanding, maintain an office or agency where such shares may be
presented for registration or transfer and where such shares may be presented
for conversion and redemption.
16. Definitions. As used in this Article IV, Section D of the
-----------
Amended and Restated Certificate of Incorporation of the Company, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
(a) "Accrued Dividend Amount" has the meaning set forth in
-----------------------
Article IV, Section D(3)(b).
(b) "Accrued Dividend Rate" means an annual rate equal to 8.5%.
---------------------
(c) "Conversion Price" means $3.50, as adjusted pursuant to Article
----------------
IV, Section D(6).
(d) "Default Dividends" has the meaning set forth in Article IV,
-----------------
Section D(3)(e).
(e) "Dividend Payment Date" means March 31, June 30, September 30
---------------------
and December 31 of each year.
(f) "Dividend Period" means the Initial Dividend Period and,
---------------
thereafter, each Quarterly Dividend Period.
-73-
<PAGE>
(g) "Dividend Rate" has the meaning set forth in Article IV, Section
-------------
D(3)(a).
(h) "Dividend Record Date" means a day fifteen (15) days preceding
--------------------
the Dividend Payment Date.
(i) "Fundamental Change" means, with respect to the Corporation, the
------------------
occurrence of any transaction to which the Corporation is a party
(including without limitation any recapitalization or reclassification of
the Common Stock (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 of the Common Stock), any consolidation of the
Corporation with, or merger of the Corporation into, any other person, any
merger of another person into the Corporation (other than a merger which
does not result in a reclassification, conversion, exchange or cancellation
of outstanding shares of Common Stock of the Corporation) or any sale or
transfer of all or substantially all of the assets of the Corporation or
any compulsory share exchange) pursuant to which all Common Stock is
converted into the right to receive other securities, cash or other
property.
(j) "Holder" means a record holder of shares of Series C Preferred
------
Stock.
(k) "Independent Director" means a director of the Corporation who
-------------------
(apart from such directorship) (i) is not a current or former officer or
employee of the Corporation or any Affiliate of the Corporation, (ii) is
not a current or former director, officer or employee of any Holder or any
Affiliate of such Holder, (iii) did not in either of the last two completed
calendar years receive, and is not an officer, director, employee,
stockholder holding more than 10% of the voting interest of, partner or
Affiliate of any entity that in either of such entity's two most recent
fiscal years received, more than 10% of such person or entity's total
income from. either the Corporation or the party designating such director
for election to the Board.
(l) "Initial Dividend Period" means the dividend period commencing
-----------------------
on the Original Issue Date and ending on the second Dividend Payment Date
to occur thereafter.
(m) "Initial Holder" means each person listed on Exhibit A hereto.
--------------
(n) "Junior Stock" has the meaning set forth in Article IV,
------------
Section D(2).
-74-
<PAGE>
(o) "Liquidation Preference" means, initially, $3.50 per share of
----------------------
Series C Preferred Stock subject to increase as provided under Article IV,
Section D(3)(e) hereof and, thereafter if so increased, means the
Liquidation Preference as so increased.
(p) "Original Issue Date" means the date upon which the Series C
----------------
Preferred Stock is originally issued by the Corporation.
(q) "Parity Stock" means any class or series of stock, the terms of
------------
which provide that it is entitled to participate pari passu with the Series
C Preferred Stock with respect to any dividend or distribution or upon
liquidation, dissolution or winding-up of the Corporation.
(r) "Proposed Share" shall have the meaning specified in Section
--------------
8(a).
(s) "Proposed Transferee" shall have the meaning specified in Article
-------------------
IV, Section D(8)(b)(iv).
(t) "Quarterly Dividend Period" means the quarterly period commencing
-------------------------
on each March 31, June 30, September 30 and December 31 and ending on
each Dividend Payment Date, respectively.
(u) "Redemption Date" has the meaning set forth in Article IV,
---------------
Section D(5).
