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Exhibit 4.3
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State of Idaho
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Department of State
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I Pete T. Cenarrusa, Secretary of State of the State of Idaho, hereby
certify that I am the custodian of the corporation, limited liability company,
limited partnership, limited liability partnership, and assumed business name
records of this State.
I FURTHER CERTIFY That the annexed is a full, true and complete transcript
of articles of amendment to articles of incorporation for MCMS, INC., file
number C 108686, received and filed on February 24, 1998.
Dated: February 25, 1998
[SEAL OMITTED] /s/ Pete [illegible] Cenarrusa
GREAT SEAL OF
THE STATE OF SECRETARY OF STATE
IDAHO
By /s/ Alisa Hardley
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MCMS, INC.
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 12 1/2%
SENIOR EXCHANGEABLE PREFERRED STOCK AND 12 1/2%
SERIES B SENIOR EXCHANGEABLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
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Pursuant to Section 30-1-602 of the
Business Corporation Act of the State of Idaho
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MCMS, Inc. (the "Corporation"), a corporation organized and existing
under the Business Corporation Act of the State of Idaho, does hereby certify
that, pursuant to authority conferred upon the board of directors of the
Corporation (the "Board of Directors") by its Amended and Restated Articles of
Incorporation (hereinafter referred to as the "Articles of Incorporation"), and
pursuant to the provisions of Section 30-1-602 of the Business Corporation Act
of the State of Idaho, said Board of Directors, by unanimous written consent
dated, February 23, 1998, duly approved and adopted the following resolution
(the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Articles of Incorporation, the Board of Directors does
hereby create, authorize and provide for the issuance of 12 1/2% Senior
Exchangeable Preferred Stock and 12 1/2% Series B Senior Exchangeable
Preferred Stock, each with a par value of $.001 per share, and each with a
stated value of $100.00 per share, consisting initially of an aggregate of
750,000 shares, having the designations, preferences, relative,
participating, optional and other special rights and the qualifications,
limitations and restrictions thereof that are set forth in the Articles of
Incorporation and in this Resolution as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of preferred stock of the Corporation a class of preferred
stock, which includes preferred stock designated as the "12 1/2% Senior
Exchangeable Preferred Stock" and preferred stock designated as the "12 1/2%
Series B Senior Exchangeable Preferred Stock." The 12 1/2% Senior Exchangeable
Preferred Stock and the 12 1/2% Series B Senior Exchangeable Preferred Stock
shall have identical terms, except that the 12 1/2% Series B Senior Exchangeable
Preferred Stock
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will not contain terms with respect to transfer restrictions. The 12 1/2% Senior
Exchangeable Preferred Stock and the 12 1/2% Series B Senior Exchangeable
Preferred Stock are hereby collectively referred to as the "Exchangeable
Preferred Stock." The number of shares constituting Exchangeable Preferred Stock
shall be 750,000. 250,000 shares of the Exchangeable Preferred Stock shall be
initially issued, with an aggregate of 500,000 additional shares reserved for
issuance in accordance with paragraph (c)(i) hereof and the Exchange Offer (as
defined in the Registration Rights Agreement). The liquidation preference of the
Exchangeable Preferred Stock shall be $100.00 per share.
(b) Rank. The Exchangeable Preferred Stock shall, with respect to
dividend rights and rights upon liquidation, winding-up and dissolution of the
Corporation, rank (i) senior to all classes of Common Stock of the Corporation
and to each other class of preferred stock of the Corporation established
hereafter by the Board of Directors, the terms of which do not expressly provide
that it ranks senior or on a parity with the Exchangeable Preferred Stock as to
dividend rights and rights upon liquidation, winding-up and dissolution of the
Corporation (collectively referred to, together with all classes of common stock
of the Corporation, as "Junior Stock"); (ii) subject to certain conditions, on a
parity with each other class of preferred stock of the Corporation 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 Exchangeable Preferred Stock
as to dividend rights and rights upon liquidation, winding-up and dissolution
(collectively referred to as "Parity Stock"); and (iii) subject to certain
conditions, junior to each class of preferred stock of the Corporation
established after the date hereof by the Board of Directors, the terms of which
expressly provide that such class will rank senior to the preferred stock as to
dividend rights and rights upon liquidation, winding-up and dissolution of the
Corporation (collectively referred to as "Senior Stock").
(c) Dividends.
(i) The Holders of the outstanding shares of Exchangeable
Preferred Stock shall be entitled to receive, when, as and if declared by
the Board of Directors, out of funds legally available therefor,
distributions in the form of cash dividends on each share of Exchangeable
Preferred Stock, at a rate per annum equal to 12 1/2% of the liquidation
preference per share of the Exchangeable Preferred Stock, payable
quarterly. All dividends shall be cumulative, whether or not earned or
declared, on a daily basis from the Issue Date and shall be payable
quarterly
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in arrears on each Dividend Payment Date, commencing on June 1, 1998, to
holders of record on each Dividend Record Date immediately preceding the
relevant Dividend Payment Date, provided that if any dividend (including
Additional Dividends, if any) payable on any Dividend Payment Date on or
before March 1, 2003 is not paid in full in cash on such Dividend Payment
Date, the amount payable as dividends on such Dividend Payment Date that
is not paid in cash on such Dividend Payment Date shall be paid in
additional shares of Exchangeable Preferred Stock (including fractional
shares) (calculated by dividing (x) the amount of the cash dividend
payable to each holder of record of the Exchangeable Preferred Stock on
the basis of all shares held of record by such Holder, whether evidenced
by one or more certificates, by (y) $100.00), on such Dividend Payment
Date and shall be deemed paid in full and shall not accumulate. After
March 1, 2003, all dividends shall be paid in cash. Each dividend shall be
payable to Holders of record of the Exchangeable Preferred Stock as they
appear on the stock books of the Corporation on the Dividend Record Date
immediately preceding the related Dividend Payment Date. Dividends shall
cease to accumulate in respect of the Exchangeable Preferred Stock on the
Exchange Date or on the date of their earlier redemption unless the
Corporation shall have failed to issue the appropriate aggregate principal
amount of Exchange Debentures in respect of the Exchangeable Preferred
Stock on such Exchange Date or shall have failed to pay the relevant
redemption price on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the
Exchangeable Preferred Stock pursuant to paragraph (c)(i) shall be paid
pro rata to the Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Corporation to pay or set apart for payment, any dividends
on shares of the Exchangeable Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend
Period and dividends in connection with any optional redemption pursuant
to paragraph (e)(i) may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to Holders of record on
such date, not more than forty-five (45) days prior to the payment
thereof, as may be fixed by the Board of Directors.
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(v) No full dividends may be declared by the Board of
Directors or paid or funds set apart for the payment of dividends by the
Corporation on any Parity Stock for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid (or
are deemed declared and paid) in full or declared and, if payable in cash,
a sum in cash sufficient for such payment is set apart for such payment on
the Exchangeable Preferred Stock for all Dividend Periods terminating on
or prior to the date of payment of such full dividends on such Parity
Stock. If full dividends are not so paid, all dividends declared upon
shares of the Exchangeable Preferred Stock and any other Parity Stock
shall be declared pro rata so that --- ---- the amount of dividends
declared per share on the Exchangeable Preferred Stock and such Parity
Stock shall in all cases bear to each other the same ratio that
accumulated and unpaid dividends per share on the Exchangeable Preferred
Stock and such Parity Stock bear to each other.
(vi) (A) Holders of shares of the Exchangeable Preferred Stock
shall be entitled to receive the dividends provided for in paragraph
(c)(i) hereof in preference to and in priority over any dividends upon any
of the Junior Stock.
(B) So long as any share of the Exchangeable Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend on any of the Junior Stock or make any payment on
account of, or set apart for payment money for a sinking or other similar
fund for, the purchase, redemption or other retirement of, any of the
Junior Stock or any warrants, rights, calls or options exercisable for or
convertible into any of the Junior Stock whether in cash, obligations or
shares of the Corporation or other property (other than dividends in
Junior Stock to the holders of Junior Stock), and shall not permit any
corporation or other entity directly or indirectly controlled by the
Corporation to purchase or redeem any of the Junior Stock or any such
warrants, rights, calls or options unless full cumulative dividends
determined in accordance herewith on the Exchangeable Preferred Stock have
been paid (or are deemed paid) in full or declared and, if payable in
cash, a sum in cash set apart sufficient for such payment on the
Exchangeable Preferred Stock for all Dividend Periods terminating on or
prior to the date of such dividends or payments on such Junior Stock.
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(C) So long as any share of the Exchangeable Preferred Stock is
outstanding, the Corporation shall not make any payment on account of, or
set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Parity Stock or
any warrants, rights, calls or options exercisable for or convertible into
any of the Parity Stock and shall not permit any corporation or other
entity directly or indirectly controlled by the Corporation to purchase or
redeem any of the Parity Stock or any such warrants, rights, calls or
options unless full cumulative dividends determined in accordance herewith
on the Exchangeable Preferred Stock have been paid (or are deemed paid) in
full.
(vii) Dividends payable on the Exchangeable Preferred Stock
for any period less than a year shall be computed on the basis of a
360-day year of twelve 30-day months. The amount of Additional Dividends
(if any) will be determined consistent with the preceding sentence and by
multiplying the applicable Additional Dividends by a fraction, the
numerator of which is the number of days such rate was applicable during
any Dividend Period and the denominator of which is 360.
