CERTIFICATE OF DESIGNATION
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SETTING FORTH RESOLUTION CREATING A SERIES
OF PREFERRED STOCK DESIGNATED AS
EXCHANGEABLE PREFERRED STOCK
ADOPTED BY THE BOARD OF DIRECTORS OF
PETROLEUM HEAT AND POWER CO., INC.
Pursuant to the Provisions of Section 302.A401 of the
Minnesota Business Corporation Act, as amended
We, the undersigned, GEORGE LEIBOWITZ and ALAN SHAPIRO, respectively a
Senior Vice President and Assistant Secretary of Petroleum Heat and Power Co.,
Inc., a Minnesota corporation (hereinafter sometimes referred to as the
"Corporation"), hereby certify as follows:
FIRST: That under the Restated and Amended Articles of Incorporation of
the Corporation ("Restated Articles") the total number of authorized shares of
Preferred Stock which the Corporation may issue is 5,000,000 and under said
Restated Articles the Board of Directors of the Corporation ("Board") is
authorized to issue such shares of the Preferred Stock from time to time in one
or more series and to determine in the resolution providing for the issuance of
any series of Preferred Stock the rights and preferences of shares of such
series not fixed and determined by the Restated Articles.
SECOND: That the Board, pursuant to the authority so vested in it by the
Restated Articles and in accordance with the provisions of Section 302A.401 of
the Minnesota Business Corporation Act, as amended, adopted the following
resolution creating two series of Preferred Stock designated as 12 7/8% Series A
Exchangeable Preferred Stock due 2009 ("Series A Exchangeable Preferred Stock")
and 12 7/8% Series B Exchangeable Preferred Stock due 2009 ("Series B
Exchangeable Preferred Stock"), which resolution has not been amended, modified,
rescinded or revoked and is in full force and effect on the Preferred Stock
Closing Date.
WHEREAS, the Restated and Amended Articles of Incorporation (the "Restated
Articles") of Petroleum Heat and Power Co., Inc. a Minnesota corporation (the
"Corporation"), authorize the issuance of 5,000,000 shares of Preferred Stock of
the Corporation; and
WHEREAS, this Corporation wishes to issue up to 2,000,000 shares of its
Series A Exchangeable Preferred Stock to provide funds primarily for general
corporate purposes;
WHEREAS, pursuant to a Registration Rights Agreement between this
Corporation and Donaldson, Lufkin & Jenrette Securities Corporation (the
"Registration Rights Agreement"), this Corporation may issue up to 2,000,000
shares of its Series B Exchangeable Preferred Stock, which will have been
registered under the Securities Act of 1933, as amended, in exchange for a like
number of shares of its Series A Preferred Stock as provided for therein.
NOW, THEREFORE, be it, and it hereby is, resolved by the Board that two
series of the Preferred Stock of the Corporation is hereby designated 12 7/8%
Series A Exchangeable Preferred Stock due 2009 consisting of 2,000,000 shares
(the "Series A Exchangeable Preferred Stock") and 12 7/8% Series B Exchangeable
Preferred Stock due 2009 consisting of 2,000,000 shares (the "Series B
Exchangeable Preferred Stock" and, together with the Series A Exchangeable
Preferred Stock, the "Exchangeable Preferred Stock"), having the relative rights
and preferences as set forth below:
1. Ranking. The shares of the Exchangeable Preferred Stock shall rank
senior to the Corporation's Class A and Class C Common Stock, junior to the
Corporation's Class B Common Stock and pari passu with the Corporation's 1989
Preferred Stock and Parity Securities which may be issued pursuant to paragraph
10(b) "Limitation on Funded Debt and Preferred Stock" with respect to the
payment of dividends and upon liquidation, dissolution, winding-up or otherwise.
Except as specified in the preceding sentence and as provided in paragraph 7(b),
all other series of Preferred Stock, all other classes of Preferred Stock and
all other capital stock of the Corporation shall rank junior to the Exchangeable
Preferred Stock with respect to the payment of dividends or upon liquidation,
dissolution, winding-up or otherwise.
2. Dividends.
(a) The holders of the shares of the Exchangeable Preferred Stock
shall be entitled to receive dividends thereon at the rate per annum equal to 12
7/8% of the Liquidation Preference per share of Exchangeable Preferred Stock
when and as declared by the Board of Directors of this Corporation, out of funds
legally available therefor. The obligations of this Corporation to pay dividends
on the Exchangeable Preferred Stock pursuant to the provisions of this paragraph
2 shall accrue (whether or not declared) and be cumulative from and including
the date on which each such share is issued. Dividends shall be payable
quarterly in arrears (each a "Quarterly Dividend Period") on the 15th day of
February, May, August and November (each a "Dividend Payment Date"), commencing
with the first Dividend Payment Date following
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the issuance of such shares, to the holders of record as they shall appear on
the stock register of the Corporation on the first day of such calendar month.
All dividends shall be computed on the basis of a 360-day year of twelve 30-day
months and the actual number of days elapsed in the period for which such
dividends are payable. Unpaid dividends for any period less than a full
Quarterly Dividend Period shall accrue on a day-to-day basis and shall be
computed on the basis of a 360-day year.
(b) The obligation of the Corporation to pay dividends pursuant to
the provisions of this paragraph shall be cumulative. If the full amount of
dividends required to be paid as aforesaid for any Quarterly Dividend Period
shall not have been paid, whether or not earned or declared, or a sum sufficient
for the payment thereof set apart, all of the dividends required to be so paid
but not paid (the "Deficiency") shall earn and accrue additional dividends,
effective as of the date on which such dividends were to be paid and continuing
until the full amount of the Deficiency plus all accrued but unpaid dividends
thereon shall have been paid in full, at a per annum rate equal to the per annum
dividend rate payable hereunder throughout such period with respect to
Exchangeable Preferred Stock plus 2%. All payments of dividends made on the
Exchangeable Preferred Stock shall be applied first, to the reduction of all
accrued but unpaid dividends on the Deficiency, second, to the reduction of the
Deficiency and third, to the payment of all accrued but unpaid dividends on the
Exchangeable Preferred Stock, other than the Deficiency. Reference to accrued
and/or cumulative dividends hereunder shall be deemed for all purposes to
include all amounts of Deficiency and all such accrued but unpaid dividends
thereon.
3. Priority as to Dividends.
(a) No dividends or other distributions (other than dividends or
other distributions payable in Class A Common Stock, Class C Common Stock or
other Junior Securities) shall be declared or paid or set apart for payment on
any Junior Securities for any period, and no Junior Securities may be
repurchased, redeemed or otherwise retired, nor may funds be set apart for
payment with payment with respect thereto, unless at the time thereof (1) full
cumulative dividends have been or simultaneously are declared and paid (or
declared and a sum sufficient for the payment thereof set apart for such
payment) on the Exchangeable Preferred Stock for all Quarterly Dividend Periods
terminating on or prior to the date of payment of such dividends on Junior
Securities, (ii) an amount equal to the dividends accrued on the Exchangeable
Preferred Stock as of the date of each proposed distribution or payment on the
Junior Securities has been declared and set apart in cash for payment on the
Exchangeable Preferred Stock and, (iii) any redemption payment required to be
made pursuant hereto on or prior to the date of payment of such dividends on
Junior Securities shall have
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been paid or a sum sufficient for the payment thereof set apart for such
payment.
(b) If the Corporation proposes to pay to the holders of the
outstanding Exchangeable Preferred Stock and the holders of all outstanding
Parity Securities an amount less than full accrued and unpaid cumulative
dividends thereon (whether or not declared or earned) plus Liquidated Damages,
if any, then the amount actually distributed shall be distributed among such
holders ratably per share in proportion to the amount of such accrued and unpaid
dividends plus Liquidated Damages, if any. No Parity Securities may be
repurchased, redeemed or otherwise retired, nor may funds be set apart for
payment with respect thereto, if full cumulative dividends have not been paid in
cash on the Preferred Stock.
4. Mandatory Redemption.
(a) On February 15, 2009 (the "Mandatory Redemption Date") the
Corporation shall redeem all outstanding shares of the Exchangeable Preferred
Stock. The per share redemption price shall be the Liquidation Preference per
share plus all accrued and unpaid cumulative dividends thereon (whether or not
declared or earned) plus all Liquidated Damages, if any, to the date of such
redemption; provided, however, that if such redemption price is not paid on such
Mandatory Redemption Date, such redemption price shall bear interest thereafter
at a per annum rate equal to the per annum dividend rate payable hereunder with
respect to the Exchangeable Preferred Stock plus 2% until such redemption price
is paid.
(b) No redemption may be authorized or made unless prior thereto
full unpaid cumulative dividends shall have been paid in cash or a sum set apart
for such payment on the Exchangeable Preferred Stock and all Parity Securities.
