CERTIFICATE OF DESIGNATIONS OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF 12 1/2%
SERIES C JUNIOR PREFERRED STOCK, AND
QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
MMH Holdings, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that, pursuant to authority conferred upon the Board of Directors (as
defined herein) by its Second Amended and Restated Certificate of Incorporation
(hereinafter referred to as the "Restated Certificate"), and pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, said Board of Directors, by unanimous written consent dated March 23,
1998, duly approved and adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Restated Certificate, the Board of Directors does hereby
create, authorize and provide for the issuance of 12 1/2% Series C Junior
Preferred Stock, par value $.01 per share, with a stated value of
$1,000.00 per share, consisting of 60,000 shares, having the designations,
preferences, relative, participating, optional and other special rights
and the qualifications, limitations and restrictions thereof that are set
forth in the Restated Certificate and in this Resolution as follows:
(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Corporation a series of Preferred
Stock designated as the "12 1/2% Series C Junior Preferred Stock." The number of
shares constituting such series shall be 60,000 and are referred to herein as
the "Series C Junior Preferred Stock." 30,000 shares of Series C Junior
Preferred Stock shall be initially issued with an additional 30,000 shares
reserved for issuance in accordance with paragraph (c)(i) hereof. The
liquidation preference of the Series C Junior Preferred Stock shall be $1,000.00
per share.
(b) Ranking. The Series C Junior Preferred Stock shall, with respect
to dividends and distributions upon liquidation, dissolution or winding-up of
the Corporation, rank (i) junior to the Senior Preferred Stock and the Series B
Junior Preferred Stock, (ii) junior to any other Preferred Stock not ranking
junior to the Senior Preferred Stock and the Series B Junior Preferred Stock and
(iii) senior to all classes of Junior Stock and Common Stock of the Corporation.
The Corporation may not (i) issue any class or series of
Capital Stock that ranks on a parity with the Series C Junior Preferred Stock as
to dividends or distributions upon liquidation, dissolution or winding-up of the
Corporation, or amend the provisions of any existing class of Capital Stock or
series of Preferred Stock to make such class or series rank on a parity with
Series C Junior Preferred Stock (collectively referred to as "Parity Stock")
(provided, that the Corporation can issue, from time to time, additional shares
of Series C Junior Preferred Stock to satisfy dividend payments on outstanding
shares of Series C Junior Preferred Stock in accordance with this certificate of
designations) without the approval of the Holders in accordance with paragraph
(f)(ii)(A) hereof (to the extent such approval is required); or (ii) issue any
class or series of Capital Stock that ranks senior to the Series C Junior
Preferred Stock as to dividends and distributions upon liquidation, dissolution
or winding-up of the Corporation, or amend the provisions of any existing class
of Capital Stock or series of Preferred Stock to make such class or series rank
senior to the Series C Junior Preferred Stock (collectively referred to as
"Senior Stock") (provided, that the Corporation can issue, from time to time,
additional shares of Senior Preferred Stock to satisfy dividend payments on
outstanding shares of Senior Preferred Stock in accordance with the certificate
of designations of the Senior Preferred Stock and additional shares of Series B
Junior Preferred Stock to satisfy dividend payments on outstanding shares of
Series B Junior Preferred Stock in accordance with the certificate of
designations of the Series B Junior Preferred Stock), without the approval of
the Holders in accordance with paragraph (f)(ii)(B) hereof (to the extent such
approval is required).
(c) Dividends.
(i) Commencing on the Issue Date, the Holders of the outstanding
shares of Series C Junior Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors, out of funds legally
available therefor, dividends on each share of Series C Junior Preferred
Stock, at a rate per annum equal to 12 1/2% of the liquidation preference
per share of the Series C Junior Preferred Stock, payable semi-annually;
provided, that the dividend rate per annum is subject to increase as
provided for in clause (vi) below. All dividends shall be cumulative,
whether or not earned or declared, on a daily basis from the Issue Date
and shall be payable semi-annually in arrears on each Dividend Payment
Date, commencing on the first Dividend Payment Date after the Issue Date
to Holders of record on the Dividend Record Date immediately preceding the
relevant Dividend Payment Date. Dividends accumulating on or prior to
April 1, 2003 may be paid, at the Corporation's option, either in cash or
by the issuance of additional shares of Series C Junior Preferred Stock
(and, at the Corporation's option, payment of a whole share (after
rounding up) or cash in lieu of a fractional share) having an aggregate
liquidation preference equal to the amount of such dividends. In the event
that on or prior to April 1, 2003, dividends are declared and paid through
the issuance of additional shares of Series C Junior Preferred Stock as
provided in the previous sentence, such dividends shall be deemed paid in
full and shall not accumulate. Dividends accumulating after April 1, 2003
must be paid in cash. Each dividend shall be payable to the Holders of
record as they appear on the stock books of the Corporation on the
Dividend Record Date immediately
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preceding the related Dividend Payment Date. Dividends shall cease to
accumulate in respect of the Series C Junior Preferred Stock exchanged for
Exchange Debentures on the Exchange Date or on the date of their earlier
redemption unless the Corporation shall have failed to issue the
appropriate aggregate principal amount of Exchange Debentures in respect
of the Series C Junior Preferred Stock to be exchanged on the Exchange
Date or shall have failed to pay the relevant redemption price on Series C
Junior Preferred Stock to be redeemed on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Series C
Junior Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata
to the Holders entitled thereto.
(iii) Dividends accumulating after April 1, 2003 on the Series C
Junior Preferred Stock for any past Dividend Period and dividends in
connection with any optional redemption pursuant to paragraph (e)(i) may
be declared and paid at any time, without reference to any Dividend
Payment Date, to Holders of record on such date, not more than forty-five
(45) days prior to the payment thereof, as may be fixed by the Board of
Directors.
(iv) So long as any share of the Series C Junior Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend in cash on any Junior Stock (or make any other
dividend or distribution on any Junior Stock other than in Junior Stock)
or make any cash payment on account of any Junior Stock (A) unless full
cumulative dividends determined in accordance herewith on the Series C
Junior Preferred Stock have been paid in cash in full when required to be
so paid or (B) during any period when cash dividends (whether or not
required to be paid) are not paid on the Series C Junior Preferred Stock.
(v) Dividends payable on the Series C Junior Preferred Stock for any
period less than a year shall be computed on the basis of a 360-day year
of twelve 30-day months.
(vi) Upon the occurrence and during the continuance of a Voting
Rights Triggering Event described in paragraph (f)(iii)(A)(3) hereof, the
per annum dividend rate on the Series C Junior Preferred Stock will
increase by 400 basis points per annum ("Special Dividends") in excess of
the dividend rate originally borne by the Series C Junior Preferred Stock
as set forth under paragraph (c)(i) hereof. All references herein to
"dividends" shall be deemed to include any such "Special Dividends."
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, the Holders
of shares of Series C
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Junior Preferred Stock then outstanding shall be entitled to be paid out
of the assets of the Corporation available for distribution to its
stockholders an amount in cash equal to the liquidation preference for
each share outstanding, plus, without duplication, an amount in cash equal
to accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal to a
prorated dividend for the period from the immediately preceding Dividend
Payment Date to the date fixed for liquidation, dissolution or
winding-up), after any payment shall be made or any assets distributed to
the holders of any Senior Preferred Stock and Series B Junior Preferred
Stock, but before any payment shall be made or any assets distributed to
the holders of any of the Junior Stock. After payment of the full amount
of the liquidation preference and accumulated and unpaid dividends to
which they are entitled, Holders of Series C Junior Preferred Stock shall
not be entitled to any further participation in any distribution of assets
of the Corporation. If the assets of the Corporation are not sufficient to
pay in full the liquidation payments payable to the Holders of outstanding
shares of the Series C Junior Preferred Stock and all Parity Stock, if
any, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the Corporation, then the holders of all such
shares shall share equally and ratably in such distribution of assets in
proportion to the full liquidation preference to which each is entitled
until such preferences are paid in full, and then in proportion to their
respective amounts of accumulated but unpaid dividends.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the Property or assets
of the Corporation nor the consolidation or merger of the Corporation with
or into one or more entities shall be deemed to be a liquidation,
dissolution or winding-up of the affairs of the Corporation.
(e) Redemption. The provisions of this paragraph (e) shall not
become effective until all of the shares of Series C Junior Preferred Stock are
transferred by the Initial Holder to an unaffiliated third-party of the Initial
Holder and, thereafter, shall be in full force and effect with respect to all
Holders.
(i) Optional Redemption. (A) The Corporation may, at the option of
the Board of Directors, redeem at any time or from time to time on or
after April 1, 2003, subject to contractual and other restrictions with
respect thereto and from any source of funds legally available therefor,
in whole or in part, in the manner provided for in paragraph (e)(iii)
hereof, any or all of the shares of the Series C Junior Preferred Stock,
at the redemption prices in cash (expressed as a percentage of the then
effective liquidation preference thereof) set forth below plus, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends per share (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), if redeemed during the
12-month period beginning on April 1 of each of the years set forth below:
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2003........................................106.250%
2004........................................104.167%
2005........................................102.083%
2006 and thereafter.........................100.000%
(B) Notwithstanding the provisions of paragraph (e)(i)(A)
above, the Corporation may, at the option of the Board of Directors,
redeem in the aggregate all, but not less than all, of the Series C
Junior Preferred Stock then outstanding, at any time prior to April
1, 2001, at a redemption price equal to 112.500% of the then
effective liquidation preference thereof, plus, without duplication,
an amount in cash equal to 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) out of the Net Proceeds of
one or more Public Equity Offerings; provided, that any such
redemption occurs within 90 days following the closing of any such
Public Equity Offering.
(C) No redemption pursuant to paragraph (e)(i)(A) or (B)
hereof shall be authorized or made unless prior thereto full
accumulated and unpaid dividends are declared and paid in full, or
declared and a sum in cash (if such dividend is to be paid in cash)
is set apart sufficient for such payment, on the Series C Junior
Preferred Stock for all Dividend Periods terminating on or prior to
the Redemption Date.
(D) In the event of a redemption pursuant to paragraph
(e)(i)(A) hereof of only a portion of the then outstanding shares of
the Series C Junior Preferred Stock, the Corporation shall effect
such redemption on a pro rata basis according to the number of
shares held by each Holder of the Series C Junior Preferred Stock,
except that the Corporation may redeem such shares held by Holders
of fewer than ten shares (or shares held by Holders who would hold
less than ten shares as a result of such redemption), as may be
determined by the Corporation.
(ii) Mandatory Redemption. On April 1, 2010, the Corporation shall
redeem, subject to contractual and other restrictions with respect thereto
and to the extent of funds legally available therefor, in the manner
provided for in paragraph (e)(iii) hereof, all of the shares of the Series
C Junior Preferred Stock then outstanding at a redemption price equal to
100% of the liquidation preference per share, plus, without duplication,
an amount in cash (whether or not otherwise payable in cash) equal to all
accumulated and unpaid dividends per share (including
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an amount equal to a prorated dividend for the period from the Dividend
Payment Date immediately prior to the Redemption Date to the Redemption
Date).
(iii) Procedures for Redemption. (A) At least thirty (30) days and
not more than sixty (60) days prior to the date fixed for any redemption
of the Series C Junior Preferred Stock, written notice (the "Redemption
Notice") shall be given by first class mail, postage prepaid, to each
Holder of record on the record date fixed for such redemption of the
Series C Junior Preferred Stock at such Holder's address as it appears on
the register maintained by the Transfer Agent, provided, that no failure
to give such notice nor any deficiency therein shall affect the validity
of the procedure for the redemption of any shares of Series C Junior
Preferred Stock to be redeemed except as to the Holder or Holders to whom
the Corporation has failed to give said notice or except as to the Holder
or Holders whose notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph
(e)(i)(A) or (B) or (e)(ii) hereof;
(2) the redemption price;
(3) whether all or less than all the outstanding shares of
the Series C Junior Preferred Stock are to be redeemed
and the total number of shares of the Series C Junior
Preferred Stock being redeemed;
(4) the Redemption Date;
(5) that the Holder is to surrender to the Corporation, in
the manner, at the place or places and at the price
designated, his certificate or certificates representing
the shares of Series C Junior Preferred Stock to be
redeemed; and
(6) that dividends on the shares of the Series C Junior
Preferred Stock to be redeemed shall cease to accumulate
on such Redemption Date unless the Corporation defaults
in the payment of the redemption price.