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the Holders
of shares of Exchangeable Preferred Stock then outstanding shall be
entitled to be paid, out of the assets of the Corporation available for
distribution to its shareholders, an amount in cash equal to the
liquidation preference for each share outstanding, plus, without
duplication, an amount in cash equal to accumulated and unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding up
(including 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) before any payment shall be made or any assets distributed
to the holders of any of the Junior Stock, including, without limitation,
Common Stock of the Corporation. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the assets of
the Corporation are not sufficient to pay in full the liquidation payments
payable to the holders of outstanding shares of the Exchangeable Preferred
Stock and all other Parity Stock, then the holders of all such shares
shall share equally and ratably in
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any such distribution of assets in proportion to the full liquidation
preference to which each is entitled until such liquidation preferences
are paid in full, and then in proportion to their respective amounts of
accumulated but unpaid dividends. The holders of outstanding shares of
Exchangeable Preferred Stock and all other Parity Stock shall not be
entitled to any further participation in any distribution of assets of the
Corporation after payment of the full amount of the liquidation
preferences and accumulated and unpaid dividends to which such holders are
entitled.
(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 the Corporation nor the consolidation or merger of the Corporation with
or into one or more entities shall be deemed to be a liquidation,
dissolution or winding-up of the affairs of the Corporation.
(e) Redemption.
(i) Optional Redemption. (A) The Corporation may, at the
option of the Board of Directors, redeem at any time on or after March 1,
2003, subject to contractual and other restrictions with respect thereto
and to the legal availability of funds therefor, in whole or in part, in
the manner provided for in paragraph (e)(iii) hereof, any or all of the
shares of the Exchangeable Preferred Stock, at the redemption prices
(expressed as a percentage of the liquidation preference) set forth below,
plus, without duplication, an amount in cash equal to all accumulated and
unpaid dividends per share to the Redemption Date (including an amount in
cash equal to a prorated dividend for the period from the Dividend Payment
Date immediately prior to the Redemption Date to the Redemption Date) (the
"Optional Redemption Price"), if redeemed during the twelve-month period
commencing on March 1 of each of the years set forth below:
2003............................................ 106.250%
2004............................................ 104.167%
2005............................................ 102.083%
2006 and thereafter............................. 100.000%
(B) In addition to the foregoing paragraph (e)(i)(A), prior to March
1, 2001, the Corporation may, at its option, use the net cash proceeds of
one or more Pub-
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lic Equity Offerings to redeem in whole, or in part, from any source of
funds legally available therefor, in the manner provided for in paragraph
(e)(iii) hereof, the Preferred Stock, at a redemption price of 112.50% of
the liquidation preference thereof, plus, without duplication, an amount
in cash equal to all accumulated and unpaid dividends to the Redemption
Date including an amount in cash equal to a prorated dividend for the
period from the Dividend Payment Date immediately prior to the Redemption
Date to the Redemption Date (the "Cash Proceeds Redemption Price"). In
order to effect the foregoing redemption with the proceeds of any Public
Equity Offering, the Corporation shall make such redemption not more than
120 days after the consummation of any such Public Equity Offering.
(ii) Mandatory Redemption. On March 1, 2010, the Corporation
shall redeem (subject to the legal availability of funds therefor) in the
manner provided for in paragraph (e)(iii) hereof, all of the shares of the
Exchangeable Preferred Stock then outstanding at a redemption price equal
to 100% of the liquidation preference per share, plus, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends per share to the Redemption Date (including an amount equal to a
prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date) (the
"Mandatory Redemption Price").
(iii) Procedures for Redemption. (A) At least thirty (30) days
and not more than sixty (60) days prior to the date fixed for any
redemption of the Exchangeable Preferred Stock, the Corporation shall send
written notice (the "Redemption Notice") by first class mail, postage
prepaid, to each Holder of record on the record date fixed for such
redemption of the Exchangeable Preferred Stock at such Holder's address as
it appears on the stock books of the Corporation, provided 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 Exchangeable
Preferred Stock to be redeemed except as to the Holder or Holders to whom
the Corporation 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)(A),
(e)(i)(B) or (e)(ii);
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(2) the Optional Redemption Price, the Cash Proceeds
Redemption Price or the Mandatory Redemption Price, as the case may
be;
(3) in the case of an optional redemption pursuant to
(e)(i)(A) or (e)(i)(B) hereof, whether all or less than all the
outstanding shares of the Exchangeable Preferred Stock are to be
redeemed and the total number of shares of the Exchangeable
Preferred Stock being redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Corporation, in the
manner, at the place or places and at the price designated, his/her
certificate or certificates representing the shares of Exchangeable
Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Exchangeable Preferred
Stock to be redeemed shall cease to accumulate on such Redemption
Date unless the Corporation defaults in the payment of the Optional
Redemption Price, the Cash Proceeds Redemption Price or the
Mandatory Redemption Price, as the case may be.
(B) Each Holder of Exchangeable Preferred Stock called for
redemption shall surrender the certificate or certificates representing
such shares of Exchangeable Preferred Stock to the Corporation, duly
endorsed (or otherwise in proper form for transfer, as determined by the
Corporation), in the manner and at the place designated in the Redemption
Notice, and on the Redemption Date the full Optional Redemption Price, the
Cash Proceeds Redemption Price or Mandatory Redemption 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.
(C) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the applicable redemption price,
dividends on the Exchangeable Preferred Stock called for redemption shall
cease to accumulate, and all rights of the Holders of such shares shall
terminate with respect thereto on the Redemption Date,
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other than the right to receive the Optional Redemption Price, the Cash
Proceeds Redemption Price or the Mandatory Redemption Price, as the case
may be, without interest; provided, however, that if a notice of
redemption shall have been given as provided in paragraph (iii)(A) above
and the funds necessary for redemption (including an amount in respect of
all dividends that will accumulate to the Redemption Date) shall have been
segregated and irrevocably set apart by the Corporation, in trust for the
equal and ratable benefit of the Holders of the shares to be redeemed,
then, 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
cease to be shareholders of the Corporation and shall be entitled only to
receive the Optional Redemption Price, the Cash Proceeds Redemption Price
or the Mandatory Redemption Price, as the case may be, without interest.
(D) In the event of a redemption pursuant to paragraph (e)(i)(A) or
(e)(i)(B) hereof of only a portion of the then outstanding shares of the
Exchangeable Preferred Stock, the Corporation shall effect such redemption
on a pro rata basis according to the number of shares held by each Holder
of the Exchangeable Preferred Stock, except that the Corporation may
redeem such shares held by Holders of fewer than 100 shares (or shares
held by Holders who would hold less than 100 shares as a result of such
redemption), as may be determined by the Corporation.
(f) Voting Rights.
(i) The Holders of Exchangeable Preferred Stock, except as
otherwise required under Idaho law or as set forth in paragraphs (ii),
(iii) and (iv) below, shall not be entitled or permitted to vote on any
matter required or permitted to be voted upon by the shareholders of the
Corporation.
(ii) (A) So long as any shares of the Exchangeable Preferred
Stock are outstanding, the Corporation shall not authorize any class of
Senior Stock without the affirmative vote or consent of Holders of at
least a majority of the outstanding shares of Exchangeable 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.
(B) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not
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authorize any class of Parity Stock without the affirmative vote or
consent of Holders of at least a majority of the then outstanding shares
of Exchangeable 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; provided, however,
that no such vote or consent shall be necessary in connection with the
authorization of the issuance of Exchangeable Preferred Stock to satisfy
dividend payments in lieu of cash on outstanding shares of Exchangeable
Preferred Stock prior to March 1, 2003.
(C) So long as any shares of the Exchangeable Preferred Stock are
outstanding, the Corporation shall not amend this Certificate of
Designation so as to affect materially and adversely the specified rights,
preferences, privileges or voting rights of the then outstanding shares of
Exchangeable Preferred Stock or to authorize the issuance of any
additional shares of Exchangeable Preferred Stock without the affirmative
vote or consent of Holders of at least a majority of the issued and
outstanding shares of Exchangeable 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.
(D) Prior to the exchange of Exchangeable Preferred Stock for
Exchange Debentures, the Corporation shall not amend or modify the
Exchange Indenture for the Exchange Debentures in the form as executed on
the Effective Date (the "Exchange Indenture") (except as expressly
provided therein in respect of amendments without the consent of Holders
of Exchange Debentures) without the affirmative vote or consent of Holders
of at least a majority of the shares of Exchangeable 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.