5. Redemption Upon Change of Ownership.
(a) Upon the occurrence of a Change of Control, the Corporation
shall make an offer (the "Change of Control Offer") to each holder of
Exchangeable Preferred Stock to redeem all or any part of such holder's
Exchangeable Preferred Stock at a redemption price equal to 101% of the
Liquidation Preference thereof, plus an amount in cash equal to all accumulated
and unpaid dividends and Liquidated Damages, if any, to the date of redemption
(the "Change of Control Redemption Price"). Within 30 days following any Change
of Control, the Corporation will mail a notice to each holder ("Change of
Control Notice") stating (i) that a Change of Control has occurred and that such
holder has the right to require the Corporation to redeem such holder's
Exchangeable Preferred Stock at a redemption price in cash equal to the Change
of Control Redemption Price, (ii) the circumstances and relevant facts regarding
such Change of Control (including information with respect to pro
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forma historical income, cash flow and capitalization after giving effect to
such Change of Control), (iii) the redemption date (the "Change of Control
Redemption Date") (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed) and (iv) the instructions, determined by
the Corporation consistent with this Certificate of Designation, that a holder
must follow in order to have its Exchangeable Preferred Stock redeemed.
(b) If, at the time of a Change of Control, the Corporation is
prohibited by the terms of any Indebtedness from purchasing shares of
Exchangeable Preferred Stock that may be tendered by holders pursuant to a
Change of Control Offer, then prior to the mailing of the Change of Control
Notice but in any event within 30 days following any Change of Control, the
Corporation shall (i) repay in full such Indebtedness or (ii) obtain the
requisite consent under such Indebtedness to permit the purchase of the
Exchangeable Preferred Stock as described above.
(c) On the Change of Control Redemption Date, the Corporation shall
redeem all shares of the Exchangeable Preferred Stock properly tendered pursuant
to the Change of Control Offer out of funds legally available therefor.
(d) In the event such redemption price is not fully paid on the
Change of Control Redemption Date, such redemption price shall earn interest
from the date fixed for such redemption at a rate per annum equal to the per
annum dividend rate payable hereunder throughout such period on the Exchangeable
Preferred Stock plus 2%, until such redemption price (including all such
interest) shall be paid in full.
(e) No redemption may be authorized or made unless prior thereto
full unpaid cumulative dividends shall have been paid in cash or a sum set apart
for such payment on the Exchangeable Preferred Stock and all Parity Securities.
6. Optional Redemption of Exchangeable Preferred Stock.
(a) In addition to the mandatory redemptions required by paragraphs
4 and 5 hereof, the Corporation shall have the option at any time from time to
time on any Dividend Payment Date on and after (but not before) February 15,
2002 to redeem for cash shares of the Exchangeable Preferred Stock, either in
whole or in part (but if in part then in units of 100 shares or an integral
multiple thereof, unless less than 100 shares are then outstanding or held by
any one holder thereof), at the redemption prices set forth herein, together
with all accumulated and unpaid dividends (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) and Liquidated Damages, if
any, to the redemption date. The redemption prices (expressed as percentages of
Liquidation Preference) are as follows for shares of
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Exchangeable Preferred Stock redeemed during the twelve-month period beginning
February 15 of the years indicated:
Year Percentage
---- ----------
2002.......................................................... 106.438
2003......................................................... 104.292
2004.......................................................... 102.146
2005 and thereafter........................................... 100.000
(b) At least 30 days but not more than 60 days before an optional
redemption date, the Corporation shall mail or cause to be mailed, by first
class mail, a notice of redemption to each holder whose Exchangeable Preferred
Stock is to be redeemed at its registered address. The notice shall identify the
shares of Exchangeable Preferred Stock to be redeemed and shall state the
redemption date, the redemption price and the procedure to be followed by such
holder to receive the redemption payment.
(c) In the event of partial redemptions of Exchangeable Preferred
Stock, the shares to be redeemed will be determined pro rata or by lot, as
determined by the Company.
(d) No optional redemption may be authorized or made unless prior
thereto full unpaid cumulative dividends shall have been paid in cash or a sum
set apart for such payment on the Exchangeable Preferred Stock and all Parity
Securities.
7. Voting Rights.
(a) Except as provided in subparagraphs (b) and (c) of this
paragraph 7, or as required by the laws of the State of Minnesota or any other
applicable law, the holders of the Exchangeable Preferred Stock shall not be
entitled to any voting rights with respect to general corporate matters. On all
matters upon which holders of the Exchangeable Preferred Stock are entitled to
vote, or give their consent, each such holder shall be entitled to one (1) vote
per share of the Exchangeable Preferred Stock held by such holder.
(b) Except as provided in subparagraph (c)(vi), the Corporation
shall not (i) without the affirmative vote or written consent of the holders of
at least a majority of the then outstanding Exchangeable Preferred Stock (A)
amend, modify or supplement the Restated Articles or any agreement or
understanding, or enter into any agreement or understanding, the effect of which
would be to adversely affect the rights, preferences, privileges or powers of,
or limitations on, the Exchangeable Preferred Stock contained in the Restated
Articles, including without limitation
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this Resolution except as provided in paragraph 10(b) (B) issue any additional
shares of Exchangeable Preferred Stock or authorize any class of Parity
Securities or Senior Securities or (C) consolidate with or merge with or into,
or convey, transfer or lease all or substantially all its assets to, any person
unless: (1) the resulting, surviving or transferee person (if not the
Corporation) is organized and existing under the laws of the United States of
America or any State thereof or the District of Columbia; (2) the Exchangeable
Preferred Stock shall be converted into or exchanged for and shall become shares
of such successor, transferee or resulting corporation, having in respect of
such successor, transferee or resulting corporation the same powers, preferences
and relative, participating, optional or other special rights thereof that the
Exchangeable Preferred Stock had immediately prior to such transaction; (3)
immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the resulting, surviving or
transferee person or any Subsidiary as a result of such transaction as having
been issued by such person or such Subsidiary at the time of such transaction),
no Voting Rights Triggering Event shall have occurred and be continuing; and (4)
either (a) immediately after giving effect to such transaction, the resulting,
surviving or transferee person would be able to issue an additional $1.00 of
Funded Debt pursuant to the first paragraph of paragraph 10(b) "Limitation on
Funded Debt and Preferred Stock" or (b) the Company makes an offer to each
holder of Preferred Stock to repurchase all or any part of such holder's
Preferred Stock at a purchase price equal to 101% of the liquidation preference
thereof, plus an amount in cash equal to all accumulated and unpaid dividends
and Liquidated Damages, if any, to the date of purchase (ii) without the
affirmative vote or written consent of the holders of at least two thirds (66
2/3%) of the then outstanding Exchangeable Preferred Stock amend the Change of
Control provisions (including the related definitions) in paragraph 5.
(c) (i) If and whenever (A) dividends on the Exchangeable Preferred
Stock shall be in arrears and shall not have been fully paid or shall not have
been declared and a sum sufficient for the payment thereof set aside for four
Quarterly Dividend Periods (whether consecutive or not) on all shares of the
Exchangeable Preferred Stock at the time outstanding, or (B) any redemption
payment required to be made pursuant hereto shall not be made on the date
specified for such redemption of the Exchangeable Preferred Stock pursuant
thereto or (C) the Corporation shall fail to make an offer to redeem all
outstanding shares of Exchangeable Preferred Stock following a Change of Control
pursuant to paragraph 5 or (D) a breach or violation of any of the provisions
set forth in paragraph 10 occurs and the breach or default continues for a
period of 30 days or more or (E) a default occurs on the obligation to pay
principal or interest on or any other payment obligation when due ("Payment
Default") at final maturity on any Indebtedness of the Corporation or any
Subsidiary, whether such Indebtedness
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exists on the date of this Certificate of Designation or thereafter, having
individually or in the aggregate an outstanding amount in excess of $1 million
or its foreign currency equivalent, or any other Payment Default occurs on such
Indebtedness and such Indebtedness is declared due and payable prior to
maturity, then and in each such event (each of the events described in
subparagraphs (c)(i)(A) through (c)(i) (E) a "Voting Rights Triggering Event"),
the number of directors constituting the Board shall, without further action, be
increased by two (2) and the holders of the Exchangeable Preferred Stock shall
have, in addition to the other voting rights set forth herein, the exclusive
right (but not the obligation) voting separately as a class, to elect two
directors of the Corporation to fill such newly created directorships, the
remaining directors to be elected by the other class or classes of stock
entitled to vote therefor, at each meeting of stockholders held for the purpose
of electing directors.
(ii) Whenever such voting right shall have vested, such right
may be exercised initially either at a special meeting of the holders of the
Exchangeable Preferred Stock, called as hereinafter provided, by written consent
or at any annual meeting of stockholders held for the purpose of electing
directors, and thereafter at such annual meeting or by the written consent of
the holders of the Exchangeable Preferred Stock pursuant to applicable
provisions of the Minnesota General Corporation Law.