(B) Each Holder of Series C Junior Preferred Stock shall
surrender the certificate or certificates representing such shares
of Series C Junior Preferred Stock to the Corporation, duly endorsed
(or otherwise in proper form for transfer, as determined by the
Corporation), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full redemption
price for such shares shall be payable in cash to the Person whose
name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled and
retired. In the event that less than all of the shares represented
by any such
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certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the applicable redemption price,
dividends on the Series C Junior Preferred Stock called for
redemption shall cease to accumulate on the Redemption Date, and all
rights of the Holders of redeemed shares shall terminate with
respect thereto on the Redemption Date, other than the right to
receive the redemption price; provided, that if a notice of
redemption shall have been given as provided in paragraph (iii)(A)
above and the funds necessary for redemption (including an amount in
cash in respect of all dividends that will accumulate to the
Redemption Date) shall have been irrevocably deposited in trust for
the equal and ratable benefit for the Holders of the shares to be
redeemed, then, at the close of business on the day on which such
funds are segregated and set aside, the Holders of the shares to be
redeemed shall cease to be stockholders of the Corporation and shall
be entitled only to receive the redemption price.
(f) Voting Rights.
(i) The Holders of Series C Junior Preferred Stock, except as
otherwise required under Delaware law or as set forth in paragraphs (ii),
(iii) and (iv) below, shall not be entitled or permitted to vote on any
matter required or permitted to be voted upon by the stockholders of the
Corporation, provided, that so long as MHE Investments or any Affiliate
thereof holds any shares of the Series C Junior Preferred Stock, the
Series C Junior Preferred Stock, shall be entitled to .314 votes per share
of Series C Junior Preferred Stock, voting together as one class with the
holders of voting Common Stock of the Corporation, on all matters as to
which voting Common Stock of the Corporation is entitled to vote.
(ii) (A) So long as any shares of the Series C Junior Preferred Stock are
outstanding, the Corporation shall not authorize or issue any additional shares
of Senior Preferred Stock, Series B Junior Preferred Stock or any class or
series of Parity Stock without the affirmative vote or consent of Holders of at
least a majority of the then outstanding shares of Series C Junior Preferred
Stock, voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting; provided, that no such vote or consent shall be necessary in connection
with (i) the issuance of additional shares of Senior Preferred Stock pursuant to
the certificate of designations of the Senior Preferred Stock as in effect on
the Issue Date and shares of Series B Junior Preferred Stock pursuant to the
certificate of designations of the Series B Junior Preferred Stock as is effect
on the Issue Date, (ii) the issuance of additional shares of Series C Junior
Preferred Stock pursuant to the provisions of paragraph (c) of this certificate
of designations or (iii) the issuance of shares of Series C Junior Preferred
Stock without voting rights in exchange for shares of Series C Junior Preferred
Stock with voting rights.
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(B) So long as any shares of the Series C Junior Preferred
Stock are outstanding, the Corporation shall not authorize or issue
any class or series of Senior Stock without the affirmative vote or
consent of Holders of at least a majority of the outstanding shares
of Series C Junior Preferred Stock, voting or consenting, as the
case may be, as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting.
(C) [Reserved.]
(D) So long as any shares of the Series C Junior Preferred
Stock are outstanding, the Corporation shall not amend this
certificate of designations so as to affect adversely the specified
rights, preferences, privileges or voting rights of holders of
shares of Series C Junior Preferred Stock without the affirmative
vote or consent of Holders of at least a majority of the then issued
and outstanding shares of Series C Junior Preferred Stock, voting or
consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting; provided, that any increase in the amount of
authorized Preferred Stock of the Corporation or the creation and
issuance (other than the Senior Preferred Stock, Series B Junior
Preferred Stock and Series C Junior Preferred Stock as provided
under paragraph (b) above) of any other class of Preferred Stock or
any increase in the amount of authorized shares of such class or any
other class of Junior Stock, including Junior Stock which is
Preferred Stock, will not be deemed to affect adversely such rights,
preferences or voting powers.
(E) Prior to the exchange of all outstanding shares of Series
C Junior Preferred Stock for Exchange Debentures, the Corporation
shall not amend or modify the form of the Indenture for the Exchange
Debentures from the form thereof certified by the Secretary of the
Corporation and delivered to the Transfer Agent on the Issue Date
(the "Indenture") (except as expressly provided therein in respect
of amendments without the consent of Holders of Exchange Debentures)
without the affirmative vote or consent of holders of at least a
majority of the aggregate liquidation preference of the outstanding
shares of Series C Junior Preferred Stock, voting or consenting, as
the case may be, together as one class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special
meeting.
(iii) (A) If (1) after April 1, 2003, cash dividends on the Series C
Junior Preferred Stock are in arrears and unpaid for two or more
semi-annual Dividend Periods (whether or not consecutive) (a "Dividend
Default"); (2) the Corporation fails to redeem all of the then outstanding
shares of Series C Junior
8
Preferred Stock on or before April 1, 2010; (3) the Corporation fails to
make or consummate a Change of Control Offer following a Change of Control
if such Change of Control Offer is required by paragraph (h) hereof; (4)
the Corporation breaches or violates one of the provisions set forth in
paragraph (l) hereof and the breach or violation continues for a period of
60 days or more after the Corporation receives notice thereof specifying
the default from the holders of at least 25% of the shares of Series C
Junior Preferred Stock then outstanding, then in the case of any of
clauses (1) through (4) above, the number of directors constituting the
Board of Directors shall be increased or decreased by the number, if any,
necessary to permit the Holders of a majority of the aggregate outstanding
shares Series C Junior Preferred Stock, voting together as one class, to
elect one director to the Board of Directors. Each such event described in
clauses (1), (2), (3) and (4) is a "Voting Rights Triggering Event";
provided, that if the Corporation breaches or violates more than one of
the provisions set forth in paragraph (A) hereof, all such breaches or
violations together shall not constitute more than one Voting Rights
Triggering Event. Holders of a majority of the aggregate outstanding
shares of Series C Junior Preferred Stock, voting together and as one
class, shall have the exclusive right to elect one director to the Board
of Directors at a meeting therefor called upon occurrence of such Voting
Rights Triggering Event. Except as provided in paragraph (c)(vi), the
voting rights provided herein shall be the exclusive remedy at law or in
equity of the holders of the Series C Junior Preferred Stock for any
Voting Rights Triggering Event. Notwithstanding the foregoing, if the
voting rights granted pursuant to this subparagraph would violate any
rules or regulations applicable to any Regulated Holder, the shares of
Series C Junior Preferred Stock held by such Regulated Holder shall be
deemed to be not issued and not outstanding solely for purposes this
paragraph (f)(iii)(A). As used herein, "Regulated Holder" shall mean any
Person holding shares of Series C Junior Preferred Stock that is (or that
is a subsidiary of a bank holding company that is) subject to the
provisions of Regulation Y of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Part 225 (or any successor to Regulation Y).
(B) The right of the Holders of Series C Junior Preferred
Stock, voting together as one class, to elect members of the Board
of Directors as set forth in subparagraph (f)(iii)(A) above shall
continue until such time as (x) in the event such right arises due
to a Dividend Default, all accumulated dividends that are in arrears
on the Series C Junior Preferred Stock are paid in full in cash; and
(y) in all other cases, the failure, breach or default giving rise
to such Voting Rights Triggering Event is remedied, cured or waived
by the holders of at least a majority of the aggregate outstanding
shares of Series C Junior Preferred Stock, voting or consenting, as
the case may be, together as one class, at which time (1) the
special right of the Holders of Series C Junior Preferred Stock, to
vote together as one class for the election of directors and (2) the
term of office of the director elected by the Holders of the Series
C Junior Preferred Stock, shall each terminate and the number of
directors constituting the Board of Directors shall be
9
increased or decreased to such number equal to the directors elected
by the holders of Common Stock or Capital Stock (other than the
Series C Junior Preferred Stock pursuant to paragraph (f)(iii)(A)).
At any time after voting power to elect directors shall have become
vested and be continuing in the Holders of Series C Junior Preferred
Stock pursuant to this paragraph (f)(iii)(A) hereof, or if vacancies
shall exist in the offices of directors elected by the Holders of
Series C Junior Preferred Stock, a proper officer of the Corporation
may, and upon the written request of the Holders of record of at
least twenty-five percent (25%) of the then outstanding shares of
Series C Junior Preferred Stock, taken as a whole, addressed to the
Secretary of the Corporation shall call a special meeting of the
Holders of Series C Junior Preferred Stock for the purpose of
electing the directors which such Holders are entitled to elect. If
such meeting shall not be called by a proper officer of the
Corporation within twenty (20) days after personal service of said
written request upon the Secretary of the Corporation, or within
twenty (20) days after mailing the same within the United States by
certified mail, addressed to the Secretary of the Corporation at its
principal executive offices, then the Holders of record of at least
twenty-five percent (25%) of the outstanding shares of Series C
Junior Preferred Stock, taken as a whole, may designate in writing
one of their number to call such meeting at the expense of the
Corporation, and such meeting may be called by the Person so
designated upon the notice required for the annual meetings of
stockholders of the Corporation and shall be held at the place for
holding the annual meetings of stockholders. Any Holder of Series C
Junior Preferred Stock so designated shall have, and the Corporation
shall provide, reasonable access to the lists of stockholders of
Series C Junior Preferred Stock to be called pursuant to the
provisions hereof.
(C) At any meeting held for the purpose of electing directors
at which the Holders of Series C Junior Preferred Stock shall have
the right, voting together as one class, to elect directors as
aforesaid, the presence in person or by proxy of the Holders of at
least a majority of the then outstanding shares of Series C Junior
Preferred Stock, taken as a whole, entitled to vote thereat shall be
required to constitute a quorum of such Series C Junior Preferred
Stock.
(D) Any vacancy occurring in the office of a director elected
by the Holders of Series C Junior Preferred Stock may be filled by
the remaining director, if any, elected by the Holders of Series C
Junior Preferred Stock unless and until such vacancy shall be filled
by the Holders of Series C Junior Preferred Stock.
(iv) In any case in which the Holders of Series C Junior Preferred
Stock shall be entitled to vote pursuant to this paragraph (f) or pursuant
to Delaware law, each Holder of Series C Junior Preferred Stock entitled
to vote with respect
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to such matter shall be entitled to one vote for each share of Series C
Junior Preferred Stock.
(g) Exchange. The provisions of this paragraph (g) shall not become
effective until all of the shares of Series C Junior Preferred Stock are
transferred by the Initial Holder to an unaffiliated third-party of the Initial
Holder and, thereafter, shall be in full force and effect with respect to all
Holders.
(i) Requirements. The outstanding shares of Series C Junior
Preferred Stock (including any shares of Series C Junior Preferred Stock
issuable on such Dividend Payment Date on the outstanding shares of Series
C Junior Preferred Stock) are exchangeable, in whole but not in part, at
the option of the Corporation, at any time on any Dividend Payment Date
for the Corporation's 12 1/2% Exchange Debentures due 2010 (the "Exchange
Debentures") to be substantially in the form of Exhibit A to the
Indenture, a copy of which is on file with the Transfer Agent and the
Secretary of the Corporation; provided, that any such exchange may only be
made if on or prior to the date of such exchange, (i) the Corporation has
paid all accumulated dividends on the Series C Junior Preferred Stock
(including the dividends payable on such Dividend Payment Date) and there
shall be no contractual impediment to such exchange on such Dividend
Payment Date; (ii) there shall be legally available funds sufficient
therefor; (iii) immediately after giving effect to such exchange, no
Default or Event of Default (each as defined in the Indenture) would exist
under the Indenture as if the Indenture had been in effect as of the Issue
Date and no default or event of default under any other material
instrument governing Indebtedness outstanding at the time of such exchange
would be caused thereby; and (iv) the Indenture has been qualified under
the Trust Indenture Act, if such qualification is required at the time of
exchange. The exchange rate shall be $1.00 principal amount of Exchange
Debentures for each $1.00 of liquidation preference of Series C Junior
Preferred Stock. Exchange Debentures shall be issued in principal amounts
of $1,000 and integral multiples thereof to the extent possible and, to
the extent necessary, in principal amounts less than $1,000, provided,
that the Corporation shall have the right, at its option, to pay cash in
an amount equal to the principal amount of that portion of any Exchange
Debenture that is not an integral multiple of $1,000 in lieu of delivering
an Exchange Debenture in a denomination of less than $1,000.