(y) "Reference Date" means, with respect to any dividend or other
--------------
distribution, the Trading Day prior to the date on which the Common Stock
first trades in its principal market with a Closing Price that reflects the
absence of a right to receive such dividend or other distribution.
(w) "Senior Stock" means any class or series of stock, including the
------------
Series A Preferred Stock and the Series B Preferred Stock, the terms of
which provide that it is entitled to a preference to the Series C Preferred
Stock with respect to any dividend or distribution or upon voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation.
(x) "Series C Preferred Stock Certificate" has the meaning set forth
------------------------------------
in Article IV, Section D(6)(b).
(y) "Tag-along Notice" shall have the meaning specified in Article
----------------
IV, Section D(8)(a).
(z) "Tag-along Parties" shall have the meaning specified in Article
-----------------
IV, Section D(8)(a).
-75-
<PAGE>
(aa) "Tag-along Price" shall have the meaning specified in Article IV,
---------------
Section D(8)(a).
(bb) "Tag-along Proposing Party" shall have the meaning specified in
------------------------
Article IV, Section D(8)(a).
(cc) "Tag-along Seller" shall have the meaning specified in Article
----------------
IV, Section 13 (8)(b)(iii).
(dd) "Tag-along Shares" shall have the meaning specified in Article
----------------
IV, Section D(8)(b)(i).
(ee) "Tag-along Terms" shall have the meaning specified in Article IV,
---------------
Section D(8)(a).
V
By the affirmative vote or concurrence of the holders of a majority of
the outstanding shares of the Corporation, or any class or series thereof, the
stockholders may take any action that, but for this Article, would require a
two-thirds affirmative vote or concurrence of the holders of the outstanding
shares, or of any class or series thereof under the DGCL, subject to the rights
of the Preferred Stock set forth herein.
VI
1. All corporate powers shall be exercised by or under the authority
of, and the business and affairs of the Corporation shall be managed by or under
the direction of, a Board of Directors, consisting of not less than three, the
exact number to be determined from time to time by resolution of the Board of
Directors adopted by a majority of the directors then in office.
2. The number of directors may be increased or decreased from time
to time in the manner provided in the bylaws of the Corporation, but no decrease
shall have the effect of shortening the term of any incumbent director.
VII
The principal office of the Corporation is 1900 Pike Road, Longmont,
Colorado 80501-6700.
VIII
No contract or any other transaction between the Corporation and one
or more of its directors or any other corporation, partnership, joint venture,
-76-
<PAGE>
trust, association, other entity, or employee benefit plan in which one or more
of the Corporation's directors or officers are directors or officers or are in
any similar managerial or fiduciary position or are financially interested shall
be either void or voidable solely because of such relationship or interest or
solely because such directors or officers are present at the meeting of the
board of directors or a committee thereof which authorizes, approves, or
ratifies such contract or transaction or solely because their votes are counted
for such purpose, so long as such contract or transaction satisfies the
requirements set forth in Section 144 of the DGCL, as the same may be amended
and supplemented.
IX
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended.
Any repeal or modification of the foregoing paragraph shall not
adversely affect any right or protection of a director of the Corporation
existing hereunder with respect to any act or omission occurring prior to such
repeal or modification.
X
Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
----------
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the General Corporation Law
of the State of Delaware, as the same exists or may hereafter be amended (but,
in the case of any such amendment, to the fullest extent permitted by law, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys, fees, judgments, fines, amounts paid or to be paid in settlement, and
excise taxes or penalties arising under the Employee Retirement Income Security
Act of 1974) reasonably incurred or suffered by such person in
-77-
<PAGE>
connection therewith and such indemnification shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
-------- -------
that, except as provided in paragraph (b) hereof, the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board. The right to indemnification
conferred in this Section shall be a contract right and shall include the right
to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if the
-------- -------
General Corporation Law of the State of Delaware requires, the payment of such
expenses incurred by a director or officer in his or her capacity as a director
or officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of the Board, provide indemnification to employees
and agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
If a claim under paragraph (a) of this Section is not paid in full by
the Corporation within thirty days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the General
Corporation Law of the State of Delaware for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the Corporation (including its Board, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
-78-
<PAGE>
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-law, agreement, vote of stockholders or disinterested
directors or otherwise.