(iii) Without the affirmative vote or consent of Holders of a
majority of the issued and outstanding shares of Exchangeable Preferred
Stock and any Parity 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, the Corporation shall not, in a
single transaction or a series of related transactions, consolidate or
merge with or into any Person, or sell, assign, transfer, lease, convey or
otherwise dispose of (or cause or permit any Restricted Subsidiary
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of the Corporation to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of the Corporation's assets
(determined on a consolidated basis for the Corporation and the
Corporation's Restricted Subsidiaries) whether as an entirety or
substantially as an entirety to any Person or adopt a plan of liquidation
unless (A) either (1) the Corporation is the surviving or continuing
Person or (2) the Person (if other than the Corporation) formed by such
consolidation or into which the Corporation is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Corporation and of the
Corporation's Restricted Subsidiaries substantially as an entirety or, in
the case of a plan of liquidation, the Person to which assets of the
Corporation have been transferred shall be a corporation existing under
the laws of the United States or any State thereof or the District of
Columbia; (B) if the Corporation is not the surviving or continuing
Person, the Exchangeable Preferred Stock shall be converted into or
exchanged for and shall become shares of such successor, transferee or
resulting person, having in respect of such successor, transferee or
resulting person the same powers, preferences and relative participating,
optional or other special rights and the qualifications, limitations or
restrictions thereon, that the Exchangeable Preferred Stock had
immediately prior to such transaction; (C) immediately after giving effect
to such transaction and the use of the proceeds therefrom (on a pro forma
basis, including giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred in connection with
such transaction), the Corporation (in the case of clause (1) of the
foregoing clause (A)) or such person (in the case of clause (2) of the
foregoing clause (A)) shall be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with
paragraph (l)(i) hereof; and (D) immediately after giving effect to such
transactions, no Voting Rights Triggering Event shall have occurred or be
continuing. Notwithstanding clause (C) of the preceding sentence, (a) any
Restricted Subsidiary of the Corporation may consolidate with, merge into
or transfer all or part of its properties and assets to the Corporation
and (b) the Corporation may merge with an Affiliate incorporated solely
for the purpose of reincorporating the Corporation in another
jurisdiction.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of
all or substantially
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all of the properties or assets of one or more Restricted Subsidiaries of
the Corporation, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Corporation, shall
be deemed to be the transfer of all or substantially all of the properties
and assets of the Corporation.
(iv) (A) If (1) after March 1, 2003, cash dividends on the
Exchangeable Preferred Stock are in arrears and unpaid for six or more
Dividend Periods (whether or not consecutive) (a "Dividend Default"); (2)
the Corporation fails to redeem all of the then outstanding shares of
Exchangeable Preferred Stock on March 1, 2010; (3) the Corporation fails
to make a Change of Control Offer following a Change of Control if such
Change of Control Offer is required by paragraph (h) hereof or fails to
purchase shares of Exchangeable Preferred Stock from Holders who elect to
have such shares purchased pursuant to the Change of Control Offer; (4)
the Corporation breaches or violates any of the provisions set forth in
paragraph (l) hereof and the breach or violation continues for a period of
30 days or more after the Corporation receives notice thereof specifying
the default from the Holders of at least 25% of the shares of Exchangeable
Preferred Stock then outstanding; or (5) the Corporation fails to pay at
the final stated maturity (giving effect to any extensions thereof) the
principal amount of any Indebtedness of the Corporation or any Restricted
Subsidiary of the Corporation, or the final stated maturity of any such
Indebtedness is accelerated, if the aggregate principal amount of such
Indebtedness, together with the aggregate principal amount of any other
such Indebtedness in default for failure to pay principal at the final
stated maturity (giving effect to any extensions thereof) or that has been
accelerated, aggregates $10.0 million or more at any one time, in each
case, after a 20-day period during which such default shall not have been
cured or such acceleration rescinded, then in the case of any of clauses
(1)-(5) the number of directors constituting the Board of Directors shall
be adjusted by the number, if any, necessary to permit the Holders of
Exchangeable Preferred Stock, voting separately and as one class (together
with the holders of any Parity Stock having similar voting rights), to
elect the lesser of two directors or that number of directors constituting
25% of the members of the Board of Directors. Each such event described in
clauses (1), (2), (3), (4) and (5) is a "Voting Rights Triggering Event."
Holders of a majority of the issued and outstanding shares of Exchangeable
Preferred Stock, voting separately and as one class (together
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with the holders of any Parity Stock having similar voting rights), shall
have the exclusive right to elect the lesser of two directors or 25% of
the number of members constituting the Board of Directors at a meeting
therefor called upon occurrence of such Voting Rights Triggering Event,
and at every subsequent meeting at which the terms of office of the
directors so elected by the Holders of the Exchangeable Preferred Stock
expire (other than as described in (f)(iv)(B) below). The voting rights
provided herein shall be the exclusive remedy at law or in equity of the
Holders of the Exchangeable Preferred Stock for any Voting Rights
Triggering Event.
(B) The right of the Holders of Exchangeable Preferred Stock voting
separately and as one class (together with the holders of any Parity Stock
then having similar rights) to elect members of the Board of Directors as
set forth in subparagraph (f)(iv)(A) above shall continue until such time
as (x) in the event such right arises due to a Dividend Default, all
accumulated dividends that are in arrears on the Exchangeable Preferred
Stock are paid in full in cash; and (y) in all other cases, the 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
Exchangeable Preferred Stock then outstanding and entitled to vote
thereon, at which time (1) the special right of the Holders of
Exchangeable Preferred Stock so to vote as a class for the election of
directors and (2) the term of office of the directors elected by the
Holders of the Exchangeable Preferred Stock shall each terminate and the
directors elected by the holders of Capital Stock (other than the
Exchangeable Preferred Stock or Parity Stock having similar voting rights)
shall constitute the entire Board of Directors. At any time after voting
power to elect directors shall have become vested and be continuing in the
Holders of Exchangeable Preferred Stock pursuant to paragraph (f)(iv)
hereof, or if vacancies shall exist in the offices of directors elected by
the Holders of Exchangeable Preferred Stock, a proper officer of the
Corporation may, and upon the written request of the Holders of record of
at least twenty percent (20%) of the shares of Exchangeable Preferred
Stock then outstanding addressed to the secretary of the Corporation
shall, call a special meeting of the Holders of Exchangeable Preferred
Stock, for the purpose of electing the directors which such Holders are
entitled to elect. If such meeting shall not be called by a proper officer
of the Corporation within twenty (20) days after personal service of said
written
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request upon the secretary of the Corporation, or within twenty (20) days
after mailing the same within the United States by certified mail,
addressed to the secretary of the Corporation at its principal executive
offices, then the Holders of record of at least twenty percent (20%) of
the outstanding shares of Exchangeable Preferred Stock may designate in
writing one of their number to call such meeting at the expense of the
Corporation, and such meeting may be called by the Person so designated
upon the notice required for the annual meetings of shareholders of the
Corporation and shall be held at the place for holding the annual meetings
of shareholders. Any Holder of Exchangeable Preferred Stock so designated
shall have, and the Corporation shall provide, access to the lists of
shareholders to be called pursuant to the provisions hereof.
(C) At any meeting held for the purpose of electing directors at
which the Holders of Exchangeable Preferred Stock (and any Parity Stock
having similar voting rights) shall have the right, voting together as a
separate class, to elect directors as aforesaid, the presence in person or
by proxy of the Holders of at least a majority of the outstanding shares
of Exchangeable Preferred Stock (and any Parity Stock having similar
voting rights) shall be required to constitute a quorum of such
Exchangeable Preferred Stock.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Exchangeable Preferred Stock (and any Parity Stock having
similar voting rights) may be filled by the remaining directors elected by
the Holders of Exchangeable Preferred Stock and holders of such Parity
Stock unless and until such vacancy shall be filled by the Holders of
Exchangeable Preferred Stock and holders of such Parity Stock.
In any case in which the Holders of Exchangeable Preferred Stock
shall be entitled to vote pursuant to this paragraph (f) or pursuant to Idaho
law, each Holder of Exchangeable Preferred Stock entitled to vote with respect
to such matter shall be entitled to one vote for each share of Exchangeable
Preferred Stock held.
(g) Exchange.
(i) Requirements. The outstanding shares of Exchangeable
Preferred Stock are exchangeable in whole but not in part, at the option
of the Corporation at any time
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on any Dividend Payment Date for the Corporation's 12 1/2% Subordinated
Exchange Debentures due 2010 (the "Exchange Debentures") to be
substantially in the form of Exhibit A to the form of Exchange Indenture,
a copy of which is on file with the secretary of the Corporation, provided
that any such exchange may only be made if on or prior to the Exchange
Date (i) the Corporation has paid (or is deemed to have paid) all
accumulated dividends on the Exchangeable Preferred Stock (including the
dividends payable on the date of exchange) and there shall be no
contractual impediment to such exchange; (ii) there shall be funds legally
available sufficient therefor; (iii) immediately after giving effect to
such exchange, no Default or Event of Default (each as defined in the
Exchange Indenture) would exist under the Exchange Indenture, no Default
or Event of Default (each as defined in the Indenture) would exist under
the Indenture, no default or event of default (each as defined in the New
Revolving Credit Facility) would exist under the New Revolving Credit
Facility and no default or event of default under any other material
instrument governing Indebtedness outstanding at the time would be caused
thereby; and (iv) the Exchange Indenture has been qualified under the TIA,
if such qualification is required at the time of exchange. The exchange
rate shall be $1.00 principal amount of Exchange Debentures for each $1.00
of liquidation preference of Exchangeable Preferred Stock. Exchange
Debentures issued in exchange for Exchangeable Preferred Stock shall be
issued in principal amounts of $1,000 and integral multiples thereof to
the extent possible and also will be issued in principal amounts less than
$1,000 so that each holder of Exchangeable Preferred Stock will receive
certificates representing the entire amount of Exchange Debentures to
which such holder's shares of Exchangeable Preferred Stock entitle such
holder; provided that the Corporation may pay cash in lieu of issuing an
Exchange Debenture in a principal amount less than $1,000.