(ii) Procedure for Exchange. (A) At least thirty (30) days and not
more than sixty (60) days prior to the date fixed for exchange, written
notice (the "Exchange Notice") shall be given by the Corporation by
first-class mail, postage prepaid, to each Holder of record on the
Dividend Record Date immediately preceding such Dividend Payment Date at
such Holder's address as the same appears on the stock register maintained
by the Transfer Agent, provided, that no failure to give such notice nor
any deficiency therein shall affect the validity of the procedure for the
exchange of shares of Series C Junior Preferred Stock to be exchanged. The
Exchange Notice shall state:
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(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Corporation, in
the manner and at the place or places designated, his
certificate or certificates representing all his shares
of Series C Junior Preferred Stock to be exchanged;
(3) that dividends on the shares of Series C Junior
Preferred Stock to be exchanged shall cease to
accumulate on the Exchange Date whether or not
certificates for shares of Series C Junior Preferred
Stock are surrendered for exchange on the Exchange Date
unless the corporation shall default in the delivery of
the Exchange Debentures; and
(4) that interest on the Exchange Debentures shall accrue
from the Exchange Date whether or not certificates for
shares of Series C Junior Preferred Stock are
surrendered for exchange on the Exchange Date.
(B) On or before the Exchange Date, each Holder of shares of
Series C Junior Preferred Stock shall surrender the certificates
representing such shares of Series C Junior Preferred Stock, in the
manner and at the place designated in the Exchange Notice. The
Corporation shall cause the Indenture and the Exchange Debentures to
be executed on the Exchange Date and, upon surrender in accordance
with the Exchange Notice of the certificates for the shares of
Series C Junior Preferred Stock so exchanged, duly endorsed (or
otherwise in proper form for transfer, as determined by the
Corporation), such shares shall be exchanged by the Corporation into
Exchange Debentures. The Corporation shall pay interest on the
Exchange Debentures at the rate and on the dates specified therein
from the Exchange Date.
(C) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice all Exchange Debentures
necessary for such exchange shall have been duly executed by the
Corporation and delivered to the trustee under the Indenture with
irrevocable instructions to authenticate the Exchange Debentures
necessary for such exchange, then the rights of the Holders of
Series C Junior Preferred Stock so exchanged as stockholders of the
Corporation shall cease (except the right to receive Exchange
Debentures (including Exchange Debentures issued in exchange for
shares of Series C Junior Preferred Stock issued on such Dividend
Payment Date), an amount in cash equal to the amount of accumulated
and unpaid dividends to the Exchange Date and, if the Corporation so
elects, cash in lieu of any Exchange Debenture not an integral
multiple of $1,000), and the Person or Persons entitled to receive
the Exchange Debentures
12
issuable upon exchange shall be treated for all purposes as the registered
Holder or Holders of such Exchange Debentures as of the Exchange Date.
(iii) No Exchange in Certain Cases. Notwithstanding the foregoing
provisions of this paragraph (g), the Corporation shall not be entitled or
required to exchange the Series C Junior Preferred Stock for Exchange
Debentures if such exchange, or any term or provision of the Indenture or
the Exchange Debentures, or the performance of the Corporation's
obligations under the Indenture or the Exchange Debentures, shall
materially violate or conflict with any applicable law or agreement or
instrument then binding on the Corporation or if, at the time of such
exchange, the Corporation is insolvent or if it would be rendered
insolvent by such exchange.
(h) Change of Control.
(i) Upon the occurrence of a Change of Control, the Corporation
shall be obligated to make an offer to purchase (the "Change of Control
Offer") the outstanding Series C Junior Preferred Stock at a purchase
price equal to 101% of the liquidation preference thereof plus, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends thereon (including an amount in cash equal to a prorated
dividend for the period from the immediately preceding Dividend Payment
Date to the Change of Control Payment Date) (such applicable purchase
price being hereinafter referred to as the "Change of Control Purchase
Price") in accordance with the procedures set forth in this paragraph (h).
(ii) Within 30 days of the occurrence of a Change of Control, the
Corporation shall (i) cause a notice of the Change of Control Offer to be
sent at least once to the Dow Jones News Service or similar business news
service in the United States and (ii) send by first-class mail, postage
prepaid, to each Holder of Series C Junior Preferred Stock, at the address
appearing in the register maintained by the Transfer Agent, a notice
stating:
(1) that the Change of Control Offer is being made pursuant
to this paragraph (h) and that all Series C Junior
Preferred Stock validly tendered will be accepted for
payment;
(2) the Change of Control Purchase Price and the purchase
date (which shall be a Business Day not earlier than 30
days nor later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"));
(3) that any Series C Junior Preferred Stock not validly
tendered will continue to accumulate dividends;
(4) that, unless the Corporation defaults in the payment of
the Change of Control Purchase Price, any Series C
Junior
13
Preferred Stock accepted for payment pursuant to the
Change of Control Offer shall cease to accumulate
dividends after the Change of Control Payment Date;
(5) that Holders accepting the offer to have their Series C
Junior Preferred Stock purchased pursuant to a Change of
Control Offer will be required to surrender their
certificates representing Series C Junior Preferred
Stock to the Corporation at the address specified in the
notice prior to the close of business on the Business
Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their
acceptance if the Corporation receives, not later than
the close of business on the third Business Day
preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the number of
shares of Series C Junior Preferred Stock delivered for
purchase, and a statement that such Holder is
withdrawing his election to have such Series C Junior
Preferred Stock purchased;
(7) that Holders whose Series C Junior Preferred Stock is
being purchased only in part will be issued new
certificates representing the number of shares of Series
C Junior Preferred Stock equal to the unpurchased
portion of the certificates surrendered; and
(8) any other procedures that a Holder must follow to accept
a Change of Control Offer or effect withdrawal of such
acceptance.
(iii) The Corporation will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
redemption of the Series C Junior Preferred Stock in connection with a
Change of Control Offer. Without limiting the foregoing, in the event that
a Change of Control occurs and the holders of Series C Junior Preferred
Stock exercise their right to require the Corporation to purchase Series C
Junior Preferred Stock, if such purchase constitutes a "tender offer" for
purposes of Rule l4e-1 under the Exchange Act at that time, the
Corporation will comply with the requirements of Rule l4e-1 as then in
effect with respect to such repurchase.
(iv) On the Change of Control Payment Date, the Corporation shall,
to the extent lawful, (A) accept for payment the number of shares of
Series C Junior Preferred Stock validly tendered pursuant to the Change of
Control Offer and (B) promptly mail to each Holder of shares so accepted
the Change of Control
14
Purchase Price therefor and execute and issue a new Series C Junior
Preferred Stock certificate representing the numbers of shares of Series C
Junior Preferred Stock equal to any unpurchased shares represented by a
certificate surrendered. Unless the Corporation defaults in the payment
for the shares of Series C Junior Preferred Stock validly tendered
pursuant to the Change of Control Offer, dividends shall cease to
accumulate with respect to the shares of Series C Junior Preferred Stock
so tendered and all rights of Holders of such tendered shares shall
terminate, except for the right to receive payment therefor, on the Change
of Control Payment Date.
(v) If any Credit Facility is in effect or if the Senior Notes, the
Senior Preferred Stock or Series B Junior Preferred Stock are outstanding
or if any other Indebtedness of the Corporation or its Restricted
Subsidiaries that requires a payment upon a Change of Control is
outstanding, or any amounts are owing thereunder or in respect thereof, at
the time of the occurrence of a Change of Control, then, prior to the
mailing of the notice to Holders described in paragraph (h)(ii) above, but
in any event within 30 days following any Change of Control, the
Corporation shall, to the extent required to permit the repurchase of
Series C Junior Preferred Stock pursuant to this paragraph (h), be
required to (A) cause the borrowers thereunder to repay in full all
obligations under or in respect of such Credit Facility, the Senior
Preferred Stock, the Series B Junior Preferred Stock or such other
Indebtedness or offer to repay in full all obligations under or in respect
of such Credit Facility, the Senior Preferred Stock, the Series B Junior
Preferred Stock or such other Indebtedness and repay the obligations under
or in respect of such Credit Facility, the Senior Preferred Stock, Series
B Junior Preferred Stock or such other Indebtedness of each lender or
holder who has then irrevocably accepted such offer and cause Morris
Material Handling to repay within such 30 day period in full all
obligations in respect of the Senior Notes or offer to repay in full all
obligations in respect of the Senior Notes of each holder who has then
irrevocably accepted such offer or (B) cause such borrowers and Morris
Material Handling to obtain the requisite consent under such Credit
Facility, the Senior Preferred Stock, the Series B Junior Preferred Stock
or such other Indebtedness, from the holders of such other Indebtedness
and from the holders of the Senior Notes, respectively, to permit the
repurchase of the Series C Junior Preferred Stock as described above.
Until the requirements of the immediately preceding sentence are
satisfied, the Corporation shall not make, and shall not be required to
make, any Change of Control Offer; provided, that the Corporation's
failure to comply with the provisions of this paragraph (h)(v) shall
constitute a Voting Rights Triggering Event.
(vi) (A) If the Corporation has any outstanding Preferred Stock
(other than the Senior Preferred Stock, the Series B Junior Preferred
Stock and the Series C Junior Preferred Stock), and the Corporation is
required to make a Change of Control Offer or to make a distribution with
respect to such Preferred Stock (other than the Senior Preferred Stock,
the Series B Junior Preferred Stock and the Series C Junior Preferred
Stock) in the event of a Change of Control, the Corporation
15
shall not consummate any such offer or distribution with respect to such
Preferred Stock (other than the Senior Preferred Stock, the Series B
Junior Preferred Stock and the Series C Junior Preferred Stock) until such
time as the Corporation shall have paid the Change of Control Purchase
Price in full to the Holders of Series C Junior Preferred Stock that have
validly accepted the Corporation's Change of Control Offer and shall
otherwise have consummated the Change of Control Offer made to Holders of
the Series C Junior Preferred Stock and (B) the Corporation will not issue
Preferred Stock (except pursuant to paragraph (b) hereof) with change of
control provisions requiring the payment of such Preferred Stock prior to
the payment of the Series C Junior Preferred Stock in the event of a
Change in Control under this paragraph (h).
(vii) The Corporation will not be required to make a Change of
Control Offer upon a Change of Control if a third party makes such Change
of Control Offer contemporaneously with or upon a Change of Control in the
manner, at the times and otherwise in compliance with the requirements of
this paragraph (h) and purchases all Series C Junior Preferred Stock
validly tendered and not withdrawn under such Change of Control Offer.
(i) [Reserved.]
(j) Reissuance of Series C Junior Preferred Stock. Shares of Series
C Junior Preferred Stock that have been issued and reacquired in any manner,
including shares purchased or redeemed or exchanged, shall (upon compliance with
any applicable provisions of the laws of Delaware) have the status of authorized
and unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock, provided
that any issuance of such shares of Preferred Stock must be in compliance with
the terms hereof; provided, further, that shares of Series C Junior Preferred
Stock with voting rights that have been issued and reacquired in exchange for
shares of Series C Junior Preferred Stock without voting rights and shares of
Series C Junior Preferred Stock reacquired from HarnCo or its Affiliates, shall
(upon compliance with any applicable provisions of the laws of the State of
Delaware) have the status of authorized and unissued shares of Series C Junior
Preferred Stock and may be reissued as part of the Series C Junior Preferred
Stock
(k) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
(l) Certain Additional Provisions.
(i) Limitation on Additional Indebtedness. The Corporation will not,
and will not cause or permit any Restricted Subsidiary of the Corporation
to, directly or indirectly, incur (as defined) any Indebtedness (including
any Acquired Indebtedness); provided, that if no Voting Rights Triggering
Event shall have
16
occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness, the Corporation or any Restricted
Subsidiary may incur Indebtedness (including any Acquired Indebtedness) if
the Corporation's Consolidated Interest Coverage Ratio is greater than 2.0
to 1.
Notwithstanding the foregoing, the Corporation and its
Restricted Subsidiaries may incur Permitted Indebtedness.
