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EXCHANGE AGREEMENT
dated as of December 29, 2000
by and among
CORAM, INC.
and
NOTEHOLDERS NAMED HEREIN
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TABLE OF CONTENTS
EXCHANGE AGREEMENT
PAGE
Article 1 DEFINITIONS................................................................1
Article 2 THE PURCHASE OF PREFERRED STOCK...........................................11
2.1 Authorization of Issue........................................................11
2.2 Exchange of Notes.............................................................11
2.3 Closing.......................................................................11
Article 3 NOTEHOLDERS' REPRESENTATIONS..............................................11
3.1 Investment Intention..........................................................11
3.2 Accredited Investor...........................................................11
3.3 Corporate Existence...........................................................12
3.4 Power; Authorization; Enforceable Obligations.................................12
3.5 Ownership of Exchange Notes...................................................12
3.6 Information...................................................................12
3.7 No General Solicitation.......................................................13
3.8 California Blue Sky...........................................................13
3.9 New York Blue Sky.............................................................13
Article 4 COMPANY'S REPRESENTATIONS AND WARRANTIES..................................13
4.1 Authorized and Outstanding Shares of Capital Stock............................13
4.2 Authorization and Issuance of Preferred Stock.................................14
4.3 Securities Laws...............................................................14
4.4 Corporate Existence; Compliance with Law......................................14
4.5 Subsidiaries..................................................................14
4.6 Corporate Power; Authorization; Enforceable Obligations.......................15
4.7 Financial Condition...........................................................15
4.8 Properties....................................................................16
4.9 Adverse Agreements, Etc.......................................................16
4.10 Environmental Matters.........................................................16
4.11 Labor Matters.................................................................16
4.12 Holding Company and Investment Company Acts...................................17
4.13 Taxes.........................................................................17
4.14 Litigation....................................................................17
4.15 Brokers.......................................................................17
4.16 Governmental Approvals........................................................17
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4.17 Patents, Trademarks, Copyrights and Licenses..................................18
4.18 Compliance with Laws, Etc.....................................................18
4.19 ERISA.........................................................................18
4.20 ADVANCE \l 40 Registration Under Exchange Act; Registration Rights..........19
4.21 Full Disclosure...............................................................19
4.22 Insurance.....................................................................19
4.23 Joint Ventures................................................................20
4.24 Permits, Etc..................................................................20
Article 5 COVENANTS.................................................................20
5.1 Affirmative and Financial Covenants...........................................20
(c) Communication with Accountants..............................22
(d) Tax Compliance..............................................22
(e) Insurance...................................................22
(f) Compliance with Law.........................................23
(g) Maintenance of Existence and Conduct of Business............23
(h) Access......................................................23
(i) Excess Cash.................................................23
(j) Exchange of Stock Certificates..............................23
(k) Lost, Stolen, Destroyed or Mutilated Stock Certificates.....23
(l) Further Assurances..........................................24
5.2 Negative Covenants............................................................24
(a) Permitted Acquisitions or Investments.......................24
(b) Sales of Assets; Liquidation................................24
(c) Capital Stock...............................................25
(d) Transactions with Affiliates................................25
(e) Liens, Etc..................................................25
(f) Indebtedness................................................25
(g) Restricted Payments.........................................26
(h) Sale and Leaseback Transactions.............................26
5.3 Certain Tax Matters...........................................................26
ii
5.4 Status of Dividends...........................................................27
Article 6 CONDITIONS PRECEDENT......................................................28
6.1 Conditions Precedent..........................................................28
6.2 Additional Conditions.........................................................29
Article 7 SECURITIES LAW MATTERS....................................................29
7.1 Legends.......................................................................29
Article 8 INDEMNIFICATION...........................................................30
Article 9 EXPENSES..................................................................30
Article 10 MISCELLANEOUS.............................................................31
10.1 Notices.......................................................................31
10.2 Binding Effect; Benefits......................................................32
10.3 Amendment.....................................................................32
10.4 Successors and Assigns; Assignability.........................................33
10.5 Remedies......................................................................33
10.6 Section and Other Headings....................................................33
10.7 Severability..................................................................33
10.8 Counterparts..................................................................33
10.9 Publicity.....................................................................33
10.10 Governing Law; Waiver of Jury Trial...........................................34
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Schedules
Schedule 4.1......... Stockholders and Capital Stock
Schedule 4.5......... Subsidiaries
Schedule 4.6......... Enforceable Obligations
Schedule 4.7......... Financial Condition
Schedule 4.8......... Properties
Schedule 4.10........ Environmental Matters
Schedule 4.13........ Taxes
Schedule 4.14........ Litigation
Schedule 4.15........ Brokers
Schedule 4.16........ Governmental Contracts
Schedule 4.17........ Patents, Trademarks, Etc.
