EXHIBIT 3.1
EXECUTION COPY
RIVER HOLDING CORP.
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF 11 1/2% SENIOR
EXCHANGEABLE PIK PREFERRED STOCK DUE 2010 AND 11 1/2% SERIES B SENIOR
EXCHANGEABLE PIK PREFERRED STOCK DUE 2010 AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
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Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
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River Holding Corp. ("Holding"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
that (i) pursuant to authority conferred upon the board of directors of Holding
(the "Board of Directors") by its Certificate of Incorporation (hereinafter
referred to as the "Certificate of Incorporation"), and pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, said Board of Directors is authorized to issue Preferred Stock of
Holding in one or more series and (ii) the Board of Directors has duly approved
and adopted the following resolution on April 6, 1998 (the "Resolution"):
RESOLVED that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issuance of 11 1/2% Senior
Exchangeable PIK Preferred Stock Due 2010, par value $.01 per share,
initially consisting of up to 600,000 shares, and 11 1/2% Series B Senior
Exchangeable PIK Preferred Stock Due 2010, par value $.01 per share,
initially consisting of up to 600,000 shares (collectively, the "Holding
Preferred Stock"), having the designations, preferences, relative,
participating, optional and other special rights and the qualifications,
limitations and restrictions thereof that are set forth in the Certificate
of Incorporation and in this Resolution as follows:
(a) Designation. There is hereby created out of the authorized and
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unissued shares of Preferred Stock of Holding (i) a series of Preferred Stock
designated as the "11 1/2% Senior Exchangeable PIK Preferred Stock Due 2010"
(the
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"Initial Holding Preferred Stock") and (ii) a series of Preferred Stock
designated as the"11 1/2% Series B Senior Exchangeable Preferred Stock Due 2010"
(the "Series B Stock"). The number of shares constituting the Initial Holding
Preferred Stock shall be 600,000, and the number of shares constituting the
Series B Stock shall be 600,000 (when issued). The Initial Holding Preferred
Stock and the Series B Stock are referred to as the Holding Preferred Stock.
The liquidation preference of the Holding Preferred Stock shall be $100 per
share (the "Liquidation Preference").
(b) Ranking. The Initial Holding Preferred Stock and the Series B
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Preferred Stock will each rank on a parity with the other in all respects. The
Holding Preferred Stock will, with respect to dividend rights and rights on
liquidation, winding up and dissolution, rank (i) senior to all classes of
common stock of Holding and to each other class of Capital Stock or series of
Preferred Stock established hereafter by the Board of Directors the terms of
which do not expressly provide that it ranks senior to, or on a parity with, the
Holding Preferred Stock as to dividend rights and rights on liquidation,
winding-up and dissolution of Holding (collectively referred to, together with
all classes of common stock of Holding, as "Junior Stock") and (ii) on a parity
with each other class of Capital Stock or series of Preferred Stock established
hereafter by the Board of Directors, the terms of which expressly provide that
such class or series will rank on a parity with the Holding Preferred Stock as
to dividend rights and rights on liquidation, winding-up and dissolution
(collectively referred to as "Parity Stock").
(c) Dividends. (i) Holders of the outstanding shares of Holding
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Preferred Stock will be entitled to receive, when, as and if declared by the
Board of Directors of Holding, out of funds legally available therefor,
cumulative preferential dividends on each share of the Holding Preferred Stock
at a rate per annum equal to 11 1/2% of the Liquidation Preference of such
share, payable semi-annually in arrears (each such semi-annual period being
herein called a "Dividend Period") in the manner set forth below. In addition
to the dividends described in the preceding sentence, holders of outstanding
shares of Holding Preferred Stock will be entitled to additional dividends (the
"Additional Dividends"), when, as and if declared by the Board of Directors of
Holding, out of funds legally available therefor, with respect to the shares of
Holding Preferred Stock, which Additional Dividends shall accrue as follows if
any of the following events occur (each such event in clauses (A), (B), (C), and
(D) below being herein
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called a "Registration Default"): (A) if on or prior to June 6, 1998, neither
the Exchange Offer Registration Statement nor the Shelf Registration Statement
has been filed with the Securities and Exchange Commission (the "SEC"); (B) if
on or prior to September 5, 1998, neither the Exchange Offer Registration
Statement nor the Shelf Registration Statement has been declared effective by
the SEC; (C) if on or prior to October 5, 1998, neither the Registered Exchange
Offer has been consummated nor the Shelf Registration Statement has been
declared effective; or (D) after either the Exchange Offer Registration
Statement or the Shelf Registration Statement has been declared effective, such
Registration Statement thereafter ceases to be effective or usable (in each case
except as permitted below) in connection with resales of Holding Preferred Stock
in accordance with and during the periods specified herein.
Additional Dividends shall accrue on the shares of Holding Preferred
Stock from and including the date on which any such Registration Default shall
occur, to but excluding the date on which all such Registration Defaults have
been cured. Such Additional Dividends will accrue at a rate of 0.25% per annum
during the 90-day period immediately following the occurrence of such
Registration Default and shall increase by 0.25% per annum at the end of each
subsequent 90-day period, but in no event shall the amount of such Additional
Dividends exceed 1.00% per annum.
A Registration Default referred to in clause (C) of this paragraph
(c)(i) shall be deemed not to have occurred and be continuing in relation to a
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Registration Statement to incorporate annual audited financial
information with respect to Holding where such post-effective amendment is not
yet effective and needs to be declared effective to permit Holders to use the
related prospectus or (y) other material events with respect to Holding that
would need to be described in the Registration Statement or the related
prospectus and (ii) in the case of clause (y), Holding proceeds promptly and in
good faith to amend or supplement the Registration Statement and related
prospectus to describe such events unless Holding has determined in good faith
that there are material legal or commercial impediments in doing so; provided,
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however, that in any case if such Registration Default occurs for a continuous
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period in excess of 45 days, Additional Dividends shall be payable in accordance
with the immediately preceding paragraphs of this paragraph (c)(i) from the day
such Registration Default
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initially occurs to but excluding the date on which such Registration Default is
cured and provided, further, that not more than one Registration Default shall
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be deemed to have occurred pursuant to clause (y) of this paragraph during any
365-day period.
Any amounts of Additional Dividends due pursuant to clauses (A), (B),
(C) or (D) of this paragraph (c)(i) or pursuant to the proviso contained in the
preceding sentence will be payable on the regular dividend payment dates with
respect to the Holding Preferred Stock and on the same terms and conditions and
subject to the same limitations as pertain at such time for the payment of
regular dividends. The amount of Additional Dividends will be determined by
multiplying the applicable Additional Dividends rate by the aggregate
Liquidation Preference of the outstanding shares of Holding Preferred Stock,
multiplied by a fraction, the numerator of which is the number of days such
Additional Dividend rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months), and the denominator
of which is 360.
All dividends on the Holding Preferred Stock, including Additional
Dividends, to the extent accrued, shall be cumulative, whether or not Holding
has earnings or profits, whether or not there are funds legally available for
the payments of such dividends and whether or not dividends are declared, on a
daily basis from the Issue Date or, in the case of additional shares of Holding
Preferred Stock issued in payment of a dividend, from the date of issuance of
such additional shares of Holding Preferred Stock, and shall be payable semi-
annually in arrears on each April 15 and October 15 (each, a "Dividend Payment
Date"), commencing on October 15, 1998, to holders of record on the April 1 and
October 1 immediately preceding the relevant Dividend Payment Date. Any
dividend on the Holding Preferred Stock payable pursuant to this paragraph
(c)(i) on or prior to April 15, 2003 shall be, at the option of Holding, payable
(1) in cash or (2) through the issuance of a number of additional shares
(including fractional shares) of Holding Preferred Stock (the "Additional
Shares") equal to the dividend amount divided by the Liquidation Preference of
such Additional Shares. With respect to dividends payable after April 15, 2003,
all dividends shall be payable solely in cash.
(ii) All dividends paid with respect to shares of the Holding
Preferred Stock pursuant to this paragraph (c) shall be paid pro rata to the
Holders entitled thereto.
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(iii) No dividend whatsoever may be declared or paid upon, or any sum
set apart for the payment of dividends upon, any outstanding share of the
Holding Preferred Stock with respect to any Dividend Period unless all dividends
for all preceding Dividend Periods have been declared and paid or declared and,
if payable in cash, a sufficient sum in cash set apart for the payment of such
dividend, upon all outstanding shares of Holding Preferred Stock.
(iv) No full dividends may be declared or paid or funds set apart for
the payment of dividends by Holding on any Parity Stock for any period unless
full cumulative dividends in respect of each Dividend Period ending on or before
such period shall have been or contemporaneously are declared and paid in full
or declared and, if payable in cash, a sufficient sum in cash set apart for such
payment on the Holding Preferred Stock. If full dividends are not so paid, the
Holding Preferred Stock will share dividends pro rata with the Parity Stock.
(v) Holding will not (A) declare, pay or set apart funds for the
payment of any dividend or other distribution with respect to any Junior Stock
or (B) repurchase, redeem or otherwise retire any Junior Stock or Parity Stock,
nor may funds be set apart for payment with respect thereto, unless all accrued
and unpaid dividends with respect to the Holding Preferred Stock at the time
such dividends are payable have been paid or funds have been set apart for
payment of such dividends, if payable in cash. As used herein, the term
"dividend" does not include dividends payable solely in shares of Junior Stock
on Junior Stock.
(vi) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption or any mandatory repurchase
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 45 days prior to
the payment thereof, as may be fixed by the Board of Directors of Holding.
(vii) Dividends payable on the Holding Preferred Stock for any period
other than a Dividend Period shall be computed on the basis of a 360-day year
comprised of twelve 30-day months and the actual number of days elapsed in the
period for which payable and will be deemed to accrue on a daily basis.
Dividends payable on the Holding Preferred Stock for a full Dividend Period will
be computed by dividing the per annum dividend rate by two.
(viii) Holding shall take all actions required or permitted under
applicable law to permit the payment of
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dividends on the Holding Preferred Stock including, without limitation, through
the revaluation of its assets in accordance with the General Corporation Law of
the State of Delaware, to make or keep funds legally available for the payment
of dividends.
(d) Liquidation Preference. (i) Upon any voluntary or involuntary
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liquidation, dissolution or winding-up of Holding, each Holder of Holding
Preferred Stock will be entitled to be paid, out of the assets of Holding
available for distribution to its stockholders, an amount equal to the
Liquidation Preference per share of Holding Preferred Stock held by such Holder,
plus, without duplication, an amount in cash equal to all accumulated and unpaid
dividends (whether or not declared and including Additional Dividends, if any)
thereon to the date fixed for liquidation, dissolution or winding-up (including,
without duplication, an amount equal to a prorated dividend for the period from
the last Dividend Payment Date to the date fixed for liquidation, dissolution or
winding up that would have been payable had the Holding Preferred Stock been the
subject of an Optional Redemption on such date) before any distribution is made
on any Junior Stock, including, without limitation, common stock of Holding.
If, upon any voluntary or involuntary liquidation, dissolution or winding-up of
Holding, the amounts payable with respect to the holders of the Holding
Preferred Stock and all Parity Stock are not paid in full, the holders of the
Holding Preferred Stock and the Parity Stock will share equally and ratably (in
proportion to the full liquidation preference and accumulated and unpaid
dividends that would be payable on such shares of Holding Preferred Stock and
the Parity Stock, respectively, if all amounts payable thereon had been paid in
full) in any distribution of assets of Holding to which each is entitled. After
payment of the full amount of the Liquidation Preference of the outstanding
shares of Holding Preferred Stock (plus all accumulated and unpaid dividends),
the holders of shares of Holding Preferred Stock will not be entitled to any
further participation in any distribution of assets of Holding.
(ii) For the purposes of this paragraph (d), 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 Holding
nor the consolidation or merger of Holding with or into one or more other
entities shall be deemed to be a liquidation, dissolution or winding-up of
Holding.
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(e) Redemption. (i) Optional Redemption. (A) Except as set forth
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in clause (B) below, the Holding Preferred Stock shall not be redeemable at the
option of Holding prior to April 15, 2003. On or after April 15, 2003, each
share of the Holding Preferred Stock may be redeemed at any time or from time to
time, in whole or in part, at the option of Holding, at the redemption prices
(expressed as a percentage of the Liquidation Preference of such share) set
forth below, plus, without duplication, an amount in cash equal to all accrued
and unpaid dividends to the date fixed for redemption (an "Optional Redemption
Date") (including, without duplication, an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to such
Optional Redemption Date) (the "Optional Redemption Price"), if redeemed during
the 12-month period beginning April 15 of each of the years set forth below:
YEAR IN WHICH
REDEMPTION OCCURS PERCENTAGE
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2003............................... 105.750%
2004............................... 104.600
2005............................... 103.450
2006............................... 102.300
2007............................... 101.150
2008 and thereafter................ 100.000
(B) At any time prior to April 15, 2001, Holding may redeem at its
option (i) up to 50% or (ii) all but not less than all of the outstanding shares
of Holding Preferred Stock with the net proceeds of any Public Equity Offering
by the Company at a redemption price (expressed as a percentage of the
Liquidation Preference per share thereof) of 111.5% plus accumulated and unpaid
dividends (including, without duplication, an amount in cash equal to a prorated
dividend for any partial dividend period). Any such redemption shall be made
upon consummation of such Public Equity Offering upon not less than 30 nor more
than 60 days' notice.
(C) In the event of a redemption of only a portion of the then
outstanding shares of Holding Preferred Stock, Holding shall effect such
redemption on a pro rata basis, except that Holding may redeem all of the shares
held by Holders of fewer than 100 shares (or all of the shares held by Holders
who would hold less than 100 shares as a result of such redemption), as may be
determined by Holding.
(ii) Mandatory Redemption. (a) Each share of the Holding Preferred
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Stock (if not earlier redeemed or exchanged) shall be subject to mandatory
redemption in whole (to the extent of lawfully available funds therefor) on
April 15, 2010 (the "Mandatory Redemption Date") at a price
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equal to 100% of the Liquidation Preference of such share, plus an amount equal
to all accrued and unpaid dividends thereon (including, without duplication, an
amount equal to a prorated dividend thereon from the immediately preceding
Dividend Payment Date to the Mandatory Redemption Date), if any, to the
Mandatory Redemption Date (the "Mandatory Redemption Price"). Holding shall take
all actions required or permitted under applicable law to permit the redemption
of the Holding Preferred Stock including, without limitation, through the
revaluation of its assets in accordance with the General Corporation Law of the
State of Delaware, to make or keep funds legally available for such redemption.
(b) Each share of Holding Preferred Stock (if not earlier redeemed or
exchanged) shall be subject to mandatory redemption in whole on April 24, 1998
(the "Unwind Date") at a price equal to 100% of the Liquidation Preference of
such share, plus an amount equal to all accrued and unpaid dividends thereon
(including, without duplication, an amount equal to a prorated dividend thereon
from the Issue Date to the Unwind Date), if any, to the Unwind Date (the "Unwind
Price") in the event that the Merger has not been consummated by 1:00 p.m.,
California time, on April 10, 1998.
(iii) Procedure for Redemption. (A) On and after any Optional
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Redemption Date, the Mandatory Redemption Date or the Unwind Date, as the case
may be (the "Redemption Date"), unless Holding defaults in the payment of the
applicable redemption price, dividends will cease to accumulate on shares of
Holding Preferred Stock called for redemption and all rights of Holders of such
shares will terminate except for the right to receive the Optional Redemption
Price, the Mandatory Redemption Price or the Unwind Price, as the case may be,
without interest; provided, however, that if a notice of redemption shall have
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been given as provided in subparagraph (iii)(B) and the funds necessary for
redemption (including an amount in respect of all dividends that will accrue to
the Redemption Date) shall have been segregated and irrevocably set apart by
Holding, in trust for the benefit of the Holders of the shares called for
redemption, then dividends shall cease to accumulate on the Redemption Date on
the shares to be redeemed and, at the close of business on the day on which such
funds are segregated and set apart, the Holders of the shares to be redeemed
shall, with respect to the shares to be redeemed, cease to be stockholders of
Holding and shall be entitled only to receive the Optional Redemption Price, the
Mandatory Redemption Price or the Unwind Price, as the
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case may be, for such shares without interest from the Redemption Date.