The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the General Corporation Law of the State of Delaware.
XI
Subject to the rights of the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock, the Corporation reserves the
right to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon the stockholders herein are granted
subject to this right.
XII
As used in this Amended and Restated Certificate of Incorporation of
the Company, the following terms shall have the following meanings (with terms
defined in the singular having comparable meanings when used in the plural and
vice versa), unless the context otherwise requires:
(a) "Affiliate" of any specified person means any other person which,
---------
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified person. For the purposes of
this definition, "control" when used with respect to any person means the
-------
power to direct or cause the direction of the management or policies of
such person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise, and the terms "controlling"
-----------
and "controlled" have meanings correlative to the foregoing.
----------
(b) "Board" means the Board of Directors of the Corporation.
-----
(c) "Business Day" means a day that is not a Saturday, a Sunday or a
------------
day on which banking institutions in the State of New York are not required
to be open. Unless specifically stated as a Business Day, all days referred
to herein shall mean calendar days.
-79-
<PAGE>
(d) "Capital Stock" means, with respect to any person, any and all
-------------
shares, partnership interests, participations, rights in, or other
equivalents (however designated and whether voting or nonvoting) of, such
person's capital stock.
(e) "CapRe" means American High-Income Trust, a Massachusetts
-----
business trust, American Variable Insurance Series Asset Allocation Fund, a
Massachusetts business trust, American Variable Insurance Series Bond Fund,
a Massachusetts business trust, American Variable Insurance Series High-
Yield Bond Fund, a Massachusetts business trust, and Bond Fund of America,
Inc., a Maryland corporation, collectively.
(f) "Closing Date" shall have the meaning set forth in the Recap
------------
Agreement.
(g) "Closing Price" of any common stock on any day shall mean the
-------------
last reported sale price regular way on such day or, in case no such sale
takes place on such day, the average of the reported closing bid and asked
prices regular way of the common stock in each case on the New York Stock
Exchange, or, if the common stock is not listed or admitted to trading on
such Exchange, on the principal national securities exchange or quotation
system on which the common stock is listed or admitted to trading or
quoted, or, if not listed or admitted to trading or quoted on any national
securities exchange or quotation system, the average of the closing bid and
asked prices of the common stock in the over-the-counter market on the day
in question as reported by the National Quotation Bureau Incorporated, or a
similarly generally accepted reporting service, or, if not so available in
such manner, as furnished by any New York Stock Exchange member firm
selected from time to time by the Board for that purpose, or, if not so
available in such manner, as determined by the Board for that purpose in
good faith, whose determination shall be conclusive.
(h) "Common Stock" means the Common Stock, par value $.001 per share,
------------
of the Corporation.
(i) "Corporation" has the meaning set forth in the first paragraph
-----------
hereto.
(j) "DGCL" means the Delaware General Corporation Law.
----
(k) "Director" means a member of the Board.
--------
(l) "Existing Stock Option Plan" shall have the meaning specified in
--------------------------
the Recap Agreement.
-80-
<PAGE>
(m) "FCC Approval" means a determination of the Federal
------------
Communications Commission approving of or consenting to the transfer of
control of the Company to the extent required under the terms of, or rules
and regulations governing, the FCC Licenses, without any condition
materially adverse to any of the Company, MS, CapRe and ITT.
(n) "FCC Licenses" means the following three licenses held by the
------------
Company: Earth Station, Longmont, Colorado (No. E950498); Earth Station
Fairbanks, Alaska (No. E950499); and Sparce Station 21/22-DSSP-93; 43-DSS-
LA-94(2); and 52-SAT-AMEND-95, authorized August 1, 1995.