Schedule 4.19........ ERISA
Schedule 4.20........ Registration Rights
Schedule 4.22........ Insurance
Schedule 4.23........ Joint Ventures
Schedule 4.24........ Permits
Schedule 5.2(a)...... Existing Investments
Schedule 5.2(e)...... Existing Liens
Schedule 5.2(f)...... Existing Indebtedness
Exhibits
Exhibit A............ Certificate of Designation - Preferred Stock A-2
Exhibit B............ Stockholders Agreement B-1
Exhibit C............ Opinions of Counsel C-1
Exhibit D............ Term Sheet D-1
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EXCHANGE AGREEMENT
EXCHANGE AGREEMENT, dated as of December 29, 2000, by and
among CORAM, INC., a Delaware corporation (the "COMPANY"), ▇▇▇▇▇▇▇ ▇▇▇▇▇ CREDIT
PARTNERS, L.P. ("GSCP"), CERBERUS PARTNERS, L.P. ("CERBERUS") and FOOTHILL
CAPITAL CORPORATION ("FOOTHILL") (GSCP, Cerberus and Foothill collectively
referred to herein as "NOTEHOLDERS" and individually as a "NOTEHOLDER").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to a Securities Exchange Agreement dated as
of May 6, 1998, among the Company, Coram Healthcare Corporation, a Delaware
corporation ("HOLDINGS"), and the Noteholders, as amended (the "EXISTING
SECURITIES EXCHANGE AGREEMENT"), the Company is indebted to the Noteholders as
at the date hereof in the aggregate principal amount of $251,007,471, of which
$158,923,372 principal amount relates to the Company's Series A Notes and
$92,084,099 principal amount relates to the Company's Series B Notes (the Series
A Notes and Series B Notes being collectively referred to as the "NOTES"); and
WHEREAS, the Company has requested Noteholders to exchange
$97,715,434 of their Series A Notes and to forgive $11,610,542 of accrued but
unpaid interest on the Notes for the period from July 16, 2000 to December 29,
2000 (such Notes being exchanged hereby being the "EXCHANGE NOTES") for their
pro rata share of 905 shares of the Company's Series A Preferred Stock, $0.001
par value per share, having a liquidation preference equal to $120,802 per
share, the terms, preferences and limitations of which are set forth in Exhibit
A hereto (the "PREFERRED STOCK"), and Noteholders have agreed to such exchange
on and subject to the terms and conditions of this Agreement;
WHEREAS, on August 8, 2000, the Company and Holdings commenced
cases (the "CHAPTER 11 CASES") under Chapter 11 of Title 11 of the United States
Code (the "BANKRUPTCY CODE") in the United States Bankruptcy Court for the
District of Delaware (the "BANKRUPTCY COURT").
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:
Article 1
DEFINITIONS
"ACQUISITION THRESHOLD" shall mean 20% of the gross fixed
assets of Holdings, as reflected on the most recent consolidated balance sheet
provided to the Noteholders pursuant to Section 5.1(b)(iii) of this Agreement.
"AFFILIATE" shall mean, with respect to any Person, (i) each
Person that, directly or
indirectly, owns or controls, as to any Person, any other Person that directly
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (i)
vote 10% or more of the Capital Stock having ordinary voting power for the
election of directors of such Person or (ii) direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
Notwithstanding anything herein to the contrary, in no event shall any
Noteholder be considered an "Affiliate" of the Company or any of its
Subsidiaries.