(B) With respect to a redemption pursuant to paragraph (e)(i) or
(e)(ii)(a), Holding will send a written notice of redemption by first class mail
to each holder of record of shares of Holding Preferred Stock at its registered
address, not fewer than 30 days nor more than 60 days prior to the Redemption
Date, and with respect to a redemption pursuant to paragraph (e)(ii)(b), Holding
will deliver a written notice of redemption by facsimile transmission, confirmed
by telephone, to a responsible officer of the Transfer Agent, and by first class
mail to each holder of record of shares of Holding Preferred Stock, at its
registered address, before 5:00 p.m., New York City time, on April 10, 1998 (the
"Redemption Notice") and notice, if mailed in the manner herein provided, shall
conclusively be presumed to have been given, whether or not the Holder receives
such notice; provided, however, that no failure to give such notice nor any
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deficiency therein shall affect the validity of the procedure for the redemption
of any shares of Holding Preferred Stock to be redeemed except as to the Holder
or Holders to whom Holding has failed to give said notice or except as to the
Holder or Holders whose notice was defective. The Redemption Notice shall
state:
(1) whether the redemption is pursuant to paragraph (e)(i),(e)(ii)(a)
or (e)(ii)(b) hereof;
(2) the Optional Redemption Price, the Mandatory Redemption Price or
the Unwind Price, as the case may be;
(3) whether all or less than all the outstanding shares of Holding
Preferred Stock are to be redeemed and the total number of shares of
Holding Preferred Stock being redeemed;
(4) the Redemption Date;
(5) that the Holder is to surrender to Holding, in the manner, at the
place or places and at the price designated, his certificate or
certificates representing the shares of Holding Preferred Stock to be
redeemed; and
(6) that dividends on the shares of the Holding Preferred Stock to be
redeemed shall cease to accumulate on such Redemption Date unless Holding
defaults in the payment of the Optional Redemption Price, the Mandatory
Redemption Price or the Unwind
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Price, as the case may be, to Holders of the Holding Preferred Stock who
have duly surrendered their certificates for redemption in accordance with
clause (C) below on or before the Redemption Date.
In the event of a redemption pursuant to paragraph (e)(ii)(b), Holding
will, on April 10, 1998, cause a notice of such redemption to be sent at least
once to the Dow Jones News Service or similar business news service in the
United States.
(C) Each Holder of Holding Preferred Stock shall surrender the
certificate or certificates representing such shares of Holding Preferred Stock
to Holding, duly endorsed (or otherwise in proper form for transfer, as
determined by Holding), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full Optional Redemption
Price, Mandatory Redemption Price or Unwind Price, as the case may be, for such
shares shall be payable in cash to the person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.
(D) In the event of a redemption pursuant to paragraph (e)(ii)(b),
Holding will, on April 10, 1998, deposit with the Transfer Agent, or a paying
agent designated by the Transfer Agent, (and not withdraw) money sufficient to
pay the Unwind Price. The Transfer Agent (or the paying agent) will invest such
funds in cash or Temporary Cash Investments as directed in writing by Holding
pending distribution to Holders on the Unwind Date. The Transfer Agent (or the
paying agent) shall not be accountable or liable for any losses resulting from
the sale or depreciation in value of such investments.
(f) Voting Rights. (i) The Holders of Holding Preferred Stock,
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except as otherwise required under Delaware law or as set forth in paragraphs
(ii) and (iii) below, shall not be entitled to vote on any matter required or
permitted to be voted upon by the stockholders of Holding.
(ii) (A) If (1) dividends on the Holding Preferred Stock are in
arrears and unpaid and, in the case of dividends payable after April 15, 2003,
are not paid in cash for six or more Dividend Periods (whether or not
consecutive) (a "Dividend Default"); (2) Holding fails for any reason to redeem
the Holding Preferred Stock on April 15, 2010, or fails to otherwise discharge
any
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redemption obligation with respect to the Holding Preferred Stock; (3) Holding
fails to make an offer to redeem all of the outstanding shares of Holding
Preferred Stock following a Change of Control (whether or not Holding is
permitted to do so by the terms of the Indenture, the New Credit Facility or any
other obligation of Holding); (4) a breach or violation of any of the provisions
set forth under paragraph (l) (Certain Additional Provisions) occurs and (except
with respect to a breach or violation of paragraph (l)(ii)), the breach or
violation continues for a period of 30 days or more after Holding receives
notice thereof specifying the default from the Holders of at least 25% of the
shares of Holding Preferred Stock then outstanding; (5) a breach or violation of
any of the provisions of the Mirror Preferred Stock occurs; or (6) Holding fails
to pay at final maturity (giving effect to any applicable grace period) the
principal amount of any Debt of Holding or any Subsidiary of Holding or the
stated maturity of any such Debt of Holding or any Subsidiary of Holding is
accelerated because of a default and the total amount of such Debt unpaid or
accelerated exceeds $7.5 million, then the number of directors constituting the
Board of Directors of Holding will, subject to paragraph (f)(ii)(E), be
increased by two and the Holders of the then outstanding shares of Holding
Preferred Stock (together with the holders of any other series of Preferred
Stock upon which like rights have been conferred and are exercisable), voting
together as a class, shall have the right and power to elect such two additional
directors. Each such event described in clauses (1), (2), (3), (4), (5) or (6)
above is a "Voting Rights Triggering Event".
(B) The voting rights set forth in paragraph (f)(ii)(A) above will
continue until such time as (x) in the case of a Dividend Default, all dividends
in arrears on the Holding Preferred Stock are paid in full in cash and (y) in
all other cases, any failure, breach or default giving rise to such Voting
Rights Triggering Event is remedied or waived by the Holders of at least a
majority of the shares of Holding Preferred Stock then outstanding, at which
time the term of any directors elected pursuant to the provisions of paragraph
(f)(ii)(A) above (subject to the right of holders of any other Preferred Stock
to elect such directors) shall terminate forthwith and the number of directors
constituting the Board of Directors shall be decreased by two (until the
occurrence of any subsequent Voting Rights Triggering Event). At any time
voting power to elect directors shall have become vested and be continuing in
the Holders of Holding Preferred Stock (together with the holders of any other
series of Preferred Stock upon which like rights have been conferred and are
exercisable) or if vacancies shall exist in the offices of directors elected by
such Holders, any officer of Holding may, and upon the written request of the
Holders of record of at least 25% of the shares of Holding Preferred Stock then
outstanding or the holders of 25% of the shares of any other series of Preferred
Stock then outstanding upon which like rights have been conferred and are
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exercisable addressed to the Secretary of Holding shall, call a special meeting
of the Holders of Holding Preferred Stock and the holders of such Preferred
Stock for the purpose of electing the directors which such holders are entitled
to elect pursuant to the terms hereof; provided, however, that no such special
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meeting shall be called if the next annual meeting of stockholders of Holding is
to be held within 60 days after the voting power to elect directors shall have
become vested, in which case such meeting shall be deemed to have been called
for such next annual meeting. If such meeting shall not be called by Holding
within 20 days after personal service to the Secretary of Holding at its
principal executive offices, then the Holders of record of at least 25% of the
outstanding shares of Holding Preferred Stock or the holders of 25% of the
shares of any other series of Preferred Stock upon which like rights have been
conferred and are exercisable may designate in writing one of their members to
call such meeting at the expense of Holding, and such meeting may be called by
the person so designated upon the notice required for the annual meetings of
stockholders of Holding and shall be held at any place permissible for holding
the annual meetings of stockholders. Any Holder of Holding Preferred Stock or
such Preferred Stock so designated shall have, and Holding shall provide, access
to the lists of Holders of Holding Preferred Stock and the holders of such
Preferred Stock to be called pursuant to the provisions hereof. If no special
meeting of the Holders of Holding Preferred Stock and the holders of such
Preferred Stock is called as provided in this paragraph (f)(ii), then such
meeting shall be deemed to have been called for the next annual meeting of
stockholders of Holding or special meeting of the holders of any other Capital
Stock of Holding.
(C) At any meeting held for the purposes of electing directors at
which the Holders of Holding Preferred Stock (together with the holders of any
other series of Preferred Stock upon which like rights have been conferred and
are exercisable) shall have the right, voting together as a single class, to
elect directors as aforesaid, the presence in person or by proxy of the holders
of at least a majority in voting power of the outstanding shares of Holding
Preferred Stock (and such Preferred Stock) shall be required to constitute a
quorum thereof.
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(D) Any vacancy occurring in the office of a director elected by the
Holders of Holding Preferred Stock (and such Preferred Stock) may be filled by
the remaining director elected by the Holders of Holding Preferred Stock (and
such Preferred Stock) unless and until such vacancy shall be filled by the
Holders of Holding Preferred Stock (and such Preferred Stock).
(E) In the event that an event occurs at any time which results in
the holders of any Parity Stock having voting rights to elect directors to the
Board of Directors, Holders of Holding Preferred Stock shall, whether or not
such event otherwise constitutes a Voting Rights Triggering Event pursuant to
paragraph (f)(ii)(A), have the voting rights set forth in paragraphs (f)(ii)(A)
and (f)(ii)(B), and such event shall be deemed (for purposes of this paragraph
(f) only) to constitute a Voting Rights Triggering Event. In addition, in the
event that during a time in which directors elected by the Holders of Holding
Preferred Stock pursuant to this paragraph (f)(ii) are serving on the Board of
Directors ("Previously-Elected Directors") an event occurs which results in
holders of Preferred Stock having voting rights to elect (voting together with
the Holders of Holding Preferred Stock) at least two directors to the Board of
Directors, the Holders of Holding Preferred Stock shall vote together, as a
single class, with the holders of such Preferred Stock to elect such new
directors, and upon the election of the new directors the term of office of the
Previously-Elected Directors shall (unless such Previously-Elected Directors are
elected as new directors) automatically terminate.
(iii) (A) So long as any shares of Holding Preferred Stock are
outstanding, Holding will not authorize, create or increase the authorized
amount of any class or series of Capital Stock or Preferred Stock, the terms of
which expressly provide that such class or series will ranks senior to the
Holding Preferred Stock as to dividend rights and rights upon liquidation,
winding-up and dissolution of Holding (collectively referred to as "Senior
Stock") or Parity Stock without the affirmative vote or consent of Holders of at
least two-thirds of the shares of Holding Preferred Stock then outstanding,
voting or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting.
(B) So long as any shares of the Holding Preferred Stock are
outstanding, Holding will not amend this Certificate of Designation so as to
affect adversely the specified rights, preferences, privileges or voting rights
14
of Holders of shares of Holding Preferred Stock or to authorize the issuance of
any additional shares of Holding Preferred Stock (except to authorize the
issuance of additional shares of Holding Preferred Stock to be paid as dividends
on the Holding Preferred Stock, for which no consent shall be necessary) without
the affirmative vote or consent of Holders of at least a majority of the issued
and then outstanding shares of Holding Preferred Stock, voting or consenting, as
the case may be, as one class, given in person or by proxy, either in writing or
by resolution adopted at an annual or special meeting.
(C) Except as set forth in paragraph (f)(iii)(A) or (B) above, (x)
the creation, authorization or issuance of any shares of any Junior Stock,
Parity Stock or Senior Stock, including the designation of a series thereof
within the existing class of Holding Preferred Stock, or (y) the increase or
decrease in the amount of authorized Capital Stock of any class, including any
Holding Preferred Stock, shall not require the consent of Holders of Holding
Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of shares of Holding Preferred Stock.
(D) Prior to the exchange of Holding Preferred Stock for Company
Preferred Stock or Company Exchange Debentures, Holding shall not permit the
Company to amend or modify the Certificate of Determination of the Company
Preferred Stock or the Exchange Indenture (except as expressly provided therein
in respect of amendments which may be effected without the consent of holders of
the Company Preferred Stock or the Company Exchange Debentures) without the
affirmative vote or consent of Holders of at least a majority of the shares of
Holding Preferred Stock then outstanding, voting or consenting, as the case may
be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting; provided that this paragraph
--------
shall not prohibit the merger of the Company and a Wholly Owned Subsidiary of
Holding or the Company incorporated in another state of the United States solely
for the purpose of reincorporating the Company to the extent that the surviving
corporation adopts a series of Preferred Stock and executes an indenture
relating to debt securities having, in each case, terms and provisions
substantially similar to those set forth in the Certificate of Designation of
the Company Preferred Stock and the Exchange Indenture, which Preferred Stock
and debt securities shall be issuable in exchange for the Holding Preferred
Stock on the terms set forth in paragraph (g).
15
(iv) In any case in which the Holders of Holding Preferred Stock
shall be entitled to vote pursuant to this paragraph (f) or pursuant to law,
each Holder of Holding Preferred Stock entitled to vote with respect to such
matters shall be entitled to one vote for each share of Holding Preferred Stock
held.
(g) Exchange. (i) Exchange for Company Exchange Debentures or
--------- -------------------------------------------
Company Preferred Stock. (A) Holding may, at its option, exchange the Holding
- ------------------------
Preferred Stock, in whole but not in part (including in conjunction with, and
after giving effect to, a redemption of up to 50% of the outstanding shares of
Holding Preferred Stock with the proceeds of a Public Equity Offering by the
Company pursuant to clause (B) of paragraph (e)(i) above), at any time, for
either Company Exchange Debentures or Company Preferred Stock; provided,
--------
however, that (i) on the date of such exchange there are no accumulated and
- -------
unpaid dividends on the Holding Preferred Stock (including the dividend payable
on such date) that are not paid contemporaneously with such exchange or other
contractual impediments to such exchange; (ii) such exchange is permitted under
applicable law; (iii) immediately after giving effect to such exchange, no
Default (as defined in the Company Exchange Indenture) or Voting Rights
Triggering Event (as defined in the Company Exchange Certificate of
Designation), as applicable, shall have occurred and be continuing; and (iv) the
Company shall have delivered to the Trustee under the Company Exchange Indenture
or the transfer agent for the Company Preferred Stock, as applicable, an opinion
of counsel with respect to the due authorization and issuance of the Company
Exchange Debentures or Company Preferred Stock, as applicable.
(B) In order to effect any exchange of the Holding Preferred Stock
for Company Exchange Debentures or Company Preferred Stock as described in this
paragraph (g)(i), Holding shall (i) cause the Company (a) to redeem a number of
shares of Mirror Preferred Stock held by Holding having an aggregate liquidation
preference equal to the aggregate Liquidation Preference of the Holding
Preferred Stock to be so exchanged, (b) to issue to Holding in redemption
thereof an aggregate principal amount of Company Exchange Debentures, or a
number of shares of Company Preferred Stock having an aggregate liquidation
preference, as applicable (in each case subject to the provisions described in
this paragraph (g)(i)), equal to the aggregate Liquidation Preference of the
Holding Preferred Stock subject to such exchange and (ii) thereafter exchange
such Holding Preferred Stock for Company Exchange Debentures or Company
Preferred Stock, as applicable.
16
(C) Upon any exchange of Holding Preferred Stock for Company Exchange
Debentures pursuant to this paragraph (g)(i), each Holder of Holding Preferred
Stock will be entitled to receive, subject to the second succeeding sentence,
$1.00 principal amount of Company Exchange Debentures for each $1.00 Liquidation
Preference of Holding Preferred Stock so exchanged, and an amount in cash equal
to a prorated dividend for any partial dividend period. The Company Exchange
Debentures will be issued in registered form without coupons. Company Exchange
Debentures issued in exchange for Holding Preferred Stock will be issued in
principal amounts of $1,000 and integral multiples thereof to the extent
possible, and will also be issued in principal amounts less than $1,000 so that
each Holder of Holding Preferred Stock will receive certificates representing
the entire amount of Company Exchange Debentures to which such Holder's shares
of Holding Preferred Stock entitle such Holder; provided, however, that Holding
-------- -------
may pay cash in lieu of issuing a Company Exchange Debenture in a principal
amount less than $1,000.
(D) Upon any exchange of Holding Preferred Stock for Company
Preferred Stock pursuant to this paragraph (g)(i), each Holder of Holding
Preferred Stock will be entitled to receive, subject to the following sentence,
shares of Company Preferred Stock with an aggregate liquidation preference equal
to the aggregate Liquidation Preference of the shares of Holding Preferred Stock
so exchanged, and an amount in cash equal to a prorated dividend for any partial
dividend period. In lieu of fractional shares of Company Preferred Stock,
Holding may pay an amount in cash equal to the product of (i) the Liquidation
Preference of the Holding Preferred Stock multiplied by (ii) the amount of such
fractional share.
(ii) Procedures. (A) Holding will send a written notice of exchange
-----------
(the "Exchange Notice") by first-class mail to each Holder of record of shares
of Holding Preferred Stock not fewer than 30 days nor more than 60 days before
the date fixed for any exchange (the "Exchange Date") at its registered address
and notice, if mailed in the manner herein provided, shall conclusively be
presumed to have been given, whether or not the Holder receives such notice;
provided, however, that no failure to give such notice nor any deficiency
- -------- -------
therein shall affect the validity of the procedure for the redemption of any
shares of Holding Preferred Stock to be exchanged except as to the Holder or
Holders to whom Holding has failed to give said notice or except as to the
Holder or Holders whose notice was defective; provided further that, in the
----------------
event of any exchange which is intended to occur in conjunction with a
17
Public Equity Offering by the Company, (i) Holding may provide for an Exchange
Date which relates to the consummation of such Public Equity Offering and (ii)
Holding shall have the right to revoke such written notice in the event that
such related Public Equity Offering is terminated by sending by first-class mail
a subsequent written notice to such Holders within two Business Days following
such termination.
