Certificate of Incorporation

SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
THE DERBY CYCLE CORPORATION
_______________________________
ARTICLE ONE


The name of the Corporation is The Derby Cycle Corporation.


ARTICLE TWO


The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of its registered agent at such address is the Corporation Trust Company.


ARTICLE THREE


The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.


ARTICLE FOUR


Part A. Authorized Shares


The total number of shares of capital stock which the Corporation has authority to issue is [ ] shares, consisting of:


(i) 25,000 shares of Preferred Stock, Series A, par value $.01
per share ("Series A Preferred Stock");


(ii) 3,000 shares of Preferred Stock, Series B, par value $.01
per share ("Series B Preferred Stock");


(iii) 100 shares of Preferred Stock, Series C-1, par value $.01
per share ("Series C-1 Preferred Stock");


(iv) 52,180 shares of Preferred Stock, Series D, par value $.01
per share ("Series D Preferred Stock");


(v) 7,500 shares of Preferred Stock, Series D-1, par value $.01
per share ("Series D-1 Preferred Stock");


(vi) 200,000 shares of Class A Common Stock, par value $.01 per
share ("Class A Common Stock");


(vii) 15,000 shares of Class B Common Stock, par value $.01 per
share ("Class B Common Stock");


(viii) 30,000 shares of Class C Common Stock, par value $.01 per
share ("Class C Common Stock"; and together with the Class A
Common Stock and the Class B Common Stock, the "Common Stock").


1


The Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series D-1 Preferred Stock are referred to collectively as the "Preferred Stock." The Preferred Stock and the Common Stock are referred to collectively as the "Shares." The Preferred Stock shall have the rights, preferences and limitations set forth in Part B. The Common Stock shall have the rights, preferences and limitations set forth in Part C. The Shares shall have the Distribution rights and be subject to the general terms set forth in Part D. Capitalized terms used but not otherwise defined in Part A, Part B, Part C or Part D of this ARTICLE FOUR are defined in Part E of this ARTICLE FOUR.


Part B. Preferred Stock


Section 1. Dividends.


1A. When and as declared by the Corporation's Board of Directors and to the extent permitted under the General Corporation Law, the Corporation shall pay preferential dividends in cash to the holders of Preferred Stock as provided in this Section 1 and Part D of this ARTICLE FOUR.


Series A Preferred Stock. Dividends on each share of the Series A
------------------------ Preferred Stock (a "Series A Preferred Share") shall accrue on a daily basis at the rate of twenty percent (20%) per annum of the sum of the Liquidation Amount thereof plus all accumulated and unpaid dividends thereon from and including the date of issuance of such Series A Preferred Share to and including the first to occur of (i) the date on which the Liquidation Amount of such Series A Preferred Share (plus all accrued and accumulated but unpaid dividends thereon) is paid to the holder thereof, (ii) the date on which such Series A Preferred Share is converted to Class A Common Stock as set forth herein or (iii) the date on which such Series A Preferred Share is otherwise acquired by the Corporation.


Series B Preferred Stock. Dividends on each share of the Series B
------------------------ Preferred Stock (a "Series B Preferred Share") shall accrue on a daily basis at the rate of nine and three-quarters percent (9.75%) per annum of the sum of the Liquidation Amount thereof plus all accumulated and unpaid dividends thereon from and including the date of issuance of such Series B Preferred Share to and including the first to occur of (i) the date on which the Liquidation Amount of such Series B Preferred Share (plus all accrued and accumulated but unpaid dividends thereon) is paid to the holder thereof, (ii) the date on which such Series B Preferred Share is redeemed as set forth herein or (iii) the date on which such Series B Preferred Share is otherwise acquired by the Corporation.


Series C Preferred Stock. Dividends on each share of the Series C
------------------------ Preferred Stock (a "Series C Preferred Share") shall accrue at the rate of nineteen percent (19%) per annum, compounded daily, for an annual effective yield of twenty and nine-tenths percent (20.9%) on the sum of the Liquidation Amount thereof plus all accumulated and unpaid dividends thereon from and including the date of issuance of such Series C Preferred Share to and including the first to occur of (i) the date on which the Liquidation Amount of such Series C Preferred Share (plus all accrued and accumulated but unpaid dividends thereon) is paid to the holder thereof, or (ii) the date on which such Series C Preferred Share is otherwise acquired by the Corporation. Dividends on each Series C Preferred Share outstanding from time to time shall be computed on the basis of a 360-day year, actual days elapsed from the date of issuance of such Series C Preferred Share.