"BANKRUPTCY CODE" shall have the meaning set forth in the
recitals hereof.
"BANKRUPTCY COURT" shall have the meaning set forth in the
recitals hereof.
"BUSINESS DAY" shall mean any day that is not a Saturday, a
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"BUSINESS PLAN" means a schedule of projected cash receipts,
cash disbursements and monthly cash flows of the Company and its Subsidiaries
prepared on an annual basis.
"CAPITAL LEASE" shall mean, with respect to any Person, any
lease of any property (whether real, personal or mixed) by such Person as lessee
that, in accordance with GAAP, either would be required to be classified and
accounted for as a capital lease on a balance sheet of such Person or otherwise
be disclosed as a capital lease in a note to such balance sheet, other than, in
the case of the Company or a Subsidiary of the Company, any such lease under
which the Company or such Subsidiary is the lessor.
"CAPITAL LEASE OBLIGATION" shall mean, with respect to any
Capital Lease, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease or otherwise be disclosed in a note to such balance sheet.
"CASH EQUIVALENTS" shall mean (i) marketable direct
obligations issued 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 90 days from the date of acquisition
thereof; (ii) commercial paper, maturing not more than 90 days after the date of
issue rated P-1 by ▇▇▇▇▇'▇ Investors Service, Inc. and its successors
("MOODY'S") or A-1 by Standard & Poor's Ratings Service, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or any successor ("STANDARD & POOR'S"); (iii)
certificates of deposit maturing not more than 90 days after the date of issue,
issued by commercial banking institutions and money market or demand deposit
accounts maintained at commercial banking institutions, each of which is a
member of the Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000; (iv) repurchase agreements
having maturities of not more than 90 days from the date of acquisition which
are entered into with major money center banks included in
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the commercial banking institutions described in clause (iii) above and which
are secured by readily marketable direct obligations of the Government of the
United States of America or any agency thereof; (v) money market accounts
maintained with mutual funds having assets in excess of $2,000,000,000; and (vi)
tax exempt securities rated A or better by Moody's or A+ or better by Standard &
Poor's.
"CERBERUS" shall have the meaning set forth in the recitals
hereof.
"CERTIFICATE OF DESIGNATION" shall mean the Certificate of
Designation setting forth the rights and preferences of the Preferred Stock, as
such Certificate of Designation may be amended from time to time.
"CHAPTER 11 CASES" shall have the meaning set forth in the
recitals hereof.
"CLOSING" shall have the meaning set forth in Section 2.3
hereof.
"CLOSING DATE" shall have the meaning set forth in Section 2.3
hereof.
"COMMON STOCK" shall mean the common stock, $1.00 par value
per share, of the Company.
"COMPANY" shall have the meaning set forth in the recitals
hereof.
"CONTEST" shall have the meaning set forth in Section 5.3(c)
hereof.
"DEFAULT" shall mean any event which, with the passage of time
or notice or both, would, unless cured or waived, become an Event of Default.
"DIVIDENDS DEDUCTION LAWS" shall have the meaning set forth in
Section 5.4 hereof.
"DIVIDENDS-RECEIVED DEDUCTION" shall have the meaning set
forth in Section 5.3(a) hereof.
"EMPLOYEE PLAN" means an employee benefit plan (other than a
Multiemployer Plan) covered by Title IV of ERISA and maintained (or was
maintained at any time during the six (6) calendar years preceding the date of
any borrowing hereunder) for employees of the Company or any of its ERISA
Affiliates.
"ENVIRONMENTAL ACTIONS" means any complaint, summons,
citation, notice, directive, order, claim, litigation, investigation, judicial
or administrative proceeding, judgment, letter or other communication from any
Governmental Authority involving violations of Environmental Laws or Releases of
Hazardous Materials (i) from any assets, properties or businesses of the Company
or any of its Subsidiaries or any predecessor in interest; (ii) from adjoining
properties or businesses; or (iii) onto any facilities which
3
received Hazardous Materials generated by the Company or any of its Subsidiaries
or any predecessor in interest.