(ii) Procedure for Exchange. (A) At least thirty (30) days and
not more than sixty (60) days prior to the date fixed for exchange, the
Corporation shall send written notice (the "Exchange Notice") by
first-class mail, postage prepaid, to each Holder of record on the record
date fixed for such exchange of the Exchangeable Preferred Stock at such
Holder's address as the same appears on the stock books of the
Corporation, provided that no failure to give such notice nor any
deficiency therein shall affect the validity of the procedure for the
exchange of any shares of Exchangeable Preferred Stock to be exchanged
except as to the Holder or Holders to whom the Corporation
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has failed to give said notice or except as to the Holder or Holders whose
notice was defective. The Exchange Notice shall state:
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in the
manner and at the place or places designated, his/her certificate or
certificates representing the shares of Exchangeable Preferred Stock
to be exchanged;
(3) that dividends on the shares of Exchangeable Preferred
Stock to be exchanged shall cease to accrue on such Exchange Date
whether or not certificates for shares of Exchangeable Preferred
Stock are surrendered for exchange on such Exchange Date unless the
corporation shall default in the delivery of Exchange Debentures;
and
(4) that interest on the Exchange Debentures shall accrue from
the Exchange Date whether or not certificates for shares of
Exchangeable Preferred Stock are surrendered for exchange on such
Exchange Date.
(B) On or before the Exchange Date, each Holder of Exchangeable
Preferred Stock shall surrender the certificate or certificates
representing such shares of Exchangeable Preferred Stock, in the manner
and at the place designated in the Exchange Notice. The Corporation shall
cause the Exchange Debentures to be executed on the Exchange Date and,
upon surrender in accordance with the Exchange Notice of the certificates
for any shares of Exchangeable Preferred Stock so exchanged, duly endorsed
(or otherwise in proper form for transfer, as determined by the
Corporation), such shares shall be exchanged by the Corporation into
Exchange Debentures. The Corporation shall pay interest on the Exchange
Debentures at the rate and on the dates specified therein from the
Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice (1) the Exchange Indenture shall
have been duly executed and delivered by the Corporation and the Debenture
Trustee thereunder and (2) all Exchange Debentures necessary for such
exchange shall have been duly executed by the Corporation and delivered to
the Debenture Trustee under the Exchange Indenture with irrevocable
instructions to
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authenticate the Exchange Debentures necessary for such exchange, then the
rights of the Holders of Exchangeable Preferred Stock so exchanged as
shareholders of the Corporation shall cease (except the right to receive
Exchange Debentures, an amount in cash, to the extent applicable, equal to
the amount of accrued and unpaid dividends to the Exchange Date and, if
the Corporation so elects, cash in lieu of any Exchange Debenture that is
in a principal amount that is not an integral multiple of $1,000), and the
Person or Persons entitled to receive the Exchange Debentures issuable
upon exchange shall be treated for all purposes as the registered holder
or holders of such Exchange Debentures as of the Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the
foregoing provisions of this paragraph (g), the Corporation shall not be
entitled to exchange the Exchangeable Preferred Stock for Exchange
Debentures if such exchange, or any term or provision of the Exchange
Indenture or the Exchange Debentures, or the performance of the
Corporation's obligations under the Exchange Indenture or the Exchange
Debentures, shall materially violate or conflict with any applicable law
or agreement or instrument then binding on the Corporation or if, at the
time of such exchange, the Corporation is insolvent or if it would be
rendered insolvent by such exchange.
(h) Change of Control.
(i) In the event of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Corporation shall
notify the Holders of the Exchangeable Preferred Stock in writing of such
occurrence and shall make an offer to purchase (the "Change of Control
Offer") all then outstanding shares of Exchangeable Preferred Stock at a
purchase price equal to 101% of the liquidation preference thereof, plus,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends per share to the Change of Control Payment Date (including an
amount in cash equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Change of Control Payment
Date to the Change of Control Payment Date).
(ii) Within 60 days following the Change of Control Date, the
Corporation shall send, by first class mail, postage prepaid, a notice to
each Holder of Exchangeable Preferred Stock at such Holder's address as it
appears on the stock books of the Corporation, which no-
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tice shall govern the terms of the Change of Control Offer. The notice to
the Holders shall contain all instructions and materials necessary to
enable such Holders to tender Exchangeable Preferred Stock pursuant to the
Change of Control Offer. Such notice shall state:
(A) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this paragraph (h) and that all
Exchangeable Preferred Stock validly tendered and not withdrawn will be
accepted for payment;
(B) the purchase price (including the amount of accrued dividends,
if any) and the purchase date (which shall be no earlier than 60 days nor
later than 90 days from the date such notice is mailed, other than as may
be required by law) (the "Change of Control Payment Date");
(C) that any shares of Exchangeable Preferred Stock not tendered
will continue to accrue dividends;
(D) that, unless the Corporation defaults in making payment
therefor, any share of Exchangeable Preferred Stock accepted for payment
pursuant to the Change of Control Offer shall cease to accrue dividends
after the Change of Control Payment Date;
(E) that Holders electing to have any shares of Exchangeable
Preferred Stock purchased pursuant to a Change of Control Offer will be
required to surrender the certificate or certificates representing such
shares, properly endorsed for transfer, together with such customary
documents as the Corporation and the transfer agent may reasonably
require, in the manner and at the place specified in the notice prior to
the close of business on the third Business Day prior to the Change of
Control Payment Date;
(F) that Holders will be entitled to withdraw their election if the
Corporation receives, not later than five Business Days prior to the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the number of shares of
Exchangeable Preferred Stock the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such shares
of Exchangeable Preferred Stock purchased;
20
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(G) that Holders whose shares of Exchangeable Preferred Stock are
purchased only in part will be issued a new certificate representing the
unpurchased shares of Exchangeable Preferred Stock; and
(H) the circumstances and relevant facts regarding such Change of
Control.
(iii) The Corporation shall comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
repurchase of the Exchangeable Preferred Stock in connection with a Change
of Control Offer.
(iv) On the Change of Control Payment Date the Corporation shall (A)
accept for payment the shares of Exchangeable Preferred Stock validly
tendered pursuant to the Change of Control Offer, (B) pay to the Holders
of shares so accepted the purchase price therefor in cash and (C) cancel
and retire each surrendered certificate. Unless the Corporation defaults
in the payment for the shares of Exchangeable Preferred Stock tendered
pursuant to the Change of Control Offer, dividends will cease to accrue
with respect to the shares of Exchangeable 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 Payment
Date.
(v) If the purchase of the Exchangeable Preferred Stock would
violate or constitute a default under the New Revolving Credit Facility,
the Indenture or any other Indebtedness of the Corporation, then,
notwithstanding anything to the contrary contained above, prior to
complying with the foregoing provisions, but in any event within 60 days
following the Change of Control Date, the Corporation shall, to the extent
needed to permit such purchase of Exchangeable Preferred Stock, either (A)
repay in full all such Indebtedness and terminate all commitments
outstanding thereunder or (B) obtain the requisite consents, if any, under
such Indebtedness required to permit the repurchase of Exchangeable
Preferred Stock required by this paragraph (h). Until the requirements of
the immediately preceding sentence are satisfied, the Corporation shall
not make, and shall not be obligated to make, any Change of Control Offer.
(i) Conversion or Exchange. The Holders of shares of Exchangeable
Preferred Stock shall not have any rights here-
21
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under 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 the Corporation.
(j) Reissuance of Exchangeable Preferred Stock. Shares of
Exchangeable Preferred Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed or exchanged, shall (upon compliance with
any applicable provisions of the laws of Idaho) have the status of authorized
but unissued shares of preferred stock undesignated as to series and may be
redesignated and reissued as part of any series of preferred stock, provided
that any issuance or reissuance of such shares as Exchangeable Preferred Stock
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.
(i) Limitation on Incurrence of Additional Indebtedness. The
Corporation shall not, and shall not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume, guarantee, acquire, become
liable, contingently or otherwise, with respect to, or otherwise become
responsible for payment of (collectively, "incur") any Indebtedness (other than
Permitted Indebtedness); provided, however, that if no Voting Rights Triggering
Event shall have occurred and be continuing at the time of or as a consequence
of the incurrence of any such Indebtedness, the Corporation may incur
Indebtedness (including, without limitation, Acquired Indebtedness) and
Restricted Subsidiaries of the Corporation may incur Acquired Indebtedness, in
each case if on the date of the incurrence of such Indebtedness, after giving
effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio
of the Corporation is greater than 2.0 to 1.0.