The Exchange Notice shall state:
(1) the Exchange Date;
(2) that the Holder is to surrender to Holding, in the manner and at
the place or places designated, his certificate or certificates
representing the shares of Holding Preferred Stock to be exchanged;
(3) that dividends on the shares of Holding Preferred Stock to be
exchanged shall cease to accrue on such Exchange Date whether or not
certificates representing shares of Holding Preferred Stock are surrendered
for exchange on such Exchange Date unless Holding shall default in the
delivery of the Company Exchange Debentures or Company Preferred Stock to
Holders of the Holding Preferred Stock who have duly surrendered their
certificates for exchange in accordance with clause (g)(ii)(C) on or before
the Exchange Date; and
(4) that interest on the Company Exchange Debentures and the dividends
on the Company Preferred Stock shall accrue from the Exchange Date whether
or not certificates for shares of Holding Preferred Stock are surrendered
for exchange on such Exchange Date.
(B) On and after the Exchange Date, dividends will cease to accrue on
the outstanding shares of Holding Preferred Stock, and all rights of the Holders
of Holding Preferred Stock (except the right to receive the Company Exchange
Debentures or Company Preferred Stock, as applicable, an amount in cash, to the
extent applicable, equal to the accumulated and unpaid dividends to the Exchange
Date and, if Holding so elects, cash in lieu of any Company Exchange Debenture
that is in a principal amount that is not an integral multiple of $1,000 or in
lieu of any fractional share of Company Preferred Stock) will terminate. Subject
to clause (g)(ii)(D) below, from and after the Exchange Date, the person
entitled to receive the Company Exchange Debentures or Company Preferred Stock
issuable upon such exchange will be treated for all purposes as the
18
registered holder of such Company Exchange Debentures or Company Preferred
Stock.
(C) On or before the Exchange Date, each Holder of Holding Preferred
Stock shall surrender the certificate or certificates representing such shares
of Holding Preferred Stock, in the manner and at the place designated in the
Exchange Notice. Upon surrender in accordance with the Exchange Notice of the
certificates representing any shares of Holding Preferred Stock so exchanged,
duly endorsed (or otherwise in proper form for transfer, as determined by
Holding and the Company), such shares shall be exchanged by Holding for Company
Exchange Debentures or Company Preferred Stock received by Holding in accordance
with clause g(i)(B). Subject to clause (g)(ii)(D) below, the Company shall pay
dividends or interest, as applicable, on the Company Preferred Stock or Company
Exchange Debentures at the rate and on the dates specified therein from the
Exchange Date.
(D) Anything contained herein to the contrary notwithstanding, no
Holder of Holding Preferred Stock will be entitled to receive any payment of
interest on Company Exchange Debentures or dividends on Company Preferred Stock,
or exercise any other right or privilege in respect thereof, until such Holder
has surrendered the certificate or certificates evidencing such Holder's Holding
Preferred Stock in accordance with clause (g)(ii)(C). The Company shall pay all
interest or dividends, as the case may be, which would have accrued on a
Holder's Company Exchange Debentures or Company Preferred Stock, as applicable,
without additional interest or dividends, had such Holder surrendered the
certificate or certificates evidencing such Holder's Holding Preferred Stock on
the Exchange Date at the time such certificate or certificates are duly
surrendered.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
-----------------------------
provisions of this paragraph (g), Holding shall not be entitled to exchange the
Holding Preferred Stock for Company Preferred Stock or Company Exchange
Debentures if such exchange, or any term or provision of the Company Exchange
Certificate of Designation, the Company Preferred Stock, the Company Exchange
Indenture or the Company Exchange Debentures, or the performance of the
Company's obligations under the Company Exchange Certificate of Designation, the
Company Preferred Stock, the Company Exchange Indenture or the Exchange
Debentures, shall violate or conflict with any applicable law or agreement or
instrument then binding on Holding or the Company or if, at the time of such
exchange,
19
Holding or the Company is insolvent or would be rendered insolvent by such
exchange.
(iv) Exchange of Initial Holding Preferred Stock for Series B Stock.
---------------------------------------------------------------
The Series B Stock will be issued by Holding only in connection with an exchange
offer, on a share for share basis, for the Initial Holding Preferred Stock as
required pursuant to the Registration Agreement. Each share of Series B Stock
issued in exchange for a share of Initial Holding Preferred Stock will be deemed
to have the same Liquidation Preference and accrued and unpaid dividends as the
share of Initial Holding Preferred Stock so exchanged.
(h) Redemption at the Option of Holders Upon a Change of Control.
-------------------------------------------------------------
(i) Upon the occurrence of a Change of Control (the date of such occurrence
being the "Change of Control Date"), each Holder of Holding Preferred Stock
shall have the right to require Holding to redeem all or any part of such
Holder's Holding Preferred Stock pursuant to the offer described in paragraph
(h)(ii) below (the "Change of Control Offer") at a cash redemption price (the
"Change of Control Redemption Price") equal to 101% of the Liquidation
Preference thereof, plus payment in cash of accrued and unpaid dividends
thereon, if any, to the redemption date (including an amount in cash equal to a
prorated dividend for any partial dividend period).
(ii) Within 30 days following the date on which Holding knows or
reasonably should have known a Change of Control has occurred, Holding shall (a)
cause a notice of the Change of Control Offer to be sent at least once to the
Dow Jones News Service or similar business news service in the United States and
(b) send, by first-class mail, with a copy to the transfer agent, to each Holder
of Holding Preferred Stock, at such Holder's address appearing in the security
register, a notice stating: (A) that a Change of Control has occurred and a
Change of Control Offer is being made pursuant to this paragraph (h) and that
all Holding Preferred Stock timely tendered will be accepted for payment; (B)
the Change of Control Redemption Price and the purchase date (the "Change of
Control Redemption Date"), which shall be, subject to any contrary requirements
of applicable law, a Business Day no earlier than 30 days nor later than 60 days
from the date such notice is mailed; (C) the circumstances and relevant facts
regarding the Change of Control (including information with respect to pro forma
historical income, cash flow and capitalization after giving effect to the
Change of Control); (D) that any shares of Holding Preferred Stock not tendered
will continue to accrue dividends; (E) that, unless Holding defaults in
20
making payment therefor, any share of Holding Preferred Stock accepted for
payment pursuant to the Change of Control Offer shall cease to accrue dividends
after the Change of Control Redemption Date; (F) that Holders electing to have
any shares of Holding Preferred Stock redeemed pursuant to a Change of Control
Offer will be required to surrender stock certificates representing such shares
of Holding Preferred Stock, properly endorsed for transfer, together with such
other customary documents as Holding and the Transfer Agent may reasonably
request to the Transfer Agent and registrar for the Holding Preferred Stock at
the address specified in the notice prior to the close of business on the
Business Day prior to the Change of Control Redemption Date; (G) that Holders
will be entitled to withdraw their election if Holding receives, not later than
five Business Days prior to the Change of Control Redemption Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the number of shares of Holding Preferred Stock the Holder delivered for
redemption and a statement that such Holder is withdrawing his election to have
such shares of Holding Preferred Stock redemption; and (H) that Holders whose
shares of Holding Preferred Stock are redeemed only in part will be issued a new
certificate representing the unredeemed shares of Holding Preferred Stock.
(iii) Holding will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the redemption of Holding Preferred Stock
pursuant to a Change of Control Offer. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Certificate of
Designation, Holding will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under this
Certificate of Designation by virtue of such compliance.
(iv) On the Change of Control Redemption Date Holding shall (A)
accept for payment the shares of Holding Preferred Stock validly tendered
pursuant to the Change of Control Offer, (B) pay to the Holders of shares so
accepted the redemption price therefor in cash and (C) cancel each surrendered
certificate and retire the shares represented thereby. Unless Holding defaults
in the payment for the shares of Holding Preferred Stock duly tendered pursuant
to the Change of Control Offer, dividends will cease to accrue with respect to
the shares of Holding Preferred Stock tendered and all rights of Holders of such
tendered shares will terminate, except for the right to receive payment
therefor, on the Change of Control Redemption Date.
21
(v) To accept the Change of Control Offer, the Holder of a share of
Holding Preferred Stock shall deliver, on or before the 10th day prior to the
Change of Control Redemption Date, written notice to Holding (or an agent
designated by Holding for such purpose) of such Holder's acceptance, together
with certificates evidencing the shares of Holding Preferred Stock with respect
to which the Change of Control Offer is being accepted, duly endorsed for
transfer.
(i) Conversion or Exchange. The Holders of shares of Holding
-----------------------
Preferred Stock shall not have any rights hereunder to convert such shares into
or exchange such shares for shares of any other class or classes or of any other
series of any class or classes of Capital Stock of Holding.
(j) Reissuance of Holding Preferred Stock. Shares of Holding
--------------------------------------
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall not be reissued as shares of
Holding Preferred Stock and 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 be redesignated and
reissued as part of any series of Preferred Stock; provided, however, that so
-------- -------
long as any shares of Holding Preferred Stock are outstanding, any issuance of
such shares must be in compliance with the terms hereof.
(k) Business Day. If any payment, redemption or exchange shall be
-------------
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Additional Provisions. The sole remedy to Holders of
------------------------------
Holding Preferred Stock in the event of Holding's failure to comply with the
provisions of paragraph (f)(iii)(D) or (g)(i)(B) or any of the following
covenants, and the sole consequence of any such failure, shall be the voting
rights described in paragraph (f)(ii).
(i) SEC Reports. Notwithstanding that Holding may not be subject to
------------
the reporting requirements of Section 13 or 15(d) of the Exchange Act, Holding
shall file with the SEC and provide the Holders and, upon request, security
analysts of prospective holders of the Holding Preferred Stock with such annual
reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to
22
a U.S. corporation subject to such Sections, such information, documents and
other reports to be so filed and provided at the times specified for the filing
of such information, documents and reports under such Sections; provided,
--------
however, that Holding shall not be so obligated to file such information,
- -------
documents and reports with the SEC if the SEC does not permit such filings.
Holding shall file with the SEC and provide Holders and, upon request, security
analysts of prospective holders of the Holding Preferred Stock with the
information, documents and reports described herein whether or not the Exchange
Offer Registration Statement has been filed or declared effective.
(ii) Mirror Preferred Stock. (a) Holding shall cause 300,000 shares
-----------------------
of Mirror Preferred Stock having an aggregate liquidation preference of $30.0
million to be issued to Holding on the Issue Date on the terms described in the
Certificate of Determination for the Mirror Preferred Stock. When issued, such
Company Mirror Preferred Stock will be validly issued, fully paid and
nonassessable. While any shares of Holding Preferred Stock are outstanding,
Holding shall (i) beneficially own all of the outstanding shares of Mirror
Preferred Stock and (ii) not permit (1) any shares of the Mirror Preferred Stock
to be purchased, repurchased, redeemed, acquired or retired for value except as
set forth in paragraph (g)(i)(B) or in accordance with the Certificate of
Determination governing the Mirror Preferred Stock or (2) such Certificate of
Determination to be amended in a manner adverse to the Holders of the Holding
Preferred Stock or any provision thereof to be waived, in each case without the
consent of the Holders of at least 66 2/3% of the outstanding shares of Holding
Preferred Stock then outstanding, consenting as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or special
meeting; provided that this paragraph shall not prohibit the merger of the
--------
Company with and into a Wholly Owned Subsidiary of Holding or the Company
incorporated in another state of the United States solely for the purpose of
reincorporating the Company to the extent that the surviving corporation issues
to Holding shares of a series of Preferred Stock having an aggregate liquidation
preference equal to the Liquidation Preference of the Holding Preferred Stock
outstanding immediately prior to such merger and terms and provisions
substantially similar to those of the Mirror Preferred Stock.
(b) Upon consummation of the Merger, Holding shall cause the Company
to file the Certificate of Amendment with the Secretary of State of the State of
California and shall use its best efforts to cause such Certificate of Amendment
to become effective as soon as practicable. The
23
Company shall not modify the provisions of the Certificate of Amendment relating
to dividends, liquidation preference, voting rights or redemption, or any other
material provision thereof, in a manner adverse to the Holders of the Holding
Preferred Stock without the consent of the Holders of at least 66 2/3% of the
outstanding shares of Holding Preferred Stock then outstanding, consenting as
one class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting.
(iii) Limitation on Holding Debt. Holding shall not, directly or
---------------------------
indirectly, Incur any Debt other than Guarantees of the Company's obligations
under the Credit Facility.
(iv) Limitation on Restricted Subsidiary Debt. Holding shall not
-----------------------------------------
permit any Restricted Subsidiary to Incur, directly or indirectly, any Debt
unless, after giving pro forma effect to the application of the proceeds
thereof, either (a) after giving effect to the Incurrence of such Debt and the
application of the proceeds thereof, the Consolidated Interest Coverage Ratio
would be greater than 1.75 to 1.00 if such Debt is Incurred from the Issue Date
through April 15, 2000, and 2.00 to 1.00 if such Debt is Incurred thereafter or
(b) such Debt is Permitted Debt. For purposes of determining compliance with
this covenant, the Consolidated Interest Coverage Ratio, Consolidated Interest
Expense, Consolidated Net Income and EBITDA shall each be calculated with
reference to the Company and its Restricted Subsidiaries.
(v) Limitation on Restricted Payments. Holding shall not make, and
----------------------------------
shall not permit any Restricted Subsidiary to make, directly or indirectly, any
Restricted Payment if at the time of, and after giving pro forma effect to, such
proposed Restricted Payment,
(a) a Voting Rights Triggering Event shall have occurred and be
continuing,
(b) the Company could not Incur at least $1.00 of additional Debt
pursuant to clause (a) of the first paragraph of covenant (l)(iv) above or
(c) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made since the Issue Date (the amount of
any Restricted Payment, if made other than in cash, to be based upon
24
Fair Market Value) would exceed an amount equal to the sum of:
(i) 50% of the aggregate amount of Consolidated Net Income
accrued during the period (treated as one accounting period) from the
beginning of the fiscal quarter during which the Issue Date occurs to
the end of the most recent fiscal quarter ending at least 45 days
prior to the date of such Restricted Payment (or if the aggregate
amount of Consolidated Net Income for such period shall be a deficit,
minus 100% of such deficit),
(ii) Capital Stock Sale Proceeds,
(iii) the amount by which Debt of Holding or the Company Incurred
after the Issue Date is reduced on Holding's balance sheet upon the
conversion or exchange (other than by Holding or a Subsidiary of
Holding) subsequent to the Issue Date of any Debt for Preferred Stock
or Junior Stock (other than Disqualified Stock) of Holding (less the
amount of any cash or other Property distributed by Holding or any
Restricted Subsidiary upon such conversion or exchange), and
(iv) an amount equal to the sum of (A) the net reduction in
Investments in any Person other than Holding or a Restricted
Subsidiary resulting from dividends, repayments of loans or advances
or other transfers of Property, in each case to Holding or any
Restricted Subsidiary from such Person, to the extent such dividends,
repayments or transfers do not increase the amount of Permitted
Investments permitted to be made pursuant to clause (i) of the
definition thereof and (B) the portion (proportionate to Holding's
equity interest in such Unrestricted Subsidiary) of the Fair Market
Value of the net assets of an Unrestricted Subsidiary at the time such
Unrestricted Subsidiary is designated a Restricted Subsidiary;
provided, however, that the foregoing sum shall not exceed, in the
-------- -------
case of any Person, the amount of Investments previously made (and
treated as a Restricted Payment) by Holding or any Restricted
Subsidiary in such Person, and
(v) $7.5 million.
25
Notwithstanding the foregoing limitation, Holding and the Company may:
(a) pay dividends on its Capital Stock within 60 days of the
declaration thereof if, on said declaration date, such dividends could have
been paid in compliance with this covenant; provided, however, that at the
-------- -------
time of such payment of such dividend, no other Voting Rights Triggering
Event shall have occurred and be continuing (or result therefrom); provided
--------
further, however, that such dividend shall be included in the calculation
------- -------
of the amount of Restricted Payments;
(b) purchase, repurchase, redeem, legally defease, acquire or retire
for value Capital Stock of Holding or the Company in exchange for, or in an
amount not in excess of the proceeds of the substantially concurrent sale
of, Parity Stock or Junior Stock of Holding or the Company (other than
Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary of Holding or an employee stock ownership plan or trust
established by Holding or any of its Subsidiaries for the benefit of their
employees); provided, however, that (i) such purchase, repurchase,
-------- -------
redemption, legal defeasance, acquisition or retirement shall be excluded
in the calculation of the amount of Restricted Payments and (ii) the
Capital Stock Sale Proceeds from such exchange or sale shall be excluded
from the calculation pursuant to clause (c)(ii) above;
(c) purchase, repurchase, redeem, legally defease, acquire or retire
for value shares of, or options to purchase shares of, common stock of the
Company or Holding from employees or former employees of the Company,
Holding or their Subsidiaries (or their estates or beneficiaries thereof)
upon death, disability, retirement or termination pursuant to the terms of
the agreements (including employment agreements) or plans (or amendments
thereto) approved by the Board of Directors or the Company, as the case may
be, under which such individuals purchase or sell, or are granted the
option to purchase or sell, shares of such common stock (or pay dividends
or make loans to Holding for such purpose); provided, however, that (i) the
-------- -------
aggregate amount of such purchases, repurchases, redemptions, defeasances,
acquisitions or retirements shall not exceed $1.0 million in any year or
$5.0 million during the term of the Holding Preferred Stock, except that
(x) such amounts shall be increased by the aggregate net amount of cash
received
26
by Holding or the Company after the Issue Date from the sale of such shares
to, or the exercise of options to purchase such shares by, employees of the
Company, Holding or their Subsidiaries and (y) Holding or the Company may
forgive or return Employee Notes without regard to the limitation set forth
in clause (c)(i) above and such forgiveness or return shall not be treated
as a Restricted Payment for purposes of determining compliance with such
clause (c)(i) and (ii) such purchases, repurchases, defeasances,
acquisitions or retirements (but not forgiveness or return of Employee
Notes) shall be included in the calculation of the amount of Restricted
Payments; and
(d) make payments to Helen Hudson Lovaas pursuant to the Merger
Agreement in an aggregate amount not to exceed $1.1 million in any fiscal
year or $3.3 million in the aggregate (plus, in each case, interest due on
the unpaid portion of such required payments in accordance with the Merger
Agreement); provided, however, that such payments shall be excluded in the
-------- -------
calculation of the amount of Restricted Payments.