(ii) Limitation on Restricted Payments. The Corporation will not
make, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly, make, any Restricted Payment after the Issue Date, unless:
(A) no Voting Rights Triggering Event shall have occurred and
be continuing at the time of or immediately after giving effect to
such Restricted Payment;
(B) immediately after giving pro forma effect to such
Restricted Payment, (i) the Corporation could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under
paragraph (l)(i); and
(C) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum (without duplication)
of (1) 50% of the cumulative Consolidated Net Income of the
Corporation (or minus 100% of any cumulative deficit in Consolidated
Net Income) for the period (treated as one accounting period) from
the first day of the fiscal quarter in which the Issue Date occurs
through the last day of the fiscal quarter immediately preceding
such Restricted Payment, (2) 100% of the aggregate Net Proceeds in
cash received by the Corporation from the issuance or sale, after
the Issue Date (other than to a Restricted Subsidiary), of (a)
Junior Stock (other than Disqualified Capital Stock) of the
Corporation or (b) any Indebtedness or other securities of the
Corporation that are convertible into or exercisable or exchangeable
for Junior Stock (other than Disqualified Capital Stock) of the
Corporation which have been so converted or exercised or exchanged
(other than by a Restricted Subsidiary of the Corporation) and (3)
100% of the net reduction in Investments (other than Permitted
Investments), subsequent to the Issue Date, in any Person, resulting
from payments of interest on Indebtedness, dividends, repayments of
loans or advances or other transfers or distributions of Property or
return of capital (but only to the extent such interest, dividends
or repayments or other transfers or distributions of Property or
return of capital are not included in the calculation of
Consolidated Net Income), in each case, to the Corporation or any
Restricted Subsidiary from any Person (including Unrestricted
Subsidiaries) or from redesignations (the designation of which did
not constitute a Permitted Investment) of Unrestricted Subsidiaries
as Restricted Subsidiaries in accordance with the
17
Certificate of Designations, not to exceed in the case of any
Person, the amount of Investments (other than Permitted Investments)
previously made by the Corporation or any Restricted Subsidiary in
such Person. For purposes of determining the amount expended for
Restricted Payments under this clause (C), Property other than cash
(including a distribution of assets) shall be valued at its Fair
Market Value.
The provisions of this paragraph (l)(ii) shall not prohibit:
(i) the payment of any distribution within 60 days after the
date of declaration thereof, if at such date of
declaration such payment would comply with the
provisions of the Certificate of Designations;
(ii) the retirement of any shares of Junior Stock of the
Corporation by conversion into, or by or in exchange
for, shares of Junior Stock (other than Disqualified
Capital Stock) of the Corporation, or out of, the Net
Proceeds of the substantially concurrent sale (other
than to a Restricted Subsidiary of the Corporation) of
other shares of Junior Stock of the Corporation (other
than Disqualified Capital Stock); provided, that any
such Net Proceeds are excluded from clause (C)(2) of
this paragraph (l)(ii) for the purposes of this
calculation (and were not included therein at any time);
(iii) the retirement of any shares of Junior Stock that is
Disqualified Capital Stock by conversion into, or by
exchange for, shares of Junior Stock that is
Disqualified Capital Stock of the Corporation, or out of
the Net Proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary of the
Corporation) of other shares of Junior Stock that are
Disqualified Capital Stock of the Corporation;
(iv) payments to MHE Investments or any other Person in
respect of which MHE Investments or such other Person is
a member of the consolidated tax group of the
Corporation, for so long as MHE Investments or such
other Person owns such amount of the Capital Stock of
the Corporation as will permit it or a member of the
consolidated tax group of MHE Investments or such other
Person to be entitled to file consolidated federal tax
returns with the Corporation, for income taxes pursuant
to the Tax Allocation Agreement or for the purpose of
enabling MHE Investments or such other Person or any
such members to pay taxes other than income
18
taxes, to the extent actually owed and attributable to
the operations of the Corporation and its Subsidiaries
or to MHE Investments' or such other Person's ownership
thereof;
(v) payments to MHE Investments, for so long as it owns not
less than a majority of the outstanding Common Stock of
the Corporation, in amounts sufficient to pay the
ordinary operating and administrative expenses of MHE
Investments (including all reasonable professional fees
and expenses), including in connection with its
complying with the Corporation's reporting obligations
(including filings with the Commission and any exchange
on which the Corporation's securities are traded) and
obligations to prepare and distribute business records
in the ordinary course of business and the Corporation's
costs and expenses relating to taxes, other than those
referred to in clause (iv) (which taxes are attributable
to the operations of the Corporation and its Restricted
Subsidiaries or to MHE Investments' ownership thereof);
provided, that the aggregate payments paid in each
fiscal year pursuant to this clause (v) will not exceed
0.20% of the consolidated net sales of the Corporation
and its Restricted Subsidiaries for such fiscal year;
(vi) the purchase, redemption, retirement or other
acquisition for value of Capital Stock of the
Corporation or of any Person that directly or indirectly
controls (as defined in the definition of Affiliate) the
Corporation held by employees or former employees of the
Corporation or any Restricted Subsidiary (or their
estates or beneficiaries under their estates) upon
death, disability, retirement, termination of employment
and pursuant to the terms of any agreement under which
such Capital Stock was issued, provided, that the
aggregate Fair Market Value of the consideration paid
for such purchase, redemption, retirement or other
acquisition of such Capital Stock does not exceed
$500,000 in any fiscal year;
(vii) payments due under the Permitted Affiliate Agreements
(other than payments pursuant to paragraph (iv) above)
that would otherwise constitute Restricted Payments; and
(viii) payments that would otherwise constitute Restricted
Payments, not to exceed $750,000 in the aggregate;
19
provided, that in calculating the aggregate amount of Restricted Payments made
subsequent to the Issue Date for purposes of clause (C) of this paragraph
(l)(ii), amounts expended pursuant to clause (i) (but only if the declaration
thereof has not been counted in a prior period), (v) (other than to the extent
otherwise reducing Consolidated Net Income), (vi) and (viii) shall be included,
without duplication, in such calculation and (ii), (iii), (iv) and (vii) shall
not be included in such calculation. Nothing in the immediately preceding
proviso is meant to affect whether any amount expended pursuant to clause (iv)
should be reflected in Consolidated Net Income. Notwithstanding any other
provision of this paragraph (l)(ii), no dividends or distributions may be paid
on any class of Common Stock of the Corporation unless the Corporation has paid
in cash all accumulated dividends due on the two Dividend Payment Dates on or
immediately preceding such proposed date of such dividend or distribution.
If the Corporation or any Restricted Subsidiary makes a Restricted
Payment which, at the time of the making of such Restricted Payment, in the good
faith determination of the Board of Directors or the board of directors of
Morris Material Handling, would be permitted under the requirements of the
Certificate of Designations, such Restricted Payment shall be deemed to have
been made in compliance with the Certificate of Designations notwithstanding any
subsequent adjustment made in good faith to the Corporation's or such Restricted
Subsidiary's financial statements affecting Consolidated Net Income.
(iii) Limitation on Transactions with Affiliates. The Corporation
will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, Property or services) with any
Affiliate (each, an "Affiliate Transaction") or extend, renew, waive or
otherwise modify the terms of any Affiliate Transaction entered into prior
to the Issue Date unless (A) such Affiliate Transaction is between or
among the Corporation and the Restricted Subsidiaries or between or among
Restricted Subsidiaries; or (B) the terms of such Affiliate Transaction
are fair to the Corporation or such Restricted Subsidiary, as the case may
be, and the terms of such Affiliate Transaction are at least as favorable
as the terms which could be obtained by the Corporation or such Restricted
Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties. In any Affiliate
Transaction (or any series of related Affiliate Transactions) involving an
amount or having a Fair Market Value in excess of $2 million which is not
permitted under clause (A) of the immediately preceding sentence, the
Corporation shall first obtain a resolution of a majority of the
disinterested members of the Board of Directors which reflects the
approval of such Affiliate Transaction and a determination that such
Affiliate Transaction complies with clause (B) of the immediately
preceding sentence. In any Affiliate Transaction (or series of related
Affiliate Transactions) which includes the payment of fees of $1 million
or more to Chartwell, the Corporation shall obtain a resolution of a
majority of the disinterested members of the Board of Directors which
reflects the approval of such Affiliate Transaction. In addition, in any
20
Affiliate Transaction (or any series of related Affiliate Transactions)
involving an amount or having a Fair Market Value in excess of $10 million
which is not permitted under clause (A) of the immediately preceding
sentence, the Corporation must obtain, prior to the consummation of the
transaction or transactions, a written opinion from a nationally
recognized investment banking firm or other expert stating that such
transaction or transactions are fair to the Corporation or such Restricted
Subsidiary, as the case may be, from a financial point of view; provided,
that no such opinion shall be required in respect of the provision of
services or sales of inventory or products by the Corporation or any of
its Restricted Subsidiaries to a Joint Venture in the ordinary course of
business.
The foregoing provisions will not apply to: (i) any transaction or
series of related transactions pursuant to the terms of the Permitted Affiliate
Agreements; (ii) reasonable fees and compensation paid to and indemnity provided
on behalf of officers, directors or employees of the Corporation or any
Restricted Subsidiary of the Corporation as determined in good faith by the
Board of Directors or senior management; (iii) any payment that would be
permitted under the first paragraph or clauses (iv) or (v) of the second
paragraph of paragraph (l)(ii) above; (iv) any Permitted Investment (other than
Permitted Investments made pursuant to clause (x) of the definition of Permitted
Investments); or (v) loans or advances to employees and officers of the
Corporation or any of its Subsidiaries in the ordinary course of business to
provide for the payment of reasonable expenses incurred by such persons in the
performance of their responsibilities to the Corporation or such Subsidiary or
in connection with any relocation. The aggregate management, consulting and
similar fees paid by the Corporation or its Subsidiaries (excluding expenses and
amounts paid pursuant to the last sentence of this covenant or pursuant to
clause (iii) of this paragraph) to Chartwell shall not exceed $1 million during
any fiscal year; provided, that any such fees may accrue but shall not be paid
by the Corporation at any time after the occurrence and during the continuance
of a Voting Rights Triggering Event until such Voting Rights Triggering Event is
cured, whereupon such accrued and unpaid fees may be paid in addition to other
permitted fees. In addition, the Corporation may pay advisory fees to an
Affiliate of the Corporation (including Chartwell) with respect to specific
transactions, provided, that such payments would be permitted under the first
paragraph of paragraph (l)(ii). In addition, for purposes of this paragraph
(l)(iii), any transaction or series of related transactions between the
Corporation or any Restricted Subsidiary and an Affiliate of the Corporation
that is approved by a majority of the disinterested members of its Board of
Directors shall be deemed to comply with clause (B) of the first sentence of the
preceding paragraph. Notwithstanding the provisions of this paragraph (l)(iii),
the Corporation may pay fees and expenses to Affiliates of the Corporation on
the Issue Date in connection with the consummation of the Transactions.
(iv) Limitation on Preferred Stock of Restricted Subsidiaries. The
Corporation will not permit any of its Restricted Subsidiaries to issue
any Preferred Stock (other than to the Corporation or a Wholly-Owned
Subsidiary), other than Permitted Foreign Restricted Subsidiary Preferred
Stock, or permit any Person (other than the Corporation or a Wholly-Owned
Subsidiary) to hold any
21
such Preferred Stock unless the Corporation or such Restricted Subsidiary
would be entitled to incur or assume Indebtedness under paragraph (l)(i)
in the aggregate principal amount equal to the aggregate liquidation value
of the Preferred Stock to be issued or so held.
(v) Merger, Consolidation or Sale of Assets. The Corporation will
not consolidate or merge with or into any Person, or sell, assign, lease,
convey or otherwise dispose of (or cause or permit any of its Restricted
Subsidiaries to sell, assign, lease, convey or otherwise dispose of
(however effected, including, without limitation, by merger or
consolidation)) all or substantially all of the Corporation's assets
(determined on a consolidated basis for the Corporation and its Restricted
Subsidiaries), whether as an entirety or substantially an entirety in one
transaction or a series of related transactions, including by way of
liquidation or dissolution, to any Person unless, in each such case:
(A)(x) the Corporation shall be the continuing Person, or (y) the Person
(if other than the Corporation) formed by such consolidation or into which
the Corporation or the Restricted Subsidiary, as the case may be, is
merged or to which the Properties and assets of the Corporation or any
Restricted Subsidiary, as the case may be, are transferred (such Person,
the "Surviving Entity") (1) shall be a corporation organized and existing
under the laws of the United States or any State thereof or the District
of Columbia and (2) the Series C Junior Preferred Stock shall be converted
into or exchanged for and shall become shares of such successor,
transferee or resulting Person, having in respect of such successor,
transferee or resulting Person the same powers, preferences and relative
participating, optional or other special rights and the qualifications,
limitations or restrictions thereon, that the Series C Junior Preferred
Stock had immediately prior to such transaction; (B) immediately before
and immediately after giving effect to such transaction on a pro forma
basis (including, without limitation, giving effect to any Indebtedness
and Acquired Indebtedness incurred or anticipated to be incurred in
connection with or in respect of the transaction), no Voting Rights
Triggering Event shall have occurred and be continuing; and (C)
immediately after giving effect to such transaction on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated
to be incurred in connection with or in respect of such transaction or
series of transactions) the Corporation (or the Surviving Entity if the
Corporation is not continuing) (x) shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Corporation
immediately prior to such transaction and (y) could incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) under
paragraph (l)(i) above; provided, that a Restricted Subsidiary may merge
with and into the Corporation without complying with this clause (C)(y).