"ENVIRONMENTAL LAWS" means the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601, ET SEQ.), the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801, ET SEQ.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901, ET SEQ.), the
Federal Clean Water Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act (42
U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 ET SEQ.) and the Occupational Safety and Health Act (29 U.S.C.
Section 651 ET SEQ.), as such laws may be amended or otherwise modified from
time to time, and any other present or future federal, state, local or foreign
statute, ordinance, rule, regulation, order, judgment, decree, permit, license
or other binding determination of any Governmental Authority imposing liability
or establishing standards of conduct for protection of the environment.
"ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities,
monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts and consultants
and costs of investigations and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of any claim or demand by any
Governmental Authority or any third party, and which relate to any environmental
condition or a Release of Hazardous Materials from or onto (i) any property
presently or formerly owned by the Company or any of its Subsidiaries or (ii)
any facility which received Hazardous Materials generated by the Company or any
of its Subsidiaries.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974 (or any successor legislation thereto), as amended from time to time and
any regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean, with respect to the Company, any
trade or business (whether or not incorporated) under common control with the
Company and which, together with the Company, are treated as a single employer
within the meaning of Sections 414(b), (c), (m) or (o) of the IRC, excluding
Noteholders and each other person which would not be an ERISA Affiliate if
Noteholders did not own any issued and outstanding shares of Stock of the
Company.
"EVENT OF DEFAULT" shall mean (i) the occurrence of (A) any
breach of any covenant set forth in Section 5.2 of this Agreement that remains
uncured for a period of 15 days after receipt by the Company of written notice
thereof by the Noteholders (B) the non-payment of any dividend when due or (C)
the commencement by the Company or any of its Subsidiaries of a voluntary case
(other than the Chapter 11 Cases) or the consent to or entry of an order for
relief by a court of competent jurisdiction against the Company or its
Subsidiaries, appointing a custodian of the Company or for all or substantially
all of its property, making a general assignment for the benefit of the
Company's creditors, ordering the liquidation of the Company or its Subsidiaries
or if the Company is generally not paying its debts as they become due, in which
case of (A), (B)
4
or (C), the Noteholders shall be entitled to exercise any available remedies
under the Certificate of Designation (subject to the Stockholders Agreement), or
(ii) the occurrence of any breach of any representation or warranty in any
material respect, or of any other agreement of the Company or any covenant set
forth in Section 5.1 of this Agreement, in each case which remains uncured for a
period of 45 days after receipt by the Company of written notice thereof by the
Noteholders, in which case the Noteholders shall be entitled to exercise all
available remedies other than the election of additional directors to the board
of directors of the Company under Section 5 of the Certificate of Designation.
"EXCESS DISTRIBUTION" shall have the meaning set forth in
Section 5.3(a) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and all rules and regulations promulgated thereunder.
"EXCHANGE NOTES" shall have the meaning set forth in the
recitals hereof.
"EXISTING SECURITIES EXCHANGE AGREEMENT" shall have the
meaning set forth in the recitals hereof.
"FINAL DETERMINATION" shall have the meaning set forth in
Section 5.3(b).
"FISCAL YEAR" shall mean the twelve month period ending
December 31. Subsequent changes of the fiscal year of the Company shall not
change the term "Fiscal Year," unless the Noteholders shall consent in writing
to such changes.
"FOOTHILL" shall have the meaning set forth in the recitals
hereof.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government,
any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"GROSS-UP PAYMENT" shall have the meaning set forth in Section
5.3(a) hereof.
"GSCP" shall have the meaning set forth in the recitals
hereof.
"GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any
obligation of such Person guaranteeing any Indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working
5
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency or any balance sheet condition of the primary obligor, (c)
to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation, or (d) to indemnify the
owner of such primary obligation against loss in respect thereof; PROVIDED,
HOWEVER, that Guaranteed Indebtedness shall not include guarantees by the
Company or its Subsidiaries of Indebtedness or other obligations of the Company
or its Subsidiaries.