(vi) Limitation on Issuance or Sale of Capital Stock of Restricted
-------------------------------------------------------------
Subsidiaries. Holding shall not (a) sell, pledge, hypothecate or otherwise
- -------------
dispose of any shares of Capital Stock of a Restricted Subsidiary or (b) permit
any Restricted Subsidiary to, directly or indirectly, issue or sell or otherwise
dispose of any shares of its Capital Stock, other than (i) directors' qualifying
shares and (ii) to Holding or a Wholly Owned Subsidiary. Notwithstanding the
foregoing, the Company may (A) make primary issuances of its common stock (1) in
exchange solely for cash or Employee Notes or (2) as consideration in connection
with the acquisition by the Company of any Person engaged in a Related Business
and (B) dispose of 100% of the shares of Capital Stock of another Restricted
Subsidiary; provided that (I) in the case of clause (A)(1) or (B) above, the Net
--------
Available Cash received by the Company from any such transaction is applied
within twelve months from the date of the receipt of such Net Available Cash to
prepay, repay, legally defease or purchase Debt of Holding or any Restricted
Subsidiary (excluding, in any such case, Disqualified Stock and Debt owed to
Holding or an Affiliate of Holding) or to reinvest in Additional Assets
(including by means of an Investment in Additional Assets by Holding or a
Restricted Subsidiary with Net Available Cash received by the Company); (II) in
the case of clause (B) above, the Company receives consideration at the time of
such disposition at least equal to the Fair Market Value of such Restricted
Subsidiary and at least 75% of the consideration
27
paid to the Company in connection with such disposition is in the form of cash
or cash equivalents or the assumption by the purchaser of liabilities of the
Company or any other Restricted Subsidiary (other than liabilities that are by
their terms subordinated to the Holding Preferred Stock) as a result of which
the Company and the other Restricted Subsidiaries are no longer obligated with
respect to such liabilities; (III) in the case of clause (A)(2) above, (x) the
Company shall remain a Restricted Subsidiary immediately following such
transaction, (y) such acquired Person shall be designated as a Restricted
Subsidiary effective immediately following such transaction and (z) the
aggregate consideration paid by the Company for such acquired Person shall not
be in excess of the Fair Market Value thereof; and (IV) in the case of clause
(A)(1) or (A)(2) above, Holding obtains an opinion of independent counsel of
national standing to the effect that such action will not result in Holding and
the Company ceasing to be members of the same affiliated group (as defined in
Section 1504(a) of the Code).
(vii) Limitation on Restrictions on Distributions from Restricted
-----------------------------------------------------------
Subsidiaries. Holding shall not, and shall not permit any Restricted Subsidiary
- -------------
to, directly or indirectly, create or otherwise cause or suffer to exist any
consensual restriction on the right of any Restricted Subsidiary to (a) pay
dividends, in cash or otherwise, or make any other distributions on or in
respect of its Capital Stock, or pay any Debt or other obligation owed, to the
Company or any other Restricted Subsidiary (except, with respect to restrictions
on dividends of non-cash Property, as permitted pursuant to clause (ii) of the
next sentence), (b) make any loans or advances to Holding or any other
Restricted Subsidiary or (c) transfer any of its Property to Holding or any
other Restricted Subsidiary. The foregoing limitations will not apply (i) with
respect to clauses (a), (b) and (c), to restrictions (A) in effect on the Issue
Date, (B) pursuant to the Credit Facility, (C) relating to Debt of a Restricted
Subsidiary and existing at the time it became a Restricted Subsidiary if such
restriction was not created in connection with or in anticipation of the
transaction or series of transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the Company or (D)
which result from the Refinancing of Debt Incurred pursuant to an agreement
referred to in clause (i)(A) or (C) above or in clause (ii)(A) or (B) below,
provided such restriction is no less favorable to the Holders of the Holding
- --------
Preferred Stock than those under the agreement evidencing the Debt so
Refinanced, and (ii) with respect to clause (c) only, to restrictions (A)
encumbering Property at the time such
28
Property was acquired by Holding or any Restricted Subsidiary, so long as such
restriction relates solely to the Property so acquired and was not created in
connection with or in anticipation of such acquisition, (B) resulting from
customary provisions restricting subletting or assignment of leases or customary
provisions in other agreements that restrict assignment of such agreements or
rights thereunder or (C) customary restrictions contained in asset sale
agreements limiting the transfer of such Property pending the closing of such
sale.
(viii) Limitation on Transactions with Affiliates. Holding shall not,
-------------------------------------------
and shall not permit any Restricted Subsidiary to, directly or indirectly,
conduct any business or enter into or suffer to exist any transaction or series
of transactions (including the purchase, sale, transfer, assignment, lease,
conveyance or exchange of any Property or the rendering of any service) with, or
for the benefit of, any Affiliate of Holding (an "Affiliate Transaction"),
unless (a) the terms of such Affiliate Transaction are (i) set forth in writing,
(ii) in the interest of Holding or such Restricted Subsidiary, as the case may
be, and (iii) no less favorable to Holding or such Restricted Subsidiary, as the
case may be, than those that could be obtained in a comparable arm's-length
transaction with a Person that is not an Affiliate of Holding, (b) if such
Affiliate Transaction involves aggregate payments or value in excess of $2.5
million, the Board of Directors (including a majority of the disinterested
members of the Board of Directors, if any) approves such Affiliate Transaction
and, in its good faith judgment, believes that such Affiliate Transaction
complies with clauses (a)(ii) and (iii) of this paragraph as evidenced by a
Board Resolution promptly delivered to the Trustee and (c) if such Affiliate
Transaction involves aggregate payments or value in excess of $5.0 million,
Holding obtains a written opinion from an Independent Appraiser to the effect
that the consideration to be paid or received in connection with such Affiliate
Transaction is fair, from a financial point of view, to the Company or such
Restricted Subsidiary, as the case may be.
Notwithstanding the foregoing limitation, Holding or any Restricted
Subsidiary may enter into or suffer to exist the following:
(i) any transaction or series of transactions between Holding and one
or more Restricted Subsidiaries or between two or more Restricted
Subsidiaries in the ordinary course of business; provided that no more than
--------
5% of the total voting power of the Voting Stock (on a fully diluted basis)
of any such Restricted Subsidiary
29
is owned by an Affiliate of Holding (other than a Restricted Subsidiary);
(ii) any Restricted Payment permitted to be made pursuant to the
covenant described in paragraph(l)(v) above;
(iii) the payment of compensation (including amounts paid pursuant to
employee benefit plans) for the personal services of officers, directors
and employees of Holding or any of the Restricted Subsidiaries, so long as
the Board of Directors in good faith shall have approved the terms thereof
and deemed the services theretofore or thereafter to be performed for such
compensation to be fair consideration therefor;
(iv) loans and advances to employees made in the ordinary course of
business and consistent with the past practices of Holding or any
Restricted Subsidiary, as the case may be; provided that such loans and
--------
advances do not exceed $1.0 million in the aggregate at any one time
outstanding;
(v) the payment of fees and expenses in connection with the
Recapitalization pursuant to written agreements in effect on the Issue
Date;
(vi) the sale of common stock of Holding or the Company for cash;
provided, that Holding or the Company may receive Employee Notes in an
--------
aggregate principal amount not in excess of $1.0 million at any one time
outstanding;
(vii) the payment of dividends in kind in respect of (i) the Mirror
Preferred Stock or (ii) any other Preferred Stock issued in compliance with
this covenant; and
(viii) a proportionate split of, or a common stock dividend payable
on, the common stock of Holding or the Company.
(ix) Designation of Restricted and Unrestricted Subsidiaries. The
--------------------------------------------------------
Board of Directors may designate any Subsidiary of Holding (other than the
Company or any Subsidiary of the Company designated as a Restricted Subsidiary
under the Indenture governing the Notes) to be an Unrestricted Subsidiary if (a)
the Subsidiary to be so designated does not own any Capital Stock or Debt of, or
own or hold any Lien on any Property of, Holding or any other Restricted
Subsidiary, (b) the Subsidiary to be so
30
designated is not obligated under any Debt, Lien or other obligation that, if in
default, would result (with the passage of time or notice or otherwise) in a
default on any Debt of Holding or of any Restricted Subsidiary and (c) either
(i) the Subsidiary to be so designated has total assets of $1,000 or less or
(ii) such designation is effective immediately upon such entity becoming a
Subsidiary of Holding. Unless so designated as an Unrestricted Subsidiary, any
Person that becomes a Subsidiary of Holding will be classified as a Restricted
Subsidiary; provided, however, that such Subsidiary shall not be designated a
-------- -------
Restricted Subsidiary and shall be automatically classified as an Unrestricted
Subsidiary if the requirement set forth in the immediately following paragraph
will not be satisfied after giving pro forma effect to such classification.
Except as provided in the first sentence of this paragraph, no Restricted
Subsidiary may be redesignated as an Unrestricted Subsidiary.
The Board of Directors may designate any Unrestricted Subsidiary to be
a Restricted Subsidiary if, immediately after giving pro forma effect to such
designation, the Company could Incur at least $1.00 of additional Debt pursuant
to clause (a) of the first paragraph of covenant (l)(iv) above.
Any such designation or redesignation by the Board of Directors will
be evidenced to the Transfer Agent by filing with the Transfer Agent a Board
Resolution giving effect to such designation or redesignation and an Officers'
Certificate (a) certifying that such designation or redesignation complies with
the foregoing provisions and (b) giving the effective date of such designation
or redesignation, such filing with the Transfer Agent to occur within 45 days
after the end of the fiscal quarter of Holding in which such designation or
redesignation is made (or, in the case of a designation or redesignation made
during the last fiscal quarter of Holding's fiscal year, within 90 days after
the end of such fiscal year).
(x) Limitation on Holding's Business. Holding shall not, directly or
---------------------------------
indirectly, engage in any business or activity other than the ownership of
Capital Stock of the Company and business activities incidental thereto.
(xi) Merger, Consolidation and Sale of Property. Holding shall not
-------------------------------------------
merge, consolidate or amalgamate with or into any other Person (other than a
merger of a Wholly Owned Subsidiary into Holding) or sell, transfer, assign,
lease, convey or otherwise dispose of all or substantially all its Property in
any one transaction or series of transactions
31
unless: (a) Holding shall be the surviving Person (the "Surviving Person") or
the Surviving Person (if other than Holding) formed by such merger,
consolidation or amalgamation or to which such sale, transfer, assignment,
lease, conveyance or disposition is made shall be a corporation organized and
existing under the laws of the United States of America, any State thereof or
the District of Columbia; (b) the Surviving Person (if other than Holding)
expressly assumes all obligations of Holding under the Holding Preferred Stock
and the Certificate of Designation; (c) in the case of a sale, transfer,
assignment, lease, conveyance or other disposition of all or substantially all
the Property of Holding, such Property shall have been transferred as an
entirety or virtually as an entirety to one Person; (d) immediately before and
after giving effect to such transaction or series of transactions on a pro forma
basis (and treating, for purposes of this clause (d) and clauses (e) and (f)
below, any Debt which becomes, or is anticipated to become, an obligation of the
Surviving Person or any Restricted Subsidiary as a result of such transaction or
series of transactions as having been Incurred by the Surviving Person or such
Restricted Subsidiary at the time of such transaction or series of
transactions), no Voting Rights Triggering Event shall have occurred and be
continuing; (e) immediately after giving effect to such transaction or series of
transactions on a pro forma basis, Holding or the Surviving Person, as the case
may be, would be able to Incur at least $1.00 of additional Debt under clause
(a) of the first paragraph of covenant (l)(iv) above, determining compliance
thereunder for this purpose based upon the Consolidated Interest Expense,
Consolidated Net Income and EBITDA of Holding or the Surviving Person, as the
case may be, and its Restricted Subsidiaries; provided, however, that this
-------- -------
clause (e) shall not apply to a merger between Holding and a Wholly Owned
Subsidiary of Holding solely for the purpose of reincorporating Holding in
another state of the United States so long as the total amount of Debt of
Holding and its Restricted Subsidiaries is not increased as a result thereof;
and (f) Holding shall deliver, or cause to be delivered, to the Transfer Agent,
in form and substance reasonably satisfactory to the Transfer Agent, an
Officers' Certificate and an Opinion of Counsel, each stating that such
transaction complies with this covenant and that all conditions precedent herein
provided for relating to such transaction have been satisfied.
(m) Certificates. (i) Form and Dating. The Holding Preferred Stock
------------- ----------------
and the Transfer Agent's Countersignature shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly
32
made a part of this Certificate of Designation. The Holding Stock certificate
may have notations, legends or endorsements required by law, stock exchange
rule, agreements to which Holding is subject, if any, or usage (provided that
any such notation, legend or endorsement is in a form acceptable to Holding).
Each Holding Preferred Stock certificate shall be dated the date of its
countersignature. The terms of the Holding Preferred Stock certificate set forth
in Exhibit A are part of the terms of this Certificate of Designation.
(A) Global Holding Preferred Stock. Rule 144A Holding Preferred
-------------------------------
Stock shall be issued initially in the form of one or more permanent global
securities in definitive, fully registered form (collectively, the "Rule 144A
Global Holding Preferred Stock") and Regulation S Holding Preferred Stock shall
be issued initially in the form of one or more temporary global securities
(collectively, the "Temporary Regulation S Global Holding Preferred Stock"), in
each case without coupons with the global securities legend and restricted
securities legend set forth in Exhibit A hereto, which shall be deposited on
behalf of the purchasers of the Initial Holding Preferred Stock represented
thereby with the Transfer Agent, at its New York office, as custodian for DTC
(or with such other custodian as DTC may direct), and registered in the name of
DTC or a nominee of DTC, duly executed by Holding and countersigned by the
Transfer Agent as hereinafter provided. Beneficial ownership interests in the
Temporary Regulation S Global Holding Preferred Stock will not be exchangeable
for interests in the Rule 144A Global Holding Preferred Stock, a permanent
Regulation S global security (the "Permanent Regulation S Global Holding
Preferred Stock"), or any other security without a legend containing
restrictions on transfer until the expiration of the Restricted Period and then
only upon certification in form reasonably satisfactory to the Transfer Agent
that beneficial ownership interests in such Temporary Regulation S Global
Holding Preferred Stock are owned either by non-U.S. persons or U.S. persons who
purchased such interests in a transaction that did not require registration
under the Securities Act. The Rule 144A Global Holding Preferred Stock,
Temporary Regulation S Global Holding Preferred Stock and Permanent Regulation S
Global Holding Preferred Stock are collectively referred to herein as "Global
Holding Preferred Stock." Subject to the terms hereof and to the requirements of
applicable law, the number of shares of Holding Preferred Stock represented by
Global Holding Preferred Stock may from time to time be increased or decreased
by adjustments made on the records of the Transfer Agent and DTC or its nominee
as hereinafter provided. The Transfer Agent shall have no
33
obligation or duty to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Certificate of Designation or under
applicable law with respect to any transfer of any interest in the Holding
Preferred Stock (including any transfers between or among DTC participants,
members or beneficial owners in any Global Holding Preferred Stock) other than
to require delivery of such certificates and other documentation or evidence as
are expressly required by the terms of this Certificate of Designation, and to
examine the same to determine substantial compliance as to form with the express
requirements hereof.
(B) Book-Entry Provisions. In the event Global Holding Preferred
----------------------
Stock is deposited with or on behalf of DTC, Holding shall execute and the
Transfer Agent shall countersign and deliver initially one or more Global
Holding Preferred Stock certificates that (a) shall be registered in the name of
DTC for such Global Holding Preferred Stock or the nominee of DTC and (b) shall
be delivered by the Transfer Agent to DTC or pursuant to DTC's instructions or
held by the Transfer Agent as custodian for DTC.
Members of, or participants in, DTC ("Agent Members") shall have no
rights under this Certificate of Designation with respect to any Global Holding
Preferred Stock held on their behalf by DTC or by the Transfer Agent as the
custodian of DTC or under such Global Holding Preferred Stock, and DTC may be
treated by Holding, the Transfer Agent and any agent of Holding or the Transfer
Agent as the absolute owner of such Global Holding Preferred Stock for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent Holding, the Transfer Agent or any agent of Holding or the Transfer
Agent from giving effect to any written certification, proxy or other
authorization furnished by DTC or impair, as between DTC and its Agent Members,
the operation of customary practices of DTC governing the exercise of the rights
of a holder of a beneficial interest in any Global Holding Preferred Stock.