Series D Preferred Stock. Dividends on each share of the Series D
------------------------ Preferred Stock (a "Series D Preferred Share") shall accrue on a compounded daily basis at the rate of thirty percent (30%) per annum of the sum of the Liquidation Amount plus accumulated and unpaid dividends thereon from and including the date of issuance of such Series D Preferred Share to and including the first to occur of (i) the date on which the Liquidation Amount of such Series D Preferred Share (plus all accrued and accumulated but unpaid dividends thereon) is paid to the holder thereof or (ii) the date on which such Series D Preferred Share is otherwise acquired by the Corporation.


Series D-1 Preferred Stock. Dividends on each share of the Series D-1
-------------------------- Preferred Stock (a "Series D-1 Preferred Share") shall accrue at the rate of nineteen percent (19%) per annum, compounded daily, for an annual effective yield of twenty and nine-tenths percent (20.9%) on the sum of the Liquidation Amount thereof plus all accumulated and unpaid dividends thereon from and including the date of issuance of such Series D-1


2


Preferred Share to and including the first to occur of (i) the date on which the Liquidation Amount of such Series D-1 Preferred Share (plus all accrued and accumulated but unpaid dividends thereon) is paid to the holder thereof, or (ii) the date on which such Series D-1 Preferred Share is otherwise acquired by the Corporation. Dividends on each Series D-1 Preferred Share outstanding from time to time shall be computed on the basis of a 360-day year, actual days elapsed from the date of issuance of such Series D-1 Preferred Share.


Such dividends shall accrue whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. The date on which the Corporation initially issues any Preferred Share (as defined below) shall be deemed to be its "date of issuance" regardless of the number of times transfer of such Preferred Share is made on the stock records maintained by or for the Corporation and regardless of the number of certificates which may be issued to evidence such Preferred Share. The Series A Preferred Shares, the Series B Preferred Shares, the Series C Preferred Shares, the Series D Preferred Shares and the Series D-1 Preferred Shares are referred to collectively as the "Preferred Shares."


1B. Dividend Reference Dates. To the extent not paid on December 31 of each year, beginning December 31, 1998 (the "Preferred Dividend Reference Dates"), all dividends which have accrued on each Preferred Share outstanding during the twelve-month period (or other period in the case of the initial Preferred Dividend Reference Date) ending upon each such Preferred Dividend Reference Date shall be accumulated and shall remain accumulated dividends with respect to such Preferred Share until paid to the holder thereof.


Section 2. Priority of Preferred Stock on Dividends and Redemptions.


2A. Series C Preferred Shares. So long as any accrued but unpaid dividends on the Series C Preferred Shares remain outstanding, without the prior written consent of the holders of a majority of the outstanding Series C Preferred Shares, the Corporation shall not, nor shall it permit any Subsidiary to, (i) redeem, purchase or otherwise acquire directly or indirectly any Junior A Securities, nor shall the Corporation directly or indirectly pay or declare any dividend or make any distribution upon any Junior A Securities (including any redemptions, purchases or acquisitions pursuant to Section 8 of Part C hereof) or (ii) issue any equity security with rights equal or superior to the rights of the Series C Preferred Shares.


2B. Series D Preferred Shares. So long as any accrued but unpaid dividends on the Series D Preferred Shares and the Series D-1 Preferred Shares remain outstanding, without the prior written consent of the holders of a majority of the outstanding Series D Preferred Shares (which for the avoidance of doubt, shall not include the holders of Series D-1 Preferred Shares), the Corporation shall not, nor shall it permit any Subsidiary to, (i) redeem, purchase, retire or otherwise acquire directly or indirectly any Junior C Securities, nor shall the Corporation directly or indirectly pay or declare any dividend or make any distribution upon any Junior C Securities (including any redemptions, purchases or acquisitions pursuant to Section 8 of Part C hereof) or (ii) issue any equity security with rights equal or superior to the rights of the Series D Preferred Shares or the Series D-1 Preferred Shares. The Series D Preferred Shares and the Series D-1 Preferred Shares are pari passu in all respects.


2C. Series A Preferred Shares and Series B Preferred Shares. So long as any accrued but unpaid dividends on the Series A Preferred Shares or the Series B Preferred Shares remains outstanding, without the prior written consent of (a) the holders of a majority of the outstanding Series A Preferred Shares and (b) the holders of a majority of the outstanding Series B Preferred Shares, the Corporation shall not, nor shall it permit any Subsidiary to, redeem, purchase or otherwise acquire directly or indirectly any Junior B Securities, nor shall the Corporation directly or indirectly pay or declare any dividend or make any distribution upon any Junior B Securities.