(iii) At any time when such voting rights shall have vested in
the holders of the Exchangeable Preferred Stock, and if such right shall not
already have been initially exercised, a proper officer of the Corporation
shall, upon the written request of any holder of record of the Exchangeable
Preferred Stock then outstanding, addressed to the Secretary of the Corporation,
call a special meeting of the holders of the Exchangeable Preferred Stock and of
any other class or classes of stock having voting power with respect thereto for
the purpose of electing directors. Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of stockholders at
the place for holding annual meetings of stockholders of the Corporation or, if
none, at a place designated by the Secretary of the Corporation; provided,
however, that the Secretary shall not be required to call any such special
meeting in the case of any request therefor received less than ninety (90) days
prior to the date fixed for any annual meeting of stockholders of the
Corporation, and if in such case such special meeting is not called, the holders
of Exchangeable Preferred Stock shall be entitled to exercise the special voting
rights provided in this subparagraph (c) (iii) at such annual meeting; provided,
further, that nothing herein shall be deemed to prohibit the holders of
Exchangeable Preferred Stock from exercising their special voting rights by
written consent at any time, including without limitation, during the 90-day
period immediately preceding any annual meeting of stockholders of the
Corporation, with the
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election of such director by the holders of the Exchangeable Preferred Stock
being effective as of the date of such written consent. If such meeting shall
not be called by the proper officers of the Corporation within 10 days after the
personal service of such written request upon the Secretary of the Corporation,
or within 10 days after mailing the same within the United States, by registered
mail, addressed to the Secretary of the Corporation at its principal office
(such mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of 10% or more of the shares of the
Exchangeable Preferred Stock then outstanding may designate in writing a holder
of the Exchangeable Preferred Stock to call such meeting at the expense of the
Corporation, and such meeting may be called by such person so designated upon
the notice required for annual meetings of stockholders and shall be held at the
same place as is elsewhere provided in this subparagraph (c)(iii). Any holder of
the Exchangeable Preferred Stock shall have access to the stock books of the
Corporation for the purposes of causing a meeting of stockholders to be called
pursuant to the provisions of this paragraph.
(iv) At any meeting held for the purpose of electing directors
at which the holders of the Exchangeable Preferred Stock shall have the right to
elect directors as provided herein, the presence in person or by proxy of the
holders of 50% of the then outstanding shares of the Exchangeable Preferred
Stock shall be required and be sufficient to constitute a quorum of such class
for the election of directors by such class. At any such meeting or adjournment
thereof (A) the absence of a quorum of the holders of the Exchangeable Preferred
Stock shall not prevent the election of directors other than those to be elected
by the holders of stock of such class and the absence of a quorum or quorums of
the holders of capital stock entitled to elect such other directors shall not
prevent the election of directors to be elected by the holders of the
Exchangeable Preferred Stock and (B) in the absence of a quorum of the holders
of any class of stock entitled to vote for the election of directors, a majority
of the holders present in person or by proxy of such class shall have the power
to adjourn the meeting for the election of directors which the holders of such
class are entitled to elect, from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
(v) The rights of the holders of outstanding shares of the
Exchangeable Preferred Stock granted by this subparagraph (c) may be exercised
only until (A) all dividends in arrears on the Exchangeable Preferred Stock, if
any, shall have been paid in full or declared and funds sufficient theretofore
set aside and the Corporation shall have paid in full or declared and set aside
funds sufficient for the two consecutive Quarterly Dividend Periods following
the payment of any arrearage, (B) all redemption payments, if any, with respect
to the Exchangeable
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Preferred Stock shall have been made, (C) the Corporation shall not have failed
to make an offer to redeem all outstanding shares of Exchangeable Preferred
Stock following a Change of Control pursuant to paragraph 5, (D) all breaches of
any of the covenants contained in paragraph 10 hereof or this paragraph 7, if
any, shall have been cured or waived by the holders of a majority of the
outstanding shares of Exchangeable Preferred Stock, and (E) all Payment
Defaults, if any, have been cured or waived; and thereafter such rights of the
holders of the Exchangeable Preferred Stock to elect two directors to the Board
shall cease, but subject always to the same provisions for the vesting of such
rights in the future pursuant to this subparagraph (c) above.
8. Payment on Liquidation.
(a) In the event of any liquidation, dissolution or winding-up of
the affairs of the Corporation, whether voluntary or involuntary, after payment
or provision for payment of the debts and other liabilities of the Corporation,
the holders of shares of the Exchangeable Preferred Stock shall be entitled to
receive, out of the assets of the Corporation, whether such assets are capital
or surplus and whether or not any dividends as such are declared, an amount per
share of the Exchangeable Preferred Stock equal to the Liquidation Preference
per such shares at the date fixed for such distribution (or, in the case of a
liquidation, dissolution or winding-up prior to February 15, 2005 the then
applicable redemption price per share for the Exchangeable Preferred Stock
pursuant to paragraph 6 hereof), plus all accrued and unpaid cumulative
dividends thereon (whether or not declared or earned) plus Liquidated Damages,
if any, to the date of such distribution; provided, however, that if upon any
liquidation, dissolution or winding-up of the affairs of the Corporation
(whether voluntary or involuntary) the assets of the Corporation available for
distribution shall be insufficient to pay such amount to the holders of all
outstanding shares of the Exchangeable Preferred Stock and to pay to the holders
of all outstanding Parity Securities and all outstanding shares of Class B
Common Stock the full amounts to which they respectively are entitled under the
Restated Articles, the holders of shares of Class B Common Stock shall be
entitled, prior to any distribution to any holder or holders of the Exchangeable
Preferred Stock or such Parity Securities, to distributions in an amount not to
exceed the amount required to be distributed to such holders of or Class B
Common Stock in the event of any such liquidation, dissolution or winding-up of
the affairs of the Corporation pursuant to the Restated Articles.
(b) Except as provided above with respect to the Class B Common
Stock, in the event of any liquidation, dissolution, or winding-up of the
affairs of the Corporation (whether voluntary or involuntary), payment shall be
made to the holders of the Exchangeable Preferred Stock and all Parity
Securities in the
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amounts provided herein, before any payment shall be made or any assets
distributed to the holders of any Class A Common Stock, the Class C Common Stock
or any other Junior Securities of the Corporation.
(c) If upon the occurrence of any liquidation, dissolution or
winding-up of the affairs of the Corporation (whether voluntary or involuntary),
the assets of the Corporation available for distribution to the holders of the
Exchangeable Preferred Stock and the holders of all Parity Securities shall be
insufficient to pay to them the full amounts to which they shall be entitled,
respectively, then the entire assets of the Corporation available for
distribution to the holders of outstanding shares of the Exchangeable Preferred
Stock and the holders of the outstanding Parity Securities shall be distributed
among such holders ratably per share in proportion to the preferential amount
per share (including Liquidation Preference and accumulated and unpaid
dividends, whether or not declared or earned) to which they are entitled.
(d) Written notice of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, stating a payment
date and the place where the distributive amounts shall be payable, shall be
given by mail, postage prepaid, not less than thirty (30) days prior to the
payment date stated therein, to the holders of record of the Exchangeable
Preferred Stock at their respective addresses as the same shall appear on the
books of the Corporation.
(e) The voluntary sale, lease, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
of its property or asset to, or a consolidation or merger of the Corporation
with, one or more Persons shall not be deemed to be a liquidation, dissolution
or winding up of the affairs of the Corporation within the meaning of this
paragraph 8.
9. Exchange of Exchangeable Preferred Stock for Exchange Debentures.
(a) The Company may at its option exchange all, but not less than
all, of the then outstanding shares of Exchangeable Preferred Stock into the
Company's 12 7/8% Junior Subordinated Exchange Debentures due 2009 (the
"Exchange Debentures") to be issued under an indenture ("Exchange Debenture
Indenture") in the form attached hereto as Annex A to be entered into between
the Corporation and a trustee to be selected by the Corporation ("Trustee") on
any Dividend Payment Date on or after February 15, 2000, provided that on the
date of such exchange: (A) there are no accumulated and unpaid dividends or
Liquidated Damages on the Exchangeable Preferred Stock (including the dividends
payable and Liquidated Damages on such date) or other contractual impediments
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to such exchange; (B) there shall be legally available funds sufficient therefor
(including, without limitation, legally available funds sufficient therefor
under the Minnesota Business Corporation Act); (C) either (i) a registration
statement relating to the Exchange Debentures shall have been declared effective
under the Securities Act of 1933, as amended (the "Securities Act"), prior to
such exchange, and shall continue to be in effect on the date of such exchange;
or (ii)(A) the Corporation shall have obtained a written opinion of counsel that
an exemption from the registration requirements of the Securities Act is
available for such exchange, and that upon receipt of such Exchange Debentures
pursuant to such exchange made in accordance with such exemption, the holders
(assuming such holder is not an Affiliate of the Corporation) thereof shall not
be subject to any restrictions imposed by the Securities Act upon the resale
thereof other than any such restrictions to which the holder thereof already is
subject on the Exchange Date, and (B) such exemption is relied upon by the
Corporation for such exchange; (D) the Exchange Debenture Indenture and the
Trustee thereunder shall have been qualified under the Trust Indenture Act of
1939, as amended; (E) immediately after giving effect to such exchange, no
Default or Event of Default (each as defined in the Exchange Debenture
Indenture) would exist under the Exchange Debenture Indenture; and (F) the
Corporation shall have delivered to the Trustee a written opinion of counsel,
dated the date of exchange, regarding the satisfaction of the conditions set
forth in clauses (A), (B), (C) and (D). In the event that the issuance of the
Exchange Debentures is not permitted on the date of exchange or any of the
conditions set forth in clauses (A) through (F) of the preceding sentence are
not satisfied on the date of exchange, the Corporation shall use its best
efforts to satisfy such conditions and effect such exchange as soon as
practicable.