"HAZARDOUS MATERIALS" means (i) any element, compound or
chemical that is defined, listed or otherwise classified as a contaminant,
pollutant, toxic pollutant, toxic or hazardous substances, extremely hazardous
substance or chemical, hazardous waste, special waste, or solid waste under
Environmental Laws; (ii) petroleum and its refined products; (iii)
polychlorinated biphenyls; (iv) any substance exhibiting a hazardous waste
characteristic, including but not limited to, corrosivity, ignitability,
toxicity or reactivity as well as any radioactive or explosive materials; and
(v) any raw materials, building components, including but not limited to
asbestos-containing materials and manufactured products containing hazardous
substances; PROVIDED, HOWEVER, (x) in the event that any Environmental Law is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (y)
to the extent that the applicable laws of any state establish a meaning for
"hazardous material," "hazardous substance," "hazardous waste," "solid waste" or
"toxic substance" which is broader than that specified in any federal
Environmental Law, such broader meaning shall apply in the relevant state.
"HOLDINGS" shall have the meaning set forth in the recitals
hereof.
"INDEBTEDNESS" of any Person shall mean (i) all indebtedness
of such Person for borrowed money or for the deferred purchase price of property
or services (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured, but not including obligations to trade
creditors incurred in the ordinary course of business), (ii) all obligations
evidenced by notes, bonds, debentures or similar instruments, (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreements with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (iv)
all Capital Lease Obligations, (v) all Guaranteed Indebtedness, (vi) all
Indebtedness referred to in clause (i), (ii), (iii), (iv) or (v) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness and (vii) all liabilities under Title IV of ERISA.
"IRC" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
6
"IRS" shall mean the Internal Revenue Service, or any
successor thereto.
"LIEN" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest as to assets owned by the relevant Person under the Uniform
Commercial Code or comparable law of any jurisdiction).
"LOSSES" shall have the meaning set forth in Article 8 hereof.
"MATERIAL ADVERSE EFFECT" shall mean material adverse effect
on the business, assets, operations, prospects or financial or other condition
of the Company and its Subsidiaries, if any, taken as a whole.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA, and to which the Company, any of its
Subsidiaries or any ERISA Affiliate is making, is obligated to make, has made or
been obligated to make, contributions on behalf of participants who are or were
employed by any of them.
"NOTEHOLDER" or "NOTEHOLDERS" shall have the meaning set forth
in the recitals hereof.
"NOTES" shall have the meaning set forth in the recitals
hereof.
"PAYMENT DATE" shall have the meaning set forth in Section
5.3(b) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any successor thereto.
"PERMITTED INDEBTEDNESS" means, with respect to the Company,
(a) any Indebtedness existing on the date hereof as set forth in Schedule 5.2(f)
and any extensions, renewals or replacements of such Indebtedness to the extent
that (i) the aggregate principal amount of such Indebtedness is not at any time
increased, (ii) no material terms applicable to such Indebtedness shall be more
favorable to the extending, renewing or replacement lenders than the terms that
are applicable to the holders of such Indebtedness on the date hereof and (iii)
the interest rate applicable to such Indebtedness shall be a market interest
rate as of the time of such extension, renewal or replacement; (b) Indebtedness
secured by Liens permitted by clauses (f) and (h) of the definition of the term
Permitted Liens; (c) intercompany Indebtedness between (i) the Company and any
wholly owned Subsidiary or (ii) any wholly owned Subsidiary and any other wholly
owned Subsidiary; (d) any reimbursement obligations of the Company or its
Subsidiaries in connection with letters of credit issued by financial
institutions for the account of the Company; (e) any Capital Lease Obligation of
the Company or its Subsidiaries, entered
7
into in the ordinary course of business and consistent with past practices; and
(f) Indebtedness owing by a Subsidiary existing at the time such Subsidiary was
acquired (or assumed by the Company or such Subsidiary at the time assets of
such Subsidiary were acquired) and any extensions, renewals or replacements of
such Indebtedness to the extent that (i) the aggregate principal amount of such
Indebtedness is not at any time increased, (ii) no material terms applicable to
such Indebtedness shall be more favorable to the extending, renewing or
replacement lenders than the terms that are applicable to the holders of such
Indebtedness on the date hereof and (iii) the interest rate applicable to such
Indebtedness shall be a market interest rate as of the time of such extension,
renewal or replacement, PROVIDED, HOWEVER, that, such Indebtedness was not
incurred or created in connection with or in contemplation of such acquisition.
