CERTIFICATE OF DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS
OF
___% SERIES A CUMULATIVE
PREFERRED STOCK
OF
COLOR SPOT NURSERIES, INC.
-------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-------------------------
Color Spot Nurseries, Inc. (the "COMPANY"), a corporation organized
and existing under the General Corporation Law of the State of Delaware,
certifies that pursuant to the authority contained in Article IV of its
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors of
the Company by unanimous written consent dated _______________, 1997 duly
approved and adopted the following resolution (this "CERTIFICATE OF
DESIGNATION") which resolution remains in full force and effect on the date
hereof:
RESOLVED, that the Board of Directors does hereby designate,
create, authorize and provide for the issuance of __% Series A Cumulative
Preferred Stock due ______________, 2008 (the "SERIES A PREFERRED STOCK"),
par value $0.01 per share, with a liquidation preference of $1,000 per share,
consisting of 100,000 shares, having the following voting powers, preferences
and relative, participating, optional and other special rights, and
qualifications, limitations and restrictions thereof as follows:
1. DIVIDENDS.
1. The Holders of shares of the Series A Preferred Stock shall be
entitled to receive, when, as and if dividends are declared by the Board of
Directors out of funds of the Company legally available therefor, cumulative
preferential dividends from the issue date of the Series A Preferred Stock
accruing at the rate of __% per annum (subject to increase as set forth
below), payable quarterly in arrears on each _______________, _____________,
______________ and ______________ or, if any such date is not a Business Day,
on the next succeeding Business Day (each, a "DIVIDEND PAYMENT DATE"), to the
Holders of record as of the next preceding _______________, _______________,
_____________ and __________________ (each, a "RECORD DATE"). Upon an
Increased Dividend Triggering Event dividends on the Series A Preferred Stock
will accrue at the rate of __% per annum of the liquidation preference
thereof until such Increased Dividend Triggering Event is cured. Dividends
shall be payable in cash, except that on each Dividend Payment Date occurring
on or prior to ____________, 2003, dividends may be paid, at the Company's
option, by the issuance of additional shares of Series A Preferred Stock
(including
fractional shares) having an aggregate Liquidation Preference equal to the
amount of such dividends. The issuance of such additional shares of Series A
Preferred Stock shall constitute "payment" of the related dividend for all
purposes of this Certificate of Designation. The first dividend payment
shall be payable on ___________, 1998. Dividends payable on the Series A
Preferred Stock shall be computed on the basis of a 360-day year consisting
of twelve 30-day months and shall be deemed to accumulate on a daily basis.
2. The rate of the cumulative preferential dividends of the Series
A Preferred Stock may be increased as hereinafter provided. Upon:
3. the failure of the Company to satisfy any mandatory
redemption or repurchase obligation with respect to the Series A
Preferred Stock;
4. the failure of the Company to make a Change of Control Offer
on the terms and in accordance with the provisions described below in
Section 5 hereof;
5. the failure of the Company to comply with any of the other
covenants or agreements set forth in this Certificate of Designation
(other than the payment of dividends) and the continuance of such failure
for 30 consecutive days or more; or
6. default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) whether such Indebtedness or guarantee now exists,
or is created after the Closing Date, which default (1) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "PAYMENT DEFAULT") or
(2) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5,000,000 or more (each of the events
described in clauses (i), (ii), (iii) and (iv) being referred to herein
as a "INCREASED DIVIDEND TRIGGERING EVENT");
then the cumulative preferential dividends of the Series A Preferred Stock
will accrue at a rate of __% of the Liquidation Preference per share per
annum from the date of such Increased Dividend Triggering Event until such
Increased Dividend Triggering Event is cured.
7. Dividends on the Series A Preferred Stock shall accumulate
whether or not the Company has earnings or profits, whether or not there are
funds legally available for the payment of such dividends and whether or not
dividends are declared. Dividends shall accumulate to the extent they are
not paid on the Dividend Payment Date for the period to which they relate.
The Company shall take all actions required or permitted under the Delaware
General Corporation Law (the "DGCL") to permit the payment of dividends on
the Series A Preferred Stock, including, without limitation, through the
revaluation of its assets in accordance with the DGCL, to make or keep funds
legally available for the payment of dividends.
8. No dividend whatsoever shall be declared or paid upon, or any
sum set apart for the payment of dividends upon, any outstanding share of the
Series A Preferred Stock with respect to any dividend period unless all
dividends for all preceding dividend periods have been declared and paid, or
declared and a sufficient sum set apart for the payment of such dividend,
upon all outstanding shares of Series A Preferred Stock. Unless full
cumulative dividends on all outstanding shares of Series A Preferred Stock
for all past dividend periods shall have been declared and paid, or declared
and a sufficient sum for
2
the payment thereof set apart, then: (i) no dividend (other than a dividend
payable solely in shares of any class of stock ranking junior to the Series A
Preferred Stock as to the payment of dividends and as to rights in
liquidation, dissolution or winding up of the affairs of the Company ("JUNIOR
SECURITIES") shall be declared or paid upon, or any sum set apart for the
payment of dividends upon, any shares of Junior Securities; (ii) no other
distribution shall be declared or made upon, or any sum set apart for the
payment of any distribution upon, any shares of Junior Securities, other than
a distribution consisting solely of Junior Securities; (iii) no shares of
Junior Securities shall be purchased, redeemed or otherwise acquired or
retired for value (excluding an exchange for shares of other Junior
Securities) by the Company or any of its Subsidiaries; and (iv) no monies
shall be paid into or set apart or made available for a sinking or other like
fund for the purchase, redemption or other acquisition or retirement for
value of any shares of Junior Securities by the Company or any of its
Subsidiaries. Holders of the Series A Preferred Stock shall not be entitled
to any dividends, whether payable in cash, property or stock, in excess of
the full cumulative dividends as herein described.
1. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company or reduction or decrease in its
capital stock resulting in a distribution of assets to the holders of any
class or series of the Company's capital stock (a "REDUCTION OR DECREASE IN
CAPITAL STOCK"), each Holder of shares of the Series A Preferred Stock shall
be entitled to payment out of the assets of the Company available for
distribution of an amount equal to the Liquidation Preference per share of
Series A Preferred Stock held by such Holder, PLUS accumulated and unpaid
dividends, if any, to the date fixed for liquidation, dissolution, winding up
or reduction or decrease in capital stock, before any distribution is made on
any Junior Securities, including, without limitation, common stock of the
Company. After payment in full of the Liquidation Preference and all
accumulated dividends, if any, to which Holders of Series A Preferred Stock
are entitled, such Holders shall not be entitled to any further participation
in any distribution of assets of the Company. However, neither the voluntary
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 Company nor the consolidation or merger of the Company with or into
one or more corporations shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Company or reduction or
decrease in capital stock, unless such sale, conveyance, exchange or transfer
shall be in connection with a liquidation, dissolution or winding up of the
business of the Company or reduction or decrease in capital stock.
2. REDEMPTION BY THE COMPANY.
1. On ________, 2008 (the "MANDATORY REDEMPTION DATE"), the Company
shall be required to redeem (subject to the legal availability of funds
therefor) all outstanding shares of Series A Preferred Stock at a price in
cash equal to the Liquidation Preference thereof, PLUS accumulated and unpaid
dividends, if any, to the date of redemption. The Company shall not be
required to make sinking fund payments with respect to the Series A Preferred
Stock. The Company shall take all actions required or permitted under the
DGCL to permit such redemption.
2. The Series A Preferred Stock may not be redeemed at the option
of the Company prior to _____________, 2002, except as set forth below. The
Series A Preferred Stock may be redeemed, in whole or in part, at the option
of the Company on or after _______________, 2002, at the Applicable
Redemption Price. At any time, or from time to time, on or prior to
__________, 2002, the Company may, at its option, use the net cash proceeds
of the first Public Equity Offering to redeem the Series A Preferred Stock at
a redemption price equal to __% of the Liquidation Preference together with
accrued and unpaid dividends, if any, to the date of redemption. In order to
effect the foregoing redemption with the proceeds
3
of such Public Equity Offering, the Company shall make such redemption not
more than 120 days after the consummation of such Public Equity Offering.
3. In case of redemption of less than all of the shares of
Series A Preferred Stock at the time outstanding, the shares to be redeemed
shall be selected PRO RATA or by lot as determined by the Company in its sole
discretion.