(ii) Limitation on Restricted Payments. The Corporation shall
not, and shall not cause or permit any of its Restricted Subsidiaries to,
directly or indirectly, (a) declare or pay any dividend or make any distribution
(other than dividends or distributions payable in Qualified Capital Stock of the
Corporation) on or in respect of shares of the Corporation's Junior Stock to
holders of such Junior Stock, (b) purchase, redeem or otherwise acquire or
retire for value any Junior Stock of the Corporation or any warrants, rights or
options
22
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to purchase or acquire shares of any class of such Junior Stock, or (c) make any
Investment (other than Permitted Investments) (each of the foregoing actions set
forth in clauses (a), (b) and (c) being referred to as a "Restricted Payment"),
if at the time of such Restricted Payment or immediately after giving effect
thereto, (i) a Voting Rights Triggering Event shall have occurred and be
continuing or (ii) the Corporation is not able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in compliance with
paragraph (l)(i) hereof or (iii) the aggregate amount of Restricted Payments
(including such proposed Restricted Payment) made subsequent to the Effective
Date (the amount expended for such purposes, if other than in cash, being the
fair market value of such property as determined reasonably and in good faith by
the Board of Directors of the Corporation) shall exceed the sum of: (w) 50% of
the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss) of the Corporation earned subsequent
to February 26, 1998 and on or prior to the date the Restricted Payment occurs
(the "Reference Date") (treating such period as a single accounting period);
plus (x) 100% of the aggregate net cash proceeds received by the Corporation
from any Person (other than a Subsidiary of the Corporation) from the issuance
and sale subsequent to the Effective Date and on or prior to the Reference Date
of Qualified Capital Stock of the Corporation; plus (y) without duplication of
any amounts included in clause (iii)(x) above, 100% of the aggregate net cash
proceeds of any equity contribution received by the Corporation from a holder of
the Corporation's Capital Stock; plus (z) without duplication, the sum of (1)
the aggregate amount returned in cash on or with respect to Investments (other
than Permitted Investments) made subsequent to the Effective Date whether
through interest payments, principal payments, dividends or other distributions
or payments, (2) the net cash proceeds received by the Corporation or any of its
Restricted Subsidiaries from the disposition of all or any portion of such
Investments (other than to a Subsidiary of the Corporation) and (3) upon
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair
market value of such Subsidiary; provided, however, that the sum of clauses (1),
(2) and (3) above shall not exceed the aggregate amount of all such Investments
made subsequent to the Effective Date.
Notwithstanding the foregoing, the provisions set forth in the
immediately preceding paragraph do not prohibit: (1) the payment of any dividend
or the consummation of any irrevocable redemption within 60 days after the date
of declaration of such dividend or notice of such redemption if the dividend or
the payment of the redemption price, as the case may
23
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be, would have been permitted on the date of declaration or notice; (2) if no
Voting Rights Triggering Event shall have occurred and be continuing, the
acquisition of any shares of Capital Stock of the Corporation, either (i) solely
in exchange for shares of Qualified Capital Stock of the Corporation or (ii)
through the application of net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Corporation) of shares of Qualified
Capital Stock of the Corporation; (3) payments for the purpose of and in an
amount equal to the amount required to permit the Corporation to redeem or
repurchase its equity or options in respect thereof, in each case in connection
with the terms of any employee stock option or stock purchase agreements or
other agreements to compensate management or other employees; provided that such
redemptions or repurchases pursuant to this clause (3) shall not exceed $3.0
million (which amount shall be increased by the amount of any net cash proceeds
to the Corporation from (x) sales of Capital Stock of the Corporation to
management or other employees subsequent to the Effective Date to the extent
such amounts have not been included in clause (iii) in the foregoing paragraph
and (y) any "key-man" life insurance policies which are used to make such
redemptions or repurchases) in the aggregate; provided, further, that the
cancellation of Indebtedness owing to the Corporation from management or other
employees of the Corporation or any of its Restricted Subsidiaries in connection
with a repurchase of Capital Stock of the Corporation shall not be deemed to
constitute a Restricted Payment under this Certificate of Designation; (4)
repurchases of Capital Stock deemed to occur upon the exercise of stock options
if such Capital Stock represents a portion of the exercise price thereof; (5) so
long as no Voting Rights Triggering Event shall have occurred and be continuing,
payments not to exceed $500,000 in the aggregate to enable the Corporation to
make payments to holders of its Capital Stock in lieu of issuance of fractional
shares of its Capital Stock; (6) payments or other distributions made in
connection with the Recapitalization; and (7) if no Voting Rights Triggering
Event shall have occurred and be continuing, other Restricted Payments in an
aggregate amount not to exceed $10.0 million. In determining the aggregate
amount of Restricted Payments made subsequent to the Effective Date in
accordance with clause (iii) of the immediately preceding paragraph, (a) amounts
expended (to the extent such expenditure is in the form of cash) pursuant to
clauses (1), (2)(ii), (3) and (7) shall be included in such calculation;
provided such expenditures pursuant to clause (3) shall not be included to the
extent of cash proceeds received by the Corporation from any "key-man" life
insurance policies and (b) amounts expended pursuant to clauses (2)(i), (4), (5)
and (6) shall be excluded from such calculation.
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(iii) Limitation on Exchangeable Preferred Stock of Restricted
Subsidiaries. The Corporation shall not permit any of its Restricted
Subsidiaries to issue any preferred stock (other than to the Corporation or to a
Wholly Owned Restricted Subsidiary of the Corporation) or permit any Person
(other than the Corporation or a Wholly Owned Restricted Subsidiary of the
Corporation) to own any preferred stock of any Restricted Subsidiary of the
Corporation.
(iv) Reports. (a) Upon consummation of the Exchange Offer (as
defined in the Registration Rights Agreement) and so long as any
shares of Exchangeable Preferred Stock are outstanding, the
Corporation (at its own expense) shall file with the Commission and
shall file with the Transfer Agent within 15 days after it files
them with the Commission copies of the quarterly and annual reports
and of the information, documents, and other reports (or copies of
such portions of any of the foregoing as the Commission may by rules
and regulations prescribe) to be filed pursuant to Section 13 or
15(d) of the Exchange Act (without regard to whether the Corporation
is subject to the requirements of such Section 13 or 15(d) of the
Exchange Act); provided that prior to the consummation of the
Exchange Offer (as defined in the Registration Rights Agreement) and
the issuance of the Exchange Preferred Stock (as defined in the
Registration Rights Agreement), the Corporation (at its own expense)
will mail to the Transfer Agent and Holders in accordance with
paragraph (l)(iv)(b) hereof substantially the same information that
would have been required by the foregoing documents within 15 days
of when any such document would otherwise have been required to be
filed with the Commission.
(b) At the Corporation's expense, the Corporation shall cause
an annual report if furnished by it to shareholders generally and
each quarterly or other financial report if furnished by it to
shareholders generally to be filed with the Transfer Agent and
mailed to the Holders at their addresses as they appear on the stock
books of the Corporation at the time of such mailing or furnishing
to shareholders.
(c) The Corporation shall provide to any Holder any
information reasonably requested by such Holder concerning the
Corporation (including financial statements) necessary in order to
permit such Holder to sell or transfer shares of Exchangeable
Preferred Stock in compliance with Rule 144A under the Securities
Act, as presently required by Rule 144A(d)(4) under the Securities
Act.
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(m) Definitions. As used in this Certificate of Designation,
the following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Acquired Indebtedness" means Indebtedness of a Person or any
of its Subsidiaries existing at the time such Person becomes a
Restricted Subsidiary of the Corporation or at the time it merges or
consolidates with the Corporation or any of its Subsidiaries or
assumed in connection with the acquisition of assets from such
Person and in each case not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Corporation or such acquisition, merger
or consolidation.
"Additional Dividends" shall have the meaning ascribed to it
in the Registration Rights Agreement.
"Affiliate" means, with respect to any specified Person, any
other Person who directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, such specified Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing. For purposes of this
Certificate of Designation, BT Alex. Brown Incorporated, Bankers
Trust Company and their Affiliates shall not be deemed to be
Affiliates of the Corporation or its Restricted Subsidiaries.
"Asset Acquisition" means (a) an Investment by the Corporation
or any Restricted Subsidiary of the Corporation in any other Person
pursuant to which such Person shall become a Restricted Subsidiary
of the Corporation or any Restricted Subsidiary of the Corporation,
or shall be merged with or into the Corporation or any Restricted
Subsidiary of the Corporation, or (b) the acquisition by the
Corporation or any Restricted Subsidiary of the Corporation of the
assets of any Person (other than a Restricted Subsidiary of the
Corporation) which constitute all or substantially all of the assets
of such Person or comprises any division or line of business of such
Person or any other properties or assets of such Person other than
in the ordinary course of business.
26
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"Asset Sale" means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered
into in the ordinary course of business), assignment or other
transfer for value by the Corporation or any of its Restricted
Subsidiaries (including any Sale and Leaseback Transaction) to any
Person other than the Corporation or a Wholly Owned Restricted
Subsidiary of the Corporation of (a) any Capital Stock of any
Restricted Subsidiary of the Corporation; or (b) any other property
or assets of the Corporation or any Restricted Subsidiary of the
Corporation other than in the ordinary course of business; provided,
however, that Asset Sales shall not include (i) a transaction or
series of related transactions for which the Corporation or its
Restricted Subsidiaries receive aggregate consideration of less than
$500,000, (ii) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the
Corporation as permitted under paragraph (f)(iii) hereof or any
disposition that constitutes a Change of Control, (iii) the sale or
discount, in each case without recourse, of accounts receivable
arising in the ordinary course of business, but only in connection
with the compromise or collection thereof, (iv) the factoring of
accounts receivable arising in the ordinary course of business
pursuant to arrangements customary in the region, (v) the licensing
of intellectual property, (vi) disposals or replacements of obsolete
equipment in the ordinary course of business, and (vii) the sale,
lease, conveyance, disposition or other transfer by the Corporation
or any Restricted Subsidiary of the Corporation of assets or
property in connection with Restricted Payments permitted under
paragraph (l)(ii) hereof.