(C) Definitive Securities. Except as provided by applicable law or
----------------------
as provided in this paragraph (m)(i) or in paragraph (m)(iii), owners of
beneficial interests in Global Holding Preferred Stock will not be entitled to
receive physical delivery of certificated Holding Preferred Stock.
(ii) Execution and Countersignature. Two Officers shall sign the
-------------------------------
certificates representing Holding Preferred Stock for Holding by manual or
facsimile signature. Holding's seal shall be impressed, affixed, imprinted or
34
reproduced on the Holding Preferred Stock and may be in facsimile form.
If an Officer whose signature is on certificates representing Holding
Preferred Stock no longer holds that office at the time the Transfer Agent
countersigns the Holding Preferred Stock evidenced thereby, the shares of
Holding Preferred Stock evidenced thereby shall be valid nevertheless.
A certificate representing Holding Preferred Stock shall not be valid
until an authorized signatory of the Transfer Agent manually countersigns the
Holding Preferred Stock. The signature shall be conclusive evidence that the
Holding Preferred Stock has been countersigned under this Certificate of
Designation.
The Transfer Agent shall countersign and deliver: (1) up to 600,000
shares of Initial Holding Preferred Stock for original issue and (2) up to
600,000 shares of Series B Stock for issue only in a Registered Exchange Offer
pursuant to the Registration Agreement, in each case upon a written order of
Holding signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of Holding. In addition, the Transfer Agent
shall countersign and deliver, from time to time, Additional Shares for original
issue upon order of Holding signed by two Officers or by an Officer or either an
Assistant Treasurer or Assistant Secretary of Holding. Such orders shall
specify the number of shares of Holding Preferred Stock to be countersigned and
the date on which the original issue of Holding Preferred Stock is to be
countersigned and whether the Holding Preferred Stock is to be Initial Holding
Preferred Stock or Series B Stock.
The Transfer Agent may appoint an countersigning agent reasonably
acceptable to Holding to countersign the Holding Preferred Stock. Unless
limited by the terms of such appointment, an countersigning agent may
countersign Holding Preferred Stock whenever the Transfer Agent may do so. Each
reference in this Certificate of Designation to countersign by the Transfer
Agent includes countersign by such agent. An countersigning agent has the same
rights as the Transfer Agent or agent for service of notices and demands.
(iii) Transfer and Exchange. (A) Transfer and Exchange of
---------------------- ------------------------
Definitive Holding Preferred Stock. When Definitive Holding Preferred Stock is
- -----------------------------------
presented to the Transfer Agent with a request to register the transfer of such
Definitive Holding Preferred Stock or to exchange such
35
Definitive Holding Preferred Stock for an equal number of shares of Definitive
Holding Preferred Stock of other authorized denominations, the Transfer Agent
shall register the transfer or make the exchange as requested if its reasonable
requirements for such transaction are met; provided, however, that the
-------- -------
Definitive Holding Preferred Stock surrendered for transfer or exchange:
(1) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to Holding and the Transfer Agent,
duly executed by the Holder thereof or its attorney duly authorized in
writing; and
(2) is being transferred or exchanged pursuant to an effective
registration statement under the Securities Act or pursuant to clause (I)
or (II) below, and are accompanied by the following additional information
and documents, as applicable:
(I) if such Definitive Holding Preferred Stock is being delivered
to the Transfer Agent by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect in substantially the form of Exhibit B hereto; or
(II) if such Definitive Holding Preferred Stock is being
transferred to Holding or to a "qualified institutional buyer" ("QIB")
in accordance with Rule 144A under the Securities Act or pursuant to
an exemption from registration in accordance with Rule 144 or
Regulation S under the Securities Act, a certification to that effect
(in substantially the form of Exhibit B hereto).
(B) Restrictions on Transfer of Definitive Holding Preferred Stock
--------------------------------------------------------------
for a Beneficial Interest in Global Holding Preferred Stock. Definitive Holding
- ------------------------------------------------------------
Preferred Stock may not be exchanged for a beneficial interest in Global Holding
Preferred Stock except upon satisfaction of the requirements set forth below.
Upon receipt by the Transfer Agent of Definitive Holding Preferred Stock, duly
endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Transfer Agent, together with:
(1) certification that such Definitive Holding Preferred Stock is
being transferred (A) to a QIB in accordance with Rule 144A, (B) to an
institution that is an "accredited investor" as defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D under
36
the Securities Act that has furnished to the Transfer Agent a signed letter
in the form of Exhibit B hereto or (C) outside the United States in an
offshore transaction within the meaning of Regulation S and in compliance
with Rule 904 under the Securities Act; and
(2) written instructions directing the Transfer Agent to make, or to
direct DTC to make, an adjustment on its books and records with respect to
such Global Holding Preferred Stock to reflect an increase in the number of
shares of Holding Preferred Stock represented by the Global Holding
Preferred Stock,
then the Transfer Agent shall cancel such Definitive Holding Preferred Stock and
cause, or direct DTC to cause, in accordance with the standing instructions and
procedures existing between DTC and the Transfer Agent, the number of shares of
Holding Preferred Stock represented by the Global Holding Preferred Stock to be
increased accordingly. If no Global Holding Preferred Stock is then
outstanding, Holding shall issue and the Transfer Agent shall countersign, upon
written order of Holding in the form of an Officers' Certificate, a new Global
Holding Preferred Stock representing the appropriate number of shares.
(C) Transfer and Exchange of Interests in Global Holding Preferred
--------------------------------------------------------------
Stock. The transfer and exchange of beneficial interests in Global Holding
- ------
Preferred Stock or beneficial interests therein shall be effected through DTC,
in accordance with this Certificate of Designation (including applicable
restrictions on transfer set forth herein, if any) and the procedures of DTC
therefor.
(D) Transfer of a Beneficial Interest in Temporary Regulation S
-----------------------------------------------------------
Global Holding Preferred Stock for interests in other Holding Preferred Stock.
- ------------------------------------------------------------------------------
During the Restricted Period, beneficial ownership interests in
Temporary Regulation S Global Holding Preferred Stock may not be exchanged for
interests in any other Global Holding Preferred Stock or Definitive Holding
Preferred Stock. Thereafter, such beneficial ownership interests may be so
exchanged only upon delivery to Holding and the Transfer Agent of a certificate
in form and substance satisfactory to them certifying that the beneficial owner
of the Temporary Regulation S Global Holding Preferred Stock is either a non-
U.S. person or a U.S. person who purchased such beneficial ownership interests
in a transaction that did not require registration under the Securities Act, as
provided in paragraph (C)(3)(ii)(B) of Rule 903 under Regulation S under the
Securities Act.
37
(E) (i) Restrictions on Transfer and Exchange of Global Holding
-------------------------------------------------------
Preferred Stock. Notwithstanding any other provisions of this Certificate of
- ----------------
Designation, Global Holding Preferred Stock may not be transferred as a whole
except by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or by DTC or any such nominee to a successor depository or a
nominee of such successor depository.
(ii) Restrictions on Transfer of Temporary Regulation S Global
---------------------------------------------------------
Holding Preferred Stock Interests. During the Restricted Period, beneficial
- ----------------------------------
ownership interests in Temporary Regulation S Global Holding Preferred Stock may
only be sold, pledged or transferred through Euroclear or Cedel in accordance
with the Applicable Procedures and only (i) to Holding, (ii) so long as such
security is eligible for resale pursuant to Rule 144A under the Securities Act
("Rule 144A"), to a person whom the selling Holder reasonably believes is a
"qualified institutional buyer" ("QIB") as defined in Rule 144A that purchases
for its own account or for the account of a QIB to whom notice is given that the
resale, pledge or transfer is being made in reliance on Rule 144A, (iii) in an
offshore transaction in accordance with Regulation S, (iv) pursuant to an
exemption from registration under the Securities Act provided by Rule 144 (if
applicable) under the Securities Act, or (v) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States. During the
Restricted Period, interests in the Temporary Regulation S Global Holding
Preferred Stock may not be transferred to institutions that are "Accredited
Investors" (but not QIBs) as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act.
(F) Countersignature of Definitive Holding Preferred Stock. If at
-------------------------------------------------------
any time:
(1) DTC notifies Holding that DTC is unwilling or unable to continue
as depository for the Global Holding Preferred Stock and a successor
depository for the Global Holding Preferred Stock is not appointed by
Holding within 90 days after delivery of such notice;
(2) DTC ceases to be a clearing agency registered under the Exchange
Act;
(3) Holding, in its sole discretion, notifies the Transfer Agent in
writing that it elects to cause the issuance of Definitive Holding
Preferred Stock under this Certificate of Designation,
38
then Holding will execute, and the Transfer Agent, upon receipt of a written
order of Holding signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of Holding requesting the countersign and
delivery of Definitive Holding Preferred Stock to the persons designated by
Holding, will countersign and deliver Definitive Holding Preferred Stock equal
to the number of shares of Holding Preferred Stock represented by the Global
Holding Preferred Stock, in exchange for such Global Holding Preferred Stock.
Definitive Holding Preferred Stock issued in exchange for a beneficial interest
in a Global Holding Preferred Stock shall be registered in such names and in
such authorized denominations as DTC, pursuant to instructions from its direct
or indirect participants or otherwise, shall instruct the Transfer Agent. The
Transfer Agent shall mail or deliver such Definitive Holding Preferred Stock to
the persons in whose names such Holding Preferred Stock are so registered in
accordance with the instructions of DTC.
(G) Legend. (1) Except as permitted by the following paragraph (2),
-------
each certificate evidencing the Global Holding Preferred Stock and the
Definitive Holding Preferred Stock (and all Holding Preferred Stock issued in
exchange therefor or substitution thereof) shall bear a legend in substantially
the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE ISSUER THAT THIS SECURITY MAY NOT
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND
ANNIVERSARY OF THE ISSUANCE HEREOF (OR OF A PREDECESSOR SECURITY HERETO) OR
(Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE ISSUER AT ANY TIME DURING
THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER
THAN (1) TO THE ISSUER, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY
THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE
REVERSE OF THIS SECURITY
39
PROVIDED THAT A CERTIFICATE WHICH MAY BE OBTAINED FROM THE ISSUER IS
DELIVERED BY CERTAIN TRANSFEREES TO THE ISSUER), (4) TO AN INSTITUTION THAT
IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR
ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS
ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION,
AND A CERTIFICATE WHICH MAY BE OBTAINED FROM THE ISSUER OR THE TRANSFER
AGENT IS DELIVERED BY THE TRANSFEREE TO THE ISSUER AND THE TRANSFER
AGENT(PROVIDED THAT CERTAIN HOLDERS MAY NOT TRANSFER THIS SECURITY PURSUANT
TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED
PERIOD" (WITHIN THE MEANING OF RULE 903(C)(3) OF REGULATION S UNDER THE
SECURITIES ACT)), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES
ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED
INVESTOR HOLDING THIS SECURITY AGREES IT WILL FURNISH TO THE ISSUER AND THE
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY
COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE ISSUER THAT IT
IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR
(2) PURCHASING FROM A PERSON NOT PARTICIPATING IN THE INITIAL DISTRIBUTION
OF THIS SECURITY (OR ANY PREDECESSOR SECURITY), IT IS AN INSTITUTION THAT
IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A)(1), (2), (3), OR (7)
UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING
THE REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER
THE SECURITIES ACT."
(2) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by Global Holding
Preferred Stock) pursuant to Rule 144 under the Securities Act or an effective
registration statement under the Securities Act:
(I) in the case of any Transfer Restricted Security that is a
Definitive Holding Preferred Stock, the Transfer Agent shall permit
the Holder
40
thereof to exchange such Transfer Restricted Security for a
Definitive Holding Preferred Stock that does not bear the legend set
forth above and rescind any restriction on the transfer of such
Transfer Restricted Security; and
(II) in the case of any Transfer Restricted Security that is
represented by a Global Holding Preferred Stock, the Transfer Agent
shall permit the Holder thereof to exchange such Transfer Restricted
Security for interests in an Unrestricted Global Preferred Stock
Security that does not bear the legend set forth above and rescind any
restriction on the transfer of such Transfer Restricted Security, if
the Holder's request for such exchange was made in reliance on Rule
144 and the Holder certifies to that effect in writing to the Transfer
Agent (such certification to be in the form and substance satisfactory
to the Transfer Agent).
(3) In the case of any Restricted or Unrestricted Global Security
that represents the Initial Holding Preferred Stock, the Transfer Agent shall
permit the Holder thereof to exchange such Restricted or Unrestricted Global
Security for a new global security representing Series B Stock that does not
bear the legend set forth above.
(H) Cancelation or Adjustment of Global Holding Preferred Stock. At
------------------------------------------------------------
such time as all beneficial interests in Global Holding Preferred Stock have
either been exchanged for Definitive Holding Preferred Stock, redeemed,
repurchased or canceled, such Global Holding Preferred Stock shall be returned
to DTC for cancelation or retained and canceled by the Transfer Agent. At any
time prior to such cancelation, if any beneficial interest in Global Holding
Preferred Stock is exchanged for Definitive Holding Preferred Stock, redeemed,
repurchased or canceled, the number of shares of Holding Preferred Stock
represented by such Global Holding Preferred Stock shall be reduced and an
adjustment shall be made on the books and records of the Transfer Agent with
respect to such Global Holding Preferred Stock, by the Transfer Agent or DTC, to
reflect such reduction.
(I) Obligations with Respect to Transfers and Exchanges of Holding
--------------------------------------------------------------
Preferred Stock. (1) To permit registrations of transfers and exchanges,
- ----------------
Holding shall execute and the Transfer Agent shall countersign Definitive
Holding Preferred Stock and Global Holding Preferred Stock
41
as required pursuant to the provisions of this paragraph (iii).
(2) All Definitive Holding Preferred Stock and Global Holding
Preferred Stock issued upon any registration of transfer or exchange of
Definitive Holding Preferred Stock or Global Holding Preferred Stock shall
be the valid obligations of Holding, entitled to the same benefits under
this Certificate of Designation as the Definitive Holding Preferred Stock
or Global Holding Preferred Stock surrendered upon such registration of
transfer or exchange.
(3) Prior to due presentment for registration of transfer of any
shares of Holding Preferred Stock, the Transfer Agent and Holding may deem
and treat the person in whose name such shares of Holding Preferred Stock
are registered as the absolute owner of such Holding Preferred Stock and
neither the Transfer Agent nor Holding shall be affected by notice to the
contrary.
(4) No service charge shall be made to a Holder for any registration
of transfer or exchange upon surrender of any Holding Preferred Stock
Certificate at the office of the Transfer Agent maintained for that
purpose. However, Holding may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with
any registration of transfer or exchange of Holding Preferred Stock
Certificates.
(5) Upon any sale or transfer of shares of Holding Preferred Stock
(including any Holding Preferred Stock represented by a Global Holding
Preferred Stock Certificate) pursuant to an effective registration
statement under the Securities Act, pursuant to Rule 144 under the
Securities Act or pursuant to an opinion of counsel reasonably satisfactory
to Holding that no legend is required:
(A) in the case of any Definitive Holding Preferred Stock, the
Transfer Agent shall permit the Holder thereof to exchange such
Holding Preferred Stock for Definitive Holding Preferred Stock
that does not bear the legend set forth in paragraph (iii)(G)
above and rescind any restriction on the transfer of such Holding
Preferred Stock; and
(B) in the case of any Global Holding Preferred Stock, such Holding
Preferred Stock shall not
42
be required to bear the legend set forth in paragraph (m)(iii)(G)
above but shall continue to be subject to the provisions of
paragraph (m)(iii)(D) hereof.
(iv) Replacement Certificates. If a mutilated Holding Preferred
-------------------------
Stock certificate is surrendered to the Transfer Agent or if the Holder of a
Holding Preferred Stock certificate claims that the Holding Preferred Stock
certificate has been lost, destroyed or wrongfully taken, Holding shall issue
and the Transfer Agent shall countersign a replacement Holding Preferred Stock
certificate if the reasonable requirements of the Transfer Agent, Holding and of
Section 8-405 of the Uniform Commercial Code as in effect in the State of New
York are met. If required by the Transfer Agent or Holding, such Holder shall
furnish an indemnity bond sufficient in the judgment of Holding and the Transfer
Agent to protect Holding and the Transfer Agent from any loss which either of
them may suffer if a Holding Preferred Stock certificate is replaced. Holding
and the Transfer Agent may charge the Holder for their expenses in replacing a
Holding Preferred Stock certificate.
(v) Temporary Certificates. Until definitive Holding Preferred Stock
-----------------------
certificates are ready for delivery, Holding may prepare and the Transfer Agent
shall countersign temporary Holding Preferred Stock certificates. Temporary
Holding Preferred Stock certificates shall be substantially in the form of
definitive Holding Preferred Stock certificates but may have variations that
Holding considers appropriate for temporary Holding Preferred Stock
certificates. Without unreasonable delay, Holding shall prepare and the
Transfer Agent shall countersign definitive Holding Preferred Stock certificates
and deliver them in exchange for temporary Holding Preferred Stock certificates.