4. Notice of any redemption shall be sent by or on behalf of the
Company not less than 30 nor more than 60 days prior to the date specified
for redemption in such notice (including the Mandatory Redemption Date, the
"REDEMPTION DATE"), by first class mail, postage prepaid, to all Holders of
record of the Series A Preferred Stock at their last addresses as they shall
appear on the books of the Company; PROVIDED, HOWEVER, that no failure to
give such notice or any defect therein or in the mailing thereof shall affect
the validity of the proceedings for the redemption of any shares of Series A
Preferred Stock except as to the Holder to whom the Company has failed to
give notice or except as to the Holder to whom notice was defective. In
addition to any information required by law or by the applicable rules of any
exchange upon which Series A Preferred Stock may be listed or admitted to
trading, such notice shall state: (i) whether such redemption is being made
pursuant to the optional or the mandatory redemption provisions hereof;
(ii) the Redemption Date; (iii) the Applicable Redemption Price; (iv) the
number of shares of Series A Preferred Stock to be redeemed and, if less than
all shares held by such Holder are to be redeemed, the number of such shares
to be redeemed; (v) the place or places where certificates for such shares
are to be surrendered for payment of the Applicable Redemption Price,
including any procedures applicable to redemptions to be accomplished through
book-entry transfers; and (vi) that dividends on the shares to be redeemed
will cease to accumulate on the Redemption Date. Upon the mailing of any
such notice of redemption, the Company shall become obligated to redeem at
the time of redemption specified therein all shares called for redemption.
5. If notice has been mailed in accordance with Section 3(d) above
and provided that on or before the Redemption Date specified in such notice,
all funds necessary for such redemption shall have been set aside by the
Company, separate and apart from its other funds in trust for the PRO RATA
benefit of the Holders of the shares so called for redemption, so as to be,
and to continue to be available therefor, then, from and after the Redemption
Date, dividends on the shares of the Series A Preferred Stock so called for
redemption shall cease to accumulate, and said shares shall no longer be
deemed to be outstanding and shall not have the status of shares of Series A
Preferred Stock, and all rights of the Holders thereof as stockholders of the
Company (except the right to receive from the Company the Applicable
Redemption Price) shall cease. Upon surrender, in accordance with said
notice, of the certificates for any shares so redeemed (properly endorsed or
assigned for transfer, if the Company shall so require and the notice shall
so state), such shares shall be redeemed by the Company at the Applicable
Redemption Price. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate or certificates shall be issued
representing the unredeemed shares without cost to the Holder thereof.
6. Any funds deposited with a bank or trust company for the purpose
of redeeming Series A Preferred Stock shall be irrevocable except that:
7. the Company shall be entitled to receive from such bank or
trust company the interest or other earnings, if any, earned on any money
so deposited in trust, and the Holders of any shares redeemed shall have
no claim to such interest or other earnings; and
8. any balance of monies so deposited by the Company and
unclaimed by the Holders of the Series A Preferred Stock entitled thereto
at the expiration of two years from the applicable Redemption Date shall
be repaid, together with any interest or other earnings earned
4
thereon, to the Company, and after any such repayment, the Holders of the
shares entitled to the funds so repaid to the Company shall look only to
the Company for payment without interest or other earnings.
9. No Series A Preferred Stock may be redeemed except with funds
legally available for the purpose. The Company shall take all actions
required or permitted under the DGCL to permit any such redemption.
10. Notwithstanding the foregoing provisions of this Section 3,
unless the full cumulative dividends on all outstanding shares of Series A
Preferred Stock shall have been paid or contemporaneously are declared and
paid for all past dividend periods, none of the shares of Series A Preferred
Stock shall be redeemed unless all outstanding shares of Series A Preferred
Stock are simultaneously redeemed.
11. All shares of Series A Preferred Stock redeemed pursuant to
this Section 3 shall be restored to the status of authorized and unissued
shares of preferred stock, without designation as to series and may
thereafter be reissued as shares of any series of preferred stock other than
shares of Series A Preferred Stock.
1. VOTING RIGHTS.
1. The Holders of record of shares of the Series A Preferred Stock
shall have no voting rights, except as required by law and as hereinafter
provided in this Section 4.
2. Upon the accumulation of accrued and unpaid dividends on the
outstanding Series A Preferred Stock in an amount equal to six full quarterly
dividends (whether or not consecutive) (the events described above being
referred to herein as a "VOTING RIGHTS TRIGGERING EVENT"), then the number of
members of the Company's Board of Directors will be immediately and
automatically increased by one unless there is a vacancy on the Company's
Board of Directors, and the Holders of a majority of the outstanding shares
of Series A Preferred Stock, voting as a separate class, will be entitled to
elect one member to the Board of Directors of the Company.
3. Whenever such voting right shall have vested, such right may be
exercised initially either at a special meeting of the Holders of Series A
Preferred Stock, called as hereinafter provided, or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at
such annual meetings or by the written consent of the Holders of Series A
Preferred Stock. Such right of the Holders of Series A Preferred Stock to
elect a director may be exercised until all dividends in arrears shall have
been paid in full, at which time the right of the Holders of Series A
Preferred Stock to elect such director shall cease, the term of such director
previously elected shall thereupon terminate, and the authorized number of
directors of the Company shall thereupon return to the number of authorized
directors otherwise in effect, but subject always to the same provisions for
the renewal and divestment of such special voting rights in the case of any
such future dividend arrearage or defaults or any such failure to make
redemption payments.
4. At any time when such voting right shall have vested in the
Holders of Series A Preferred Stock and if such right shall not already have
been initially exercised, a proper officer of the Company shall, upon the
written request of Holders of record of 10% or more of the Series A Preferred
Stock then outstanding, addressed to the Secretary of the Company, call a
special meeting of Holders of Series A Preferred Stock. Such meeting shall
be held at the earliest practicable date upon the notice required for annual
meetings of stockholders at the place for holding annual meetings of
stockholders of the Company or, if none, at a place designated by the
Secretary of the Company. If such meeting shall not be
5
called by the proper officers of the Company within 30 days after the
personal service of such written request upon the Secretary of the Company,
or within 30 days after mailing the same within the United States, by
registered mail, addressed to the Secretary of the Company at its principal
office (such mailing to be evidenced by the registry receipt issued by the
postal authorities), then the Holders of record of 10% of the shares of
Series A Preferred Stock then outstanding may designate in writing a Holder
of Series A Preferred Stock to call such meeting at the expense of the
Company, and such meeting may be called by such person so designated upon the
notice required for annual meetings of stockholders and shall be held at the
place for holding annual meetings of the Company or, if none, at a place
designated by such Holder. Any Holder of Series A Preferred Stock that would
be entitled to vote at such meeting shall have access to the stock books of
the Company for the purpose of causing a meeting of stockholders to be called
pursuant to the provisions of this Section. Notwithstanding the provisions
of this paragraph, however, no such special meeting shall be called if any
such request is received less than 90 days before the date fixed for the next
ensuing annual or special meeting of stockholders. Any action required to be
taken at a meeting of Holders may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders of a majority of the
outstanding shares of Series A Preferred Stock.
5. If any director so elected by the Holders of Series A Preferred
Stock shall cease to serve as a director before his term shall expire, the
Holders of Series A Preferred Stock then outstanding may, at a special
meeting of the Holders called as provided above, elect a successor to hold
office for the unexpired term of the director whose place shall be vacant.
6. The Company shall not, without the affirmative vote or consent
of the Holders of a majority of the shares of Series A Preferred Stock then
outstanding (with shares held by the Company or any of its Affiliates not
being considered to be outstanding for this purpose):
7. authorize, create (by way of reclassification or otherwise)
or issue any Parity Securities or any obligation or security convertible
into or evidencing the right to purchase any Parity Securities;
8. amend or otherwise alter its Certificate of Incorporation in
any manner that adversely affects the rights of Holders of Series A
Preferred Stock;
9. amend or otherwise alter this Certificate of Designation
(including the provisions of Section 5 hereof) in any manner; or
10. waive any existing Voting Rights Triggering Event, Increased
Dividend Triggering Event or compliance with any provision of this
Certificate of Designation.