The Corporation shall send a written notice (the "Exchange Notice")
of exchange by mail to each Holder of record of Exchangeable Preferred Stock,
which notice shall state: (v) that the Corporation is exercising its option to
exchange the Exchangeable Preferred Stock for Exchange Debentures pursuant to
this Certificate of Designation; (w) the date fixed for exchange (the "Exchange
Date"), which date shall not be less than 30 days nor more than 60 days
following the date on which the Exchange Notice is mailed (except as provided in
the last sentence of this paragraph); (x) that the Holder is to surrender to the
Corporation, at the place or places where certificates for shares of
Exchangeable Preferred Stock are to be surrendered for exchange, in the manner
designated in the Exchange Notice, the certificate or certificates representing
the shares of Exchangeable Preferred Stock to be exchanged; (y) that dividends
on the shares of Exchangeable Preferred Stock to be exchanged shall cease to
accrue on the Exchange Date whether or not certificates for shares of
Exchangeable Preferred Stock are surrendered for exchange on the Exchange Date
unless the Corporation shall default in the delivery
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of Exchange Debentures; and (z) 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 the Exchange Date.
On the Exchange Date, if the conditions set forth in clauses (A) through (F)
above are satisfied, the Corporation shall issue Exchange Debentures in exchange
for the Exchangeable Preferred Stock as provided in the next paragraph.
(b) Upon any exchange pursuant to this paragraph 9, Exchange
Debentures shall be issued in exchange for Exchangeable Preferred Stock, in
registered form without coupons, in an amount equal to the Liquidation
Preference thereof, plus an amount in cash equal to all accumulated and unpaid
dividends (including a prorated dividend for the period from the immediately
preceding Dividend Payment Date to the Exchange Date). Exchange Debentures will
be issued in principal amounts of $1,000 and integral multiples thereof to the
extent possible, and will also be issued in principal amounts less than $1,000
so that each Holder of Exchangeable Preferred Stock will receive certificates
representing the entire amount of Exchange Debentures to which its shares of
Exchangeable Preferred Stock entitles it, provided that the Corporation may, at
its option, pay cash in lieu of issuing an Exchange Debenture in a principal
amount of less than $1,000.
(c) Procedure for Exchange. (A) On or before the date fixed for
exchange, 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
(properly endorsed or assigned for transfer, if the notice shall so state), such
shares shall be exchanged by the Corporation into Exchange Debentures. The
Corporation shall pay interest and Liquidated Damages, if any, on the Exchange
Debentures at the rate and on the dates specified therein from the Exchange
Date.
(d) If notice has been mailed as aforesaid, and if before the
Exchange Date (1) the Exchange Debenture Indenture shall have been duly executed
and delivered by the Corporation and the Trustee and (2) all Exchange Debentures
necessary for such exchange shall have been duly executed by the Corporation and
delivered to the Trustee with irrevocable instructions to authenticate the
Exchange Debentures necessary for such exchange, then on the Exchange Date,
dividends shall cease to accrue on the outstanding shares of Exchangeable
Preferred Stock and all of the rights of the Holders of shares of the
Exchangeable Preferred Stock as stockholders of the Corporation shall cease
(except the right to receive Exchange Debentures), and the Person or Persons
entitled to
13
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 date of exchange.
10. Certain Covenants
So long as any shares of Exchangeable Preferred Stock remain
outstanding, the Corporation shall comply with the following covenants:
(a) SEC Reports. In the event that the Corporation ceases to be
subject to the informational reporting requirements of the Exchange Act, the
Corporation shall, whether or not it is required to do so by the rules and
regulations of the U.S. Securities and Exchange Commission ("Commission"), for
so long as any shares of Exchangeable Preferred Stock remain outstanding,
furnish to the holders of the Exchangeable Preferred Stock and file with the
Commission (unless the Commission will not accept such a filing) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Corporation were required to file such forms, including a "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and,
with respect to the annual information only, a report thereon by the
Corporation's certified independent public accountants and (ii) all reports that
would be required to be filed with the Commission on Form 8-K if the Corporation
were required to file such reports. In addition, for so long as any shares of
Exchangeable Preferred Stock remain outstanding, the Corporation shall make
available to any prospective purchaser of shares of Exchangeable Preferred Stock
or beneficial owner of shares of Exchangeable Preferred Stock in connection with
any sale thereof the information required by Rule 144A(d)(4) under the
Securities Act.
(b) Limitation on Funded Debt and Preferred Stock. The Corporation
will not, directly or indirectly, create, incur, issue, assume, guaranty or
otherwise become directly or indirectly liable with respect to (collectively,
"incur") any Funded Debt, and the Corporation will not issue any Parity
Securities or any additional shares of Exchangeable Preferred Stock, unless,
after giving effect thereto, the Corporation's Consolidated EBITDA Coverage
Ratio exceeds 2.0 to 1.
Notwithstanding the foregoing paragraph, the Corporation may: (i)
incur Funded Debt owed to and held by a Wholly Owned Subsidiary; provided,
however, that any subsequent issuance or transfer of any Capital Stock which
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of such Funded Debt (other than to a
Wholly Owned Subsidiary) will be deemed, in each case, to constitute the
incurrence of such Funded Debt by the Corporation; (ii) incur Funded Debt (other
than Funded Debt described in clause (i) of this
14
paragraph) outstanding on the Exchangeable Preferred Stock Issue Date and incur
Funded Debt and issue Parity Securities or additional shares of Exchangeable
Preferred Stock in exchange for, or the proceeds of which are used to refund or
refinance, any Funded Debt permitted by this clause (ii) or by the first
paragraph of this covenant; provided, however, that (1) the principal amount of
the Funded Debt so incurred or the aggregate liquidation preference of the
Parity Securities or Exchangeable Preferred Stock so issued will not exceed the
principal amount of the Funded Debt so exchanged, refunded or refinanced and (2)
the Funded Debt so incurred or the Parity Securities or Preferred Stock so
issued (A) will not mature prior to the Stated Maturity of the Funded Debt so
exchanged, refunded or refinanced and (B) will have an Average Life equal to or
greater than the remaining Average Life of the Funded Debt so exchanged,
refunded or refinanced; and (iii) incur additional Funded Debt and issue Parity
Securities or additional shares of Exchangeable Preferred Stock having an
aggregate principal amount and liquidation preference not to exceed $50 million
at any one time outstanding; provided, however, that at any time and to the
extent the Corporation is permitted to incur Funded Debt or issue Parity
Securities or additional shares of Exchangeable Preferred Stock pursuant to the
Consolidated EBITDA Coverage Ratio test contained in the immediately preceding
paragraph, the Corporation may elect that amounts of Funded Debt incurred, and
shares of Exchangeable Preferred Stock issued, pursuant to this clause (iii) be
deemed to have been incurred or issued pursuant to the immediately preceding
paragraph and be deemed not to have been incurred or issued pursuant to this
clause (iii).
(c) Limitation on Indebtedness and Preference Stock of Subsidiaries.