(vi) Cancelation. (A) In the event Holding shall purchase or
------------
otherwise acquire (including pursuant to exchanges contemplated by paragraph (g)
hereof) Definitive Holding Preferred Stock, the same shall thereupon be
delivered to the Transfer Agent for cancelation.
(B) At such time as all beneficial interests in Global Holding
Preferred Stock have been exchanged for Definitive Holding Preferred Stock,
redeemed, repurchased or canceled, such Global Holding Preferred Stock shall
thereupon be delivered to the Transfer Agent for cancelation.
(C) The Transfer Agent and no one else shall cancel and, subject to
the record retention requirements
43
under the Exchange Act, destroy all Holding Preferred Stock certificates
surrendered for transfer, exchange, replacement or cancelation and deliver a
certificate of such destruction to Holding unless Holding directs the Transfer
Agent to deliver canceled Holding Preferred Stock certificates to Holding.
Holding may not issue new Holding Preferred Stock certificates to replace
Holding Preferred Stock certificates to the extent they evidence Holding
Preferred Stock which Holding has purchased or otherwise acquired.
(n) Additional Rights of Holders. In addition to the rights provided
-----------------------------
to Holders under this Certificate of Designation, Holders shall have the rights
set forth in the Registration Agreement.
(o) Certain Definitions. As used in this Certificate of Designation,
--------------------
the following terms shall have the following meanings (and (1) terms defined in
the singular have comparable meanings when used in the plural and vice versa,
(2) "including" means including without limitation, (3) "or" is not exclusive
and (4) an accounting term not otherwise defined has the meaning assigned to it
in accordance with United States generally accepted accounting principles as in
effect on the Issue Date and all accounting calculations will be determined in
accordance with such principles), unless the content otherwise requires:
"Accounts Receivable" means, with respect to any Person, all accounts
receivable of such Person net of allowances for uncollectible accounts,
discounts, refunds and all other allowances as determined in accordance with
GAAP.
"Additional Assets" means (a) any Property (other than cash, cash
equivalents and securities) to be owned by the Company or any Restricted
Subsidiary and used in a Related Business; or (b) Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary from any Person other than
an Affiliate of the Company; provided, however, that, in the case of clause (b),
-------- -------
such Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means (a) any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person or (b) any other Person who is a
director or officer of (i) such specified Person, (ii) any Subsidiary of such
specified Person or (iii) any Person described in clause (a) above. For the
purposes of this
44
definition, "control" when used with respect to any Person means the power to
direct the management and 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. For purposes of paragraph (l) (viii) only, "Affiliate" shall also
mean any beneficial owner of shares representing 5% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of Holding or of rights or
warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
"Asset Sale" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions) by Holding or any Restricted Subsidiary, including any disposition
by means of a merger, consolidation or similar transaction (each referred to for
the purposes of this definition as a "disposition"), of (a) any shares of
Capital Stock of a Restricted Subsidiary (other than directors' qualifying
shares) or (b) any other assets of Holding or any Restricted Subsidiary outside
of the ordinary course of business of Holding or such Restricted Subsidiary
(other than, in the case of clauses (a) and (b) above, (i) any disposition by a
Restricted Subsidiary to Holding or by Holding or a Restricted Subsidiary to a
Wholly Owned Subsidiary, (ii) any disposition effected in compliance with the
first paragraph of the covenant described under paragraph (l)(xi), (iii) any
Sale and Leaseback Transaction completed within 180 days following the original
acquisition of the subject assets where such Sale and Leaseback Transaction
represents the intended financing of Property acquired after the Issue Date and
(iv) any disposition or series of related dispositions of assets having a Fair
Market Value and sale price of less than $500,000.
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such Sale and Leaseback Transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Average Life" means, as of any date of determination, with respect to
any Debt or Preferred Stock, the quotient obtained by dividing (a) the sum of
the product
45
of the numbers of years (rounded to the nearest one-twelfth of one year) from
the date of determination to the dates of each successive scheduled principal
payment of such Debt or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (b) the sum of all
such payments.
"Board of Directors" means the Board of Directors of Holding or the
Company, as applicable, or any committee thereof duly authorized to act on
behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means any obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP; and the amount of Debt represented by such obligation shall be the
capitalized amount of such obligations determined in accordance with GAAP; and
the Stated Maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Capital Stock" means, with respect to any Person, any shares or other
equivalents (however designated) of corporate stock, partnership interests or
any other participations, rights, warrants, options or other interests in the
nature of an equity interest in such Person, including Preferred Stock, but
excluding any debt security convertible or exchangeable into such equity
interest.
"Capital Stock Sale Proceeds" means the aggregate cash proceeds
received by Holding from the issuance or sale (other than to a Subsidiary of
Holding or an employee stock ownership plan or trust established by Holding or
any of its Subsidiaries for the benefit of their employees) by Holding of any
class of its Parity Stock and Junior Stock (other than Disqualified Stock) after
the Issue Date, net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"Certificate of Amendment" means a certificate of amendment relating
to the Mirror Preferred Stock containing terms and provisions substantially
similar to the Holding Preferred Stock (except that the Mirror Preferred Stock
will not be exchangeable).
46
"Change of Control" means the occurrence of any of the following
events:
(a) prior to the first Public Equity Offering of common stock of
Holding or the Company, the Permitted Holders cease to be the "beneficial
owners" (as defined in Rule 13d-3 under the Exchange Act, except that a
Person will be deemed to have "beneficial ownership" of all shares that any
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of
a majority of the voting power of the Voting Stock of Holding or the
Company, whether as a result of the issuance of securities of Holding or
the Company, any merger, consolidation, liquidation or dissolution of
Holding or the Company, any direct or indirect transfer of securities by
the Permitted Holders or otherwise (for purposes of this clause (a), the
Permitted Holders will be deemed to beneficially own any Voting Stock of a
corporation (the "specified corporation") held by any other corporation
(the "parent corporation") so long as the Permitted Holders beneficially
own, directly or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of such parent corporation); or
(b) after the first Public Equity Offering of common stock of Holding
or the Company, any "Person" or "group" (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act or any successor provisions to
either of the foregoing), including any group acting for the purpose of
acquiring, holding, voting or disposing of securities within the meaning of
Rule 13d-5(b)(1) under the Exchange Act, other than any one or more of the
Permitted Holders, becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act, except that a Person will be deemed to have
"beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of 35% or more of the voting
power of the Voting Stock of Holding or the Company; provided, however,
-------- -------
that the Permitted Holders are the "beneficial owners" (as defined in Rule
13d-3 under the Exchange Act, except that a Person will be deemed to have
"beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, in the aggregate of a lesser
percentage of the total voting power of all classes of the Voting Stock of
Holding or
47
the Company than such other Person or group (for purposes of this clause
(b), such Person or group shall be deemed to beneficially own any Voting
Stock of a specified corporation held by a parent corporation so long as
such Person or group beneficially owns, directly or indirectly, in the
aggregate a majority of the voting power of the Voting Stock of such parent
corporation); or
(c) the sale, transfer, assignment, lease, conveyance or other
disposition, directly or indirectly, of all or substantially all the assets
of Holding and the Restricted Subsidiaries, considered as a whole (other
than a disposition of such assets as an entirety or virtually as an
entirety to a Wholly Owned Subsidiary or one or more Permitted Holders)
shall have occurred, or Holding merges, consolidates or amalgamates with or
into any other Person (other than one or more Permitted Holders) or any
other Person (other than one or more Permitted Holders) merges,
consolidates or amalgamates with or into Holding, in any such event
pursuant to a transaction in which the outstanding Voting Stock of Holding
is reclassified into or exchanged for cash, securities or other Property,
other than any such transaction where (i) the outstanding Voting Stock of
Holding is reclassified into or exchanged for Voting Stock of the surviving
corporation and (ii) the Holders of the Voting Stock of Holding immediately
prior to such transaction own, directly or indirectly, not less than a
majority of the Voting Stock of the surviving corporation immediately after
such transaction and in substantially the same proportion as before the
transaction; or
(d) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of Holding or
the board of directors of the Company (together with any new directors
whose election or appointment by the applicable board or whose nomination
for election by the shareholders of Holding or the Company was approved by
a vote of 66-2/3% of the applicable directors then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of such board then in office; or
(e) the shareholders of Holding or the Company shall have approved any
plan of liquidation or dissolution of Holding or the Company.
48
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Hudson Respiratory Care Inc., a California
corporation.
"Company Exchange Certificate of Designation" means the Certificate of
Designation of the Powers, Preferences and Relative, Participating, Optional and
other Special Rights of the Company Preferred Stock.
"Company Exchange Debentures" means the 11 1/2% Subordinated Exchange
Debentures due 2010 of the Company, issuable in exchange for the Holding
Preferred Stock or the Company Preferred Stock.
"Company Exchange Indenture" means the indenture dated as of April 7,
1998, between the Company and the trustee to be named therein, governing the
Company Exchange Debentures.
"Company Preferred Stock" means the 11 1/2% Senior Exchangeable PIK
Preferred Stock due 2010 of the Company, issuable in exchange for the Holding
Preferred Stock.
"Consolidated Interest Coverage Ratio" means, as of any date of
determination, the ratio of (a) the aggregate amount of EBITDA for the most
recent four consecutive fiscal quarters ending at least 45 days prior to such
determination date to (b) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (i) if Holding or any Restricted Subsidiary
-------- -------
has Incurred any Debt since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated Interest Coverage Ratio is an Incurrence of Debt, or both,
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Debt as if such Debt had been Incurred on
the first day of such period and the discharge of any other Debt repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new Debt
as if such discharge had occurred on the first day of such period, (ii) if since
the beginning of such period Holding or any Restricted Subsidiary shall have
repaid, repurchased, legally defeased or otherwise discharged any Debt with
Capital Stock Sale Proceeds, Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to such discharge as if
such discharge had occurred on the first day of such period, (iii) if since the
beginning of such period Holding or any Restricted Subsidiary shall have made
any Asset Sale or if the transaction giving rise to the
49
need to calculate the Consolidated Interest Coverage Ratio is an Asset Sale, or
both, EBITDA for such period shall be reduced by an amount equal to the EBITDA
(if positive) directly attributable to the Property which is the subject of such
Asset Sale for such period, or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period, in either case as if
such Asset Sale had occurred on the first day of such period and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Debt of Holding or
any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged
with respect to Holding and its continuing Restricted Subsidiaries in connection
with such Asset Sale, as if such Asset Sale had occurred on the first day of
such period (or, if the Capital Stock of any Restricted Subsidiary is sold, by
an amount equal to the Consolidated Interest Expense for such period directly
attributable to the Debt of such Restricted Subsidiary to the extent Holding and
its continuing Restricted Subsidiaries are no longer liable for such Debt after
such sale), (iv) if since the beginning of such period Holding or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or
an acquisition of Property, including any acquisition of Property occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Debt) as if
such Investment or acquisition occurred on the first day of such period and (v)
if since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into Holding or any Restricted
Subsidiary since the beginning of such period) shall have made any Asset Sale,
Investment or acquisition of Property that would have required an adjustment
pursuant to clause (iii) or (iv) above if made by Holding or a Restricted
Subsidiary during such period, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto as if such
Asset Sale, Investment or acquisition occurred on the first day of such period.
For purposes of this definition, pro forma calculations shall be determined in
good faith by a responsible financial or accounting Officer of Holding and as
further contemplated by the definition of the term "pro forma". If any Debt
bears a floating rate of interest and is being given pro forma effect, the
interest expense on such Debt shall be calculated as if the rate in effect on
the date
50
of determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Debt if such Interest
Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of Holding and its consolidated Restricted Subsidiaries, plus,
to the extent not included in such total interest expense, and to the extent
Incurred by Holding or its Restricted Subsidiaries, (a) interest expense
attributable to capital leases, (b) amortization of debt discount and debt
issuance cost, including commitment fees, other than with respect to Debt
Incurred in connection with the Recapitalization, (c) capitalized interest, (d)
non-cash interest expenses, (e) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (f) net costs associated with Hedging Obligations (including
amortization of fees), (g) Disqualified Dividends other than Disqualified
Dividends paid with shares of Parity Stock or Junior Stock of Holding which is
not Disqualified Stock, (h) Preferred Stock dividends in respect of all
Preferred Stock of Restricted Subsidiaries held by Persons other than Holding or
a Wholly Owned Subsidiary, (i) interest Incurred in connection with Investments
in discontinued operations, (j) interest accruing on any Debt of any other
Person to the extent such Debt is Guaranteed by Holding or any Restricted
Subsidiary and (k) the cash contributions to any employee stock ownership plan
or similar trust to the extent such contributions are used by such plan or trust
to pay interest or fees to any Person (other than Holding) in connection with
Debt Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss)
of Holding and its consolidated Subsidiaries; provided, however, that there
-------- -------
shall not be included in such Consolidated Net Income (a) any net income (loss)
of any Person (other than Holding) if such Person is not a Restricted
Subsidiary, except that (i) subject to the exclusion contained in clause (d)
below, Holding's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate amount of
cash distributed by such Person during such period to Holding or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to a Restricted Subsidiary, to the limitations
contained in clause (c) below) and (ii) Holding's equity in a net loss of any
such Person other than an Unrestricted Subsidiary for such period shall be
included in determining such Consolidated Net Income, (b) for the purposes of
51
paragraph (l)(v) only, any net income (loss) of any Person acquired by Holding
or any of its consolidated Subsidiaries in a pooling of interests transaction
for any period prior to the date of such acquisition, (c) any net income (but
not loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject
to restrictions, directly or indirectly, on the payment of dividends or the
making of distributions, directly or indirectly, to Holding, except that subject
to the exclusion contained in clause (d) below, Holding's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash distributed by
such Restricted Subsidiary during such period to Holding or another Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to another Restricted Subsidiary, to the
limitation contained in this clause), (d) any gain (or, for purposes of
paragraphs (l)(iv) and (l)(xi) only, loss) realized upon the sale or other
disposition of any Property of Holding or any of its consolidated Subsidiaries
(including pursuant to any Sale and Leaseback Transaction) which is not sold or
otherwise disposed of in the ordinary course of business, provided that any tax
--------
benefit or tax liability resulting therefrom shall be excluded in such
Consolidated Net Income, (e) any extraordinary gain or loss, provided that any
--------
tax benefit or tax liability resulting therefrom shall be excluded in such
Consolidated Net Income, (f) the cumulative effect of a change in accounting
principles and (g) (i) any non-cash compensation expense realized for grants of
performance shares, stock options or other stock awards to officers, directors
and employees of Holding or any Restricted Subsidiary or (ii) compensation
expense realized with respect to periods prior to the Issue Date in respect of
payments under the Company's 1994 Amended and Restated Equity Participation Plan
or compensation expense, to the extent accrued in 1998, related to contingent
payments to existing managers of the Company pursuant to the Merger Agreement in
an aggregate amount not in excess of $2.4 million. Notwithstanding the
foregoing, for the purposes of paragraph (l)(v) only, there shall be excluded
from Consolidated Net Income any dividends, repayments of loans or advances or
other transfers of assets from Unrestricted Subsidiaries to Holding or a
Restricted Subsidiary to the extent such dividends, repayments or transfers
increase the amount of Restricted Payments permitted under such covenant
pursuant to clause (c)(iv) thereof.
"Credit Facility" means, with respect to the Company or any Restricted
Subsidiary, one or more debt or commercial paper facilities with banks or other
52
institutional lenders (including the New Credit Facility) providing for
revolving credit loans, term loans, receivables or inventory financing
(including through the sale of receivables or inventory to such lenders or to
special purpose, bankruptcy remote entities formed to borrow from such lenders
against such receivables or inventory) or trade letters of credit, in each case
together with any amendments, supplements, modifications (including by any
extension of the maturity thereof), refinancings or replacements thereof by a
lender or syndicate of lenders in one or more successive transactions (including
any such transaction that changes the amount available thereunder, replaces such
agreement or document, or provides for other agents or lenders).
"Currency Exchange Protection Agreement" means, in respect of a
Person, any foreign exchange contract, currency swap agreement, currency option
or other similar agreement or arrangement designed to protect such Person
against fluctuations in currency exchange rates.
"Debt" means, with respect to any Person on any date of determination
(without duplication), (a) the principal of and premium (if any) in respect of
(i) debt of such Person for money borrowed and (ii) debt evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable; (b) all Capital Lease Obligations of such
Person and all Attributable Debt in respect of Sale and Leaseback Transactions
entered into by such Person; (c) all obligations of such Person issued or
assumed as the deferred purchase price of Property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (d) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (a) through (c)
above) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (e) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends); (f) all obligations of the type
referred to in clauses (a) through
53
(e) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee; (g) all obligations of the type referred to in clauses (a) through
(f) of other Persons secured by any Lien on any Property of such Person (whether
or not such obligation is assumed by such Person), the amount of such obligation
being deemed to be the lesser of the value of such Property or the amount of the
obligation so secured; and (h) to the extent not otherwise included in this
definition, Hedging Obligations of such Person. The amount of Debt of any Person
at any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date; provided that the amount outstanding at any time of any Debt issued
--------
with original issue discount is the face amount of such Debt less the remaining
unamortized portion of the original issue discount of such Debt at such time as
determined in accordance with GAAP.