11. Without the consent of each Holder affected, an amendment or
waiver of the Company's Certificate of Incorporation or of this Certificate
of Designation may not (with respect to any shares of Series A Preferred
Stock held by a non-consenting Holder):
12. alter the voting rights with respect to the Series A
Preferred Stock or reduce the number of shares of Series A Preferred Stock
whose Holders must consent to an amendment, supplement or waiver;
13. reduce the Liquidation Preference of or change the Mandatory
Redemption Date of any share of Series A Preferred Stock or alter the
provisions with respect to the redemption of the Series A Preferred Stock
(except as provided above with respect to Section 5 hereof);
6
14. reduce the rate of or change the time for payment of
dividends on any share of Series A Preferred Stock;
15. waive the consequences of any failure to pay dividends
on the Series A Preferred Stock;
16. make any share of Series A Preferred Stock payable in any
form other than that stated in this Certificate of Designation;
17. make any change in the provisions of this Certificate of
Designation relating to waivers of the rights of Holders of Series A
Preferred Stock to receive the Liquidation Preference and dividends on the
Series A Preferred Stock;
18. waive a redemption payment with respect to any share of
Series A Preferred Stock (except as provided above with respect to
Section 5 hereof); or
19. make any change in the foregoing amendment and waiver
provisions.
20. The Company shall not, without the consent of at least
two-thirds of the then outstanding shares of Series A Preferred Stock (with
shares held by the Company or its Affiliates not being considered to be
outstanding for this purpose), authorize, create (by way of reclassification
or otherwise) or issue any Senior Securities or any obligation or security
convertible into or evidencing a right to purchase any Senior Securities.
21. The Company in its sole discretion may without the vote or
consent of any Holders of the Series A Preferred Stock amend or supplement
this Certificate of Designation:
22. to cure any ambiguity, defect or inconsistency;
23. to provide for uncertificated Series A Preferred
Stock in addition to or in place of certificated Series A Preferred
Stock; or
24. to make any change that would provide any additional
rights or benefits to the Holders of the Series A Preferred Stock;
provided that any such amendment or supplement does not adversely affect the
legal rights under this Certificate of Designation of any Holder.
1. CHANGE OF CONTROL.
1. Upon the occurrence of a Change of Control, each Holder of
shares of Series A Preferred Stock shall have the right to require the
Company to repurchase all or any part (but not, in the case of any Holder
requiring the Company to purchase less than all of the shares of Series A
Preferred Stock held by such Holder, any fractional shares) of such Holder's
Series A Preferred Stock pursuant to the offer described below (the "CHANGE
OF CONTROL OFFER") at an offer price in cash equal to 101% of the aggregate
Liquidation Preference thereof plus accumulated and unpaid dividends, if any,
thereon to the date of purchase (the "CHANGE OF CONTROL PAYMENT").
2. The Change of Control Offer shall include all instructions and
materials necessary to enable Holders to tender their shares of Series A
Preferred Stock.
7
3. The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Series A Preferred Stock as a result of
a Change of Control.
4. Within 90 days following any Change of Control, the Company
shall send, by first-class mail, a notice to each Holder stating:
5. that the Change of Control Offer is being made pursuant to
this Section 5 and that all shares of Series A Preferred Stock tendered
will be accepted for payment;
6. the purchase price and the purchase date, which shall be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed (the "CHANGE OF CONTROL PAYMENT DATE");
7. that any share of Series A Preferred Stock not tendered will
continue to accumulate dividends;
8. that, unless the Company fails to pay the Change of Control
Payment, all shares of Series A Preferred Stock accepted for payment
pursuant to the Change of Control Offer shall cease to accumulate
dividends after the Change of Control Payment Date;
9. that Holders electing to have any shares of Series A
Preferred Stock purchased pursuant to a Change of Control Offer will be
required to surrender the shares of Series A Preferred Stock, with the
form entitled "OPTION OF HOLDER TO ELECT PURCHASE" which shall be
included with the Notice of Change of Control completed, to the Paying
Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control
Payment Date;
10. that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the
second 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 A Preferred Stock delivered
for purchase, and a statement that such Holder is withdrawing his election
to have such shares purchased; and
11. the circumstances and relevant facts regarding such Change of
Control (including, but not limited to, information with respect to PRO
FORMA historical financial information after giving effect to such Change
of Control and information regarding the Person or Persons acquiring
control).
12. On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment all shares of Series A Preferred
Stock or portions thereof properly tendered pursuant to the Change of Control
Offer, (ii) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all shares of Series A Preferred Stock or
portions thereof so tendered and (iii) deliver or cause to be delivered to
the Paying Agent the shares of Series A Preferred Stock so accepted together
with an Officers' Certificate stating the aggregate Liquidation Preference of
the shares of Series A Preferred Stock or portions thereof being purchased by
the Company. The Paying Agent shall promptly mail to each Holder of Series A
Preferred Stock so tendered the Change of Control Payment for such Series A
Preferred Stock, and the Transfer Agent shall promptly authenticate and mail
(or cause to be transferred by book entry) to each Holder a new certificate
representing the shares of Series A Preferred Stock equal in
8
Liquidation Preference amount to any unpurchased portion of the shares of
Series A Preferred Stock surrendered, if any. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
13. Prior to complying with the provisions of this Section 5, but
in any event within 90 days following a Change of Control, the Company shall
either repay all outstanding Indebtedness or obtain the requisite consents,
if any, under all agreements governing outstanding Indebtedness to permit the
repurchase of Series A Preferred Stock required by this Section 5.
14. The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 5 applicable to a Change of Control
Offer made by the Company and purchases all shares of Series A Preferred
Stock validly tendered and not withdrawn under such Change of Control Offer.
1. CERTAIN COVENANTS.
1. RESTRICTED PAYMENTS. The Company and its Restricted
Subsidiaries may not, directly or indirectly:
(i) declare or pay any dividend or make any distribution in
respect of any Equity Interests of the Company that are Junior Securities
or of any of its Subsidiaries other than dividends or distributions
payable (A) in Junior Securities of the Company that are not Disqualified
Capital Stock or (B) to the Company or any Subsidiary;
(ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company that are Junior Securities or of any
of its Subsidiaries or other Affiliates of the Company (other than any
such Equity Interests owned by the Company or any Subsidiary);
(iii) make any Investment (other than Permitted Investments);
each of the foregoing actions set forth in clauses (i), (ii) and (iii) above
being referred to as a "STOCK RESTRICTED PAYMENT," unless, at the time of
such Stock Restricted Payment:
(A) no Increased Dividend Triggering Event or Voting Rights
Triggering Event has occurred and is continuing or would occur as a
consequence thereof;
(B) the Company could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Incurrence of Additional Indebtedness and Issuance of Disqualified Capital
Stock" covenant of Section 6(b); and
(C) such Stock Restricted Payment, together with the aggregate of
all other Stock Restricted Payments made by the Company and its Subsidiaries
after the Issue Date (the amount expended for such purposes if other than in
cash, being the fair market value of such property as determined reasonably
and in good faith by the Board of Directors of the Company), is less than the
sum of: (w) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the
Company earned subsequent to the Issue Date and on or prior to the date the
Stock Restricted Payment occurs (the "REFERENCE DATE") (treating such period
as a single accounting period); plus (x) 100% of the aggregate net cash
proceeds received by the Company from any Person (other than a Subsidiary of
the
9
Company) from the issuance and sale subsequent to the Issue Date and on
or prior to the Reference Date of Qualified Capital Stock of the Company
(excluding net cash proceeds received from the sale of Capital Stock to
employees of the Company and any of its Subsidiaries after the Issue Date
to the extent such amounts have been applied in accordance with clause (3)
of the following paragraph); plus (y) without duplication of any amounts
included in clause (C) (x) above, 100% of the aggregate net cash proceeds
of any equity contribution received by the Company from a holder of the
Company's Capital Stock (excluding, in the case of clauses (C) (x) and
(y), any net cash proceeds from a Public Equity Offering to the extent
used to redeem the Notes or the Series A Preferred Stock); plus (z)
aggregate net cash proceeds received by the Company or any of its
Subsidiaries as a distribution or repayment with respect to, or from the
sale of, Investments (other than Permitted Investments) made after the
Issue Date up to the original amount of such Investments.