Section 3. Voting Rights. (a) The holders of Series A Preferred Stock shall be entitled to notice of all stockholders meetings in accordance with the Corporation's bylaws, and except as otherwise provided by law or as provided herein, the holders of the Series A Preferred Stock shall be entitled to vote on all matters submitted to the stockholders for a vote together with the holders of the Class A Common Stock voting together as a single class with each share of Class A Common Stock entitled to one vote per share and each Series A Preferred Share entitled to 1.5 votes per share. Except as otherwise provided by law or as provided herein or in the Shareholders'


3


Agreement, the holders of Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Series D-1 Preferred Stock shall not be entitled to voting rights.


(b) Class Voting. The holders of Series D-1 Preferred Stock shall not be entitled to vote as a class with the holders of Series D Preferred Stock.


Section 4. Conversion.


4A. At any time in connection with an Initial Public Offering, all outstanding Series A Preferred Shares shall be converted automatically into shares of Class A Common Stock or, if the outstanding shares of Class A Common Stock are converted into another equity security of the Corporation in connection with such Initial Public Offering (the "IPO Stock"), into shares of such IPO Stock as follows: each Series A Preferred Share shall be converted into (i) one-half share of Class A Common Stock (or such number of shares of the IPO Stock into which one-half share of Class A Common Stock is converted) plus (ii) such number of shares of Class A Common Stock or IPO Stock (as applicable) having a Fair Market Value (as of the effective date of the Initial Public Offering with respect to which such conversion occurs) equal to the Liquidation Amount (plus all accrued and accumulated but unpaid dividends thereon) of such Series A Preferred Share.


4B. At any time in connection with a transfer of Shares pursuant to Section 10(a) of the Shareholders' Agreement or an Approved Sale, each holder of Series A Preferred Stock may convert all or any portion of such Series A Preferred Shares into shares of Class A Common Stock as follows: each Series A Preferred Share shall be convertible into (i) one-half share of Class A Common Stock plus (ii) such number of shares of Class A Common Stock having a Fair Market Value (as of the close of business on the day on which such conversion is to occur) equal to the Liquidation Amount (plus all accrued and accumulated but unpaid dividends thereon) of such Series A Preferred Share.


4C. At any time in connection with a transfer of Shares pursuant to Section 10(a) of the Shareholders' Agreement or an Approved Sale, each holder of Series B Preferred Stock may convert all or any portion of such Series B Preferred Shares which are to be sold under Section 10(a) of the Shareholders' Agreement or an Approved Sale into shares of Class A Common Stock as follows: each Series B Preferred Share shall be convertible into such number of shares of Class A Common Stock having a Fair Market Value (as of the close of business on the day on which such conversion is to occur) equal to the Liquidation Amount (plus all accrued and accumulated but unpaid dividends thereon) of such Series B Preferred Share.


4D. Except as otherwise provided herein, each conversion of Preferred Stock pursuant to this Section 4 or Section 5A below shall be deemed to have been effected as of the close of business on the date on which the certificate or certificates representing the Preferred Stock to be converted have been surrendered for conversion at the principal office of the Corporation. At the time any such conversion has been effected, the rights of the holder of the Preferred Stock converted as a holder of such Preferred Stock shall cease and if applicable, the Person or Persons in whose name or names any certificate or certificates for shares of Class A Common Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Class A Common Stock represented thereby.


4E. As soon as possible after a conversion pursuant to this Section 4 or Section 5A below has been effected (but in any event within five business days), the Corporation shall deliver to the converting holder:


(a) a certificate or certificates representing the number of shares of Class A Common Stock issuable by reason of such conversion in such name or names and such denomination or denominations as the converting holder has specified; and


(b) a certificate representing any Preferred Shares which were represented by the certificate or certificates delivered to the Corporation in connection with such conversion but which were not converted.


4


4F. The issuance of certificates for shares of Class A Common Stock or Class B Common Stock upon conversion of Preferred Stock pursuant to this Section 4 or Section 5A below or pursuant to the Exchange Agreements, respectively, shall be made without charge to the holders of such Preferred Stock for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of shares of Class A Common Stock or Class B Common Stock. Upon conversion of each share of Preferred Stock pursuant to this Section 4 or Section 5A below or upon exercise of rights set forth in the Exchange Agreements, the Corporation shall take all such actions as are necessary in order to insure that the Class A Common Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable, free and clear of all taxes, liens, charges and encumbrances with respect to the issuance thereof.