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the Properties or assets of one or more Subsidiaries of the
Corporation, the Capital Stock of which constitutes all or substantially all of
the Properties and assets of the Corporation,
22
shall be deemed to be the transfer of all or substantially all of the assets of
the Corporation.
For all purposes of the certificate of designations and the Series C
Junior Preferred Stock, Subsidiaries of any Surviving Entity will, upon such
transaction or series of transactions, become Restricted Subsidiaries or
Unrestricted Subsidiaries, to the extent and as provided pursuant to the
certificate of designations.
(vi) Reports to Holders. Whether or not required by the rules and
regulations of the Commission, so long as any shares of Series C Junior
Preferred Stock are outstanding, the Corporation shall furnish to the
holders of the Series C Junior Preferred Stock within 10 days after it is
or would have been required to file them with the Commission, (i) all
annual and quarterly financial information that would be required to be
contained in a filing with the Commission on Forms 10-K and 10-Q (without
exhibits) if the Corporation were required to file such forms, including a
section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Corporation's certified
independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K (without exhibits) if
the Corporation were required to file such reports. In addition, whether
or not required by the rules and regulations of the Commission, the
Corporation will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept
such a filing). In addition, the Corporation shall furnish to the holders
of the Series C Junior Preferred Stock and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144(d)(4) under the Securities Act and the
exhibits omitted from the information furnished pursuant to the preceding
sentence, for so long as the Series C Junior Preferred Stock is not freely
transferable under the Securities Act.
(m) Definitions. As used in this certificate of designations, the
following terms shall have the following meanings (with terms defined in
the singular having comparable meanings when used in the plural and vice
versa), unless the context otherwise requires:
"Acquired Indebtedness" means (a) Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person and (b) any Seller Note.
"Affiliate" of any specified Person means any other Person (including,
without limitation, such Person's issue, siblings and spouse) that directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such specified Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of
23
the power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise. For purposes of the Certificate of Designations, the term
"Affiliate," as it relates to the Corporation, shall (a) include HarnCo for so
long as HarnCo is entitled to designate at least one member of the Board of
Directors of the Corporation or any successor to the Corporation and (b) not
include CIBC Oppenheimer Corp. or Indosuez Capital or their respective
Affiliates.
"Affiliate Transaction" has the meaning ascribed to it in paragraph
(l)(iii) hereof.
"Asset Acquisition" means (a) an Investment by the Corporation or any
Restricted Subsidiary of the Corporation in any other Person pursuant to which
such Person becomes a Restricted Subsidiary of the Corporation, or is merged
with or into the Corporation or any Restricted Subsidiary of the Corporation or
(b) the acquisition by the Corporation or any Restricted Subsidiary of the
Corporation of the assets of any Person (other than a Restricted Subsidiary of
the Corporation) which constitute all or substantially all of the assets of such
Person or comprise any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means the sale, transfer or other disposition (including,
without limitation, by merger or consolidation) (other than to the Corporation
or any of its Restricted Subsidiaries) in any single transaction or series of
related transactions of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Corporation (other than directors' qualifying
shares to the extent required by applicable law), (b) all or substantially all
of the assets of the Corporation or of any Restricted Subsidiary thereof, (c)
real Property or (d) all or substantially all of the assets, or any Property, or
part thereof, owned by the Corporation or any Restricted Subsidiary thereof, or
a division, line of business or comparable business segment of the Corporation
or any Restricted Subsidiary thereof; provided, that Asset Sales shall not
include (i) sales, leases, conveyances, transfers or other dispositions to the
Corporation or to a Restricted Subsidiary or to any other Person if after giving
effect to such sale, lease, conveyance, transfer or other disposition such other
Person becomes a Restricted Subsidiary, (ii) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of the
Corporation and its Restricted Subsidiaries taken as a whole as permitted under
paragraph (l)(v) above, (iii) any transfer, conveyance, sale, lease or other
disposition of Property or assets, the gross proceeds of which (exclusive of
indemnities) do not exceed $500,000, (iv) any sales, leases, conveyances,
transfers or other dispositions of Property or equipment that has become worn
out, obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Corporation or any Restricted Subsidiary, as the case may be,
(v) the incurrence of any Liens, (vi) the making of any Restricted Payment
permitted by paragraph (l)(ii) above, (vii) transfers of cash and sales of Cash
Equivalents and (viii) sales, leases, conveyances, transfers or other
dispositions of Property or equipment in the ordinary course of business.
"Board of Directors" means the board of directors of the Corporation or
any Committee authorized to act therefor.
24
"Business Day" means any day except a Saturday, a Sunday or a federally
recognized holiday or a day on which banking institutions are not required to be
open in the State of New York or the State of Delaware.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated and whether or not voting) of capital
stock, partnership interests or any other participation, right or other interest
in the nature of an equity interest in such Person or any option, warrant or
other security convertible into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Certificate of Designations" means the Certificate of Designations
creating the Senior Preferred Stock.
"Cash Equivalents" means any of the following Investments: (i) marketable
direct obligations issued by, or unconditionally guaranteed by, the United
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any foreign country recognized by the United
States or any political subdivision of any such state or foreign country, as the
case may be, or any public instrumentality thereof (including any taxing
authority) maturing within one year from the date of acquisition thereof and, at
the time of acquisition, having one of the two highest ratings obtainable from
either Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service,
Inc. ("Moody's"); (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit,
time deposit accounts, operating accounts or bankers' acceptances maturing
within one year from the date of acquisition thereof issued or guaranteed by any
commercial banking institution organized under the laws of any jurisdiction
recognized by the United States of America and in which the Corporation or its
Subsidiaries actively conduct business, having at the date of acquisition
thereof combined capital and surplus of not less than U.S. $250,000,000 or the
foreign currency equivalent thereof; (v) repurchase obligations with a term of
not more than 30 days for underlying securities of the types described in clause
(i) above entered into with any bank meeting the qualifications specified in
clause (iv) above; (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above; and (vii) foreign bank deposits and cash equivalents in
jurisdictions where the Corporation or its Subsidiaries are then actively
conducting business, provided, that (a) all such deposits are required to be
made in the ordinary course of business, (b) such deposits do not exceed
$1,000,000 in the aggregate, and (c) the funds so deposited do not remain in
such bank for more than 10 days.
25
A "Change of Control" of the Corporation will be deemed to have occurred
at such time as (i) any Person (including a Person's Affiliates) or any Persons
acting together that would constitute a group (for purposes of Section 13(d) of
the Exchange Act, or any successor provision thereto) (a "Group"), other than a
Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of (a) 50%
or more of the total Voting Stock of the Corporation or (b) 50% of all classes
of Common Stock (whether voting or non-voting), taken as a whole, of the
Corporation, (iii) any Person (including a Person's Affiliates) or Group, other
than a Permitted Holder, becomes the beneficial owner of more than 30% of the
total Voting Stock of the Corporation, and the Permitted Holders beneficially
own, in the aggregate, a lesser percentage of the total Voting Stock of the
Corporation, than such other Person or Group and the Permitted Holders do not
have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the Corporation,
(iv) there shall be consummated any consolidation or merger of the Corporation
in which the Corporation is not the continuing or surviving corporation or
pursuant to which the Common Stock of the Corporation would be converted into
cash, securities or other Property, other than a merger or consolidation of the
Corporation in which the holders of the Common Stock of the Corporation
outstanding immediately prior to the consolidation or merger hold, directly or
indirectly, at least a majority of the Common Stock of the surviving corporation
immediately after such consolidation or merger, or (v) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Corporation (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Corporation has been approved by 66 2/3% of the directors
then still in office who either were directors at the beginning of such period
or whose election or recommendation for election was previously so approved)
cease to constitute a majority of the Board of Directors.
"Chartwell" means Chartwell Investments Inc. and its Affiliates.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means all Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding-up
of such Person, to any other class of Capital Stock of such Person.
"Consolidated Interest Coverage Ratio" of any Person means the ratio of
(i) EBITDA of such Person for the four most recent consecutive fiscal quarters
for which financial statements are available or, if the Corporation is not in
compliance with its obligations under paragraph (l)(vi) above on the date of
determination, the four most recent consecutive quarters ending on or prior to
the date of determination (in either such case, the "Four Quarter Period") to
(ii) Consolidated Interest Expense of such Person for such Four Quarter Period.
In addition to and without limitation of the foregoing, for purposes of this
definition, "EBITDA" and "Consolidated Interest Expense" shall be calculated
after giving effect on a pro forma basis to (i)(a) the incurrence of any
26
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and (b) any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), occurring on or after the first day of the
Four Quarter Period and on or prior to the date of determination, in each case
set forth in clauses (i)(a) and (b), as if such incurrence or repayment, as the
case may be (and the application of the proceeds thereof), occurred on the first
day of the Four Quarter Period (except that Indebtedness under any revolving
credit facility shall be deemed to be the average daily balance of such
Indebtedness during such Four Quarter Period) and (ii) any Asset Sales or Asset
Acquisitions (including (x) any Person who becomes a Restricted Subsidiary as a
result of any such Asset Acquisition and including any Asset Sale or Asset
Acquisition during such Four Quarter Period by any such Person determined as if
such Person had been a Restricted Subsidiary at the time of such transaction;
provided, that all Indebtedness of such Person and any such Restricted
Subsidiaries shall be deemed to have been incurred on the first day of the Four
Quarter Period and (y) the increase or decrease, as the case may be, in EBITDA
directly attributable to such Asset Sale or Asset Acquisition, as the case may
be) occurring on or after the first day of the Four Quarter Period and on or
prior to the date of determination, as if such Asset Sale or Asset Acquisition,
as the case may be, (including the incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. For purposes of this definition, whenever pro forma effect is to be
given to an Asset Acquisition, the amount of income or earnings relating thereto
and the amount of Consolidated Interest Expense associated with any Indebtedness
incurred in connection therewith shall be determined in good faith by a
responsible financial or accounting officer of the Corporation.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, without duplication, (i) the aggregate amount of interest charges
(excluding fees and expenses incurred in connection with the Transactions),
whether expensed or capitalized, incurred or accrued by such Person and its
Restricted Subsidiaries, determined on a consolidated basis in conformity with
GAAP for such period, plus (ii) to the extent not included in clause (i) above,
an amount equal to the sum of: (A) imputed interest included in Capitalized
Lease Obligations, (B) all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing, (C)
the net costs associated with Interest Rate Agreements, Currency Agreements and
other hedging obligations, (D) the interest portion of any deferred payment
obligations, (E) amortization of discount or premium on Indebtedness, if any,
(F) all capitalized interest and all accrued interest, (G) all other non-cash
interest expense, (H) all interest incurred or paid under any guarantee of
Indebtedness (including a guarantee of principal, interest or any combination
thereof) of any Person, and (I) all dividends or distributions on Disqualified
Capital Stock if payable to a Person other than the Corporation or a Restricted
Subsidiary (other than dividends paid or payable in shares of Junior A Capital
Stock (other than Disqualified Capital Stock) of the Corporation) declared and
payable in cash, minus (iii) to the extent included in clause (i) or (ii) above,
amortization or write-off of deferred financing costs (and original issue
discount to the extent it arises from the issuance of Junior A Capital Stock
(other than Disqualified Capital Stock) of the
27
Corporation) during such period and, without duplication, any charge related to
any premium or penalty paid in connection with redeeming or retiring any
Indebtedness of the Corporation or its Restricted Subsidiaries prior to the
stated maturity thereof. If any Indebtedness outstanding or to be incurred (x)
bears a floating rate of interest, the interest expense on such Indebtedness
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire Four Quarter Period (taking into account
on a pro forma basis any Interest Rate Agreement that has a remaining term as of
the date of determination in excess of 12 months), and/or (z) was incurred under
a revolving credit facility, the interest expense on such Indebtedness shall be
computed based upon the average daily balance of such Indebtedness during the
applicable period. If any Indebtedness to be incurred bears, at the option of
the Corporation or a Restricted Subsidiary, a fixed or floating rate of
interest, the interest expense on such Indebtedness shall be computed by
applying, at the option of the Corporation or such Restricted Subsidiary, such
fixed or floating rate.