Notwithstanding the foregoing, the provisions set forth above in
the immediately preceding paragraph will not prohibit: (1) the payment of
any dividend within 60 days after the date of declaration thereof, if at such
date of declaration such payment would have complied with the provisions of
this Certificate of Designation; (2) so long as no Increased Dividend
Triggering Event or Voting Rights Triggering Event shall have occurred and be
continuing, the acquisition of any Junior Securities of the Company either
(i) solely in exchange for shares of Qualified Capital Stock of the Company,
or (ii) through the application of net proceeds of a substantially concurrent
sale for cash (other than to a Subsidiary of the Company) of shares of
Qualified Capital Stock of the Company; (3) so long as no Increased Dividend
Triggering Event or Voting Rights Triggering Event shall have occurred and be
continuing, repurchases by the Company of Capital Stock of the Company from
employees of the Company or any of its Subsidiaries or their authorized
representatives upon the death, disability or termination of employment of
such employees or pursuant to a written contract or plan, in an aggregate
amount not to exceed $1,000,000 in any calendar year plus an aggregate amount
of net cash proceeds received by the Company subsequent to the Issue Date
from the sale of Capital Stock to employees of the Company and any of its
Subsidiaries to the extent such proceeds have not been included in making the
calculation in clause (C) of the immediately preceding paragraph; (4) the
payment of cash dividends on the Series A Preferred Stock; and (5) the
repurchase of Series A Preferred Stock after a Change of Control. In
determining the aggregate amount of Stock Restricted Payments made subsequent
to the Issue Date in accordance with clause (C) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2), (3) and (4) shall
be included in such calculation.
The Board of Directors may designate any Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause an Increased
Dividend Triggering Event. For purposes of making such determination, all
outstanding Investments by the Company and its Subsidiaries (except to the
extent repaid in cash) in such Subsidiary so designated will be deemed to be
Stock Restricted Payments at the time of such designation and will reduce the
amount available for Stock Restricted Payments under the first paragraph of
this covenant. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the greatest of (x) the net book value of
such Investments at the time of such designation, (y) the fair market value
of such Investments at the time of such designation and (z) the original fair
market value of such Investments at the time they were made. Such designation
will only be permitted if such Stock Restricted Payment would be permitted at
such time.
2. INCURRENCE OF ADDITIONAL INDEBTEDNESS AND ISSUANCE OF
DISQUALIFIED CAPITAL STOCK. The Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume, guarantee, acquire, become liable, contingently or otherwise, with
respect to, or otherwise become responsible for payment of (collectively,
"INCUR") any Indebtedness (other than Permitted Indebtedness) or issue any
Disqualified Capital Stock; PROVIDED, HOWEVER, that if no Increased Dividend
10
Triggering Event or Voting Rights Triggering Event shall have occurred and be
continuing at the time of or as a consequence of the incurrence of any such
Indebtedness or the issuance of Disqualified Capital Stock, the Company may
incur Indebtedness (including, without limitation, Acquired Indebtedness) or
issue Disqualified Capital Stock and Restricted Subsidiaries of the Company
may incur Acquired Indebtedness, in each case if on the date of the
Incurrence of such Indebtedness, or the issuance of Disqualified Capital
Stock, after giving effect to the incurrence or issuance thereof, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0
to 1.0.
3. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Company may not
consolidate or merge with or into (whether or not the Company is the
surviving corporation), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or
more related transactions, to another corporation, Person or entity unless
(i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) if the Company is not the Surviving Corporation, the Series A
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 A
Preferred Stock had immediately prior to such transaction; (iii) immediately
after such transaction no Increased Dividend Triggering Event or Voting
Rights Triggering Event exists; and (iv) the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, at the time of such transaction
and after giving PRO FORMA effect thereto as if such transaction had occurred
at the beginning of the applicable four-quarter period, be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Consolidated Fixed
Charge Coverage Ratio set forth in the "Incurrence of Additional Indebtedness
and Issuance of Disqualified Capital Stock" covenant of Section 6(b).
4. TRANSACTIONS WITH AFFILIATES.
(1) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with, or for the benefit of, any of its Affiliates
(each an "AFFILIATE TRANSACTION"), other than (x) Affiliate Transactions
permitted under paragraph (2) below and (y) Affiliate Transactions on terms
that are no less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arm's-length basis
from a Person that is not an Affiliate of the Company or such Restricted
Subsidiary. All Affiliate Transactions (and each series of related Affiliate
Transactions which are similar or part of a common plan) involving aggregate
payments or other property with a fair market value in excess of $1,000,000
shall be approved by the Board of Directors of the Company or such Restricted
Subsidiary, as the case may be, such approval to be evidenced by a Board
Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary of the Company enters into an Affiliate Transaction (or
a series of related Affiliate Transactions related to a common plan) that
involves an aggregate fair market value of more than $5,000,000, the Company
or such Restricted Subsidiary, as the case may be, shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view,
from an Independent Financial Advisor and file
11
the same with the Board of Directors.
(2) The restrictions set forth in clause (1) above shall not apply
to (i) reasonable fees and compensation paid to and indemnity provided on
behalf of, officers, directors, employees or consultants of the Company or
any Restricted Subsidiary of the Company (including customary provisions
contained in employment agreements with executive officers of the Company) as
determined in good faith by the Company's Board of Directors or senior
management; (ii) transactions exclusively between or among the Company and
any of its Wholly Owned Restricted Subsidiaries or exclusively between or
among such Wholly Owned Restricted Subsidiaries, provided such transactions
are not otherwise prohibited by this Certificate of Designation; (iii) any
agreement as in effect as of the Issue Date or any amendment thereto or any
transaction contemplated thereby (including pursuant to any amendment
thereto) in any replacement agreement thereto so long as any such amendment
or replacement agreement is not more disadvantageous to the holders of Series
A Preferred Stock in any material respect than the original agreement as in
effect on the Issue Date; (iv) Stock Restricted Payments permitted by this
Certificate of Designation; (v) the payments by the Company under that
certain lease of its Richmond, California facility between the Company and M.
F. Vukelich Co. dated as of December 1, 1995, as amended on December 13,
1995; and (vi) the payments by the Company under that certain residential
lease rental agreement and deposit receipt between the Company and Michael F.
Vukelich, as guardian of Trisha Vukelich, dated as of December 13, 1995.
5. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit
to exist or become effective any encumbrance or restriction on the ability of
any Restricted Subsidiary of the Company to (a) pay dividends or make any
other distributions on or in respect of its Capital Stock; (b) make loans or
advances or to pay any Indebtedness or other obligation owed to the Company
or any other Restricted Subsidiary of the Company; or (c) transfer any of its
property or assets to the Company or any other Restricted Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) this Certificate of Designation; (3)
customary non-assignment provisions of any contract or any lease governing a
leasehold interest of any Restricted Subsidiary of the Company; (4) any
instrument governing Acquired Indebtedness, which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person or the properties or assets of the Person so acquired;
(5) agreements existing on the Issue Date to the extent and in the manner
such agreements are in effect on the Issue Date; (6) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued, assumed or
incurred pursuant to an agreement referred to in clause (4) or (5) above;
PROVIDED, HOWEVER, that the provisions relating to such encumbrance or
restriction contained in any such Indebtedness are no less favorable to the
Company in any material respect as determined by the Board of Directors of
the Company in their reasonable and good faith judgment than the provisions
relating to such encumbrance or restriction contained in agreements referred
to in such clause (4) or (5); (7) Indebtedness or other contractual
requirements of a Receivables Subsidiary in connection with a Qualified
Receivables Transaction, provided that such restrictions apply only to such
Receivables Subsidiary; or (8) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (c) above on the property so acquired.
6. LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The
Company will not permit any of its Restricted Subsidiaries to issue any
Preferred Stock (other than to the Company or to a Wholly Owned Restricted
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock
of any Restricted Subsidiary of the Company.
12
7. REPORTS.
8. The Company will mail to holders of Series A
Preferred Stock within 15 days after it files them with the
Commission copies of the annual and quarterly reports and the
information, documents, and other reports that the Company is
required to file with the Commission pursuant to Section 13(a)
or 15(d) of the Exchange Act ("SEC REPORTS"). In the event
the Company is not required or shall cease to be required to
file SEC Reports, pursuant to the Exchange Act, the Company
will nevertheless continue to file such reports with the
Commission (unless the Commission will not accept such a
filing). In the event the Company is not required or shall
cease to be required to file SEC Reports and the Commission
will not accept the filing of SEC Reports, so long as any
Series A Preferred Stock are outstanding, the Company will
furnish copies of such SEC Reports to the holders of Series A
Preferred Stock at the time the Company is required to make
such information available to investors who request it in
writing.