"Definitive Holding Preferred Stock" means, certificated Initial
Holding Preferred Stock or Series B Stock bearing, if required, the restricted
securities legend set forth in clause G of paragraph (m)(iii).
"Disqualified Dividends" means, for any dividend with respect to
Disqualified Stock, the quotient of the dividend divided by the difference
between one and the maximum statutory federal income tax rate (expressed as a
decimal number between 1 and 0) then applicable to the issuer of such
Disqualified Stock.
"Disqualified Stock" means, with respect to any Person, Redeemable
Stock of such Person as to which (i) the maturity, (ii) mandatory redemption or
(iii) redemption, repurchase, conversion or exchange at the option of the holder
thereof occurs, or may occur, on or prior to the first anniversary of the Stated
Maturity of the Holding Preferred Stock; provided, however, that Redeemable
-------- -------
Stock of such Person that would not otherwise be characterized as Disqualified
Stock under this definition shall not constitute Disqualified Stock (a) if such
Redeemable Stock is convertible or exchangeable into Debt or Disqualified Stock
solely at the option of the issuer thereof or (b) solely as a result of
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Redeemable Stock upon the occurrence of a "change of
control" occurring prior to the first anniversary of the Stated Maturity of the
Holding Preferred Stock, if
54
(x) such repurchase obligation may not be triggered in respect of such
Redeemable Stock unless a corresponding obligation also arises with respect to
the Holding Preferred Stock and (y) no such repurchase or redemption is
permitted to be consummated unless and until such Person shall have satisfied
all repurchase or redemption obligations with respect to any required purchase
offer made with respect to the Holding Preferred Stock.
"EBITDA" means, for any period, an amount equal to, for Holding and
its consolidated Restricted Subsidiaries, (a) the sum of Consolidated Net Income
for such period, plus the following to the extent reducing Consolidated Net
Income for such period: (i) the provision for taxes based on income or profits
or utilized in computing net loss, (ii) Consolidated Interest Expense, (iii)
depreciation, (iv) amortization expense and (v) any other non-cash items (other
than any such non-cash item to the extent that it represents an accrual of or
reserve for cash expenditures in any future period), minus (b) all non-cash
items increasing Consolidated Net Income for such period (other than any such
non-cash item to the extent that it will result in the receipt of cash payments
in any future period). Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, and the depreciation and amortization of, a
Restricted Subsidiary shall be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same proportion) that the net income of
such Restricted Subsidiary was included in calculating Consolidated Net Income
and only if a corresponding amount would be permitted at the date of
determination to be dividended to Holding by such Restricted Subsidiary without
prior approval (that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to such Restricted Subsidiary or
its shareholders.
"Employee Notes" means promissory notes of employees of Holding, the
Company or any of their Subsidiaries payable to Holding or the Company and
received in connection with the substantially concurrent purchase of common
stock Holding or of the Company by such employees.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Offer Registration Statement" means a registration statement
of Holding and, if applicable and permitted by the SEC, the Company on an
appropriate form under the Securities Act with respect to the Registered
55
Exchange Offer, all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Exchange Securities" means the Series B Stock issued in exchange for
the Initial Holding Preferred Stock and, if applicable, new exchange debentures
of the Company issued in exchange for the Company Exchange Debentures and new
preferred stock of the Company issued in exchange for the Company Preferred
Stock pursuant to the Exchange Offer Registration Statement.
"Fair Market Value" means, with respect to any Property, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined, except as otherwise provided, (a) if such Property has a Fair Market
Value equal to or less than $2.5 million, by any Officer of Holding or (b) if
such Property has a Fair Market Value in excess of $2.5 million, by a majority
of the Board of Directors and evidenced by a Board Resolution, dated within 30
days of the relevant transaction, delivered to the Transfer Agent.
"GAAP" means United States generally accepted accounting principles as
in effect on the Issue Date, including those set forth (a) in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants, (b) in the statements and pronouncements of the
Financial Accounting Standards Board, (c) in such other statements by such other
entity as approved by a significant segment of the accounting profession and (d)
the rules and regulations of the SEC governing the inclusion of financial
statements (including pro forma financial statements) in periodic reports
required to be filed pursuant to Section 13 of the Exchange Act, including
opinions and pronouncements in staff accounting bulletins and similar written
statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
56
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
- -------- -------
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Hedging Obligation" of any Person means any obligation of such Person
pursuant to any Interest Rate Agreement, Currency Exchange Protection Agreement
or any other similar agreement or arrangement.
"Holder" means the Person in whose name a share of Holding Preferred
Stock is registered on the Transfer Agent's books.
"Holding Preferred Stock" means the 11 1/2% Senior Exchangeable PIK
Preferred Stock of River Holding Corp.
"IAI" means an institution that is an "accredited investor" as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by merger, conversion, exchange or otherwise),
extend, assume, Guarantee or become liable in respect of such Debt or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Debt or obligation on the balance sheet of such Person (and "Incurrence"
and "Incurred" shall have meanings correlative to the foregoing); provided,
--------
however, that a change in GAAP that results in an obligation of such Person that
- -------
exists at such time, and is not theretofore classified as Debt, becoming Debt
shall not be deemed an Incurrence of such Debt; provided further, however, that
---------------- -------
solely for purposes of determining compliance with paragraphs (l)(iii) and
(l)(iv), amortization of debt discount shall not be deemed to be the Incurrence
of Debt, provided that in the case of Debt sold at a discount, the amount of
--------
such Debt Incurred shall at all times be the aggregate principal amount at
Stated Maturity.
"Indenture" means the Indenture dated as of the Issue Date among
Holding, the Company and the United States Trust Company of New York, as
Trustee, governing the Notes.
"Independent Appraiser" means an investment banking firm of national
standing or any third party
57
appraiser of national standing, provided that such firm or appraiser is not an
--------
Affiliate of Holding.
"Industrias Hudson" means Industrias Hudson S.A. de C.V.
"Interest Rate Agreement" means, for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect against fluctuations in interest
rates.
"Investment" by any Person means any direct or indirect loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person), advance or other
extension of credit or capital contribution (by means of transfers of cash or
other Property to others or payments for Property or services for the account or
use of others, or otherwise) to, or Incurrence of a Guarantee of any obligation
of, or purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidence of Debt issued by, any other Person. For purposes
of paragraphs (l)(v) and (l)(ix) and the definition of "Restricted Payment",
"Investment" shall include the portion (proportionate to Holding's equity
interest in such Subsidiary) of the Fair Market Value of the net assets of any
Subsidiary of Holding at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of such
-------- -------
Subsidiary as a Restricted Subsidiary, Holding shall be deemed to continue to
have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount
(if positive) equal to (a) Holding's "Investment" in such Subsidiary at the time
of such redesignation less (b) the portion (proportionate to Holding's equity
interest in such Subsidiary) of the Fair Market Value of the net assets of such
Subsidiary at the time of such redesignation. In determining the amount of any
Investment made by transfer of any Property other than cash, such Property shall
be valued at its Fair Market Value at the time of such Investment.
"Issue Date" means the date on which the Holding Preferred Stock is
initially issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the City of New York and Los
Angeles.
"Lien" means, with respect to any Property of any Person, any mortgage
or deed of trust, pledge,
58
hypothecation, assignment, deposit arrangement, security interest, lien, charge,
easement (other than any easement not materially impairing usefulness or
marketability), encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on or with respect to
such Property (including any Capital Lease Obligation, conditional sale or other
title retention agreement having substantially the same economic effect as any
of the foregoing or any Sale and Leaseback Transaction).
"Merger Agreement" means the Amended and Restated Merger Agreement
between Holding, River Acquisition Corp., the Company and shareholders of the
Company dated as of March 15, 1998, as in effect on the Issue Date.
"Merger" means the merger of River Acquisition Corp. with and into the
Company pursuant to the Merger Agreement.
"Mirror Preferred Stock" means the 11 1/2% Senior PIK Preferred Stock
due 2010 of the Company.
"Moody's" means Moody's Investors Service, Inc. or any successor to
the rating agency business thereof.
"Net Available Cash" from any Asset Sale or other transaction subject
to paragraph (l)(vi) means cash payments received therefrom (including any cash
payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring Person of Debt or other obligations relating to the Property that is
the subject of such transaction or received in any other non-cash form), in each
case net of (a) all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, provincial, foreign
and local taxes required to be accrued as a liability under GAAP, as a
consequence of such transaction, (b) all payments made on any Debt which is
secured by any Property subject to such transaction, in accordance with the
terms of any Lien upon or other security agreement of any kind with respect to
such Property, or which must by its terms, or in order to obtain a necessary
consent to such transaction, or by applicable law, be repaid out of the proceeds
from such transaction, (c) all distributions and other payments required to be
made to minority interest holders in Subsidiaries or joint ventures as a result
of such transaction and (d) the deduction of appropriate amounts provided by the
seller as a reserve, in accordance
59
with GAAP, against any liabilities associated with the Property disposed in such
transaction and retained by the Company or any Restricted Subsidiary after such
transaction.
"Notes" means the 9 1/8% Senior Subordinated Notes due 2008 of the
Company.
"Officer" means the Chief Executive Officer, the President, the Chief
Financial Officer or any Executive Vice President of Holding.
"Officers' Certificate" means a certificate signed by two Officers of
Holding, at least one of whom shall be the principal executive officer or
principal financial officer of Holding, and delivered to the Transfer Agent.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Transfer Agent. The counsel may be an employee of or counsel
to Holding.
"Permitted Debt" means:(a) Debt of the Company evidenced by the Notes
and of Subsidiary Guarantors evidenced by Subsidiary Guaranties; (b)(i) Debt
under the Credit Facility; provided that the aggregate principal amount of all
--------
such Debt under the Credit Facility comprised of (A) term loans at any one time
outstanding shall not exceed $40.0 million minus all principal amounts repaid in
respect of such term loans and (B) revolving credit loans or obligations at any
one time outstanding shall not exceed the greater of (x) $60.0 million and (y)
the sum of the amounts equal to (1) 60% of the net book value of the inventory
of the Company and the Restricted Subsidiaries and (2) 85% of the net book value
of the accounts receivable of the Company and the Restricted Subsidiaries, in
each case as of the most recent fiscal quarter ending at least 45 days prior to
the date of determination and (ii) Guarantees of Debt under the Credit Facility;
(c) Debt in respect of Capital Lease Obligations and Purchase Money Debt;
provided that (i) the aggregate principal amount of such Debt does not exceed
the Fair Market Value (on the date of the Incurrence thereof) of the Property
acquired, constructed or leased (including costs of installation, taxes and
delivery charges with respect to such acquisition, construction or lease) and
(ii) the aggregate principal amount of all Debt Incurred and then outstanding
pursuant to this clause (c) (together with all Permitted Refinancing Debt
Incurred in respect of Debt previously Incurred pursuant to this clause (c) and
then outstanding) does not exceed $15.0 million; (d) Debt of the Company owing
to and held by any Wholly Owned Subsidiary and Debt of a Wholly Owned Subsidiary
owing to and held by the Company or any Wholly Owned Subsidiary; provided,
--------
however,
- -------
60
that any subsequent issue or transfer of Capital Stock or other event that
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of any such Debt (except to the Company or
a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Debt by the issuer thereof; (e) Debt of a Wholly Owned
Subsidiary Incurred and outstanding on or prior to the date on which such Wholly
Owned Restricted Subsidiary was acquired by the Company or otherwise became a
Restricted Subsidiary (other than Debt Incurred as consideration in, or to
provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of transactions pursuant to which such
Wholly Owned Restricted Subsidiary became a Subsidiary of the Company or was
otherwise acquired by the Company); provided that at the time such Wholly Owned
Restricted Subsidiary was acquired by the Company or otherwise became a
Restricted Subsidiary and after giving pro forma effect to the Incurrence of
such Debt, the Company would have been able to Incur $1.00 of additional Debt
pursuant to clause (a) in the first paragraph of covenant (l)(iv); (f) Debt
under Interest Rate Agreements entered into by the Company or a Restricted
Subsidiary for the purpose of limiting interest rate risk in the ordinary course
of the financial management of the Company or such Restricted Subsidiary and not
for speculative purposes, provided that the obligations under such agreements
are directly related to payment obligations on Debt otherwise permitted by the
terms of covenant (l)(iv); (g) Debt under Currency Exchange Protection
Agreements entered into by the Company or a Restricted Subsidiary for the
purpose of limiting currency exchange rate risks directly related to
transactions entered into by the Company or such Restricted Subsidiary in the
ordinary course of business and not for speculative purposes; (h) Debt in
connection with one or more standby letters of credit or performance bonds
issued for the account of the Company or a Restricted Subsidiary in the ordinary
course of business or pursuant to self-insurance obligations and not in
connection with the borrowing of money or the obtaining of advances; (i) Debt
outstanding on the Issue Date not otherwise described in clauses (a) through (h)
above; (j) Debt not otherwise described in clauses (a) through (i) above and
clause (l) below in an aggregate principal amount outstanding at any one time
not to exceed $15.0 million; (k) Permitted Refinancing Debt Incurred in respect
of Debt Incurred pursuant to clause (a) of the first paragraph of covenant
(l)(iv) and clauses (a), (c), (e) and (i) above, subject, in the case of clause
(c) above, to the limitations set forth in the proviso thereto; and (l) Debt of
the Company under the Company Exchange Debentures.
61
"Permitted Holders" means Helen Hudson Lovaas, any member of the
senior management of the Company or Holding on the Issue Date and Freeman Spogli
& Co. Incorporated or any successor entity thereof controlled by the principals
of Freeman Spogli & Co. Incorporated or any entity controlled by, or under
common control with, Freeman Spogli & Co. Incorporated.
"Permitted Investment" means any Investment by Holding or a Restricted
Subsidiary in (a) any Restricted Subsidiary or any Person that will, upon the
making of such Investment, become a Restricted Subsidiary; provided that the
--------
primary business of such Restricted Subsidiary is a Related Business; (b) any
Person if as a result of such Investment such Person is merged or consolidated
with or into, or transfers or conveys all or substantially all its Property to,
Holding or a Restricted Subsidiary; provided that such Person's primary business
--------
is a Related Business; (c) Temporary Cash Investments; (d) receivables owing to
Holding or a Restricted Subsidiary, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; provided, however, that such trade terms may include such
-------- -------
concessionary trade terms as Holding or such Restricted Subsidiary deems
reasonable under the circumstances; (e) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in the ordinary
course of business; (f) (i) loans and advances to employees made in the ordinary
course of business consistent with past practices of Holding or such Restricted
Subsidiary, as the case may be; provided that such loans and advances do not
--------
exceed $1.0 million at any one time outstanding and (ii) loans and advances to,
or the receipt of Employee Notes from, employees of Holding, the Company or any
of their Subsidiaries made or received in connection with the substantially
concurrent purchase of common stock of Holding or the Company by such employees;
provided that the aggregate principal amount of such loans, advances and notes
- --------
payable shall not exceed $1.0 million at any one time outstanding; (g) stock,
obligations or other securities received in settlement of debts created in the
ordinary course of business and owing to Holding or a Restricted Subsidiary or
in satisfaction of judgments; (h) any Person to the extent such Investment
represents the non-cash portion of the consideration received in connection with
a disposition of assets; and (i) Investments in Persons engaged in a Related
Business not to exceed $20.0 million at any one time outstanding (it being
agreed that an Investment shall cease to be outstanding to the extent of
dividends, repayments of loans or advances or other transfers of
62
Property received by Holding or any Restricted Subsidiary from such Persons,
provided that such amounts do not increase the amount of Restricted Payments
- --------
which Holding and the Restricted Subsidiaries may make pursuant to clause
(c)(iv)(A) of paragraph (l)(v)).
"Permitted Refinancing Debt" means any Debt that Refinances any other
Debt, including any successive Refinancings, so long as (a) such Debt is in an
aggregate principal amount (or if Incurred with original issue discount, an
aggregate issue price) not in excess of the sum of (i) the aggregate principal
amount (or if Incurred with original issue discount, the aggregate accreted
value) then outstanding of the Debt being Refinanced and (ii) an amount
necessary to pay any fees and expenses, including premiums and defeasance costs,
related to such Refinancing, (b) the Average Life of such Debt is equal to or
greater than the Average Life of the Debt being Refinanced and (c) the Stated
Maturity of such Debt is no earlier than the Stated Maturity of the Debt being
Refinanced; provided, however, that Permitted Refinancing Debt shall not include
-------- -------
(x) Debt of a Subsidiary that Refinances Debt of Holding or the Company or (y)
Debt of Holding or the Company or a Restricted Subsidiary that Refinances Debt
of an Unrestricted Subsidiary.
"Person" means any individual, corporation, company (including any
limited liability company), partnership, joint venture, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
the payment of dividends, or as to the distribution of assets upon any voluntary
or involuntary liquidation or dissolution of such Person, over shares of any
other class of Capital Stock issued by such Person.