"Consolidated Net Income" means with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, that (a) the Net Income of any Person that is not a
Restricted Subsidiary shall be included only to the extent of the amount of
dividends or other distributions representing the Corporation's proportionate
share of such Person's Net Income for such period actually paid in cash to the
Corporation or a Restricted Subsidiary (subject to clause (b) below) by such
Person during such period, (b) the Net Income of any Subsidiary of the Person in
question that is subject to any restriction or limitation on the payment of
dividends or the making of other distributions (other than pursuant to the
Credit Agreement, the Senior Notes, the Note Indenture, or any other
Indebtedness of the Corporation or any Restricted Subsidiary of the Corporation
containing, in the good faith judgment of the Board of Directors of the
Corporation, substantially the same or less restrictive limitations on the
payment of dividends or the making of other distributions than those contained
in such Credit Agreement, the Senior Notes or the Note Indenture or the Exchange
Debentures or the Indenture if the same were issued) shall be excluded to the
extent of such restriction or limitation (regardless of any waiver thereof),
(c)(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii) any
net after tax gain (but not loss) resulting from an Asset Sale by the Person in
question or any of its Subsidiaries other than in the ordinary course of
business shall be excluded, (d) non-cash gains and losses due solely to
fluctuations in currency values shall be excluded, (e) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings (or losses) of the successor
corporation prior to such consolidation, merger or transfer of assets shall be
excluded, and (f) all items classified as extraordinary, unusual or
nonrecurring, including all items relating to the Transactions and the
pre-closing events relating thereto shall be excluded (including the fees and
expenses incurred in connection with the Transactions and write-offs or other
costs associated or arising in connection with the Transactions). In computing
Consolidated Net Income under clause (C) under paragraph (l)(ii) above, the
Corporation or such Restricted Subsidiary (i) shall use audited financial
statements for the
28
portion of the relevant period for which such statements are available on the
date of determination and unaudited financial statements and other current
financial data based on the books and records of the Corporation for the
remaining portion of such period and (ii) shall be permitted to rely in good
faith for the balance of the relevant period for which audited financial
statements are not available on the financial statements and other financial
data derived from the books and records of the Corporation or such Restricted
Subsidiary that are available on the date of determination.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person and its Restricted Subsidiaries determined
on a consolidated basis in accordance with GAAP, less (to the extent included)
amounts attributable to Disqualified Capital Stock of such Person.
"Consolidated Tangible Assets" of any Person means the consolidated
tangible assets of such Person and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP as of the end of the most recent
fiscal quarter for which financial statements are available or, if the
Corporation is not in compliance with its obligations under paragraph (l)(vi)
above on the date of determination, the end of the most recent quarter ending on
or prior to the date of determination.
"Credit Agreement" means the Credit Agreement, dated on or about March 30,
1998, among Morris Material Handling, the Corporation, Material Handling LLC,
Morris Material Handling, Ltd., Mondel ULC, Kaverit Steel and Crane ULC, and
Canadian Imperial Bank of Commerce, as Administrative Agent, Credit Agricole
Indosuez, as Syndication Agent, BankBoston, N.A., as Documentation Agent, and
the lending institutions named therein.
"Credit Facilities" means one or more senior secured or unsecured credit
facilities providing, inter alia, for revolving credit loans, term loans,
bankers' acceptances and/or letters of credit between the Corporation or its
Restricted Subsidiaries and one or more lenders, including, in each case, any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced, restated or refinanced in whole or in part from
time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Corporation or any Restricted Subsidiary of the Corporation against fluctuations
in currency values.
"Disqualified Capital Stock" means any Capital Stock of the Corporation or
a Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the mandatory redemption date of the Senior Preferred Stock for any
consideration other than Capital Stock of the Corporation which is not
Disqualified
29
Capital Stock; provided, that the Series B Junior Preferred Stock shall not be
deemed to be Disqualified Capital Stock and the Preferred Stock of the
Corporation that is issued with the benefit of provisions requiring a change of
control offer to be made for such Preferred Stock in the event of a change of
control of the Corporation, which provisions have substantially the same effect
as the provisions of paragraph (h) of the Certificate of Designations shall not
be deemed to be Disqualified Capital Stock solely by virtue of such provisions.
Without limitation of the foregoing, Disqualified Capital Stock shall be deemed
to include any Preferred Stock of a Restricted Subsidiary of the Corporation
except for Permitted Foreign Restricted Subsidiary Preferred Stock.
"Dividend Payment Date" means April 1 and October 1 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter, each
semi-annual dividend period.
"Dividend Record Date" means March 15 and September 15 of each year.
"EBITDA" means, for any Person, for any period, an amount equal to (a) the
sum of (i) Consolidated Net Income for such period, plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income (minus any provision
for taxes utilized in computing net loss under clause (i) hereof to the extent
such provision reduced the net loss), plus (iii) Consolidated Interest Expense
for such period, plus (iv) depreciation for such period on a consolidated basis
to the extent reducing Consolidated Net Income, plus (v) amortization of
intangibles for such period on a consolidated basis to the extent reducing
Consolidated Net Income, plus (vi) amortization of original issue discount to
the extent it arises from the issuance of Junior A Capital Stock (other than
Disqualified Capital Stock) of the Corporation, to the extent reducing
Consolidated Net Income, plus (vii) any charge related to any premium or penalty
paid in connection with redeeming or retiring any Indebtedness prior to its
stated maturity to the extent reducing Consolidated Net Income, plus (viii) any
other non-cash items reducing Consolidated Net Income for such period, minus (b)
all non-cash items increasing Consolidated Net Income for such period, minus (c)
all cash payments during such period relating to non-cash charges that were
added back in determining EBITDA in any prior period (provided that payment of
such cash amounts did not reduce Consolidated Net Income), all for such Person
and its Restricted Subsidiaries determined in accordance with GAAP.
"Equity Investment" means the investment by MHE Investments, Inc., the
purchase by certain institutional investors of Units being issued by the
Corporation, and a retained equity investment by HarnCo, in each case, in the
Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Date" means the date, if any, on which the shares of Series C
Junior Preferred Stock are exchanged by the Corporation for Exchange Debentures.
30
"Exchange Debentures" shall have the meaning ascribed to it in paragraph
(g) hereof.
"Exchange Notice" shall have the meaning ascribed to it in paragraph (g)
hereof.
"Fair Market Value" means, with respect to any asset or Property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair Market
Value shall be determined by the Board of Directors acting in good faith and, in
the case of determination involving assets or Property in excess of $2 million,
shall be evidenced by a resolution of the Board of Directors delivered to the
Trustee.
"Financings" means, collectively, the offering by Morris Material Handling
of the Senior Notes, the borrowings by Morris Material Handling under the Credit
Agreement, and the Equity Investment.
"Foreign Restricted Subsidiary" of any specified Person means any
Restricted Subsidiary the jurisdiction of incorporation, organization or
formation of which is outside of the United States, Canada, the United Kingdom
and South Africa.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"Guarantee" means a guarantee of the Senior Notes by a guarantor under the
Note Indenture, as in effect from time to time.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit. A guarantee shall include, without
limitation, any agreement to preserve or maintain any other Person's financial
condition or to cause any other Person to achieve certain levels of operating
results.
"HarnCo" means Harnischfeger Corporation.
"Holder" means a holder of shares of Series C Junior Preferred Stock, as
reflected in the register maintained by the Transfer Agent.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other
31
obligation on the balance sheet of such Person (and "incurrence," "incurred,"
"incurrable," and "incurring" shall have meanings correlative to the foregoing);
provided, that a change in GAAP that results in an obligation of such Person
that exists at such time becoming Indebtedness shall not be deemed an incurrence
of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person,
any indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
Property (excluding, without limitation, any balances that constitute accounts
payable or trade payables or liabilities arising from advance payments or
customer deposits for goods and services sold by such Person or its Restricted
Subsidiaries in the ordinary course of business, and other accrued liabilities,
in each case, arising in the ordinary course of business) if and to the extent
any of the foregoing indebtedness would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP, and shall also include,
to the extent not otherwise included (i) any Capitalized Lease Obligations, (ii)
guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor), including, without limitation, guarantees
of dividends for which such Person may be liable directly or indirectly, (iii)
all obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (provided that in the case of
any such letters of credit, the items for which such letters of credit provide
credit support are those of other Persons which would be included within this
definition for such other Persons), (iv) Disqualified Capital Stock of the
Corporation or any Restricted Subsidiary thereof, including, without limitation,
any liquidation preference and mandatory redemption payment obligations in
respect thereof and (v) obligations of any such Person under any Interest Rate
Agreement or Currency Agreement applicable to any of the foregoing (if and to
the extent such Interest Rate Agreement or Currency Agreement obligations would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP). The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations included within the definition
of Indebtedness, the maximum liability upon the occurrence of the contingency
giving rise to the obligation, provided, that (i) the amount outstanding at any
time of any Indebtedness issued with original issue discount is the principal
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP (but such Indebtedness shall only be deemed to have been
incurred on the date of original issuance thereof) and, in the case of any
securities constituting Indebtedness, the payment of interest upon which is in
such securities, such Indebtedness shall only be deemed to have been incurred on
the date of issuance of the original securities constituting such Indebtedness,
(ii) Indebtedness shall not include any liability for federal, state, local,
foreign or other taxes and (iii) contingent obligations of the Corporation or
any of its Restricted Subsidiaries under any Surety Obligation will be deemed to
be Indebtedness
32
only upon the earlier of (a) the Corporation's or any Restricted Subsidiary's
obtaining knowledge of any payment by or in respect of any provider in respect
of any Surety Obligation, (b) the demand by any provider for any reimbursement
by the Corporation or any of its Restricted Subsidiaries of any Surety
Obligation or (c) the time at which the Corporation or any of its Restricted
Subsidiaries becomes obligated to make payment in respect of any Surety
Obligation as a result of the provider having made a payment in respect of such
Surety Obligation or as a result of such payment being required to be made by
such provider. Notwithstanding any other provision of the foregoing definition,
any trade or accounts payable arising from the purchase of goods or materials or
for services obtained in the ordinary course of business shall not be deemed to
be "Indebtedness" of the Corporation or any Restricted Subsidiaries for purposes
of this definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Initial Holder" means HarnCo.
"Initial Dividend Period" means the dividend period commencing on the
Issue Date and ending on the first Dividend Payment Date to occur thereafter.
"Indenture" shall have the meaning ascribed to it in paragraph (f)(ii)(E)
hereof.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance (or other
extension of credit), loan or capital contribution to (by means of transfers of
Property to others, payments for Property or services for the account or use of
others or otherwise), any guarantee of any obligations or Indebtedness of any
other Person, the purchase of any stock, bonds, notes, debentures, partnership
or joint venture interests or other securities of, the acquisition, by purchase
or otherwise, of any evidence of beneficial ownership of, or interest in, any
Person. Upon the designation of an Unrestricted Subsidiary as a Restricted
Subsidiary or the acquisition by the Corporation or a Restricted Subsidiary of
an interest in any Person that, as a result thereof, becomes a Restricted
Subsidiary, the Corporation shall be deemed to have made an Investment equal to
the Fair Market Value of all Investments owned by such new Restricted
Subsidiary. Investments shall exclude (i) accounts receivable and other
extensions of trade credit, in each case, on commercially reasonable terms in
accordance with normal trade practices, (ii) prepaid expenses and workers'
compensation, utility, lease and similar deposits, in the ordinary course of
business and (iii) acquisitions of Property or assets paid for solely by the
issuance of Capital Stock (other than Disqualified Capital Stock) of the
Corporation.
"Issue Date" means the date of original issuance of the Senior Preferred
Stock or the Series C Junior Preferred Stock, as the case may be.
33
"Joint Venture" of any specified Person means any corporation,
partnership, joint venture, limited liability company, association or other
business entity, whether now existing or hereafter organized or acquired, and
(a) which is engaged in a similar line of business as the Corporation or any
Restricted Subsidiary at the date of determination and (b)(i) in the case of a
corporation, of which not more than 50% of the total voting power of the Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, officers or trustees thereof is held by the
Corporation or any of its Restricted Subsidiaries, or (ii) in the case of a
partnership, joint venture, limited liability company, association or other
business entity, with respect to which the Corporation or any of its Restricted
Subsidiaries has not more than 50% of the ownership and voting power relating to
the policies, management and affairs thereof.
"Junior A Capital Stock" means Capital Stock of the Corporation, including
the Series B Junior Preferred Stock and the Series C Junior Preferred Stock,
that does not rank, as to the payment of dividends or other comparable
distributions or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation, prior to
or on a parity with the Senior Preferred Stock.