The Corporation will not permit any Subsidiary to incur any Indebtedness or
issue any Preference Stock except: (i) Indebtedness or Preference Stock issued
to and held by the Corporation or a Wholly Owned Subsidiary; provided, however,
that any subsequent issuance or transfer of any Capital Stock which results in
any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any
subsequent transfer of such Indebtedness or Preference Stock (other than to the
Corporation or a Wholly Owned Subsidiary) will be deemed, in each case, to
constitute the incurrence of such Indebtedness or the issuance of such
Preference Stock, as the case may be, by the issuer thereof; (ii) Indebtedness
incurred or Preference Stock of a Subsidiary issued and outstanding on or prior
to the date on which such Subsidiary was acquired by the Corporation (other than
Indebtedness incurred or Preference Stock issued in contemplation of, as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary or was
acquired by the Corporation), provided that at the time such Subsidiary is
acquired by the Corporation, after giving effect to such Indebtedness or
Preference Stock of such Subsidiary, the Corporation's Consolidated EBITDA
Coverage Ratio exceeds 2.0 to 1;
15
(iii) Indebtedness or Preference Stock (other than Indebtedness or Preference
Stock described in clause (i), (ii), (iv) or (vi) of this covenant) incurred or
issued and outstanding on or prior to the Exchangeable Preferred Stock Issue
Date; (iv) Indebtedness of a Subsidiary consisting of guarantees issued by such
Subsidiary and outstanding on the Exchangeable Preferred Stock Issue Date and
Indebtedness of a Subsidiary consisting of guarantees issued subsequent to the
Exchangeable Preferred Stock Issue Date, in each case, to the extent such
guarantee guarantees Working Capital Debt; (v) Indebtedness of a Subsidiary
(other than Indebtedness described in clause (iv) above) consisting of
guarantees of Funded Debt of the Corporation permitted by the first paragraph of
"Limitation on Funded Debt and Exchangeable Preferred Stock"; and (vi)
Indebtedness or Preference Stock issued in exchange for, or the proceeds of
which are used to refund or refinance, Indebtedness or Preference Stock referred
to in the foregoing clause (ii) or (iii); provided, however, that (1) the
principal amount of such Indebtedness or Preference Stock so incurred or issued
(the "Refinancing Indebtedness") will not exceed the principal amount of the
Indebtedness or Preference Stock so refinanced (the "Refinanced Indebtedness"),
provided that if any such Refinanced Indebtedness was incurred under a revolving
credit or similar working capital facility, the principal amount of the
Refinancing Indebtedness may be in an amount up to the aggregate amount
available under the facility under which the Refinanced Indebtedness was
incurred (A) at the time the Subsidiary that incurred such Indebtedness was
acquired by the Corporation (in the case of Indebtedness described in the
foregoing clause (ii)) or (B) on the Exchangeable Preferred Stock Issue Date (in
the case of Indebtedness described in the foregoing clause (iii)), and (2) the
Refinancing Indebtedness (other than revolving credit or similar working capital
facilities) will (A) have a Stated Maturity later than the Stated Maturity of
the Refinanced Indebtedness and (B) will have an Average Life equal to or
greater than the remaining Average Life of the Refinanced Indebtedness.
(d) Limitation on Restricted Payments. The Corporation will not,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on or in respect of any Junior Securities (including any payment in connection
with any merger or consolidation involving the Corporation) or to the direct or
indirect holders of any Junior Securities (except dividends or distributions
payable solely in shares of its Non-Convertible Capital Stock that are Junior
Securities or in options, warrants or other rights to purchase shares of its
Non-Convertible Capital Stock that are Junior Securities), (ii) purchase, redeem
or otherwise acquire or retire for value any Junior Securities or (iii) make any
Restricted Investment (any such dividend, distribution, purchase, redemption or
other acquisition, or any such Restricted Investment, being herein referred to
as a "Restricted Payment") if at the time the Corporation makes such Restricted
Payment: (1) a Voting Rights Triggering Event will have
16
occurred and be continuing (or would result therefrom); or (2) the aggregate
amount of such Restricted Payment and all other Restricted Payments subsequent
to the Exchangeable Preferred Stock Issue Date would exceed the sum of: (A) 50%
of the Cash Flow of the Corporation and its Subsidiaries accrued during the
period (treated as one accounting period) subsequent to December 31, 1996, to
the end of the most recent fiscal quarter ending at least 45 days prior to the
date of such Restricted Payment (or, in case such Cash Flow will be a deficit,
minus 100% of such deficit), minus 100% of any deficit in Subsidiary Cash Flow
for such period of any Subsidiary described in clause (b) of the exception to
the definition of Consolidated Net Income; (B) the aggregate Net Cash Proceeds
received by the Corporation from the issue or sale of any Junior Securities
subsequent to the Exchangeable Preferred Stock Issue Date (other than an
issuance or sale to a Subsidiary or Unrestricted Subsidiary of the Corporation
or an employee stock ownership plan or other trust established by the
Corporation or any Subsidiary or Unrestricted Subsidiary of the Corporation);
(C) the amount by which indebtedness of the Corporation is reduced on the
Corporation's balance sheet upon the conversion or exchange (other than by a
Subsidiary) subsequent to December 31, 1996, of any Indebtedness of the
Corporation convertible or exchangeable for Junior Securities (less the amount
of any cash, or other property, distributed by the Corporation upon such
conversion or exchange); and (D) $30 million.
(e) The provisions of the foregoing paragraph will not prohibit: (i)
any purchase or redemption of Junior Securities made by exchange for, or out of
the proceeds of the substantially concurrent sale of, Junior Securities of the
Corporation (other than Junior Securities issued or sold to a Subsidiary or an
employee stock ownership plan or other trust established by the Corporation or
any Subsidiary); provided, however, that (A) such purchase or redemption will be
excluded in the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale will be excluded from clause (2)(B) of the
foregoing paragraph; (ii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would have
complied with this covenant; provided, however, that at the time of payment of
such dividend, no other Voting Rights Triggering Event will have occurred and be
continuing (or result therefrom); provided further, however, that such dividend
will be included in the calculation of the amount of Restricted Payments; or
(iii) Restricted Investments in an aggregate amount not to exceed the sum of (A)
$30 million, plus (B) $5 million on each anniversary of the Exchangeable
Preferred Stock Issue Date, plus (C) the amount of all dividends or other
distributions received in cash by the Corporation or any of its Wholly Owned
Subsidiaries from, and the amount of any Net Cash Proceeds to the Corporation or
any of its Wholly Owned Subsidiaries from the sale of Capital Stock (other than
a sale of Capital Stock to the Corporation, a Subsidiary or Unrestricted
Subsidiary of the Corporation or an
17
employee stock ownership plan or other trust established by the Corporation or
any Subsidiary or Unrestricted Subsidiary of the Corporation) of, an
Unrestricted Subsidiary of the Corporation, to the extent that the aggregate
amount of such dividends, distributions and Net Cash Proceeds referred to in
this clause (C) do not exceed the aggregate amount of Restricted Investments
made by the Corporation in such Unrestricted Subsidiary since the Exchangeable
Preferred Stock Issue Date; provided, however, that Restricted Investments
permitted by this clause (iii) will be excluded in the calculation of the amount
of Restricted Payments.
(f) Limitation on Restrictions on Distributions from Subsidiaries.
The Corporation will not, and will not permit any Subsidiary to, create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to: (i) pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness owed to the Corporation, (ii) make any loans or advances to the
Corporation or (iii) transfer any of its property or assets to the Corporation,
except: (1) any encumbrance or restriction pursuant to an agreement in effect on
the Exchangeable Preferred Stock Issue Date; (2) any encumbrance or restriction
with respect to a Subsidiary pursuant to an agreement relating to any
Indebtedness issued by such Subsidiary on or prior to the date on which such
Subsidiary was acquired by the Corporation (other than Indebtedness issued in
contemplation of, as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Subsidiary became a Subsidiary or
was acquired by the Corporation) and outstanding on such date; (3) any
encumbrance or restriction pursuant to an agreement effecting a refinancing of
Indebtedness issued pursuant to an agreement referred to in the foregoing clause
(1) or (2) or contained in any amendment to an agreement referred to in the
foregoing clause (1) or (2); provided, however, that the encumbrances and
restrictions contained in any such refinancing agreement or amendment are no
less favorable to holders of the Exchangeable Preferred Stock than the
encumbrances and restrictions contained in such agreements; (4) any such
encumbrance or restriction consisting of customary non-assignment provisions in
leases governing leasehold interests to the extent such provisions restrict the
transfer of the lease; (5) in the case of clause (iii) above, restrictions
contained in security agreements securing Indebtedness of a Subsidiary to the
extent such restrictions restrict the transfer of the property subject to such
security agreements; and (6) any restriction with respect to a Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of all
or substantially all of the Capital Stock or assets of such Subsidiary pending
the closing of such sale or disposition.
(g) Limitation on Transactions with Affiliates. The Corporation will
not, and will not permit any Subsidiary to,
18
conduct any business or enter into any transaction or series of similar
transactions in an aggregate amount in excess of $100,000 (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of the Corporation or any legal or beneficial owner
of 5% or more of any class of Capital Stock of the Corporation or with an
Affiliate of any such owner (any such business, transaction or series of similar
transactions, an "Affiliate Transaction") unless the terms of such Affiliate
Transaction are: (i) set forth in writing, (ii) fair to the Corporation and its
Subsidiaries from a financial point of view (as determined by the Board of
Directors), (iii) in the case of any Affiliate Transaction (other than an
Affiliate Transaction with an Unrestricted Subsidiary of the Corporation) in an
aggregate amount in excess of $500,000, the disinterested members of the Board
of Directors have determined in good faith that the criteria set forth in clause
(ii) are satisfied and (iv) in the case of any Affiliate Transaction involving
an Unrestricted Subsidiary of the Corporation in an aggregate amount in excess
of $2.0 million, the members of the Board of Directors have determined in good
faith that the criteria set forth in clause (ii) are satisfied. This covenant
will not prohibit: (a) any Restricted Payment permitted under "--Limitation on
Restricted Payments," (b) any issuance of securities, or other payments, awards
or grants in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans approved by the
Board of Directors, (c) loans or advances to employees in the ordinary course of
business, (d) the payment of reasonable fees to directors of the Corporation and
its subsidiaries who are not employees of the Corporation or its subsidiaries,
(e) any transaction between the Corporation and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries or (f) the Investment represented by the Sevin
Note.