(o) "Fully-Diluted Shares" means the number of shares of Common Stock
--------------------
issued and outstanding assuming the exercise of all outstanding options,
warrants and rights to acquire, and the conversion of any securities
convertible into, shares of Common Stock, whether or not then vested or
exercisable. When calculating the percentage of the Fully-Diluted Shares
owned by a specified person, such person shall be deemed to own all shares
of Common Stock beneficially owned by such person assuming the exercise of
all outstanding options, warrants and rights to acquire, and the conversion
of any securities convertible into, shares of Common Stock, whether or not
then vested or exercisable.
(p) "High Yield Financing" means the issuance of high-yield
--------------------
securities yielding net proceeds to the Corporation (after the setting aside
of cash to preferred interest and the payment of fees, expenses and other
costs associated with such issuance) of up to $125,000,000, such securities
to be secured by the Satellite Insurance, the terms and conditions of which
insurance are summarized in Exhibit 5.5 to the Recap Agreement, for the
purpose of funding the Corporation's operations through successful launch
and commercially viable operation of each of QuickBird 1 and QuickBird 2, or
any successor to such satellite.
(q) "Initial Public Offering" means the consummation of the first
-----------------------
sale of shares of Common Stock for cash by the Company or by one or more
stockholders, in an underwritten public offering registered under the
Securities Act following the date hereof.
(r) "ITT" means ITT Industries, Inc., an Indiana corporation.
---
(s) "MS" means Morgan Stanley & Co., Incorporated, a Delaware
--
corporation.
(t) "New Equity Plan" shall have the meaning specified in the Recap
------------
Agreement.
-81-
<PAGE>
(u) "Odetics Warrant" shall have the meaning specified in the Recap
---------------
Agreement.
(v) "Permitted Transferee" has the meaning set forth in the
--------------------
Stockholders' Agreement.
(w) "person" means any individual, corporation, limited liability
-----
corporation, partnership, joint venture, association, business trust, joint-
stock corporation, trust, unincorporated organization or government or agency or
political subdivision thereof.
(x) "Preferred Stock" means shares of the Series A Preferred Stock,
---------------
the Series B Preferred Stock and/or the Series C Preferred Stock.
(y) "Recap Agreement" means that certain Recapitalization Agreement,
---------------
dated as of April 5, 1999, by and among the Corporation, MS, CapRe, ITT and
certain others, setting forth the terms and conditions of a proposed investment
by each of MS, CapRe, ITT and certain others in shares of common stock and
preferred stock of the Corporation in connection with the proposed
recapitalization of the Corporation.
(z) "Satellite Insurance" has the meaning set forth in Article I of
-------------------
the Recap Agreement.
(aa) "Securities Act" means the Securities Act of 1933, as amended.
--------------
(bb) "Series A Preferred Stock" has the meaning set forth in Article
------------------------
IV, Section B(l).
(cc) "Series B Preferred Stock" has the meaning set forth in Article
------------------------
IV, Section C(l).
(dd) "Series C Preferred Stock" has the meaning set forth in Article
------------------------
IV, Section D(I).
(ee) "Stock Exchange" with respect to shares of capital stock, shall
--------------
mean the principal national securities exchange or quotation system on which
such evidences of indebtedness or shares of capital stock are listed or admitted
to trading or quoted.
(ff) "Stockholders' Agreement" means that certain Stockholders'
-----------------------
Agreement, dated as of April 5, 1999, by and among the Corporation, MS, CapRe,
ITT and certain others.
-82-
<PAGE>
(gg) "Subsidiary" of any person means another person, an amount of
----------
the voting securities, other voting ownership or voting partnership or
membership interests of which is sufficient to elect at least a majority of its
board of directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned or controlled
directly or indirectly by such person.
(hh) "Trading Day" means a day on which securities are traded or
-----------
quoted on the national securities exchange or quotation system or in the over-
the-counter market used to determine the Closing Price.