"Junior Stock" means Capital Stock of the Corporation that does not rank,
as to the payment of dividends or other comparable distributions or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, prior to or on a parity with the
Series C Junior Preferred Stock.
"Lien" means with respect to any Property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (e) hereof.
"MHE Investments" means MHE Investments, Inc., a Delaware corporation.
"Morris Material Handling" means Morris Material Handling, Inc., a
Delaware corporation.
"Moody's" means Moody's Investors Services, Inc. and its successors.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP, plus the amount
of any decrease in the deferred tax asset for such period relating to the actual
cash tax benefit realized by such Person or the consolidated tax group of which
such Person is a member
34
resulting from the election under Section 338(h)(10) of the Internal Revenue
Code of 1986, as amended, in respect of the Transactions.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Corporation, the aggregate net proceeds received by the Corporation, after
payment of expenses, commissions and the like incurred in connection therewith,
whether such proceeds are in cash or in Property (valued at the Fair Market
Value thereof at the time of receipt) and (b) in the case of any exchange,
exercise, conversion or surrender of outstanding securities of any kind for or
into shares of Capital Stock of the Corporation which is not Disqualified Stock,
the net book value of such outstanding securities on the date of such exchange,
exercise, conversion or surrender (plus any additional amount required to be
paid by the holder to the Corporation upon such exchange, exercise, conversion
or surrender) less any and all payments made to the holders, e.g., on account of
fractional shares and less all expenses incurred by the Corporation in
connection therewith.
"Note Indenture" means the Indenture relating to the Senior Notes, as in
effect on the Issue Date.
"October 1997 Drop Down" means the transfer in October 1997 by HarnCo of
the assets of its Material Handling Equipment Division to Material Handling,
LLC, a wholly-owned subsidiary of the Corporation.
"Offering Memorandum" means the Offering Memorandum dated March 23, 1998,
relating to the Corporation's offering and placement of the Senior Preferred
Stock.
"Parity Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Permitted Affiliate Agreements" means the following agreements between or
among the Corporation and any of MHE Investments, HarnCo, Chartwell or their
respective Affiliates:
(i) Recapitalization Agreement;
(ii) Transition Services Agreement between HarnCo and Morris Material
Handling, Inc., dated on or about March 30, 1998;
(iii) Trademark License Agreement between Harnischfeger Technologies, Inc.
and Morris Material Handling Inc., dated on or about March 30, 1998;
(iv) Separation Agreement between HarnCo and Material Handling, LLC, dated
October 26, 1997;
(v) Component and Manufactured Products Supply Agreement between HarnCo
and Morris Material Handling, Inc., dated on or about March 30, 1998;
35
(vi) Employment Agreement between Morris Material Handling, Inc. and
Michael Erwin, dated on or about March 30, 1998;
(vii) Employment Agreement between Morris Material Handling, Inc. and
David Smith, dated on or about March 30, 1998;
(viii) Employment Agreement between Morris Material Handling, Inc. and
Richard Niespodziani, dated on or about March 30, 1998;
(ix) Employment Agreement between Morris Material Handling, Inc. and Peter
Kerrick, dated on or about March 30, 1998;
(x) Employment Agreement between Morris Material Handling, Inc. and Edward
Doolan, dated on or about March 30, 1998;
(xi) Employment Agreement between Morris Material Handling, Inc. and
Michael Maddock, dated on or about March 30, 1998;
(xii) Employment Agreement between Morris Material Handling, Inc. and
Bruce Norridge, dated on or about March 30, 1998;
(xiii) Management Consulting Agreement between Morris Material Handling,
Inc. and Chartwell Investments Inc., dated on or about March 30, 1998;
(xiv) Financial Advisory Agreement between Morris Material Handling, Inc.
and Chartwell Investments Inc., dated on or about March 30, 1998;
(xv) Tax Sharing Agreement between MHE Investments, Inc., the Corporation
and certain of MMH Holdings' subsidiaries, dated on or about March 30, 1998;
(xvi) Shareholders Agreement between MHE Investments, Inc., the
Corporation and HarnCo, dated on or about March 30, 1998;
(xvii) Credit Indemnification Agreement between Harnischfeger Industries,
Inc. and Morris Material Handling, Inc., dated on or about March 30, 1998;
(xviii) Equity Purchase Agreements between Niles L.L.C. and certain
members of management;
(xix) HK Agreement by and among the Corporation, MHE Investments, Inc. and
majority stockholder of the Corporation, dated on or about March 30, 1998; and
(xx) Employee Loan Agreements between Morris Material Handling, Inc. and
certain members of management with respect to loans aggregating $600,000 by
Morris Material Handling, Inc. to such employees to acquire equity interests in
Niles L.L.C.
Each of the foregoing agreements is a Permitted Affiliate Agreement in the
form such agreement is in effect immediately after the initial issuance of the
Senior Preferred
36
Stock on the Issue Date, or as the same may be amended from time to time subject
to the provisions of paragraph (l)(iii) above; provided, that notwithstanding
paragraph (l)(iii), such agreements may be extended from time to time or
otherwise amended, to the extent that a majority of the disinterested members of
the Board of Directors has determined in good faith that no material adverse
effect on the creditworthiness of the Corporation and its Restricted
Subsidiaries, taken as a whole, shall result as a consequence thereby.
"Permitted Foreign Restricted Subsidiary Preferred Stock" means securities
of Foreign Restricted Subsidiaries of the Corporation denominated in Preferred
Stock that (a) otherwise have substantially the same characteristics of voting
or non-voting Common Stock of a Delaware corporation, (b) do not obligate the
issuer to pay current dividends or distributions in cash or otherwise and (c)
are not subject to any requirement of redemption or repurchase.
"Permitted Holders" means Chartwell.
"Permitted Indebtedness" means:
(i) Indebtedness of the Corporation or any Restricted Subsidiary arising
under or in connection with the Credit Facilities or Acquired Indebtedness in an
aggregate principal amount at any one time outstanding not to exceed the sum of
(a) $55 million, less the aggregate amount of all Net Proceeds of Asset Sales
applied to permanently reduce the outstanding amount of such Indebtedness, and
(b) the greater of (1) $75 million, less the aggregate amount of all Net
Proceeds of Asset Sales applied to permanently reduce the outstanding amount of
such Indebtedness or (2) the sum of (x) 80% of the book value of accounts
receivable of the Corporation and its Restricted Subsidiaries and (y) 45% of the
book value of consolidated inventory of the Corporation and its Restricted
Subsidiaries, in each case, determined at the time of such incurrence, less the
aggregate amount of all Net Proceeds of Asset Sales applied to permanently
reduce the outstanding amount of such Indebtedness; provided, that $15 million
of the Indebtedness incurred under this clause (b) may be incurred solely to
obtain letters of credit and to fund draws thereunder to provide credit support
for the Surety Arrangement or other Surety Obligations or other letters of
credit reasonably necessary in the ordinary course of business;
(ii) Indebtedness under Surety Obligations and under the Surety
Arrangement, in either case, that are due not later than 10 days after the
earlier of (a) the Corporation's or any Restricted Subsidiary's obtaining
knowledge of any payment by or in respect of any provider in respect of any
Surety Obligation, (b) the demand by any provider for any reimbursement by the
Corporation or any of its Restricted Subsidiaries of any Surety Obligation or
(c) the time at which the Corporation or any of its Restricted Subsidiaries
becomes obligated to make payment in respect of any Surety Obligation as a
result of the provider having made a payment in respect of such Surety
Obligation or as a result of such payment being required to be made by such
provider;
37
(iii) Indebtedness under the Exchange Debentures, the Indenture, the
Senior Notes, the Note Indenture and the Guarantees;
(iv) Indebtedness not covered by any other clause of this definition which
is outstanding on the Issue Date other than under the South African Credit
Facility;
(v) Indebtedness of the Corporation to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Corporation or another
Restricted Subsidiary, provided, that Indebtedness of the Corporation or any
Wholly-Owned Subsidiary to any Restricted Subsidiary (other than a Wholly-Owned
Subsidiary) is incurred for borrowed money; provided, further, that any
Indebtedness otherwise referred to in this clause (v) that is no longer held by
a Restricted Subsidiary or the Corporation (whether (i) as a result of a sale or
transfer of such Indebtedness, (ii) as a result of such Person no longer being
the Corporation or a Restricted Subsidiary or (iii) otherwise), shall, in each
case, be deemed incurred at such time;
(vi) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire Property in the ordinary course of business, which
Indebtedness and Capitalized Lease Obligations, in the aggregate, outstanding on
any date of incurrence (and any Refinancing Indebtedness in respect thereof), do
not exceed 4% of the Consolidated Tangible Assets of the Corporation and its
Restricted Subsidiaries;
(vii) Interest Rate Agreements and Currency Agreements;
(viii) guarantees of obligations of the Corporation or its Restricted
Subsidiaries;
(ix) additional Indebtedness of the Corporation or its Restricted
Subsidiaries not to exceed an aggregate of $10 million in principal amount
outstanding at any time; and
(x) Refinancing Indebtedness in respect of Indebtedness incurred under
clauses (iii), (iv), (v) and (vii) above or incurred pursuant to the first
paragraph of paragraph (l)(i) above.
"Permitted Investments" means, for any Person, Investments made on or
after the Issue Date consisting of:
(i) Investments by the Corporation, or by a Restricted Subsidiary, in the
Corporation or a Restricted Subsidiary;
(ii) Cash Equivalents;
(iii) Investments by the Corporation, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment (a) such Person becomes
a Restricted Subsidiary of the Corporation or (b) such person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets (including the proceeds of such Investment) to, or is
liquidated into, the Corporation or a Restricted Subsidiary thereof;
38
(iv) non-cash consideration received in conjunction with the consummation
of an Asset Sale;
(v) Interest Rate Agreements and Currency Agreements;
(vi) any Investment existing on the Issue Date;
(vii) Investments received in settlement of obligations owed to the
Corporation or any Restricted Subsidiary as a result of bankruptcy or insolvency
proceedings or upon the foreclosure or enforcement of any Lien in favor of the
Corporation or any Restricted Subsidiary;
(viii) Investments required pursuant to the following agreements or
obligations of the Corporation or a Restricted Subsidiary to make such
Investments in effect on the Issue Date:
(A) Shareholders Agreement among Penang Port SDN BHD., Morris
Mechanical Handling Limited and The General Electric Company of Malaysia
SDN BHD., dated November 8, 1995; and
(B) Joint Venture Formation and Partners Agreement by and among P&H
Middle East Ltd., Morris Mechanical Handling, Ltd., and Hamad Abdulla
Al-Zamil and Brothers Company, dated 1997;
(ix) Investments required to be made pursuant to the Transactions, as
contemplated by the Permitted Affiliate Agreements; and
(x) Investments by the Corporation or any Restricted Subsidiary not
otherwise permitted under this definition, in an aggregate amount not to exceed
$15 million at any one time outstanding.
For purposes of clause (x) above, the amount of any Investment
outstanding, in respect of any Investment and the issuer thereof (and its
Subsidiaries), shall be equal to the excess of (a) the aggregate amount of all
Investments made therein by the Corporation or any Restricted Subsidiary on or
after the Issue Date (including the Fair Market Value of all such Investments
not made in cash or Cash Equivalents, valued at the time of such Investment)
over (b) the aggregate amount returned in cash or Cash Equivalents on or with
respect to Investments in such Person (whenever such Investment was made)
whether through the sale or other disposition of the Investment in such Person
(or portion thereof) or through interest payments, principal payments, dividends
or other distributions or payments; provided, that such payments or
distributions shall not be (and have not been) included in clause (C)(3) of the
first paragraph of paragraph (l)(ii) above or otherwise included in Consolidated
Net Income.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
39
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed Property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Public Equity Offering" means any underwritten public offering of shares
of Common Stock (however designated and whether voting or non-voting) of the
Corporation or Morris Material Handling and any and all rights, warrants or
options to acquire such Common Stock pursuant to an effective registration
statement (other than a registration statement on Form S-4 or S-8) filed with
the Commission in accordance with the Securities Act.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including sales and
excise taxes, installation and delivery charges and other direct costs of, and
other direct expenses paid or charged in connection with, such purchase or
construction) of an item of Property, the principal amount of which Indebtedness
does not exceed the sum of (i) 100% of such cost and (ii) reasonable fees and
expenses of such Person incurred in connection therewith.
"Recapitalization" means the recapitalization of the Corporation pursuant
to the Recapitalization Agreement.
"Recapitalization Agreement" means the Recapitalization Agreement, dated
as of January 28, 1998, among HarnCo, the sellers named therein and MHE
Investments, Inc., together with Amendment No. 1 thereto, dated as of March 4,
1998, and Amendment No. 2 thereto, dated as of March 23, 1998.