"pro forma" means, with respect to any calculation made or required to
be made pursuant to the terms hereof, a calculation performed in accordance with
Article 11 of Regulation S-X promulgated under the Securities Act, as
interpreted in good faith by the Board of Directors after consultation with the
independent certified public accountants of Holding, or otherwise a calculation
made in good faith by the Board of Directors after consultation with the
independent certified public accountants of Holding, as the case may be.
63
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including Capital Stock in, and other securities of, any
other Person.
"Public Equity Offering" means an underwritten public offering of
common stock of Holding or the Company, as applicable, pursuant to an effective
registration statement under the Securities Act.
"Purchase Money Debt" means Debt (a) consisting of the deferred
purchase price of property, conditional sale obligations, obligations under any
title retention agreement, other purchase money obligations and obligations in
respect of industrial revenue bonds, in each case where the maturity of such
Debt does not exceed the anticipated useful life of the asset being financed,
and (b) Incurred to finance the acquisition or construction by Holding or a
Restricted Subsidiary of such asset, including remodeling thereof and additions
and improvements thereto; provided, however, that such Debt is Incurred within
-------- -------
180 days after such acquisition of such asset by Holding or a Restricted
Subsidiary or completion of such construction, remodeling, addition or
improvement, as the case may be.
"Redeemable Stock" means, with respect to any Person, any Capital
Stock that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable, in either case at the option of the
holder thereof) or otherwise (a) matures or is mandatorily redeemable pursuant
to a sinking fund obligation or otherwise, (b) is or may become redeemable or
repurchaseable at the option of the holder thereof, in whole or in part, or (c)
is convertible or exchangeable, in either case at the option of the holder
thereof, for Debt of Disqualified Stock.
"Refinance" means, in respect of any Debt, to finance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue other Debt, in
exchange or replacement for, such Debt. "Refinanced" and "Refinancing" shall
have correlative meanings.
"Registered Exchange Offer" means the proposed offer to the Holders to
issue and deliver to such Holders, in exchange for the Initial Holding Preferred
Stock (or, if the Initial Holding Preferred Stock has been exchanged therefor,
the Company Preferred Stock or Company Exchange Debentures, as applicable), a
like principal amount or liquidation preference of Exchange Securities.
64
"Registration Agreement" means the Registration Agreement, dated as of
April 7, 1998, among the Company, Holding and Salomon Brothers Inc and BT Alex.
Brown Incorporated as purchasers.
"Regulation S Holding Preferred Stock" means all Initial Holding
Preferred Stock offered and sold outside the United States in reliance on
Regulation S under the Securities Act.
"Related Business" means any business that is related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Issue Date.
"Restricted Payment" means (a) any dividend or distribution (whether
made in cash, securities or other Property) declared or paid on or with respect
to any shares of Parity Stock or Junior Stock of Holding or any Capital Stock of
any Restricted Subsidiary (including any payment in connection with any merger
or consolidation with or into Holding or any Restricted Subsidiary), except for
any dividend or distribution which is made solely to Holding or a Restricted
Subsidiary (and, if such Restricted Subsidiary is not a Wholly Owned Subsidiary,
to the other shareholders of such Restricted Subsidiary on a pro rata basis or
--- ----
on a basis that results in the receipt by Holding or a Restricted Subsidiary of
dividends or distributions of greater value than it would receive on a pro rata
basis) or any dividend or distribution payable solely in shares of Junior Stock
(other than Disqualified Stock) of Holding; (b) the purchase, repurchase,
redemption, acquisition or retirement for value of any Parity Stock or Junior
Stock of Holding or any Capital Stock of any Affiliate of Holding (other than
from Holding or a Restricted Subsidiary) or any securities exchangeable for or
convertible into any such Parity Stock, Junior Stock or Capital Stock, including
the exercise of any option to exchange any such Parity Stock, Junior Stock or
Capital Stock (other than for or into Capital Stock that is not Disqualified
Stock); or (c) any Investment (other than Permitted Investments) in any Person.
"Restricted Subsidiary" means (a) any Subsidiary of Holding unless
such Subsidiary shall have been designated an Unrestricted Subsidiary as
permitted or required pursuant to paragraph (l)(ix) and (b) an Unrestricted
Subsidiary which is redesignated as a Restricted Subsidiary as permitted
pursuant to paragraph (l)(ix).
"Rule 144A Holding Preferred Stock" means the Initial Holding
Preferred Stock purchased by the Purchasers
65
from Holding pursuant to the Purchase Agreement, other than the Regulation S
Holding Preferred Stock.
"S&P" means Standard & Poor's Ratings Service or any successor to the
rating agency business thereof.
"Sale and Leaseback Transaction" means any arrangement relating to
Property now owned or hereafter acquired whereby Holding or a Restricted
Subsidiary transfers such Property to another Person and the Company or a
Restricted Subsidiary leases if from such Person.
"Securities Act" means the Securities Act of 1933.
"Shelf Registration Statement" means a "shelf" registration statement
of the Company and Holding pursuant to the provisions of the Registration
Agreement which covers the Initial Holding Preferred Stock (or if the Initial
Holding Preferred Stock has been exchanged therefor, the Company Preferred Stock
or Company Exchange Debentures, as applicable), and the Exchange Securities, as
applicable, on an appropriate form under Rule 415 under the Securities Act, or
any similar rule that may be adopted by the SEC, all amendments and supplements
to such registration statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subsidiary" means, in respect of any Person, any corporation,
company, association, partnership, joint venture or other business entity of
which more than 50% of the total voting power of shares of Capital Stock or
other interests (including partnership interests) entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled directly or
indirectly, by (a) such Person, (b) such Person and one or more Subsidiaries of
such Person or (c) one or more Subsidiaries of such Person.
66
"Subsidiary Guarantor" means each Subsidiary of the Company that
becomes a Subsidiary Guarantor pursuant to the terms of the Notes.
"Subsidiary Guaranty" means a Guarantee of the Notes on the terms set
forth in the Indenture by a Subsidiary Guarantor of the Company's obligations
with respect to the Notes.
"Temporary Cash Investments" means any of the following: (a)
Investments in U.S. Government Obligations; (b) Investments in time deposit
accounts, certificates of deposit and money market deposits maturing within 90
days of the date of acquisition thereof issued by a bank or trust company which
is organized under the laws of the United States of America or any state thereof
having capital surplus and undivided profits aggregating in excess of $500.0
million and whose long-term debt rate is "A-3 or "A-" or higher according to
Moody's or S&P (or such similar equivalent rating by at least one "nationally
recognized statistical rating organization" (as defined in Rule 436 under the
Securities Act)); (c) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (a) entered into
with a bank meeting the qualifications described in clause (b) above; (d)
Investments in commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of Holding)
organized and in existence under the laws of the United States of America with a
rating at the time as of which any investment therein is made of "P-1" (or
higher) according to Moody's or "A-1" (or higher) according to S&P (or such
similar equivalent rating by at least one "nationally recognized statistical
rating organization" (as defined in Rule 436 under the Securities Act)): (e)
direct obligations (or certificates representing an ownership in such
obligations) of any state of the United States of America (including any agency
or instrumentality thereof) for the payment of which the full faith and credit
of such state is pledged and which are not callable or redeemable at the
issuer's option, provided that (i) the long-term debt of such state is rated "A-
--------
3" or "A-" or higher according to Moody's or S&P (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)) and (ii) such obligations
mature within 180 days of the date of acquisition thereof; and (f) investments
in money market funds which invest substantially all their assets in securities
of the types described in clauses (a) through (e) above.
67
"Unrestricted Subsidiary" means (a) any Subsidiary of Holding in
existence on the Issue Date that is not a Restricted Subsidiary; (b) any
Subsidiary of an Unrestricted Subsidiary; and (c) any Subsidiary of Holding that
is designated after the Issue Date as an Unrestricted Subsidiary as permitted or
required pursuant to paragraph (l)(ix) and not thereafter redesignated as a
Restricted Subsidiary as permitted pursuant thereto.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary
all the Voting Stock of which (except directors' qualifying shares) is at such
time owned, directly or indirectly, by Holding and its other Wholly Owned
Subsidiaries.
68
IN WITNESS WHEREOF, River Holding Corp., Inc., has caused this
Certificate of Designation to be signed by Chuck P. Rullman, its President, and
John D. Ralph, its Secretary, this 6th day of April, 1998.
RIVER HOLDING CORP.,
by /s/ Charles P. Rullman
-----------------------
Name: Chuck P. Rullman
Title: President
by /s/ Jon D. Ralph
-----------------------
Name: Jon D. Ralph
Title: Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
RIVER HOLDING CORP.
River Holding Corp. (the "Corporation"), a corporation organized and
existing by virtue of the General Corporation Law of the State of Delaware (the
"General Corporation Law"), DOES HEREBY CERTIFY THAT:
FIRST: The directors of the Corporation, acting by written consent and
pursuant to Section 141(f) and 242 of the General Corporation Law, adopted a
resolution proposing and declaring advisable the amendment to the Certificate of
Incorporation of the Corporation set forth below, and calling for the submission
of said amendment for the consideration of all of the holders of the issued and
outstanding stock of the Corporation.
SECOND: Article Fourth is deleted in its entirety and replaced with a
new Article Fourth that shall read in its entirety as follows:
"Fourth: The total number of shares of stock that the Corporation
shall have authority to issue is Seventeen Million (17,000,000),
consisting of Fifteen Million (15,000,000) shares of common stock,
$.01 par value per share (the "Common Stock"), and Two Million
(2,000,000) shares of preferred stock, $.01 par value per share (the
"Preferred Stock").
"The Board of Directors (the "Board") is authorized, subject to
limitations prescribed by law and the provisions of the Article
FOURTH, to provide for the issuance of the shares of Preferred Stock
in series, and by filing a certificate pursuant to the applicable law
of the State of Delaware, 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
the qualifications, limitations or restrictions thereof.
"The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
"(a) The number of shares constituting that series and the
distinctive designation of that series;
"(b) The dividend rate on the shares of that series, whether
dividends shall
be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that
series;
"(c) Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such
voting rights;
"(d) Whether that series shall have conversion privileges,
including provision for adjustment of the conversion rate in such
events as the Board shall determine;
"(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or date upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
"(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
"(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment
of shares of that series;
"(h) Any other relative rights, preferences and limitations of
that series."
THIRD: These amendments have been consented to and authorized by the
written consent of the holder of all of the issued and outstanding stock of the
Corporation given in accordance with the provisions of Section 228 of the
General Corporation Law.
FOURTH: These amendments have been duly adopted in accordance with
applicable provisions of Section 242 of the General Corporation Law.
2
IN WITNESS WHEREOF, said River Holding Corp. has caused this
Certificate to be signed by Charles P. Rullman, President, and Sanjay K. Morey,
an Assistant Secretary, this 1/st/ day of April 1998.
/s/ Charles P. Rullman
-----------------------------
Name: Charles P. Rullman
Title: President
ATTEST:
By: /s/ Sanjay K. Morey
-------------------------------
Name: Sanjay K. Morey
Title: Assistant Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
RIVER HOLDING CORP.
River Holding Corp. (the "Corporation"), a corporation organized and
existing by virtue of the General Corporation Law of the State of Delaware (the
"General Corporation Law"), DOES HEREBY CERTIFY THAT:
FIRST: The directors of the Corporation, acting by written consent and
pursuant to Section 141(f) and 242 of the General Corporation Law, adopted a
resolution proposing and declaring advisable the amendment to the Certificate of
Incorporation of the Corporation set forth below, and calling for the submission
of said amendment for the consideration of all of the holders of the issued and
outstanding stock of the Corporation.
SECOND: Article Fourth is deleted in its entirety and replaced with a
new Article Fourth that shall read in its entirety as follows:
"Fourth: The total number of shares of stock that the Corporation
shall have authority to issue is Seventeen Million (17,000,000),
consisting of Fifteen Million (15,000,000) shares of common stock,
$.01 par value per share (the "Common Stock"), and Two Million
(2,000,000) shares of preferred stock, $.01 par value per share (the
"Preferred Stock").
"The Board of Directors (the "Board") is authorized, subject to
limitations prescribed by law and the provisions of the Article
FOURTH, to provide for the issuance of the shares of Preferred Stock
in series, and by filing a certificate pursuant to the applicable law
of the State of Delaware, 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
the qualifications, limitations or restrictions thereof.
"The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
"(a) The number of shares constituting that series and the
distinctive designation of that series;
"(b) The dividend rate on the shares of that series, whether
dividends shall
be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that
series;
"(c) Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such
voting rights;
"(d) Whether that series shall have conversion privileges,
including provision for adjustment of the conversion rate in such
events as the Board shall determine;
"(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption,
including the date or date upon or after which they shall be
redeemable, and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
"(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
"(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment
of shares of that series;
"(h) Any other relative rights, preferences and limitations of
that series.
"Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid
or declared and set apart for payment on the common shares with
respect to the same dividends period.
"If upon any voluntary or involuntary liquidation, dissolution or
winding up of the corporation, the assets available for distribution
to holders of shares of Preferred Stock of all series shall be
insufficient to pay such holders the full preferential amount to which
they are entitled, then such assets shall be distributed ratably among
the shares of all series of Preferred Stock in accordance with the
respective preferential amounts (including unpaid cumulative
dividends, if any) payable with respect thereto."
THIRD: These amendments have been consented to and authorized by the
written consent of the holder of all of the issued and outstanding stock of the
Corporation given in accordance with the provisions of Section 228 of the
General Corporation Law.
2
FOURTH: These amendments have been duly adopted in accordance with
applicable provisions of Section 242 of the General Corporation Law.
3
IN WITNESS WHEREOF, said River Holding Corp. has caused this
Certificate to be signed by Charles P. Rullman, President, and Sanjay K. Morey,
an Assistant Secretary, this 25th day of March 1998.
/s/ Charles P. Rullman
-----------------------------
Name: Charles P. Rullman
Title: President
ATTEST:
By: /s/ Sanjay K. Morey
----------------------------
Name: Sanjay K. Morey
Title: Assistant Secretary
CERTIFICATE OF INCORPORATION
OF
RIVER HOLDING CORP.
First: The name of the corporation is River Holding Corp. (the
"Corporation").
Second: The address of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle 19801. The name and address of the
Corporation's registered agent in the State of Delaware is The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle 19801.
Third: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may now or hereafter be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code.
Fourth: The total number of shares of stock which the Corporation
shall have authority to issue is One Thousand (1,000), consisting of One
Thousand (1,000) shares of common stock, $.01 par value per share (the "Common
Stock").
Fifth: The business and affairs of the Corporation shall be managed
by and under the direction of the Board of Directors. The exact number of
directors of the Corporation shall be fixed by or in the manner provided in the
Bylaws of the Corporation (the "Bylaws").
Sixth: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized:
(a) to adopt, repeal, rescind, alter or amend in any respect the
Bylaws, and to confer in the Bylaws powers and authorities upon the directors of
the Corporation in addition to the powers and authorities expressly conferred
upon them by statute;
(b) from time to time to set apart out of any funds or assets of the
Corporation available for dividends an amount or amounts to be reserved as
working capital or for any other lawful purpose and to abolish any reserve so
created and to determine whether any, and, if any, what part, of the surplus of
the Corporation or its net profits applicable to dividends shall be declared in
dividends and paid to its stockholders, and all rights of the holders of stock
of the Corporation in respect of dividends shall be subject to the power of the
Board of Directors so to do;
(c) subject to the laws of the State of Delaware, from time to time
to sell, lease or otherwise dispose of any part or parts of the properties of
the Corporation and to cease to conduct the business connected therewith or
again to resume the same, as it may deem best; and
(d) in addition to the powers and authorities hereinbefore and by the
laws of the State of Delaware conferred upon the Board of Directors, to execute
all such powers and to do all acts and things as may be exercised or done by the
Corporation; subject, nevertheless, to the express provisions of said laws, of
the Certificate of Incorporation of the Corporation and its Bylaws.
Seventh: Meetings of stockholders of the Corporation may be held
within or without the State of Delaware, as the Bylaws may provide. The books
of the Corporation may be kept (subject to any provision of applicable law)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws.
Eighth: The Corporation reserves the right to adopt, repeal, rescind,
alter or amend in any respect any provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by applicable law, and
all rights conferred on stockholders herein are granted subject to this
reservation.
Ninth: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, as the same exists or hereafter may be amended or (iv) for any
transaction from which the director derived an improper benefit. If the
Delaware General Corporation Law hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the Corporation, in addition to the limitation on personal liability
provided herein, shall be limited to the fullest extent permitted by the amended
Delaware Corporation Law. No amendment to or repeal of this Article Ninth shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
Tenth: The name and mailing address of the incorporator of the
Corporation are:
Cynthia M. Dunnett
Riordan & McKinzie
300 South Grand Avenue, 29th Floor
Los Angeles, California 90071
2.
I, the undersigned, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this Certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 27th day of January, 1998.
/s/ Cynthia M. Dunnett
-------------------------------------
Cynthia M. Dunnett, Incorporator
3.