(ii) "Waterstone Agreement" shall have the meaning specified in the
--------------------
Recap Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-83-
<PAGE>
In Witness Whereof, the party hereto has fully executed this
Certificate as of the date first written below.
Dated: April 7, 1999
EarthWatch Incorporated
By: /s/ Herbert F. Satterlee, III
-------------------------------
Name: Herbert F. Satterlee, III
Title: President and Chief
Executive Officer
[SIGNATURE PAGE TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION]
<PAGE>
CERTIFICATE OF CORRECTION FILED TO CORRECT
A CERTAIN ERROR IN THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF EARTHWATCH
INCORPORATED FILED IN THE OFFICE
OF THE SECRETARY OF STATE OF
DELAWARE ON APRIL 8, 1999.
EarthWatch Incorporated, a Delaware corporation (the "Company"), certifies
pursuant to Section 103(f) of the General Corporation Law of the State of
Delaware that:
1 The name of the corporation is EarthWatch Incorporated.
2. The Company filed on April 8, 1999, an Amended and Restated Certificate of
Incorporation of EarthWatch Incorporated (the "Restated Certificate").
3. The inaccuracy or defect of the Restated Certificate is to be corrected as
follows: the reclassification ratios for the Company's Common Stock, Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock are incorrect.
4. The first paragraph of Article IV, Section 1 of the Restated Certificate is
corrected to read as follows:
"1. The Corporation is authorized to issue a total of One Hundred
Forty-five Million (145,000,000) shares, which shall consist of (i) One
Hundred Million (100,000,000) shares of common stock, par value of $0.001
per share ("Common Stock"), and (ii) Forty-five Million (45,000,000)
shares of preferred stock, with a par value of $0.001 per share. Effective
as of the time this Amended and Restated Certificate of Incorporation the
(the "Restated Certificate") is filed with the Secretary of State of the
State of Delaware (the "Effective Time"), each share of the Corporation's
Common Stock, par value $0.001, issued and outstanding immediately prior to
the Effective Time shall automatically and without any action on the part
of the respective holders thereof, be reclassified into .210202 shares of
8.5% Cumulative Convertible Redeemable Preferred Stock Due 2009, Series C,
par value $0.001, as described herein (the "Series C Preferred Stock");
each share of the Corporation's Series A Preferred Stock, par value $0.001,
issued and outstanding immediately prior to the Effective Time shall
automatically and without any action on the part of the respective holders
thereof, be reclassified into .441160 shares of Series C Preferred Stock;
each share of the Corporation's Series B Preferred Stock, par value $0.001.
issued and outstanding immediately prior to the Effective Time shall
automatically and without any action on the part of the respective holders
thereof, be reclassified into .441160 shares of Series C Preferred Stock;
each share of the Corporation's Series C Preferred Stock par value $0.001,
issued and outstanding immediately prior to the Effective Time shall
automatically and without any action on the part of the respective holders
thereof, be reclassified into .441160 shares of Series C Preferred Stock;
and each share of the Corporation's Series D Preferred stock,
<PAGE>
par value $0.001, issued and outstanding immediately prior to the
Effective Time shall automatically and without any action on the part
of the respective holders thereof, be converted into .441160 shares of
Series C Preferred Stock; provided, however, the Corporation shall issue no
fractional shares of such Series C Preferred Stock, but shall instead pay
to any stockholder who would be entitled to receive a fractional share as a
result of the actions set forth herein a sum in cash equal to the fair
market value of such fractional share."
All other terms and provisions of the Restated Certificate shall remain in
full force and effect following such amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2.
<PAGE>
IN WITNESS WHEREOF, said EarthWatch Incorporated has caused this
Certificate to be signed by Herbert F. Satterlee III, its Chief Executive
Officer and President, this 12th day of July, 1999.
By: /s/ Herbert F. Satterlee III
--------------------------------------
Herbert F. Satterlee III, Chief Executive
Officer and President