4G. The Corporation shall assist and cooperate with any holder of Shares required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of Preferred Shares hereunder (including, without limitation, making any filings required to be made by the Corporation).


4H. The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of issuance upon the conversion of the Preferred Stock pursuant to this Section 4 or Section 5A below, such number of shares of Class A Common Stock issuable upon the conversion of all outstanding Preferred Shares. All shares of Class A Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall take all such actions as may be necessary to assure that all such shares of Class A Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Class A Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance). The Corporation shall not take any action which would cause the number of authorized but unissued shares of Class A Common Stock to be less than the number of such shares required to be reserved hereunder for issuance upon conversion of the Preferred Stock pursuant to this Section 4 and Section 5A below.


Section 5. Put Rights.


5A. Subject to Sections 2A and 2B of this Part B, (i) upon a proposed Sale of the Corporation or (ii) at any time after the tenth anniversary of the Closing Date, each holder of Series A Preferred Stock (the "Series A Offering Holder") shall have the right to require the Corporation to repurchase (the "Series A Put") all or any portion of the Series A Preferred Shares held by such holder at a price per Series A Preferred Share equal to the Series A Put Price by delivering a written notice to the Corporation at the Corporation's principal place of business or at such other address as the Corporation may, by written notice to all holders of Preferred Stock, designate, specifying the number of Series A Preferred Shares that such holder desires that the Corporation repurchase (the "Series A Put Notice"). A Series A Put Notice relating to a proposed Sale of the Corporation must be delivered not later than 10 days after the date on which the Corporation notifies a Series A Offering Holder of a proposed Sale of the Corporation. The "Series A Put Price" shall mean (x) an amount of cash equal to the Liquidation Amount (plus all accrued and accumulated but unpaid dividends thereon through the date of the Put Closing) of each Series A Preferred Share specified by a Series A Offering Holder in its Series A Put Notice plus (y) one-half share of Class A Common Stock.


5B. Subject to Sections 2A and 2B of Part B, (i) upon a proposed Sale of the Corporation or (ii) at any time after the fourth anniversary of the Closing Date, each holder of Series B Preferred Stock (the "Series B Offering Holder") shall have the right to require the Corporation to repurchase (the "Series B Put") all or any portion of the Series B Preferred Shares held by such holder for cash at a price per Series B Preferred Share equal to the Liquidation Amount (plus all accrued and accumulated but unpaid dividends thereon through the date of the Put Closing) of each Series B Preferred Share specified by such Series B Offering Holder (the "Series B Put Price") to be repurchased by the Corporation in a written notice delivered to the Corporation at the Corporation's principal place of business or at such other address as the Corporation may, by written notice to all holders of Preferred Stock,


5


designate, specifying the number of Series B Preferred Shares that such holder desires that the Corporation repurchase (the "Series B Put Notice"). A Series B Put Notice relating to a proposed Sale of the Corporation must be delivered not later than 10 days after the date on which the Corporation notifies a Series B Offering Holder of a proposed Sale of the Corporation.


5C. Upon a proposed Change of Control each holder of Series C Preferred Stock (the "Series C Offering Holder") shall have the right to require the Corporation to repurchase (the "Series C Put") all or any portion of the Series C Preferred Shares held by such holder at a price per Series C Preferred Share equal to the Series C Put Price (as defined below) by delivering a written notice to the Corporation at the Corporation's principal place of business or at such other address as the Corporation may, by written notice to all holders of Series C Preferred Stock, designate, specifying the number of Series C Preferred Shares that such holder desires that the Corporation repurchase (the "Series C Put Notice"). A Series C Put Notice relating to a proposed Change of Control must be delivered not later than 15 days after the date on which the Corporation notifies a Series C Offering Holder of a proposed Change of Control. The "Series C Put Price" shall mean (i) with respect to any Series C Put occurring on or before February 3, 2003, an amount of cash equal to one hundred and one percent (101%) of the Liquidation Amount (plus all accrued and accumulated but unpaid dividends thereon through the date of the Put Closing) of each Series C Preferred Share specified by a Series C Offering Holder in its Series C Put Notice and (ii) with respect to any Series C Put occurring after February 3, 2003, an amount of cash equal to the Liquidation Amount (plus all accrued and accumulated but unpaid dividends thereon through the date of the Put Closing) of each Series C Preferred Share specified by a Series C Offering Holder in its Series C Put Notice.