9. The Company shall deliver to the Holders, within 90
days after the end of each fiscal year, an Officers'
Certificate stating that a review of the activities of the
Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing officers
with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this
Certificate of Designation and further stating, as to each
such officer signing such certificate, that to the best of his
or her knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this
Certificate of Designation and is not in default in the
performance or observance of any of the terms, provisions and
conditions of this Certificate of Designation (or, if any such
default shall have occurred, describing all such defaults of
which he or she may have knowledge and what action the Company
is taking or proposes to take with respect thereto) and that
to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of
the Liquidation Preference of or dividends, if any, on the
Series A Preferred Stock is prohibited or if such event has
occurred, a description of the event and what action the
Company is taking or proposes to take with respect thereto.
10. The Company shall, so long as any of the shares of
Series A Preferred Stock are outstanding, deliver to the
Holders, forthwith upon any Executive Officer of the Company
becoming aware of any default under this Certificate of
Designation, an Officers' Certificate specifying such default
and what action the Company is taking or proposes to take with
respect thereto.
11. CONFLICTS WITH BY-LAWS. If any provisions of the
Company's By-laws conflict in any way with this Certificate of
Designation, the Company shall, so long as any of the shares
of Series A Preferred Stock are outstanding, take all
necessary actions to amend such By-laws and thereby resolve
the conflict.
1. PAYMENT.
1. All amounts payable in cash with respect to the Series A
Preferred Stock shall be payable in United States dollars at the office or
agency of the Company maintained for such purpose within the City and State
of New York or, at the option of the Company, payment of dividends (if any)
may be made by check mailed to the Holders of the Series A Preferred Stock at
their respective addresses set forth in the register of Holders of Series A
Preferred Stock maintained by the Transfer Agent, PROVIDED that all cash
payments with respect to the Global Shares (as defined below) and shares of
Series A Preferred Stock the Holders of which have given wire transfer
instructions to the Company shall be required to be made by
13
wire transfer of immediately available funds to the accounts specified by the
Holders thereof.
2. Any payment on the Series A Preferred Stock due on any day that
is not a Business Day need not be made on such day, but may be made on the
next succeeding Business Day with the same force and effect as if made on
such due date.
3. The Company has initially appointed the Transfer Agent to act as
the "PAYING AGENT." The Company may at any time terminate the appointment of
any Paying Agent and appoint additional or other Paying Agents, PROVIDED that
until the Series A Preferred Stock has been delivered to the Company for
cancellation, or moneys sufficient to pay the Liquidation Preference and
accumulated dividends on the Series A Preferred Stock have been made
available for payment and either paid or returned to the Company as provided
in this Certificate of Designation, it shall maintain an office or agency in
the Borough of Manhattan, The City of New York.
4. Dividends payable on the Series A Preferred Stock on any
redemption date or repurchase date that is a Dividend Payment Date shall be
paid to the Holders of record as of the immediately preceding Record Date.
5. All moneys and shares of Series A Preferred Stock deposited with
any Paying Agent or then held by the Company in trust for the payment of the
Liquidation Preference and dividends on any shares of Series A Preferred
Stock which remain unclaimed at the end of two years after such payment has
become due and payable shall be repaid to the Company, and the Holder of such
shares of Series A Preferred Stock shall thereafter look only to the Company
for payment thereof.
1. OFFICERS' CERTIFICATE.
Each Officers' Certificate provided for in this Certificate of
Designation shall include:
1. a statement that the officer making such certificate or opinion
has read such covenant or condition;
2. a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
3. a statement that, in the opinion of such officer, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
4. a statement as to whether or not, in the opinion of such officer,
such condition or covenant has been satisfied.
1. EXCLUSION OF OTHER RIGHTS.
Except as may otherwise be required by law, the shares of Series A
Preferred Stock shall not have any voting powers, preferences and relative,
participating, optional or other special rights, other than those
specifically set forth in this Certificate of Designation (as such
Certificate of Designation may be amended from time to time) and in the
Certificate of Incorporation. The shares of Series A Preferred Stock shall
have no preemptive or subscription rights.
2. HEADINGS OF SUBDIVISIONS.
14
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the
provisions hereof.
3. SEVERABILITY OF PROVISIONS.
If any voting powers, preferences and relative, participating, optional
and other special rights of the Series A Preferred Stock and qualifications,
limitations and restrictions thereof set forth in this Certificate of
Designation (as it may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule of law or public policy,
all other voting powers, preferences and relative, participating, optional
and other special rights of Series A Preferred Stock and qualifications,
limitations and restrictions thereof set forth in this Certificate of
Designation (as so amended) which can be given effect without the invalid,
unlawful or unenforceable voting powers, preferences and relative,
participating, optional and other special rights of Series A Preferred Stock
and qualifications, limitations and restrictions thereof shall, nevertheless,
remain in full force and effect, and no voting powers, preferences and
relative, participating, optional or other special rights of Series A
Preferred Stock and qualifications, limitations and restrictions thereof
herein set forth shall be deemed dependent upon any other such voting powers,
preferences and relative, participating, optional or other special rights of
Series A Preferred Stock and qualifications, limitations and restrictions
thereof unless so expressed herein.
4. FORM OF SECURITIES.
1. The series a Preferred Stock shall initially be issued in the form
of one or more Global Preferred Shares (the "GLOBAL SHARES"). The Global
Shares shall be deposited on the Closing Date with, or on behalf of, The
Depository Trust Company (the "DEPOSITARY") and registered in the name of
Cede & Co., as nominee of the Depositary (such nominee being referred to as
the "GLOBAL SHARE HOLDER").
2. So long as the Global Share Holder is the registered owner of any
Series A Preferred Stock, the Global Share Holder will be considered the sole
Holder under this Certificate of Designation of any shares of Series A
Preferred Stock evidenced by the Global Shares. Beneficial owners of Shares
of Series A Preferred Stock evidenced by the Global Shares shall not be
considered the owners or Holders thereof under this Certificate of
Designation for any purpose. The Company shall not have any responsibility or
liability for any aspect of the records of the depositary relating to the
Series A Preferred Stock.
3. Payments in respect of the Liquidation Preference, dividends on any
Series A Preferred Stock registered in the name of the Global Share Holder on
the applicable record date shall be payable by the Company to or at the
direction of the Global Share Holder in its capacity as the registered Holder
under this Certificate of Designation. The Company may treat the persons in
whose names Series A Preferred Stock, including the Global Shares, are
registered as the owners thereof for the purpose of receiving such payments.
The Company does not and will not have any responsibility or liability for
the payments of such amounts to beneficial holders of Series A Preferred
Stock.
4. Any person having a beneficial interest in a Global Share may, upon
request to the Company, exchange such beneficial interest for Series A
Preferred Stock in the form of registered definitive certificates
("CERTIFICATED SECURITIES"). Upon any such issuance, the Company shall
register such Certificated Securities in the name of, and cause the same to
be delivered to, such person or persons (or the nominee of any thereof). If
(i) the Company notifies the Holders in writing that the Depository is no
longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its
option, notifies the Holders in writing that it elects to cause the issuance
of Series A Preferred Stock in the form of Certificated Securities, then,
upon surrender by the Global Share
15
Holder of its Global Shares, Series A Preferred Stock in such form will be
issued to each person that the Global Share Holder and the Depositary
identify as being the beneficial owner of the related Series A Preferred
Stock. If the Company elects to pay dividends on the Series A Preferred
Stock by issuing additional Series A Preferred Stock, fractional shares, if
any, issued in connection with any such dividend payment may be issued to
holders of Series A Preferred Stock as Certificated Securities.
1. CERTAIN DEFINITIONS.
Unless the context otherwise requires, the terms defined in this
Section 13 shall have, for all purposes of this resolution, the meanings
herein specified (with terms defined in the singular having comparable
meanings when used in the plural).
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of the Company or at the time it merges or consolidates with the Company or
any of its Restricted Subsidiaries or assumed in connection with the
acquisition of assets from such Person and in each case not incurred by such
Person in connection with, or in anticipation or contemplation of, such
Person becoming a Restricted Subsidiary of the Company or such acquisition,
merger or consolidation.
"AFFILIATE" means, with respect to any specified Person, any other
Person who directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such
specified Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing.