"Board of Directors" shall have the meaning ascribed to it in
the first paragraph of this Resolution.
"Board Resolution" means, with respect to any Person, a copy
of a resolution certified by the Secretary or an Assistant Secretary
of such Person to have been duly adopted by the Board of Directors
of such Person and to be in full force and effect on the date of
such certification, and delivered to the Transfer Agent.
"Business Day" means any day that is not a Saturday, a Sunday
or a day on which banking institutions in New York, New York are
required to be closed.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are
27
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required to be classified and accounted for as capital lease
obligations under GAAP and, for purposes of this definition, the
amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance
with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated and whether or not voting) of
corporate stock, including each class of Common Stock and preferred
stock of such Person and (ii) with respect to any Person that is not
a corporation, any and all partnership or other equity interests of
such Person.
"Cash Equivalents" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States
Government or issued by any agency thereof and backed by the full
faith and credit of the United States, in each case maturing within
one year from the date of acquisition thereof; (ii) marketable
direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of
the two highest ratings obtainable from either Standard & Poor's
Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's");
(iii) commercial paper maturing no more than one year from the date
of creation thereof and, at the time of acquisition, having a rating
of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one
year from the date of acquisition thereof issued by any bank
organized under the laws of the United States of America or any
state thereof or the District of Columbia or any U.S. branch of a
foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described
in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer
(in one transaction or a series
28
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of related transactions) of all or substantially all of the assets
of the Corporation to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group"), together
with any Affiliates thereof (whether or not otherwise in compliance
with the provisions of this Certificate of Designation) other than
to the Permitted Holders; (ii) the approval by the holders of
Capital Stock of the Corporation of any plan or proposal for the
liquidation or dissolution of the Corporation (whether or not
otherwise in compliance with this Certificate of Designation); (iii)
any Person or Group (other than the Permitted Holders) shall become
the owner, directly or indirectly, beneficially, of shares
representing more than 50% of the aggregate ordinary voting power
represented by the issued and outstanding Capital Stock of the
Corporation; or (iv) the first day on which a majority of the
members of the Board of Directors of the Corporation during the
two-year period immediately preceding such date are not Continuing
Directors. Notwithstanding anything to the contrary contained in the
foregoing sentence, a "Change of Control" shall not be deemed to
occur upon consummation of (A) the Recapitalization, (B) the merger
of the Corporation with an Affiliate incorporated solely for the
purpose of reincorporating the Corporation in another jurisdiction
or (C) any transaction described in clauses (i) or (iii) of the
immediately preceding sentence if, after giving effect to such
transaction, (1) the Permitted Holders shall beneficially own,
directly or indirectly, shares of Capital Stock representing at
least 35% of the aggregate ordinary voting power represented by the
issued and outstanding Capital Stock of the Corporation and (2) no
Person or Group shall beneficially own, directly or indirectly, a
greater percentage of such voting power than the Permitted Holders.
"Change of Control Date" shall have the meaning ascribed to it
in paragraph (h) hereof.
"Change of Control Payment Date" shall have the meaning
ascribed to it in paragraph (h) hereof.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means any and all shares,
interests or other participations in, and other equivalents (however
designated and whether voting or non-voting) of such Person's common
stock, whether outstanding on the Effective Date or issued after the
Effec-
29
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tive Date, and includes, without limitation, all series and classes
of such common stock.
"Consolidated EBITDA" means, with respect to any Person, for
any period, the sum (without duplication) of (i) Consolidated Net
Income and (ii) to the extent Consolidated Net Income has been
reduced thereby, (A) all income taxes and foreign withholding taxes
of such Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or nonrecurring gains or
losses or taxes attributable to sales or dispositions outside the
ordinary course of business), (B) Consolidated Interest Expense and
(C) Consolidated Non-cash Charges less, to the extent Consolidated
Net Income has been increased thereby, any non-cash items increasing
Consolidated Net Income for such period, all as determined on a
consolidated basis for such Person and its Restricted Subsidiaries
in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to any Person, the ratio of Consolidated EBITDA of such Person
during the four full fiscal quarters (the "Four Quarter Period")
ending on or prior to the date of the transaction giving rise to the
need to calculate the Consolidated Fixed Charge Coverage Ratio (the
"Transaction Date") to Consolidated Fixed Charges of such Person for
the Four Quarter Period. In addition to and without limitation of
the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after
giving effect on a pro forma basis for the period of such
calculation to (i) the incurrence or repayment of any Indebtedness
of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make
such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other
than the incurrence or repayment of Indebtedness in the ordinary
course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and
on or prior to the Transaction Date, as if such incurrence or
repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and
(ii) any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make
such calculation as a result of such Person or one of its Restricted
Sub-
30
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sidiaries (including any Person who becomes a Restricted Subsidiary
as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness and also including
any Consolidated EBITDA (including any pro forma expense and cost
reductions calculated on a basis consistent with Regulation S-X
under the Securities Act) attributable to the assets which are the
subject of the Asset Acquisition or Asset Sale during the Four
Quarter Period) occurring during the Four Quarter Period or at any
time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such Asset Sale or Asset
Acquisition (including the incurrence, assumption or liability for
any such Acquired Indebtedness) occurred on the first day of the
Four Quarter Period. If such Person or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if such Person or any
Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness. Furthermore, in
calculating "Consolidated Fixed Charges" for purposes of determining
the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on outstanding Indebtedness
determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed
to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and
(2) notwithstanding clause (1) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall
be deemed to accrue at the rate per annum resulting after giving
effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person
for any period, the sum, without duplication, of (i) Consolidated
Interest Expense, plus (ii) the amount of all dividend payments on
any series of preferred stock of such Person (other than dividends
paid in Qualified Capital Stock or the amortization of deferred
financing costs relating to the issuance of the Exchangeable
Preferred Stock) paid, accrued or scheduled to be paid or accrued
during such period.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the sum of, without duplication: (i) the
aggregate of the interest expense of such
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Person and its Restricted Subsidiaries for such period determined on
a consolidated basis in accordance with GAAP, including, without
limitation, (a) any amortization of debt discount and (b) the net
costs under Interest Swap Obligations, but excluding any
amortization or write-off of deferred financing costs; and (ii) the
interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person,
for any period, the aggregate net income (or loss) of such Person
and its Restricted Subsidiaries for such period on a consolidated
basis, determined in accordance with GAAP; provided that there shall
be excluded therefrom (a) after-tax gains and losses from Asset
Sales (without giving effect to the proviso therein) or abandonments
or reserves relating thereto, (b) after-tax items classified as
extraordinary or nonrecurring gains and losses, (c) the net income
or loss of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted
Subsidiary of the referent Person or is merged or consolidated with
the referent Person or any Restricted Subsidiary of the referent
Person, (d) the net income (but not loss) of any Restricted
Subsidiary of the referent Person to the extent that the declaration
of dividends or similar distributions by that Restricted Subsidiary
of that income is restricted by a contract, operation of law or
otherwise, (e) the net loss of any Person other than a Restricted
Subsidiary of the Corporation, (f) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to
the extent of cash dividends or distributions paid to the referent
Person or to a Wholly Owned Restricted Subsidiary of the referent
Person by such Person, (g) income or loss attributable to
discontinued operations (including, without limitation, operations
disposed of during such period whether or not such operations were
classified as discontinued), (h) in the case of a successor to the
referent Person by consolidation or merger or as a transferee of the
referent Person's assets, any earnings of the successor corporation
prior to such consolidation, merger or transfer of assets, (i)
non-cash, non-recurring charges reducing Consolidated Net Income
(excluding any such non-cash charge to the extent it represents an
accrual of or reserve for cash charges in any future period or
amortization of prepaid cash expense that was paid in a prior period
not included in the calculation), (j) non-cash compensation charges,
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including any arising from stock options, (k) gains and losses due
solely to fluctuations in currency values and the related tax
effects according to GAAP, (l) start-up costs and duplicative costs
incurred in connection with the transition services agreements in
effect on the Effective Date (as the same may be amended from time
to time), not to exceed $200,000, (m) costs relating to the
implementation of the Baan information technology system which have
not been capitalized and (n) expenses related to the
Recapitalization.
"Consolidated Non-cash Charges" means, with respect to any
Person, for any period, the aggregate depreciation, amortization and
other non-cash expenses of such Person and its Restricted
Subsidiaries reducing Consolidated Net Income of such Person and its
Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP (excluding any such
charges constituting an extraordinary item or loss or any such
charge which requires an accrual of or a reserve for cash charges
for any future period).