"Redemption Date" with respect to any shares of Senior Preferred Stock,
means the date on which such shares of Senior Preferred Stock are redeemed by
the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph (e)
hereof.
"Refinancing Indebtedness" means Indebtedness that refunds or refinances
any Indebtedness of the Corporation or its Restricted Subsidiaries outstanding
on the Issue Date or other Indebtedness permitted to be incurred by the
Corporation or its Restricted Subsidiaries pursuant to the terms of the
Certificate of Designations, but only to the extent that (i) the Refinancing
Indebtedness is scheduled to mature either (a) no earlier than the Indebtedness
being refunded or refinanced, or (b) at least 91 days after the mandatory
Redemption Date of the Senior Preferred Stock (ii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the
mandatory Redemption Date of the Senior Preferred Stock has a weighted average
life to maturity at the time such Refinancing Indebtedness is incurred that is
equal to or greater than the weighted average
40
life to maturity of the portion of the Indebtedness being refunded or refinanced
that is scheduled to mature on or prior to the mandatory Redemption Date of the
Senior Preferred Stock and, in the case of clause (i) above and this clause
(ii), such Refinancing Indebtedness by its terms, or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, does not
permit redemption or other retirement (including pursuant to any required offer
to purchase to be made by the Corporation or a Restricted Subsidiary) of such
Indebtedness at the option of the holder thereof prior to the final stated
maturity of the Indebtedness being refinanced, other than a redemption or other
retirement at the option of the holder of such Indebtedness (including pursuant
to a required offer to purchase made by the Corporation or a Restricted
Subsidiary) which is conditioned on a change of control of the Corporation
pursuant to provisions substantially similar to those contained under paragraph
(h) above or provisions contained in the Note Indenture attributable to required
offers to purchase attributable to Asset Sales or otherwise on terms
substantially similar to those in such Indebtedness being refinanced, (iii) such
Refinancing Indebtedness is in an aggregate principal amount that is equal to or
less than the sum of (a) the aggregate principal amount then outstanding under
the Indebtedness being refunded or refinanced, (b) the amount of accrued and
unpaid interest, if any, and premiums owed, if any, not in excess of
pre-existing prepayment provisions on such Indebtedness being refunded or
refinanced and (c) the amount of customary fees, expenses and costs related to
the incurrence of such Refinancing Indebtedness, and (iv) such Refinancing
Indebtedness is incurred by the same Person that initially incurred the
Indebtedness being refunded or refinanced, except that the Corporation may incur
Refinancing Indebtedness to refund or refinance Indebtedness of any Wholly-Owned
Subsidiary of the Corporation and any Restricted Subsidiary may incur
Refinancing Indebtedness to refund or refinance Indebtedness of any other
Restricted Subsidiary.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment of any kind or
character (whether in cash, Property or securities) on Junior Stock of the
Corporation or Capital Stock of any Restricted Subsidiary or any payment made to
the direct or indirect holders (in their capacities as such) of Junior Stock of
the Corporation or Capital Stock of any Restricted Subsidiary of the Corporation
(other than (x) dividends or distributions payable solely in Junior Stock (other
than Disqualified Capital Stock) of the Corporation, and (y) dividends or
distributions payable to the Corporation or to a Restricted Subsidiary of the
Corporation and (z) dividends or distributions from a Restricted Subsidiary of
the Corporation that are paid ratably to all Persons holding the Capital Stock
of such Restricted Subsidiary in proportion to the Capital Stock held by such
Persons), (ii) the purchase, redemption or other acquisition or retirement for
value of any Junior Stock of the Corporation or any Capital Stock of any of its
Restricted Subsidiaries or any options, warrants or rights to purchase or
acquire such shares or any securities convertible or exchangeable into such
shares (other than any such shares, options, warrants, rights or securities (a)
that are owned by the Corporation or a Restricted Subsidiary of the Corporation;
provided, that such options, warrants, rights or securities are purchased,
redeemed or otherwise acquired for value by the issuer thereof, or (b) the
issuer of which is a Restricted Subsidiary; provided, that, for purposes of this
clause (b), such purchase,
41
redemption or other acquisition or retirement for value is (A) permitted under
clauses (viii) or (x) of the definition of Permitted Investments or (B) in an
amount, which, when added to all other Restricted Payments made pursuant to this
clause (b), is not greater than 10% of Consolidated Tangible Assets of the
Corporation and its Restricted Subsidiaries), (iii) the making of any Investment
other than a Permitted Investment, (iv) any designation (other than pursuant to
clause (x) of the definition of Permitted Investments) of a Restricted
Subsidiary as an Unrestricted Subsidiary (a "Designation"), provided, that the
Designation of a Subsidiary of the Corporation as an Unrestricted Subsidiary
shall be deemed to include the Designation of all of the Subsidiaries of such
Subsidiary that were Restricted Subsidiaries, (v) forgiveness of any
Indebtedness of an Affiliate of the Corporation to the Corporation or a
Restricted Subsidiary and (vi) any advisory fee paid to an Affiliate with
respect to a specific transaction (other than fees payable on the Issue Date
upon consummation of the Transactions. For purposes of determining the amount
expended for Restricted Payments, (a) cash distributed or invested shall be
valued at the face amount thereof and Property other than cash shall be valued
at its Fair Market Value, except that in determining the amount of any
Restricted Payment made under clause (iv) above, the amount of such Restricted
Payment shall be equal to the greater of (x) the book value or (y) the Fair
Market Value of the Corporation's direct and indirect proportionate interest in
such Subsidiary on such date and (b) upon the designation of an Unrestricted
Subsidiary as a Restricted Subsidiary, or the acquisition by the Corporation or
a Restricted Subsidiary of an interest in any Person that, as a result thereof,
becomes a Restricted Subsidiary, the Corporation shall be deemed to have made a
Restricted Payment equal to the Fair Market Value of the Capital Stock of the
Corporation or its Restricted Subsidiaries owned by such new Restricted
Subsidiaries.
"Restricted Subsidiary" means a Subsidiary of the Corporation other than
an Unrestricted Subsidiary and includes all of the Subsidiaries of the
Corporation existing as of the Issue Date. The Board of Directors may designate
any Unrestricted Subsidiary or any Person that is to become a Subsidiary as a
Restricted Subsidiary if immediately after giving effect to such action (and
treating any Acquired Indebtedness as having been incurred at the time of such
action), (i) no Voting Rights Triggering Event shall have occurred and be
continuing, (ii) Indebtedness of such Person and its Subsidiaries outstanding
immediately following such redesignation would, if incurred at such time, be
permitted to be incurred under the Certificate of Designations and (iii) the
provisions referred to in clause (b) of the last sentence of the definition of
Restricted Payment is complied with and any Investments pursuant to the second
sentence of the definition of Investments are permitted to be made pursuant to
the Certificate of Designations.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Note" means any Indebtedness of the Corporation or any Restricted
Subsidiary issued to a seller as a portion of the purchase price in any Asset
Acquisition by the Corporation or such Restricted Subsidiary from such seller.
"Senior Notes" means the $200,000,000 aggregate principal amount of 9 1/2%
Senior Notes due 2008 of Morris Material Handling.
42
"Senior Preferred Stock" means the 12% Series A Senior Exchangeable
Preferred Stock of the Corporation, liquidation preference $1,000 per share.
"Senior Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Series B Junior Preferred Stock" means the 12 1/4% Series B Junior
Exchangeable Preferred Stock of the Corporation, liquidation preference $1,000
per share.
"South African Credit Facility" means a Credit Facility in an aggregate
principal amount or with aggregate commitments not to exceed $5 million to be
entered into by Morris Mechanical Handling (Pty) Ltd.
"Special Dividends" shall have the meaning ascribed to it in paragraph
(c)(vi) hereof.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, limited liability company, association or other business entity,
whether now existing or hereafter organized or acquired, (i) in the case of a
corporation, of which more than 50% of the total Voting Stock is held by such
first-named Person or any of its Subsidiaries or (ii) in the case of a
partnership, joint venture, limited liability company, association or other
business entity, with respect to which such first-named Person or any of its
Subsidiaries has at least a majority ownership and voting power relating to the
policies, management and affairs thereof.
"Surety Arrangement" means one or more surety arrangements providing,
inter alia, for the issuance of Surety Obligations between the Corporation or
any of its Restricted Subsidiaries and one or more providers, provided to the
Corporation or its Restricted Subsidiaries including, in each case, any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, restated or refinanced from time to time.
"Surety Obligations" means any bonds, including bid bonds, advance bonds,
or performance bonds, letters of credit, warranties, and similar arrangements
between the Corporation and any of its Restricted Subsidiaries and one or more
providers, for the benefit of the Corporation's or any Restricted Subsidiary's
suppliers, vendors, insurers or customers including, in each case, any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, restated or refinanced from time to time.
"Tax Allocation Agreement" means a tax allocation agreement among the
Corporation, Morris Material Handling and MHE Investments, as in effect on the
Issue Date and as the same may be amended from time to time subject to the
provisions of paragraph (l)(iii) above and provided, that no material adverse
effect on Corporation or on the holders of the Senior Preferred Stock shall
result as a consequence thereby.
43
"Transactions" means, collectively, the Recapitalization, the Financings
and the October 1997 Drop Down and the other related transactions described in
the section "The Transactions" contained in the Offering Memorandum.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Corporation which is classified
(whether on or after the Issue Date) as an Unrestricted Subsidiary by a
resolution adopted by the Board of Directors of the Corporation; provided, that
a Subsidiary may be so classified as an Unrestricted Subsidiary only if (i) such
classification in compliance with paragraph (l)(ii) above, (ii) such Subsidiary
does not own beneficially any Capital Stock of the Corporation or any Restricted
Subsidiary (other than any Restricted Subsidiary of such Subsidiary that is
being designated as an Unrestricted Subsidiary at the time of such
classification) and (iii) all Indebtedness of the Corporation or any Restricted
Subsidiary to such Subsidiary is deemed incurred at the time of such
classification or at the time such Capital Stock is no longer so owned. The
Corporation shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, at any time, (a) be liable for any Indebtedness of any
Unrestricted Subsidiary or (b) be liable for any Indebtedness that provides that
the holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final maturity upon the occurrence of a default with respect to any Indebtedness
of any Unrestricted Subsidiary.
"Voting Rights Triggering Event" shall have the meaning ascribed to it in
paragraph (f) hereof.
"Voting Stock" of any Person means the Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all of the
outstanding Voting Stock (other than directors' qualifying shares) of which are
owned, directly or indirectly, by the Corporation.
(n) Restrictions on Transfer
(a) Each share of Series C Junior Preferred Stock shall contain a legend
substantially to the following effect until the Resale Restriction Termination
Date (as defined below) unless the Corporation determines otherwise:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT
44
IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO
REGULATION S (WITHIN THE MEANING OF RULE 903(C)(2) OF REGULATION S UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") THAT IS TWO YEARS (OR SUCH SHORTER PERIOD AS MAY
BE PRESCRIBED BY RULE 144(K)(OR ANY SUCCESSOR PROVISION THEREOF) UNDER THE
SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL ISSUE DATE AND THE LAST DATE ON
WHICH THE ISSUER OR ANY AFFILIATE THEREOF WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY), RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT
(A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (D) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRANSFER AGENT A LETTER SIGNED BY SUCH INVESTOR CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRANSFER
AGENT), (E) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) AND (3) AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED PRIOR TO THE
RESALE RESTRICTION TERMINATION DATE A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. PRIOR TO ANY OFFER, SALE OR OTHER TRANSFER OF THIS SECURITY PRIOR TO THE
RESALE RESTRICTION TERMINATION DATE PURSUANT TO CLAUSES (D) AND (F) ABOVE, THE
HOLDER WILL BE REQUIRED TO DELIVER TO THE TRANSFER AGENT AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
(b) Prior to the Resale Restriction Termination Date (or such shorter
period as may be prescribed by Rule 144(k) under the Securities Act (or any
successor thereto)) no
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transfers of any Series C Junior Preferred Stock may be effected other than in
accordance with the procedures set forth in paragraph (n)(i) above.
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IN WITNESS WHEREOF, said MMH Holdings, Inc. has caused this Certificate of
Designations to be signed by Martin L. Ditkof, its Secretary, this 27th day of
March, 1998.
MMH HOLDINGS, INC.
By: /s/ Martin L. Ditkof
------------------------------
Name: Martin L. Ditkof
Title: Secretary
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