"APPLICABLE REDEMPTION PRICE" means a price per Share equal to the
following redemption prices specified below (expressed as percentages of the
Liquidation Preference thereof), in each case, together with accumulated and
unpaid dividends, if any, to the date of redemption if redeemed during the
12-month period commencing on _________ of each of the years set forth below:
Redemption
Year Rate
----- ------------
2002 . . . . . . . . . . . . %
2003 . . . . . . . . . . . . %
2004 . . . . . . . . . . . . %
2005 . . . . . . . . . . . . %
2006 and thereafter 100.00%
"ASSET ACQUISITION" means (a) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which
such Person shall become a Restricted Subsidiary of the Company or of any
Restricted Subsidiary of the Company, or shall be merged with or into the
Company or any Restricted Subsidiary of the Company, or (b) the acquisition
by the Company or any Restricted Subsidiary of the Company of the assets of
any Person (other than a Restricted Subsidiary of the Company) which
constitute all or substantially all of the assets of such Person or comprises
any division or line of business of such Person or any other properties or
assets of such Person other than in the ordinary course of business.
"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer
16
for value by the Company or any of its Restricted Subsidiaries (including any
Sale and Leaseback Transaction) to any Person other than the Company or a
Wholly Owned Restricted Subsidiary of the Company of (a) any Capital Stock of
any Restricted Subsidiary of the Company; or (b) any other property or assets
of the Company or any Restricted Subsidiary of the Company other than in the
ordinary course of business; PROVIDED, HOWEVER, that Asset Sales shall not
include (i) a transaction or series of related transactions for which the
Company or its Restricted Subsidiaries receive aggregate consideration of
less than $500,000; (ii) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company as
permitted under "Merger, Consolidation and Sale of Assets;" (iii) sales of
accounts receivable and related assets of the type specified in the
definition of "Qualified Receivables Transaction" to a Receivables Subsidiary
in connection with a Qualified Receivables Transaction; and (iv) sales of
Permitted Investments.
"BOARD OF DIRECTORS" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such
Person to have been duly adopted by the Board of Directors of such Person and
to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the
capitalized amount of such obligations at such date, determined in accordance
with GAAP.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other
equivalents (however designated and whether or not voting) of corporate
stock, including each class of Common Stock and Preferred Stock of such
Person and (ii) with respect to any Person that is not a corporation, any and
all partnership or other equity interests of such Person.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation ("S&P")
or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper
maturing no more than one year from the date of creation thereof and, at the
time of acquisition, having a rating of at least A-1 from S&P or at least P-1
from Moody's; (iv) certificates of deposit or bankers' acceptances maturing
within one year from the date of acquisition thereof issued by any bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at
the date of acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications
17
specified in clause (iv) above; and (vi) investments in money market funds
which invest substantially all their assets in securities of the types
described in clauses (i) through (v) above.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all
of the assets of the Company to any Person or group of related Persons for
purposes of Section 13(d) of the Exchange Act (a "GROUP"), together with any
Affiliates thereof (whether or not otherwise in compliance with the
provisions of the Indenture); (ii) the approval by the holders of Capital
Stock of the Company of any plan or proposal for the liquidation or
dissolution of the Company (whether or not otherwise in compliance with the
provisions of the Indenture); (iii) any Person or Group (other than the
Permitted Holder(s)) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing more than 50% of the
aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of the Company; or (iv) the replacement of a majority of the
Board of Directors of the Company over a two-year period from the directors
who constituted the Board of Directors of the Company at the beginning of
such period, and such replacement shall not have been approved by a vote of
at least a majority of the Board of Directors of the Company then still in
office who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors was
previously so approved.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and
whether voting or non-voting) of such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all Series And classes of such common stock.
"CONSOLIDATED EBITDA" means, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii)
to the extent Consolidated Net Income has been reduced thereby, (A) all
income taxes of such Person and its Restricted Subsidiaries paid or accrued
in accordance with GAAP for such period (other than income taxes attributable
to extraordinary, unusual or nonrecurring gains or losses or taxes
attributable to sales or dispositions outside the ordinary course of
business), (B) Consolidated Interest Expense, (C) Consolidated Non-cash
Charges LESS any non-cash items increasing Consolidated Net Income for such
period, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP, (D) any expenses or charges
related to the termination of the Fee Agreement and (E) any write-off of
deferred financing costs in connection with the refinancing of the Company's
credit agreement in existence prior to the Credit Agreement and any
refinancings of the Credit Agreement.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "FOUR QUARTER PERIOD") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "TRANSACTION DATE") to Consolidated Fixed Charges
of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "CONSOLIDATED FIXED CHARGES" shall be calculated after giving
effect on a PRO FORMA basis for the period of such calculation to (i) the
incurrence or repayment of any Indebtedness of such Person or any of its
Restricted Subsidiaries (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), other than
the incurrence or repayment of Indebtedness in the ordinary course of
business for working capital purposes pursuant to working capital facilities,
occurring during the Four Quarter Period or at any time subsequent
18
to the last day of the Four Quarter Period and on or prior to the Transaction
Date, as if such incurrence or repayment, as the case may be (and the
application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make
such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being
liable for Acquired Indebtedness and also including any Consolidated EBITDA
(provided that such Consolidated EBITDA shall be included only to the extent
includable pursuant to the definition of "Consolidated Net Income")
attributable to the assets which are the subject of the Asset Acquisition or
Asset Sale during the Four Quarter Period) occurring during the Four Quarter
Period or at any time subsequent to the last day of the Four Quarter Period
and on or prior to the Transaction Date, as if such Asset Sale or Asset
Acquisition (including the incurrence, assumption or liability for any such
Acquired Indebtedness) occurred on the first day of the Four Quarter Period.
If such Person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall give
(without duplication) effect to the incurrence of such guaranteed
Indebtedness as if such Person or any Restricted Subsidiary of such Person
had directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "CONSOLIDATED FIXED CHARGES" for purposes of
determining the denominator (but not the numerator) of this "CONSOLIDATED
FIXED CHARGE COVERAGE RATIO," (1) interest on outstanding Indebtedness
determined on a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to have accrued at a
fixed rate per annum equal to the rate of interest on such Indebtedness in
effect on the Transaction Date; (2) if interest on any Indebtedness actually
incurred on the Transaction Date may optionally be determined at an interest
rate based upon a factor of a prime or similar rate, a eurocurrency interbank
offered rate, or other rates, then the interest rate in effect on the
Transaction Date will be deemed to have been in effect during the Four
Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest
is covered by agreements relating to Interest Swap Obligations, shall be
deemed to accrue at the rate per annum resulting after giving effect to the
operation of the operation of such agreements.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for any
period, the sum ( without duplication) of (i) Consolidated Interest Expense,
plus (ii) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of such Person (other than dividends paid in
Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued
during such period times (y) a fraction, the numerator of which is one and
the denominator of which is one minus the then current effective consolidated
federal, state and local tax rate of such Person, expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, the sum of (without duplication): (i) the aggregate of the
interest expense of such Person and its Restricted Subsidiaries of such
period determined on a consolidated basis in accordance with GAAP, including
without limitation, (a) any amortization of debt discount and amortization or
write-off of deferred financing costs (excluding any write-off of deferred
financing costs in connection with the refinancing of the Company's credit
agreement in existence prior to the Credit Agreement or any refinancing of
the Credit Agreement), (b) the net costs under Interest Swap Obligations, (c)
all capitalized interest and (d) the interest portion of any deferred payment
obligation; and (ii) the interest component of Capitalized Lease Obligations
paid, accrued and/or scheduled to be paid or accrued by such Person and its
Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; PROVIDED that there shall be excluded
19
therefrom (a) after-tax gains from Asset Sales or abandonments or reserves
relating thereto, (b) after-tax items classified as extraordinary or
nonrecurring gains, (c) the net income of any Person acquired in a "pooling
of interests" transaction accrued prior to the date it becomes a Restricted
Subsidiary of the referent Person or is merged or consolidated with the
referent Person or any Restricted Subsidiary of the referent Person, (d) the
net income (but not loss) of any Restricted Subsidiary of the referent Person
to the extent that the declaration of dividends or similar distributions by
that Restricted Subsidiary of that income is restricted by a contract,
operation of law or otherwise, (e) the net income of any Person, other than a
Restricted Subsidiary of the referent Person, except to the extent of cash
dividends or distributions paid to the referent Person or to a Wholly Owned
Restricted Subsidiary of the referent Person by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed
of during such period whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets,
any earnings of the successor corporation prior to such consolidation, merger
or transfer of assets.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for
any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Restricted Subsidiaries reducing Consolidated
Net Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any
such charges constituting an extraordinary item or loss or any such charge
which requires an accrual of or a reserve for cash charges for any future
period).