"Consolidated Tangible Assets" means, with respect to any
Person, as of any date of determination, the total assets, less
goodwill, deferred financing costs and other intangibles and less
accumulated amortization, shown on the most recent balance sheet of
such Person, determined on a consolidated basis in accordance with
GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Corporation who (i) was
a member of such Board of Directors on the first day of the two-year
period immediately preceding such date of determination or (ii) was
nominated for election or elected to such Board of Directors with,
or whose election to such Board of Directors was approved by, the
affirmative vote of a majority of the Continuing Directors who were
members of such Board of Directors at the time of such nomination or
election or (iii) is any designee of the Principal or its Affiliates
or was nominated by the Principal or its Affiliates or any designees
of the Principal or its Affiliates on the Board of Directors.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement
designed to protect the Corporation or any Restricted Subsidiary of
the Corporation against fluctuations in currency values.
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"Debenture Trustee" means the trustee under the Exchange
Indenture.
"Disqualified Capital Stock" means that portion of any Capital
Stock which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable), or upon
the happening of any event (other than upon the occurrence of a
Change of Control), matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or is redeemable at the
sole option of the holder thereof on or prior to the date of the
mandatory redemption of the Exchangeable Preferred Stock.
"Dividend Payment Date" means March 1, June 1, September 1 and
December 1 of each year.
"Dividend Period" means the Initial Dividend Period and,
thereafter, each Quarterly Dividend Period.
"Dividend Record Date" means February 15, May 15, August 15
and November 15 of each year.
"Effective Date" means February 26, 1998, the date the first
share of Exchangeable Preferred Stock is issued.
"Exchangeable Preferred Stock" shall have the meaning ascribed
to it in paragraph (a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto.
"Exchange Date" means a date on which shares of Exchangeable
Preferred Stock are exchanged by the Corporation for Exchange
Debentures.
"Exchange Debentures" shall have the meaning ascribed to it in
paragraph (g) hereof.
"Exchange Indenture" shall mean the indenture governing the
Exchange Debentures, if issued.
"Exchange Notes" means notes to be issued in exchange for the
Notes in accordance with the Indenture and the Registration Rights
Agreement.
"Exchange Notice" shall have the meaning ascribed to it in
paragraph (g) hereof.
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"fair market value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length,
free market transaction, for cash, between a willing seller and a
willing and able buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair market value shall be
determined by the Board of Directors of the Corporation acting
reasonably and in good faith and shall be evidenced by a Board
Resolution of the Board of Directors of the Corporation delivered to
the Transfer Agent.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the
Effective Date. Except as otherwise set forth herein, all ratios and
computations based on GAAP contained in this Certificate of
Designation shall be computed in conformity with GAAP applied on a
consistent basis.
"Holder" means a holder of shares of Exchangeable Preferred
Stock as reflected in the stock books of the Corporation.
"Indebtedness" means with respect to any Person, without
duplication, (i) all obligations of such Person for borrowed money,
(ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all Capitalized Lease
Obligations of such Person, (iv) all obligations of such Person
issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title
retention agreement (but excluding trade accounts payable and other
accrued liabilities arising in the ordinary course of business), (v)
all obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations of
such Person in respect of Indebtedness referred to in clauses (i)
through (v) above and clause (viii) below, (vii) all obligations of
any other Person of the type referred to in clauses (i) through (vi)
which are secured by any lien on any property or asset of such
Person, the amount of such obligation being deemed to be the lesser
of the fair market value of such property or asset or the amount of
the
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obligation so secured, (viii) all obligations under currency
agreements and interest swap agreements of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any. For purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not
have a fixed repurchase price shall be calculated in accordance with
the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to this Certificate of
Designation, and if such price is based upon, or measured by, the
fair market value of such Disqualified Capital Stock, such fair
market value shall be determined reasonably and in good faith by the
Board of Directors of the issuer of such Disqualified Capital Stock.
"Indenture" means the indenture dated as of February 26, 1998
by and between the Corporation and United States Trust Company of
New York, as Trustee, governing the Notes and the Exchange Notes.
"Initial Dividend Period" means the dividend period commencing
on the Issue Date and ending on the next succeeding Dividend Payment
Date.
"Interest Swap Obligations" means the obligations of any
Person pursuant to any arrangement with any other Person, whereby,
directly or indirectly, such Person is entitled to receive from time
to time periodic payments calculated by applying either a floating
or a fixed rate of interest on a stated notional amount in exchange
for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional
amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
"Investment" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without
limitation, a guarantee) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any
purchase or acquisition by such Person of any Capital Stock, bonds,
notes, debentures or other securities or evidences of In-
36
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debtedness issued by, any Person. "Investment" shall exclude
extensions of trade credit by the Corporation and its Restricted
Subsidiaries on commercially reasonable terms in accordance with
normal trade practices of the Corporation or such Restricted
Subsidiary, as the case may be. For the purposes of paragraph
(l)(ii) hereof, (i) "Investment" shall include and be valued at the
fair market value of the net assets of any Restricted Subsidiary at
the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the fair market value of
the net assets of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary and
(ii) the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by the
Corporation or any of its Restricted Subsidiaries, without any
adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment, reduced
by the payment of dividends or distributions in connection with such
Investment or any other amounts received in respect of such
Investment; provided that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the
amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in
Consolidated Net Income. If the Corporation or any Restricted
Subsidiary of the Corporation sells or otherwise disposes of any
Common Stock of any direct or indirect Restricted Subsidiary of the
Corporation such that, after giving effect to any such sale or
disposition, the Corporation no longer owns, directly or indirectly,
100% of the outstanding Common Stock of such Restricted Subsidiary,
the Corporation shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value
of the Common Stock of such Restricted Subsidiary not sold or
disposed of.
"Issue Date" means, with respect to each share of Exchangeable
Preferred Stock, the date of original issuance of such share.
"Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in
the nature thereof and any agreement to give any security interest).
37
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"New Revolving Credit Facility" means the Credit Agreement
dated as of the Effective Date, among the Corporation, the lenders
party thereto in their capacities as lenders thereunder and Bankers
Trust Company, as agent, together with the related documents thereto
(including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise
restructuring (including, without limitation, increasing the amount
of available borrowings thereunder or adding Subsidiaries of the
Corporation as additional borrowers or guarantors thereunder) all or
any portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same or any
other agent, lender or group of lenders.
"Notes" means the 9 3/4% Senior Subordinated Notes due 2008
and the Floating Interest Rate Subordinated Term Securities due
2008.
"Permitted Holders" means the Principal and its Affiliates.
"Permitted Indebtedness" means, without duplication, each of
the following:
(i) Indebtedness under the Notes and the Exchange Notes
issued in exchange therefor in an aggregate principal amount
not to exceed $175.0 million;
(ii) Indebtedness incurred pursuant to the New Revolving
Credit Facility in an aggregate principal amount at any time
outstanding not to exceed the greater of (a) $40.0 million and
(b) the excess of (1) the sum of 50% of the book value of the
inventory of the Corporation and its Restricted Subsidiaries
and 65% of the book value of the accounts receivable of the
Corporation and its Restricted Subsidiaries over (2) the
amount of Indebtedness of foreign Restricted Subsidiaries of
the Corporation outstanding pursuant to clause (xiv) below;
(iii) other Indebtedness of the Corporation and its
Restricted Subsidiaries outstanding on the Effective Date
reduced by the amount of any scheduled amortization payments
or mandatory prepayments when actually paid or permanent
reductions thereon;
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(iv) Interest Swap Obligations of the Corporation or any
of its Restricted Subsidiaries covering Indebtedness of the
Corporation or any of its Restricted Subsidiaries; provided,
however, that such Interest Swap Obligations are entered into
to protect the Corporation and its Restricted Subsidiaries
from fluctuations in interest rates on Indebtedness incurred
in accordance with this Certificate of Designation to the
extent the notional principal amount of such Interest Swap
Obligation does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligation relates;
(v) Indebtedness under Currency Agreements; provided
that in the case of Currency Agreements which relate to
Indebtedness, such Currency Agreements do not increase the
Indebtedness of the Corporation and its Restricted
Subsidiaries outstanding other than as a result of
fluctuations in foreign currency exchange rates or by reason
of fees, indemnities and compensation payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted
Subsidiary of the Corporation to the Corporation or to a
Wholly Owned Restricted Subsidiary of the Corporation for so
long as such Indebtedness is held by the Corporation or a
Wholly Owned Restricted Subsidiary of the Corporation;
provided that if as of any date any Person other than the
Corporation or a Wholly Owned Restricted Subsidiary of the
Corporation owns or holds any such Indebtedness in respect of
such Indebtedness, such date shall be deemed the incurrence of
Indebtedness not constituting Permitted Indebtedness by the
issuer of such Indebtedness;
(vii) Indebtedness of the Corporation to a Wholly Owned
Restricted Subsidiary of the Corporation for so long as such
Indebtedness is held by a Wholly Owned Restricted Subsidiary
of the Corporation; provided that if as of any date any Person
other than a Wholly Owned Restricted Subsidiary of the
Corporation owns or holds any such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the Corporation;
(viii) Indebtedness arising from the honoring by a bank
or other financial institution of a check, draft or similar
instrument inadvertently (except in the case of daylight
overdrafts) drawn against insuf-
39
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ficient funds in the ordinary course of business; provided,
however, that such Indebtedness is extinguished within five
Business Days of incurrence;
(ix) Indebtedness of the Corporation or any of its
Restricted Subsidiaries represented by letters of credit for
the account of the Corporation or such Restricted Subsidiary,
as the case may be, in order to provide security for workers'
compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course
of business;
(x) Indebtedness represented by Capitalized Lease
Obligations and Purchase Money Indebtedness of the Corporation
and its Restricted Subsidiaries incurred in the ordinary
course of business not to exceed the greater of $7.5 million
and 5% of Consolidated Tangible Assets of the Corporation at
any one time outstanding;
(xi) Indebtedness arising from agreements of the
Corporation or a Restricted Subsidiary of the Corporation
providing for indemnification, adjustment of purchase price,
earn out or other similar obligations, in each case incurred
or assumed in connection with the disposition of any business,
assets or a Restricted Subsidiary of the Corporation in a
principal amount not to exceed the gross proceeds actually
received by the Corporation or any of its Restricted
Subsidiaries in connection with such disposition;
(xii) obligations in respect of performance and surety
bonds and completion guarantees provided by the Corporation or
any Restricted Subsidiary of the Corporation in the ordinary
course of business;
(xiii) guarantees by the Corporation and its Wholly
Owned Restricted Subsidiaries of each other's Indebtedness;
provided that such Indebtedness is permitted to be incurred
under this Certificate of Designation;
(xiv) Indebtedness of foreign Restricted Subsidiaries of
the Corporation incurred to finance working capital of such
foreign Restricted Subsidiaries in an aggregate principal
amount at any time outstanding not to exceed the sum of 50% of
the book value of the inventory of such foreign Restricted
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Subsidiaries and 65% of the book value of the accounts
receivable of such foreign Restricted Subsidiaries;
(xv) Refinancing Indebtedness; and
(xvi) additional Indebtedness of the Corporation and its
Restricted Subsidiaries in an aggregate principal amount not
to exceed $20.0 million at any one time outstanding (which
amount may, but need not, be incurred in whole or in part
under the New Revolving Credit Facility).