11. Certain Definitions
"101/8% Notes" means the Corporation's 101/8% Subordinated Notes due
2003.
"14.10% Notes" means the Corporation's 14.10% Senior Notes due
January 15, 2001 and the Corporation's 14.10% Subordinated Notes due January 15,
2001.
"1989 Preferred Stock" shall have the meaning set forth in the
Corporation's Restated Articles.
"Affiliate" of any person specified means (i) any person directly or
indirectly controlling or under direct or indirect common control with such
specified person, (ii) any spouse, immediate family member or other relative who
has the same principal residence as any person described in clause (i) above,
(iii) any trust in which any persons described in clause (i) or (ii) above has a
beneficial interest and (iv) in the case of the
19
Corporation, any Unrestricted Subsidiary of the Corporation. For the purposes of
this definition, "control," when used with respect to any person, means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, a contract or
otherwise, and the terms "controlling" and "controlled" have meaning correlative
to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) of
shares of Capital Stock of a Subsidiary (other than directors' qualifying
shares), property or other assets (each referred to for the purposes of this
definition as a "disposition") by the Corporation or any of its Subsidiaries
(including any disposition by means of a merger, consolidation or similar
transaction) other than (i) a disposition by a Subsidiary to the Corporation or
by the Corporation or a Subsidiary to a Wholly Owned Subsidiary, (ii) a
disposition of property or assets at fair market value in the ordinary course of
business or (iii) a disposition of obsolete assets in the ordinary course of
business.
"Attributable Indebtedness" in respect of a Sale/Leaseback
Transaction means, as of the time of determination, the present value
(discounted at the dividend rate borne by the Exchangeable Preferred Stock or
the interest rate borne by the Exchange Debentures, as the case may be,
compounded annually) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preference Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to such Preference Stock
multiplied by the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Corporation
or any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a person means any obligation which
is required to be classified and accounted for as a capital lease on the face of
a balance sheet of such person prepared in accordance with generally accepted
accounting principles; the amount of such obligation will be the capitalized
20
amount thereof, determined in accordance with generally accepted accounting
principles; and the Stated Maturity thereof will be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such person, including any
Preference Stock, but excluding any debt securities convertible into or
exchangeable for such equity.
"Cash Flow" of a person for any period means the sum of (i) the
Consolidated Net Income of such person for such period, plus (ii) to the extent
deducted in the calculation of such Consolidated Net Income, the amortization of
customer lists and other deferred charges and the amortization and depreciation
of capital assets, plus (iii) to the extent not included in Consolidated Net
Income, the amount of all dividends or other distributions received in cash by
the Corporation or any of its Wholly Owned Subsidiaries (other than a Wholly
Owned Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income) from, and the amount of any Net Cash Proceeds to the
Corporation or any of its Wholly Owned Subsidiaries (other than a Wholly Owned
Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income) from the sale of Capital Stock of, an Unrestricted
Subsidiary of the Corporation, plus (iv) the amount of any cash actually
distributed by any Subsidiary described in clause (b) of the exception to the
definition of Consolidated Net Income during such period as a dividend or other
distribution to the Corporation or another Subsidiary of the Corporation (other
than another Subsidiary described in such clause (b)), plus (v) to the extent
excluded in calculating Net Income of such person and its Subsidiaries for such
period, any gain realized upon the sale or other disposition of any real
property or equipment or of any Capital Stock of the Corporation or a Subsidiary
owned by such person or any of its Subsidiaries, plus (vi) to the extent
deducted in calculating Net Income of such person and its Subsidiaries for such
period, any non-cash charge relating to the grant of stock options to executives
of the Corporation plus (vii) to the extent deducted in calculating Net Income
of such person and its Subsidiaries for such period, any non-cash expense
associated with deferred compensation plans; provided, however, that (a) Cash
Flow shall not include the amortization of customer lists or other deferred
charges or the amortization and depreciation of capital assets of any person or
Subsidiary described in clause (b) of the exception, or clause (i) of the
proviso, to the definition of Consolidated Net Income, (b) Cash Flow for any
period shall be reduced by the amount that any liability recorded on the books
of the Corporation relating to any deferred compensation expense referred to in
clause (vii) above is
21
reduced during such period and (c) any amounts included in clause (iii)(C) of
the second subparagraph of paragraph 10(d) "Limitations on Restricted Payments"
shall be excluded from Cash Flow of the Corporation.
"Change of Control" means (i) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than the
members of the Sevin Group and the Traber Group, becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to be the beneficial owner of all shares that such person
has the right to acquire, regardless of whether such right is exercisable
immediately or after the passage of time), directly or indirectly, of 50% or
more of the total voting power of all classes of the Voting Stock of the
Corporation and the members of the Sevin Group and the Traber Group cease to
have the right to appoint at least a majority of the members of the Board of
Directors of the Corporation, (ii) the holders of the 101/8% Notes have the
right to require the Corporation to purchase any such 101/8% Notes pursuant to
Section 4.08 of the Indenture, dated as of April 1, 1993, between the
Corporation and Chemical Bank, as trustee, relating thereto, (iii) any holder of
Private Notes exercises its right to declare any such notes to be due and
payable pursuant to Section 2.1 of the Note Agreement, dated as of September 1,
1988, relating thereto (the "1988 Note Agreement"), (iv) any holder of 14.10%
Notes exercises its right to declare any such notes to be due and payable
pursuant to Section 5.2(A) of the Note Agreement, dated as of January 15, 1991,
relating thereto (the "1991 Note Agreement") or (v) any holder of Private Notes
or 14.10% Notes shall have received any consideration (whether in the form of
cash, a change in the rate of interest relating to such notes, a change in any
other provision of the terms of such notes, or otherwise) to amend, modify,
waive or otherwise give up its right to declare any such notes to be due and
payable upon a "Change of Ownership," as defined in the 1988 Note Agreement or
the 1991 Note Agreement, as the case may be; provided, however, that an
amendment to or waiver or other modification of Section 2.1 of the 1988 Note
Agreement or Section 5.2(A) of the 1991 Note Agreement shall not, in the absence
of any consideration, constitute a Change of Control.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated EBITDA Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that (1) if the Corporation or any
Subsidiary has incurred any Indebtedness since the beginning of such period that
remains outstanding or if the transaction giving rise to the need to calculate
the Consolidated EBITDA Coverage
22
Ratio is an incurrence of Indebtedness, or both, EBITDA and Consolidated
Interest Expense for such period will be calculated after giving effect on a pro
forma basis to (A) such Indebtedness as if such Indebtedness had been incurred
on the first day of such period, (B) the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of such
period and (C) the interest income realized by the Corporation and its
Subsidiaries on the proceeds of such Indebtedness, to the extent not yet applied
at the date of determination, assuming such proceeds earned interest at the
Treasury Rate from the date such proceeds were received through such date of
determination, (2) if since the beginning of such period the Corporation or any
Subsidiary will have made any Asset Disposition, EBITDA for such period will be
reduced by an amount equal to EBITDA (if positive) directly attributable to the
assets which are the subject of such Asset Disposition for such period, or
increased by an amount equal to EBITDA (if negative), directly attributable
thereto for such period and Consolidated Interest Expense for such period will
be reduced by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Corporation or any Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Corporation
and its continuing Subsidiaries in connection with such Asset Dispositions for
such period (or, if the Capital Stock of any Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable for the
Indebtedness of such Subsidiary to the extent the Corporation and its continuing
Subsidiaries are no longer liable for such Indebtedness after such sale) (3) if
since the beginning of such period the Corporation or any Subsidiary (by merger
or otherwise) will have made an Investment in any Subsidiary (or any person
which becomes a Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially all an
operating unit of a business, EBITDA and Consolidated Interest Expense for such
period will be calculated after giving pro forma effect thereto (including the
incurrence of any Indebtedness) as if such Investment or acquisition occurred on
the first day of such period and (4) if the Company has issued any Parity
Securities or additional shares of Preferred Stock described in subparagraph (c)
of the definition "Consolidated Interest Expense" since the beginning of such
period that remains outstanding or if the transaction giving rise to the need to
calculate the Consolidated EBITDA Coverage Ratio is the issuance of such Parity
Securities or such additional shares of Preferred Stock, or both, EBITDA and
Consolidated Interest Expense for such period will be calculated after giving
effect on a pro forma basis to (A) such issuance as if such issuance had
occurred on the first day of such period, (B) the discharge of any Indebtedness
repaid, purchased, defeased or otherwise discharged with the proceeds of such
shares as if such discharge had occurred on the first day of such period
23
and (C) the interest income realized by the Company on the proceeds of the sale
of such shares, to the extent not yet applied at the date of determination,
assuming such proceeds earned interest at the Treasury Rate from the dates such
proceeds were received through such date of determination. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto, and the amount of
Consolidated Interest Expense associated with any Indebtedness incurred in
connection therewith, the pro forma calculations will be determined in good
faith by a responsible financial or accounting Officer of the Corporation;
provided, however, that such Officer shall assume (i) the historical sales and
gross profit margins associated with such assets for any consecutive 12-month
period ended prior to the date of purchase (provided that the first month of
such period will be no more than 18 months prior to such date of purchase), less
estimated post-acquisition loss of customers and (ii) other expenses as if such
assets had been owned by the Corporation since the first day of such period. If
any Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest on such Indebtedness will be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period.