"CREDIT AGENT" means, at any time, the then-acting Administrative
Agent as defined in and under the Credit Agreement, which initially shall be
Credit Agricole Indosuez. The Company shall promptly notify the Trustee of
any change in the Credit Agent.
"CREDIT AGREEMENT" means the Second Amended and Restated Credit
Agreement dated as of __________, 1997, between the Company, the lenders
party thereto in their capacities as lenders thereunder and Credit Agricole
Indosuez, as agent, together with the related documents thereto (including,
without limitation, any guarantee agreements and security documents), in each
case as such agreements may be amended (including any amendment and
restatement thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including increasing the amount of available
borrowings thereunder (PROVIDED that such increase in borrowings is Permitted
Indebtedness or is permitted by the "Incurrence of Additional Indebtedness
and Issuance of Disqualified Capital Stock" covenant of Section 6(b)) or
adding Restricted Subsidiaries of the Company as additional guarantors
thereunder) all or any portion of the Indebtedness under such agreement or
any successor or replacement agreement and whether by the same or any other
agent, lender or group of lenders.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, other than in connection with a
Change of Control, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the sole option of the holder thereof on or prior to the date
of redemption for the Series A Preferred Stock as set forth in this
20
Certificate of Designation.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock or that are measured by the value of
Capital Stock (but excluding any debt security that is convertible into or
exchangeable for Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto.
"FAIR MARKET VALUE" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
market value shall be determined by the Board of Directors of the Company
acting reasonably and in good faith and shall be evidenced by a Board
Resolution of the Board of Directors of the Company delivered to the Trustee.
"FEE AGREEMENT" means that certain fee agreement between the Company
and Kohlberg & Company, LLC dated as of December 31, 1996, as amended.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession of the United States, which are in effect as of
the Issue Date.
"HOLDER" means the record holder of one or more Shares of Series A
Preferred Stock, as shown on the books and records of the Transfer Agent.
"INDEBTEDNESS" means with respect to any Person, without duplication,
(i) all Obligations of such Person for borrowed money, (ii) all Obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all
Obligations of such Person issued or assumed as the deferred purchase price
of property, all conditional sale obligations and all Obligations under any
title retention agreement (but excluding trade accounts payable and other
accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days or more or are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and
excluding long-term, deferred purchase price obligations for trees, PROVIDED
that such obligations for trees are not recorded as liabilities on such
Person's balance sheet in accordance with GAAP), (v) all Obligations for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (vi) guarantees and other contingent obligations
in respect of Indebtedness referred to in clauses (i) through (v) above and
clause (viii) below, (vii) all Obligations of any other Person of the type
referred to in clauses (i) through (vi) which are secured by any lien on any
property or asset of such Person, the amount of such Obligation being deemed
to be the lesser of the fair market value of such property or asset or the
amount of the Obligation so secured, (viii) all Obligations under Currency
Agreements and Interest Swap Obligations of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to
the greater of its voluntary or involuntary liquidation preference and its
maximum fixed repurchase price, but excluding accrued dividends, if any. For
purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as
if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to
21
be determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such
fair market value shall be determined reasonably and in good faith by the
Board of Directors of the issuer of such Disqualified Capital Stock.
"INDENTURE" means that certain indenture between the Company and U.S.
Trust Company of California, N.A. dated as of December __, 1997, as amended
or supplemented from time to time.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) which does not, and
whose directors, officers and employees or Affiliates do not, have a direct
or indirect financial interest in the Company (other than an interest in less
than 5% of the Company's Common Stock after such time as the Company's Common
Stock is publicly traded) and (ii) which, in the judgment of the Board of
Directors of the Company, is otherwise independent and qualified to perform
the task for which it is to be engaged.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
on a stated notional amount in exchange for periodic payments made by such
other Person calculated by applying a fixed or a floating rate of interest on
the same notional amount and shall include, without limitation, interest rate
swaps, caps, floors, collars and similar agreements.
"INVESTMENT" means, with respect to any Person, any direct or indirect
loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition by such Person of
any Capital Stock, bonds, notes, debentures or other securities or evidences
of Indebtedness issued by, any Person. "Investment" shall exclude extensions
of trade credit by the Company and its Restricted Subsidiaries on
commercially reasonable terms in accordance with normal trade practices of
the Company or such Restricted Subsidiary, as the case may be. For the
purposes of the "Restricted Payments" covenant, (i) "Investment" shall
include and be valued at the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is
designated as an Unrestricted Subsidiary and shall exclude the fair market
value of the net assets of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated as a Restricted Subsidiary and (ii) the
amount of any Investment shall be the original cost of such Investment plus
the cost of all additional Investments by the Company or any of its
Restricted Subsidiaries, without any adjustments for increases or decreases
in value, or write-ups, write-downs or write-offs with respect to such
Investment, reduced by the payment of dividends or distributions in
connection with such Investment or any other amounts received in respect of
such Investment; PROVIDED that no such payment of dividends or distributions
or receipt of any such other amounts shall reduce the amount of any
Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If the Company or
any Restricted Subsidiary of the Company sells or otherwise disposes of any
Common Stock of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, the Company
no longer owns, directly or indirectly, 100% of the outstanding Common Stock
of such Restricted Subsidiary, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair
market value of the Common Stock of such Restricted Subsidiary not sold or
disposed of.
"ISSUE DATE" means the date of original issuance of the Series A
Preferred Stock.
"LEGAL HOLIDAY" means a Saturday or Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized
by law, regulation or executive order to
22
remain closed.
"LIEN" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof and any
agreement to give any security interest).
"LIQUIDATION PREFERENCE" means $1,000 per share of Series A Preferred
Stock.
"NOTES" means the Company's ___% Senior Subordinated Notes due 2007.
"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the
Company by two officers of the Company, one of whom must be the principal
executive officer, the principal financial officer or the principal
accounting officer of the Company that meets the requirements of Section 9.
"PARITY SECURITIES" means any class or series of Capital Stock of the
Company ranking on a parity with the Series A Preferred Stock.
"PERMITTED HOLDER(S)" means KCSN Acquisition Company, L.P. and its
Affiliates, Kohlberg & Company, LLC and its Affiliates, and Michael F.
Vukelich and his Affiliates.
"PERMITTED INDEBTEDNESS" means, without duplication, each of the
following:
1) Indebtedness under the Notes and the Indenture;
2) Indebtedness incurred pursuant to the Credit Agreement in
an aggregate principal amount at any time outstanding not
to exceed $150.0 million, less the amount of all
mandatory principal payments actually made by the Company
in respect of the Term Loan Facility (excluding any such
payments to the extent refinanced at the time of payment
under a replaced Credit Agreement), PROVIDED that (1) not
more than $110.0 million of borrowings under the Credit
Agreement are used to make Asset Acquisitions and (2) not
more than $90.0 million of borrowings under the Credit
Agreement are used for any other purpose;
3) other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date reduced by the
amount of any scheduled amortization payments or
mandatory prepayments when actually paid or permanent
reductions thereon;
4) Interest Swap Obligations of the Company covering
Indebtedness of the Company or any of its Restricted
Subsidiaries and Interest Swap Obligations of any
Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; PROVIDED,
HOWEVER, that such Interest Swap Obligations are entered
into to protect the Company and its Restricted
Subsidiaries from fluctuations in interest rates on
Indebtedness incurred in accordance with the Indenture to
the extent the notional principal amount of such Interest
Swap Obligation does not exceed the principal amount of
the Indebtedness to which such Interest Swap Obligation
relates;
5) Indebtedness under Currency Agreements; PROVIDED that in
the case of Currency Agreements which relate to
Indebtedness, such Currency Agreements do not increase
the Indebtedness of the
23
Company and its Restricted Subsidiaries outstanding other than as a
result of fluctuations in foreign currency exchange rates or by reason of
fees, indemnities and compensation payable thereunder;
6) Indebtedness of a Wholly Owned Restricted Subsidiary of the Company to the
Company or to a Wholly Owned Restricted Subsidiary of the Company for so
long as such Indebtedness is held by the Company or a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Lien held
by a Person other than the Company or a Wholly Owned Restricted Subsidiary
of the Company (other than the Lien of the Credit Agent under the Credit
Agreement); PROVIDED that if as of any date any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company owns or
holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;
7) Indebtedness of the Company to a Wholly Owned Restricted Subsidiary of the
Company for so long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Lien;
PROVIDED that (a) any Indebtedness of the Company to any Wholly Owned
Restricted Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and (b) if as of any date any Person other than a
Wholly Owned Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
8) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except
in the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; PROVIDED, HOWEVER, that such Indebtedness is
extinguished within two business days of incurrence;
9) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with self-
insurance or similar requirements in the ordinary course of business;
10) Refinancing Indebtedness;
11) Indebtedness incurred in a Qualified Receivables Transaction that is
without recourse to the Company or to any Restricted Subsidiary of the
Company or their assets (other than a Receivables Subsidiary and its
assets); and
12) additional Indebtedness of the Company and its Restricted Subsidiaries in
an aggregate principal amount not to exceed $25,000,000 at any one time
outstanding.
