CERTIFICATE OF DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS
OF
13% 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 November 26, 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 13% Series A Cumulative
Preferred Stock (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.
(a) The Holders of shares of the Series A Preferred Stock shall be
entitled to receive in preference to holders of all other Capital Stock of
the Company, 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 13% per annum (subject to increase as set forth
below), payable quarterly in arrears on each March 15, June 15, September 15
and December 15 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 March 1, June 1, September 1 and December 1
(each, a "RECORD DATE"). Upon an Increased Dividend Triggering Event
dividends on the Series A Preferred Stock will accrue at the rate of 18% 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 December 15, 2002,
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 shares of
Series A Preferred Stock issued as dividends will be duly authorized, validly
issued, fully paid and non-assessable. 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 March 15, 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 accrue on a daily
basis.
(b) The rate of the cumulative preferential dividends of the
Series A Preferred Stock may be increased as hereinafter provided. Upon:
(i) the failure of the Company to satisfy any mandatory
redemption or repurchase obligation with respect to the Series A
Preferred Stock;
(ii) 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;
(iii) 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
(iv) 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 18% 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.
(c) Dividends on the Series A Preferred Stock shall accrue
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 accrue 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.
(d) 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
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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 have been declared and paid in cash for the current
dividend period and the two most recent dividend periods in which the Series
A Preferred Stock were outstanding, or declared and a sufficient sum for the
payment in cash 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, except as provided in
clause (3) of the notwithstanding paragraph of Section 6(a); 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.
2. 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 accrued 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 accrued
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.
3. REDEMPTION BY THE COMPANY.
(a) On December 15, 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 accrued 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.
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(b) The Series A Preferred Stock may not be redeemed at the option
of the Company prior to December 15, 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 December 15, 2002, at the Applicable Redemption
Price. At any time, or from time to time, on or prior to December 15, 2002,
the Company may, at its option, use the net cash proceeds of any Public
Equity Offering to redeem the Series A Preferred Stock at a redemption price
equal to 113% 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 of such Public Equity Offering, the
Company shall make such redemption not more than 120 days after the
consummation of such Public Equity Offering.
(c) 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.
(d) 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 accrue 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.
(e) 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 accrue, 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.
(f) Any funds deposited with a bank or trust company for the
purpose of redeeming Series A Preferred Stock shall be irrevocable except
that:
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(i) 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
(ii) 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 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.
(g) 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.
(h) 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.
(i) 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.
4. VOTING RIGHTS.
(a) 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.
(b) 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.
(c) 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
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the case of any such future dividend arrearage or defaults or any such
failure to make redemption payments.
(d) 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 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, with 15 days 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.
(e) 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.
(f) 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) unless a greater
percentage is required by law:
(i) 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;
(ii) amend or otherwise alter its Certificate of Incorporation
in any manner that adversely affects the rights of Holders of Series A
Preferred Stock;
(iii) amend or otherwise alter this Certificate of Designation
(including the provisions of Section 5 hereof) in any manner; or
(iv) waive any existing Voting Rights Triggering Event,
Increased Dividend Triggering Event or compliance with any provision of
this Certificate of Designation.
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(g) 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):
(i) 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;
(ii) 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);
(iii) reduce the rate of or change the time for payment of
dividends on any share of Series A Preferred Stock;
(iv) waive the consequences of any failure to pay dividends
on the Series A Preferred Stock;
(v) make any share of Series A Preferred Stock payable in
any form other than that stated in this Certificate of Designation;
(vi) 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;
(vii) 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
(viii) make any change in the foregoing amendment and waiver
provisions.
(h) The Company shall not, without the consent of at least 75% 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.
(i) 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:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to provide for uncertificated Series A Preferred Stock
in addition to or in place of certificated Series A Preferred Stock; or
(iii) 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.
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5. CHANGE OF CONTROL.
(a) 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 accrued and unpaid dividends, if any,
thereon to the date of purchase (the "CHANGE OF CONTROL PAYMENT").
(b) The Change of Control Offer shall include all instructions and
materials necessary to enable Holders to tender their shares of Series A
Preferred Stock.
(c) 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.
(d) Within 90 days following any Change of Control, the Company
shall send, by first-class mail, a notice to each Holder stating:
(i) 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;
(ii) 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");
(iii) that any share of Series A Preferred Stock not tendered
will continue to accrue dividends;
(iv) 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 accrue
dividends after the Change of Control Payment Date;
(v) 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;
(vi) 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
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(vii) 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).
(e) 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 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.
(f) 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.
(g) 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.
6. CERTAIN COVENANTS.
(a) 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:
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(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
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.
10
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.
(b) 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
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.
(c) 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).
(d) 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
11
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 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.
(e) 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
12
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.
(f) 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.
(g) REPORTS.
(i) 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.
(ii) 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.
13
(iii) 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.
(h) 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.
7. PAYMENT.
(a) 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 wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
(b) 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.
(c) 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
accrued 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.
(d) 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.
(e) 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.
8. OFFICERS' CERTIFICATE.
Each Officers' Certificate provided for in this Certificate of
Designation shall include:
(a) a statement that the officer making such certificate or
opinion has read such covenant or condition;
14
(b) 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;
(c) 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
(d) a statement as to whether or not, in the opinion of such
officer, such condition or covenant has been satisfied.
9. 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.
10. HEADINGS OF SUBDIVISIONS.
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.
11. 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.
12. FORM OF SECURITIES.
(a) 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").
(b) 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
15
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.
(c) 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.
(d) 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 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.
13. 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,
16
together with accrued and unpaid dividends, if any, to the date of redemption
if redeemed during the 12-month period commencing on December 15 of each of
the years set forth below:
Redemption
Year Rate
---- -----
2002 106.500%
2003 104.875%
2004 103.250%
2005 101.625%
2006 and thereafter 100.000%
"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 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.
17
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's;
(iv) certificates of deposit or bankers' acceptances maturing within one year
from the date of acquisition thereof issued by any bank organized under the laws
of the United States of America or any state thereof or the District of Columbia
or any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series 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.
18
"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 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
19
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 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).
20
"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 December 24, 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 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
21
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 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 24, 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.
22
"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 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 10 1/2% 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.
23
"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:
(i) Indebtedness under the Notes and the Indenture;
(ii) 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;
(iii) 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;
(iv) 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;
(v) Indebtedness under Currency Agreements; PROVIDED that in the
case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the 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;
(vi) 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;
(vii) 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
24
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;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; PROVIDED, HOWEVER, that such
Indebtedness is extinguished within two business days of incurrence;
(ix) 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;
(x) Refinancing Indebtedness;
(xi) 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
(xii) 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 course of business for bona fide
business purposes not in excess of $2,000,000 in the aggregate 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.
25
"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
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 levelsof 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.
26
"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.
"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
27
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.
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IN WITNESS WHEREOF, the Company has caused this certificate to be duly
executed by Michael F. Vukelich, Chief Executive Officer, and attested by Karla
D. Vukelich, its Secretary, this 22nd day of December, 1997.
COLOR SPOT NURSERIES, INC.
By: /s/ Michael F. Vukelich
----------------------------------
Michael F. Vukelich
Chief Executive Officer
ATTEST:
By: /s/ Karla D. Vukelich
---------------------------
Karla D. Vukelich
Secretary