"Consolidated Interest Expense" means, for any period, the sum of
(a) the total interest expense of the Corporation and its Subsidiaries (other
than a Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income), determined on a consolidated basis, including (i)
interest expense attributable to capital leases, (ii) amortization of debt
discount, (iii) capitalized interest, (iv) non-cash interest expense, (v)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (vi) interest actually paid by the
Corporation or any such Subsidiary under any guarantee of Indebtedness or other
obligation of any other Person, (vii) net costs associated with Hedging
Obligations (including amortization of fees), (viii) the cash contributions to
any employee stock ownership plan or similar trust to the extent such
contributions are used by such plan to pay interest or fees to any person (other
than the Corporation) in connection with loans incurred by such plan or trust to
purchase newly issued or treasury shares of the Corporation (but excluding
interest expense associated with the accretion of principal on non-interest
bearing or other discount securities) and (ix) to the extent not already
included in Consolidated Interest Expense, the interest expense attributable to
Indebtedness of another person that is guaranteed by the Corporation or any of
its Subsidiaries, less interest income (exclusive of deferred financing fees) of
the Corporation and its Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles, plus (b) dividends in
respect of all Preference Stock of Subsidiaries (other than a
24
Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income) held by persons other than the Corporation or a Wholly
Owned Subsidiary (other than a Subsidiary described in clause (b) of the
exception to the definition of Consolidated Net Income); (c) the amount of all
cash dividends paid with respect to any Parity Securities or shares of Preferred
Stock issued pursuant to the first subparagraph of paragraph 10(b) "--Limitation
on Funded Debt and Preferred Stock"; provided, however, that Consolidated
Interest Expense shall include any interest paid by the Corporation to Star Gas
and Indebtedness owed to Star Gas but only to the extent the amount of such
interest paid during any period exceeds the cash dividends or other cash
distributions on the Capital Stock of Star Gas distributed to the Corporation or
any Subsidiary during such period.
"Consolidated Net Income" of a person, for any period, means the
aggregate of the Net Income of such person and its Subsidiaries (other than (a)
any Subsidiary acquired by such person in a pooling of interests transaction for
any period prior to the date of acquisition and (b) any Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions to such person) for such period,
determined on a consolidated basis in accordance with generally accepted
accounting principles, provided that (i) the Net Income of any other person
(other than a Subsidiary) in which such person has an interest will be included
only to the extent of the amount of dividends or distributions paid to such
person and (ii) the cumulative effect of a change in accounting principles will
be excluded; (iii) notwithstanding clause (i), Consolidated Net Income of the
Corporation shall include cash dividends or other cash distributions on the
Capital Stock of Star Gas distributed to the Corporation by Star Gas but only to
the extent such cash dividends or other cash distributions exceed during any
period the amount of any interest paid by the Corporation during such period to
Star Gas on Indebtedness owed to Star Gas.
"Credit Agreement" means the Amended and Restated Credit Agreement,
dated as of September 27, 1996, between the Corporation and The Chase Manhattan
Bank, as agent, as amended from time to time.
"EBITDA" of a person for any period means the Consolidated Net
Income of such person for such period (but without giving effect to adjustments,
accruals, deductions or entries resulting from purchase accounting,
extraordinary losses or gains and any gains or losses from any Asset
Dispositions), plus (a) to the extent deducted in calculating such Consolidated
Net Income, (i) income tax expense (ii) Consolidated Interest Expense, (iii)
depreciation expense, (iv) amortization expense and (v) non-cash charges
relating to the grant of stock options to executives of the Corporation,
non-cash charges associated with deferred compensation
25
plans and other non-cash charges of a similar nature, plus (b) the amount of any
cash actually distributed by any Subsidiary described in clause (b) of the
exception to the definition of Consolidated Net Income during such period as a
dividend or other distribution to the Corporation or another Subsidiary of the
Corporation (other than another Subsidiary described in such clause (b), minus
(c) such person's equity in any deficit in Subsidiary Cash Flow for such period
of any Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income; provided, however, that EBITDA shall not include any
income tax expense, interest expense, depreciation expense, amortization expense
or other non-cash expense of any person or Subsidiary described in clause (b) of
the exception, or clause (i) of the proviso, to the definition of Consolidated
Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchangeable Preferred Stock Issue Date" means the first date on
which shares of Exchangeable Preferred Stock are issued under the Certificate of
Designation.
"Exchangeable Stock" means any Capital Stock which is exchangeable
or convertible into another security (other than Capital Stock of the
Corporation which is neither Exchangeable Stock nor Redeemable Stock).
"Funded Debt" as applied to any person means, without duplication,
(a) any Indebtedness with a Stated Maturity of more than one year from the date
of incurrence, (b) any Indebtedness, regardless of its term, if such
Indebtedness is renewable or extendable at the option of the obligor of such
Indebtedness pursuant to the terms thereof to a date more than one year from the
date of incurrence; and (c) any Indebtedness, regardless of its term, that by
its terms or by the terms of the agreement pursuant to which it is issued, may
be paid with the proceeds of other Indebtedness that may be incurred pursuant to
the terms of such first-mentioned Indebtedness or by the terms of such
agreement, which other Indebtedness has a Stated Maturity of more than one year
from the date of incurrence of such first-mentioned Indebtedness; provided,
however, that Working Capital Borrowings shall be excluded from Funded Debt
except to the extent that Working Capital Borrowings exceed an amount equal to
(i) 100% of the current assets (excluding cash) of such person and its
Subsidiaries, less (ii) the excess, if any, of current liabilities over current
assets of such person and its Subsidiaries, in each case determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Guarantee" means any obligation, contingent or otherwise, of any
person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other person and any
26
obligation, direct or indirect, contingent or otherwise, of such person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "guarantee" will not include
endorsements for collection or deposit in the ordinary course of business. The
term "guarantee" used as a verb has a corresponding meaning.
"Hedging Obligations" of any person means the obligations of such
person pursuant to any interest rate swap agreement, foreign currency exchange
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement designed to protect such person against changes
in interest rates or foreign exchange rates.
"Indebtedness" of any person means, without duplication,
(i) the principal of (A) indebtedness of such person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such person is
responsible or liable;
(ii) all Capital Lease Obligations of such person and all
Attributable Indebtedness in respect of Sale/Leaseback Transactions
entered into by such person;
(iii) all obligations of such person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
such person and all obligations of such person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
(iv) all obligations of such person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such
person to the extent such letters of credit are not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the
third Business Day following receipt by such person of a demand for
reimbursement following payment on the letter of credit);
27
(iv) all obligations of the type referred to in clauses (i) through
(iv) of other persons and all dividends of other persons for the payment
of which, in either case, such person is responsible or liable, directly
or indirectly, as obligor, guarantor or otherwise, including any
guarantees of such obligations and dividends, including by means of any
agreement which has the economic effect of a guarantee; and
(vi) all obligations of the type referred to in clauses (i) through
(v) of other persons secured by any Lien on any property or asset of such
person (whether or not such obligation is assumed by such person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
"Investment" in any person means any loan or advance to, any
guarantee of, any acquisition of any Capital Stock, equity interest, obligation
or other security of, or capital contribution or other investment in, such
person. Investments will exclude advances to customers and suppliers in the
ordinary course of business.
"Junior Securities" means the Class A and Class C Common Stock of
the Corporation and each other Class of capital stock or series of preferred
stock, the terms of which do not expressly provide that it ranks senior to or on
a parity with the Exchangeable Preferred Stock as to dividends, and
distributions upon the liquidation, winding-up and dissolution of the
Corporation.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means any mortgage, pledge, security interest, conditional
sale or other title retention agreement or other similar lien.
"Liquidated Damages" shall have the meaning assigned to it in the
Registration Rights Agreement.
"Liquidation Preference" means $25 with respect to each share of
Exchangeable Preferred Stock.
"Mandatory Redemption Date" means February 15, 2009.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or
28
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
actually incurred in connection with such issuance or sale and net of taxes paid
or payable as a result thereof.
"Net Income" of any person means the net income (loss) of such
person, determined in accordance with generally accepted accounting principles;
excluding, however, from the determination of Net Income any gain (but not loss)
realized upon the sale or other disposition (including, without limitation,
dispositions pursuant to leaseback transactions) of any real property or
equipment of such person, which is not sold or otherwise disposed of in the
ordinary course of business, or of any Capital Stock of the Corporation or a
Subsidiary owned by such person.
"Non-Convertible Capital Stock" means, with respect to any
corporation, any non-convertible Capital Stock of such corporation and any
Capital Stock of such corporation convertible solely into non-convertible common
stock of such corporation; provided, however, that Non-Convertible Capital Stock
will not include any Redeemable Stock or Exchangeable Stock.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Treasurer or the Secretary of
the Corporation.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Corporation or the Trustee.