"PERMITTED INVESTMENTS" means (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company; (ii) Investments in the Company by any
Restricted Subsidiary of the Company; (iii) investments in cash and Cash
Equivalents; (iv) loans and advances to employees and officers of the Company
and its Restricted Subsidiaries in the ordinary
24
course of business for bona fide business purposes not in excess of
$2,000,000 at any one time outstanding; (v) Currency Agreements and Interest
Swap Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with the
Indenture; (vi) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of such trade creditors or customers; (vii)
Investments made by the Company or its Restricted Subsidiaries as a result of
consideration received in connection with an Asset Sale; (viii) Investment by
the Company or a Wholly Owned Restricted Subsidiary of the Company in a
Receivables Subsidiary or any Investment by a Receivables Subsidiary in any
other Person in connection with a Qualified Receivables Transaction; (ix)
notes received from management as payment for purchases of Capital Stock; and
(x) additional Investments by the Company or any Restricted Subsidiary of the
Company in an aggregate amount, based on original cost, not to exceed
$1,000,000 at any one time outstanding.
"PERSON" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, limited liability company or a
governmental agency or political subdivision thereof.
"PREFERRED STOCK" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"PUBLIC EQUITY OFFERING" means an underwritten public offering of
Qualified Capital Stock of the Company sold by the Company after the Issue
Date pursuant to a registration statement filed with the Commission in
accordance with the Securities Act.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not
Disqualified Capital Stock.
"QUALIFIED RECEIVABLES TRANSACTION" means any transaction or series of
transactions that may be entered into by the Company or any of its Restricted
Subsidiaries pursuant to which the Company or any of its Restricted
Subsidiaries may sell, convey or otherwise transfer to (i) a Receivables
Subsidiary (in the case of a transfer by the Company or any of its Restricted
Subsidiaries) and (ii) any other Person (in the case of a transfer by a
Receivables Subsidiary), or may grant a security interest in, any accounts
receivable (whether now existing or arising in the future) of the Company or
any of its Restricted Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"RECEIVABLES SUBSIDIARY" means a Wholly Owned Restricted Subsidiary
of the Company that engages in no activities other than in connection with
the financing of accounts receivable and that is designated by the Board of
Directors of the Company (as provided below) as a Receivables Subsidiary (a)
which has no Indebtedness or any other Obligations (contingent or otherwise)
which (i) is guaranteed by the Company or any other Restricted Subsidiary of
the Company (excluding guarantees of Obligations (other than the principal
of, and interest on, Indebtedness) pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction), (ii) is recourse to or
obligates the Company or any other Restricted Subsidiary of the Company in
any way other than pursuant to representations, warranties, covenants and
indemnities entered into in the ordinary course of business in connection
with a Qualified Receivables
25
Transaction or (iii) subjects any property or asset of the Company or any
other Restricted Subsidiary of the Company, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than pursuant
to representations, warranties, covenants and indemnities entered into in the
ordinary course of business in connection with a Qualified Receivables
Transaction, (b) with which neither the Company nor any other Restricted
Subsidiary of the Company has any material contract, agreement, arrangement
or understanding other than on terms no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company, other than fees payable in the
ordinary course of business in connection with servicing accounts receivable
and (c) with which neither the Company nor any other Restricted Subsidiary of
the Company has any obligation to maintain or preserve such Restricted
Subsidiary's financial condition or cause such Restricted Subsidiary to
achieve certain levels of operating results. Any such designation by the
Board of Directors of the Company shall be evidenced to the Transfer Agent by
filing with the Transfer Agent a Board Resolution of the Board of Directors
of the Company giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"REFINANCE" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, pre-pay, redeem, defease or retire,
or to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or
any Restricted Subsidiary of the Company of Indebtedness incurred in
accordance with the "Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock" covenant of Section 6(b) (other than pursuant to
clause (ii), (iv), (v), (vi), (vii), (viii), (ix), (xi) or (xii) of the
definition of Permitted Indebtedness), in each case that does not (1) result
in an increase in the aggregate principal amount of Indebtedness of such
Person as of the date of such proposed Refinancing (plus the amount of any
premium required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the
Company in connection with such Refinancing) or (2) create Indebtedness with
(A) a Weighted Average Life to Maturity that is less than the Weighted
Average Life to Maturity of the Indebtedness being Refinanced or (B) a final
maturity earlier than the final maturity of the Indebtedness being
Refinanced.
"RESTRICTED SUBSIDIARY" of any Person means any Subsidiary of such
Person which is not an Unrestricted Subsidiary.
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Restricted Subsidiary of any property,
whether owned by the Company or any Restricted Subsidiary at the Issue Date
or later acquired, which has been or is to be sold or transferred by the
Company or such Restricted Subsidiary to such Person or to any other Person
from whom funds have been or are to be advanced by such Person on the
security of such Property.
"SENIOR SECURITIES" means any class or series of Capital Stock of
the Company ranking senior to the Series A Preferred Stock with respect to
dividends or upon liquidation.
"SUBSIDIARY," with respect to any Person, means (i) any corporation
of which the outstanding Capital Stock having at least a majority of the
votes entitled to be cast in the election of directors under ordinary
circumstances shall at the time be owned, directly or indirectly, by such
Person or (ii) any other Person of which at least a majority of the voting
interest under ordinary circumstances is at the time, directly or indirectly,
owned by such Person.
26
"TERM LOAN FACILITY" means one or more term loan facilities under
the Credit Agreement.
"TRANSFER AGENT" means the entity designated from time to time by
the Company to act as the registrar and transfer agent for the Series A
Preferred Stock.
"TRUSTEE" means U.S. Trust Company of California, N.A.
"UNRESTRICTED SUBSIDIARY" of any Person means (i) any Subsidiary of
such Person that at the time of determination shall be or continue to be
designated an Unrestricted Subsidiary by the Board of Directors of such
Person in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; PROVIDED that (x) the Company certifies to the Transfer Agent
that the Company's investment in such Unrestricted Subsidiary is a Permitted
Investment or that such designation complies with the "Restricted Payments"
covenant and (y) each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the
lender has recourse to any of the assets of the Company or any of its
Restricted Subsidiaries. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately
after giving effect to such designation, the Company is able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Incurrence of Additional Indebtedness and Issuance of
Disqualified Capital Stock" covenant of Section 6(b) and (y) immediately
before and immediately after giving effect to such designation, no Default or
Event of Default shall have occurred and be continuing. Any such designation
by the Board of Directors shall be evidenced to the Trustee by promptly
filing with the Transfer Agent a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b) the
sum of the total of the products obtained by multiplying (i) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payment of principal, including payment at final maturity, in
respect thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) which will elapse between such date and the making of such
payment.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means any
Restricted Subsidiary of such Person of which all the outstanding voting
securities (other than in the case of a foreign Restricted Subsidiary,
directors' qualifying shares or an immaterial amount of shares required to be
owned by other Persons pursuant to applicable law) are owned by such Person
or any Wholly Owned Restricted Subsidiary of such Person.
27
IN WITNESS WHEREOF, the Company has caused this certificate to be
duly executed by Michael F. Vukelich, Chief Executive Officer, and attested
by __________________, its [assistant secretary], this ___ day of
_______________, 1997.
COLOR SPOT NURSERIES, INC.
By:___________________________________
Michael F. Vukelich
Chief Executive Officer
ATTEST:
By:
[name]
[title]
1