"Permitted Investments" means (i) Investments by the
Corporation or any Restricted Subsidiary of the Corporation in any
Person that is or will become immediately after such Investment a
Wholly Owned Restricted Subsidiary of the Corporation or that will
merge or consolidate into the Corporation or a Wholly Owned
Restricted Subsidiary of the Corporation, (ii) Investments in the
Corporation by any Restricted Subsidiary of the Corporation; (iii)
investments in cash and Cash Equivalents; (iv) loans and advances to
employees and officers of the Corporation and its Restricted
Subsidiaries in the ordinary course of business for bona fide
business purposes not in excess of $500,000 at any one time
outstanding; (v) Currency Agreements and Interest Swap Obligations
entered into in the ordinary course of the Corporation's or its
Restricted Subsidiaries' businesses and otherwise in compliance with
this Certificate of Designation; (vi) Investments not to exceed the
greater of $7.5 million and 5% of Consolidated Tangible Assets of
the Corporation at the time of such Investment at any one time
outstanding; (vii) Investments in securities of trade creditors or
customers received pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of such trade
creditors or customers; (viii) Investments made by the Corporation
or its Restricted Subsidiaries as a result of consideration received
in connection with an Asset Sale; (ix) accounts receivable created
or acquired in the ordinary course of business; (x) guarantees (a)
by the Corporation of Indebtedness otherwise permitted to be
incurred by Restricted Subsidiaries of the Corporation under this
Certificate of Designation or (b) by a Restricted Subsidiary of the
Corporation of Indebtedness otherwise permitted to be incurred by
the Corporation or Restricted Subsidiaries of the Corporation under
this Certificate of Designation; and (xi) Investments the payment
for which consists exclusively of Qualified Capital Stock of the
Corporation.
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"Person" means an individual, partnership, corporation,
unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"preferred stock" of any Person means any Capital Stock of
such Person that has preferential rights to any other Capital Stock
of such Person with respect to dividends or redemptions or upon
liquidation.
"Principal" means Cornerstone Equity Investors, L.L.C.
"Public Equity Offering" means an underwritten public offering
of Qualified Capital Stock of the Corporation, pursuant to a
registration statement filed with the Commission in accordance with
the Securities Act.
"Purchase Money Indebtedness" means Indebtedness of the
Corporation and its Restricted Subsidiaries incurred in the normal
course of business for the purpose of financing all or any part of
the purchase price, or the cost of installation, construction or
improvement, of property or equipment.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Quarterly Dividend Period" shall mean the quarterly period
commencing on each March 1, June 1, September 1 and December 1 and
ending on the next succeeding Dividend Payment Date, respectively.
"Recapitalization," means the recapitalization of the
Corporation on the Effective Date pursuant to the Amended and
Restated Recapitalization Agreement dated as of February 1, 1998 by
and among Micron Electronics, Inc., MEI California, Inc. Cornerstone
Equity Investors IV L.P. and the Corporation, as amended.
"Redemption Date," with respect to any shares of Exchangeable
Preferred Stock, means the date on which such shares of Exchangeable
Preferred Stock are to be redeemed by the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in
paragraph (e) (iii) hereof.
"Refinance" means, in respect of any security or Indebtedness,
to refinance, extend, renew, refund, repay,
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prepay, redeem, defease or retire, or to issue a security or
Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the
Corporation or any Restricted Subsidiary of the Corporation of (A)
for purposes of clause (xv) of the definition of Permitted
Indebtedness, Indebtedness incurred in accordance with paragraph
(l)(i) hereof (other than pursuant to clause (ii), (iv), (v), (vi),
(vii), (viii), (ix), (x), (xi), (xii), (xiii), (xiv) or (xvi) of the
definition of Permitted Indebtedness) or (B) for any other purpose,
Indebtedness incurred in accordance with paragraph (l)(i) hereof, in
each case that does not (1) result in an increase in the aggregate
principal amount of Indebtedness of such Person as of the date of
such proposed Refinancing (plus the amount of any premium required
to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by
the Corporation in connection with such Refinancing) except to the
extent such increase is otherwise permitted to be incurred under
this Certificate of Designation or (2) create Indebtedness with a
Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced;
provided that if such Indebtedness being Refinanced is Indebtedness
solely of the Corporation, then such Refinancing Indebtedness shall
be Indebtedness solely of the Corporation.
"Registration Rights Agreement" means the Registration Rights
Agreement dated February 26, 1998 among the Corporation and BT Alex.
Brown Incorporated.
"Restricted Subsidiary" of any Person means any Subsidiary of
such Person which at the time of determination is not an
Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to the Corporation or a Restricted
Subsidiary of any property, whether owned by the Corporation or any
Restricted Subsidiary at the Effective Date or later acquired, which
has been or is to be sold or transferred by the Corporation or such
Restricted Subsidiary to such Person or to any other Person from
whom funds have been or are to be advanced by such Person on the
security of such Property.
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"Securities Act" means the Securities Act of 1933, as amended,
or any successor statute or statutes thereto.
"Subsidiary", with respect to any Person, means (i) any
corporation of which the outstanding Capital Stock having at least a
majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned,
directly or indirectly, by such Person or (ii) any other Person of
which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such
Person.
"TIA" shall mean the Trust Indenture Act of 1939, as amended.
"Transfer Agent" shall mean United States Trust Company of New
York.
"Unrestricted Subsidiary" of any Person means (i) any
Subsidiary of such Person that at the time of determination shall be
or continue to be designated an Unrestricted Subsidiary by the Board
of Directors of such Person in the manner provided below and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors
may designate any Subsidiary (including any newly acquired or newly
formed Subsidiary) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Corporation or any other Subsidiary of the
Corporation that is not a Subsidiary of the Subsidiary to be so
designated; provided that (x) the Corporation certifies to the
Transfer Agent that such designation complies with paragraph (l)(ii)
hereof and (y) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any of the
assets of the Corporation or any of its Restricted Subsidiaries. The
Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if (x) immediately after giving effect to
such designation, the Corporation is able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) in
compliance with paragraph (l)(i) hereof and (y) immediately before
and immediately after giving effect to such designation, no Voting
Rights Triggering Event shall have occurred and be continuing under
this Certificate of Designation. Any such designation
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by the Board of Directors shall be evidenced by an officers'
certificate certifying that such designation complied with the
foregoing provisions.
"Voting Rights Triggering Event" shall have the meaning
ascribed to it in paragraph (f)(iv) hereof.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing
(a) the then outstanding aggregate principal amount of such
Indebtedness into (b) the sum of the total of the products obtained
by multiplying (i) the amount of each then remaining installment,
sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof,
by (ii) the number of years (calculated to the nearest one-twelfth)
which will elapse between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding
voting securities (other than in the case of a foreign Restricted
Subsidiary, directors' qualifying shares or an immaterial amount of
shares required to be owned by other Persons pursuant to applicable
law) are owned by such Person or any Wholly Owned Restricted
Subsidiary of such Person.
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IN WITNESS WHEREOF, said MCMS, INC. has caused this Certificate to
be signed by Robert F. Subia, its President and Chief Executive Officer, this
24th day of February, 1998.
MCMS, INC.
By: /s/ Robert F. Subia
-----------------------------
Name: Robert F. Subia
Title: President and Chief
Executive Officer