"Parity Securities" means the 1989 Preferred Stock and any
additional shares of Preferred Stock issued by the Corporation and any other
class of capital stock or series of preferred stock issued by the Corporation,
the terms of which expressly provide that such class or series will rank on a
parity with the Exchangeable Preferred Stock as to dividends and distributions
upon the liquidation, winding-up and dissolution of the Corporation.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preference Stock," as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of
29
dividends, or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such corporation, over shares of Capital Stock of
any other class of such corporation; provided, however, that Preference Stock
will not include the Corporation's Class B Common.
"Private Notes" means the Corporation's 11.85% Senior Notes due
October 1, 2002, the Corporation's 12.17% Senior Notes due October 1, 2002 and
the Corporation's 12.18% Senior Notes due October 1, 2002.
"Public Notes" means the 101/8% Notes, the Corporation's 93/8%
Subordinated Debentures due 2006 and the Corporation's 12 1/4% Subordinated
Debentures due 2005.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of
the deferred purchase price of property, conditional sale obligations,
obligation under any title retention agreement and other purchase money
obligations, in each case where the maturity of such Indebtedness does not
exceed the anticipated useful life of the asset being financed, and (ii)
incurred to finance the acquisition by the Corporation or a Subsidiary of such
asset, including additions and improvements; provided, however, that any Lien
arising in connection with any such Indebtedness will be limited to the
specified asset being financed or, in the case of real property or fixtures,
including additions and improvements, the real property on which such asset is
attached.
"Redeemable Stock" means any Capital Stock that by its terms or
otherwise is required to be redeemed on or prior to the first anniversary of the
Stated Maturity of the Debentures or is redeemable at the option of the holder
thereof at any time on or prior to the first anniversary of the Stated Maturity
of the Exchange Debentures.
"Refinancing Agreement" means any credit agreement or other
agreement between the Corporation and lenders pursuant to which the Corporation
refinances borrowings under the Credit Agreement or another Refinancing
Agreement.
"Representative" means the holder, trustee, agent or representative
(if any) for an issue of Senior Debt.
"Restricted Investment" means any Investment in an Unrestricted
Subsidiary. At the time any Subsidiary of the Corporation is designated by the
Board of Directors of the Corporation as an Unrestricted Subsidiary, the
Corporation shall be deemed to have made a Restricted Investment in an amount
equal to the fair market value as of such time of the Corporation's interest in
such Unrestricted Subsidiary, as determined in good faith by the Board of
Directors and set forth in a Board Resolution; provided, however, that all
amounts which the Corporation is deemed to have
30
invested in Star Gas by reason of the designation of Star Gas as an Unrestricted
Subsidiary by the Board of Directors of the Corporation shall not be included in
the definition of Restricted Investment.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Corporation or a Subsidiary
transfers such property to a person and the Corporation or a Subsidiary leases
it from such person.
"Sevin Group" means the Estate of Malvin P. Sevin and trusts created
thereunder, Audrey L. Sevin, Irik P. Sevin, Thomas J. Edelman, Margot Gordon and
Phillip Ean Cohen and any trust over which such persons have sole voting power.
"Sevin Note" means the promissory note, dated December 31, 1994 (as
amended by an agreement dated December 21, 1995), of Irik P. Sevin to the
Corporation in the original principal amount of $1,640,060 which is due in five
equal annual installments commencing as of December 31, 1995, the principal
amount of which may not be increased in any one year by more than the amount of
accrued and unpaid interest during the immediately preceding year.
"Significant Subsidiary" means any Subsidiary of the Corporation
which at the time of determination either (A) had assets which, as of the date
of the Corporation's most recent quarterly consolidated balance sheet,
constituted at least 3% of the Corporation's total assets on a consolidated
basis as of such date, or (B) had revenues for the 12-month period ending on the
date of the Corporation's most recent quarterly consolidated statement of income
which constituted at least 3% of the Corporation's total revenues on a
consolidated basis for such period.
"Stated Maturity" means, with respect to any Indebtedness, the date
specified in such Indebtedness, or in any agreement pursuant to which such
Indebtedness was incurred, as the fixed date on which the principal of such
Indebtedness is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
Indebtedness at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligations" means any Indebtedness of the Corporation
(whether outstanding on the date hereof or hereafter incurred) which is
subordinate or junior in right of payment to the Exchange Debentures.
"Subsidiary" means a corporation of which a majority of the Capital
Stock having voting power under ordinary circumstances to elect a majority of
the board of directors is
31
owned by (i) the Corporation, (ii) the Corporation and one or more Subsidiaries
or (iii) one or more Subsidiaries; provided, however, that an Unrestricted
Subsidiary shall be deemed not to be a Subsidiary (except as used in the
definition thereof).
"Subsidiary Cash Flow" of a person for any period means the Net
Income of such person and its Subsidiaries determined on a consolidated basis
for such period, plus, to the extent deducted in determining such Net Income,
depreciation, amortization, non-cash charges relating to the grant of stock
options to executives of the Corporation, non-cash charges associated with
deferred compensation plans and other non-cash charges of a similar nature, less
accrued preferred stock dividends (excluding preferred stock dividends paid or
payable in additional shares of preferred stock and preferred stock dividends
payable to the Corporation or any of its Subsidiaries (other than a Subsidiary
described in clause (b) of the exception to the definition of Consolidated Net
Income) until actually paid), excluding Net Income derived from investments
accounted for by the equity method except to the extent of any cash dividends
received by such person and its Subsidiaries.
"Traber Group" means (i) all the holders of Class C Common Stock as
of the Exchangeable Preferred Stock Issue Date who are not members of the Sevin
Group, (ii) any person who receives shares from persons described in clause (i)
without such transfer of shares being subject to the first refusal right
referred to in the shareholders agreement among the holders of Class C Common
Stock dated November 25, 1986, as amended through the Exchangeable Preferred
Stock Issue Date, and (iii) any trust over which persons described in clause (i)
or (ii) have sole voting power.
"Treasury Rate" as of any date of determination means the yield to
maturity at the time of computation of United States Treasury securities with a
constant maturity (as compiled and published in the most recent federal Reserve
Statistical Release H.15(519) which has become publicly available at least two
business days prior to such date of determination (or, if such Statistical
Release is no longer published, any publicly available source of similar market
data)) of five years.
"Trust Officer" means the chairman or vice-chairman of the board of
directors, the chairman or vice-chairman of the executive committee of the board
of directors, the president, any vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any assistant
cashier, any trust officer or assistant trust officer, the controller and any
assistant controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above-designated officers and
also means, with respect to a particular corporate trust matter, any other
officer
32
to whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Unrestricted Subsidiary" means a Subsidiary of the Corporation, and
each Subsidiary of such Subsidiary, designated by the Board of Directors of the
Corporation as an Unrestricted Subsidiary pursuant to a Board Resolution set
forth in an Officers' Certificate and delivered to the Trustee, (a) no portion
of the Indebtedness or any other obligations (contingent or otherwise) of which
(i) is guaranteed by the Corporation or any other Subsidiary of the Corporation,
(ii) is recourse to or obligates the Corporation or any other Subsidiary of the
Corporation in any way or (iii) subjects any property or asset of the
Corporation or any other Subsidiary of the Corporation, directly or indirectly,
contingently or otherwise, to the satisfaction thereof and (b) with which
neither the Corporation nor any other Subsidiary of the Corporation has any
obligation (i) to subscribe for additional shares of Capital Stock or other
equity interests therein or (ii) to maintain or preserve such Subsidiary's
financial condition or to cause such Subsidiary to achieve certain levels of
operating results. An Unrestricted Subsidiary may be designated a Subsidiary,
provided that (A) no Voting Rights Triggering Event shall have occurred and be
continuing and (B) immediately after giving effect to such designation, the
Corporation would be able to issue an additional $1.00 of Funded Debt pursuant
to the first paragraph 10(b).
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Rights Triggering Event" shall have the meaning assigned to
it in paragraph 7(c)(i).
"Voting Stock" of a corporation means all classes of Capital Stock
of such corporation then outstanding and normally entitled to vote in the
election of directors.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock
of which (other than directors' qualifying shares) is owned by the Corporation
or another Wholly Owned Subsidiary.
"Working Capital Borrowings" means, on any date of determination,
all Indebtedness of the Corporation and its Subsidiaries on a consolidated basis
incurred to finance current assets.
"Working Capital Debt" means any and all amounts payable under or in
respect of the Credit Agreement, as amended
33
from time to time, any Refinancing Agreement, any Working Capital Financing
Agreement, or any other loan agreement, including principal, premium (if any),
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Corporation to the extent a
claim for post-filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.
"Working Capital Financing Agreement" means any agreement entered
into after the Exchangeable Preferred Stock Issue Date by the Corporation and
lenders pursuant to which the Corporation issues Working Capital Borrowings.
34