5D. Upon a proposed Change of Control each holder of Series D Preferred Stock or Series D-1 Preferred Stock (the "Series D Offering Holder" and the "Series D-1 Offering Holder", respectively) shall have the right to require the Corporation to repurchase (the "Series D Put" ) or the "Series D-1 Put", as applicable) all or any portion of the Series D Preferred Shares or Series D-1 Preferred Shares held by such holder at a price per Series D Preferred Share or Series D-1 Preferred Share equal to the Series D Put Price or Series D-1 Put Price(as defined below) by delivering a written notice to the Corporation at the Corporation's principal place of business or at such other address as the Corporation may, by written notice to all holders of Series D Preferred Stock or Series D-1 Preferred Stock, as applicable, designate, specifying the number of Series D Preferred Shares or Series D-1 Preferred Shares that such holder desires that the Corporation repurchase (the "Series D Put Notice," " and the "Series D-1 Put Notice", respectively, and together with the Series A Put Notice, the Series B Put Notice and the Series C Put Notices, collectively the "Put Notices" and each a "Put Notice"); provided that (i) no advance or other amount remains outstanding under the Corporation's Amended and Restated Credit Facility whether or not due or payable or any commitment is in force in relation to the Amended and Restated Credit Facility and (ii) such redemption is permitted under the GSIC Loan Agreement and the Senior Notes. A Series D Put Notice or Series D-1 Put Notice relating to a proposed Change of Control must be delivered not later than 15 days after the date on which the Corporation notifies a Series D Offering Holder or Series D-1 Offering Holder of a proposed Change of Control. The "Series D Put Price" shall mean (i) with respect to any Series D Put occurring on or before November 10, 2005, an amount of cash equal to one hundred and one percent (101%) of the Liquidation Amount (plus all accrued and accumulated but unpaid dividends thereon through the date of the Put Closing) of each Series D Preferred Share specified by a Series D Offering Holder in its Series D Put Notice and (ii) with respect to any Series D Put occurring after November 10, 2005, an amount of cash equal to the Liquidation Amount (plus all accrued and accumulated but unpaid dividends thereon through the date of the Put Closing) of each Series D Preferred Share specified by a Series D Offering Holder in its Series D Put Notice. The "Series D-1 Put Price" shall mean (i) with respect to any Series D-1 Put occurring on or before November 10, 2005, an amount of cash equal to one hundred and one percent (101%) of the Liquidation Amount (plus all accrued and accumulated but unpaid dividends thereon through the date of the Put Closing) of each Series D-1 Preferred Share specified by a Series D-1 Offering Holder in its Series D-1 Put Notice and (ii) with respect to any Series D-1 Put occurring after November 10, 2005, an amount of cash equal to the Liquidation Amount (plus all accrued and accumulated but unpaid dividends thereon through the date of the Put Closing) of each Series D-1 Preferred Share specified by a Series D-1 Offering Holder in its Series D-1 Put Notice. A Series A Offering Holder, a Series B Offering Holder, Series C Offering Holder, a Series D Offering Holder and a Series D-1 Offering Holder shall be referred to herein as an "Offering Holder."


6


5E. The Corporation shall purchase, and the Offering Holder shall sell, the number of Preferred Shares specified in the applicable Put Notice, at a mutually agreeable place (the "Put Closing") (i) on a date that is not later than thirty days after the delivery of the applicable Put Notice, in the case of the exercise of a put right pursuant to Section 5A(ii) or 5B(ii), (ii) immediately prior to the consummation of the Sale of the Corporation in the case of the exercise of a put right pursuant to Section 5A(i) or 5B(i) or (iii) on the repurchase date specified in the Change of Control Offer delivered to the holders of the Senior Notes pursuant to Section 4.08 of the Indentures in the case of the exercise of a put right pursuant to Section 5C or Section 5D; provided, however, the Corporation shall not be obligated to purchase any Preferred Shares upon exercise of the rights specified in Sections 5A(i), 5B(i), 5C and 5D if the related proposed Sale of the Corporation or Change of Control, as the case may be, is not consummated; and provided further that if, other than in connection with a Sale of the Corporation or Change of Control, as the case may be, the Corporation is prohibited by law from repurchasing any Preferred Shares or if any such repurchase would result in a default under any Financing Documents, then the Corporation may defer such repurchase until such prohibitions no longer exist or such default would no longer occur; and provided further that the holders of Series C Preferred Shares shall not have any rights pursuant to this Sec ...