"PERMITTED LIENS" shall means (a) Liens for taxes, assessments
and governmental charges the payment of which is not required under Section
5.1(d) unless such taxes, assessments or charges are being contested by the
Company in good faith; (b) Liens imposed by law, such as carriers',
warehousemen's, mechanics', materialmen's and other similar Liens arising in the
ordinary course of business and securing obligations (other than Indebtedness
for borrowed money); (c) Liens existing on the on the date hereof, as set forth
on Schedule 5.2(e), but not the extension of coverage thereof to other property
or the extension of maturity, refinancing or other modification of the terms
thereof or the increase of the Indebtedness secured thereby; (d) deposits and
pledges securing (i) obligations incurred in respect of workers' compensation,
unemployment insurance or other forms of governmental insurance or benefits,
(ii) the performance of bids, tenders, leases, contracts, including those for
utilities (other than for the payment of money) and statutory obligations or
(iii) obligations on surety or appeal bonds, but only to the extent such
deposits or pledges are incurred or otherwise arise in the ordinary course of
business and secure obligations not past due; (e) easements, zoning restrictions
and similar encumbrances on real property and minor irregularities in the title
thereto that do not (i) secure obligations for the payment of money or (ii)
materially impair the value of such property or its use by any of the Company or
its Subsidiaries in the normal conduct of such Person's business; (f) Liens upon
real or personal property acquired or held in the ordinary course of business at
the time of acquisition or improvement of such property to secure the purchase
price thereof or incurred solely to finance the acquisition or improvement of
such property, provided that (A) such Liens do not cover property other than the
property acquired or improved, and (B) the Indebtedness secured by such Liens
does not in any case exceed the lesser of the cost or fair market value of such
property at the time of such acquisition; (g) Liens incurred in connection with
the Capital Lease Obligations of the Company or its Subsidiaries, entered into
in the ordinary course of business and consistent with past practices; (h) Liens
to secure insurance cancellation premiums relating to insurance maintained by
the Company for the Noteholders in the ordinary course of business; and (i)
Liens on cash collateral pledged to support reimbursement obligations with
respect to the letters of credit described in clause (e) of the definition of
Permitted Indebtedness.
8
"PERSON" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
"PREFERRED STOCK" shall have the meaning set forth in the
recitals hereof.
"RELEASE" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, seeping,
migrating, dumping or disposing of any Hazardous Material (including the
abandonment or discarding of barrels, containers and other closed receptacles
containing any Hazardous Material) into the indoor or outdoor environment,
including ambient air, soil, surface or ground water.
"REMAINING NOTES" shall mean the $61,207,938 aggregate
principal amount of Series A Notes and $92,084,099 aggregate principal amount of
Series B Notes held by the Noteholders following the consummation of the
transactions contemplated in this Agreement.
"REMEDIAL ACTION" means all actions taken to (i) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate or in any other way
address Hazardous Materials in the indoor or outdoor environment; (ii) prevent
or minimize a Release or threatened Release of Hazardous Materials so they do
not migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; (iii) perform pre-remedial studies and
investigations and post-remedial operation and maintenance activities; or (iv)
any other actions authorized by 42 U.S.C. 9601.
"RESTRICTED PAYMENT" shall mean (i) the declaration of any
dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of the Company's
Stock or (ii) any payment on account of the purchase, redemption or other
retirement of the Company's Stock or any other payment or distribution made in
respect of any Stock of the Company, either directly or indirectly.
"SEC" shall mean the U.S. Securities and Exchange Commission,
or any successor thereto.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
"STOCK" shall mean all shares, options, warrants, general or
limited partnership interests, limited liability company membership interest,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such
9
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the SEC under the Exchange Act).
"STOCKHOLDERS AGREEMENT" shall mean the Stockholders Agreement
by and among the Company, Noteholders and each of the other stockholders party
thereto, substantially in the form attached hereto as Exhibit B, as such
agreement may be amended, supplemented or otherwise modified from time to time.
"SUBSIDIARY" shall mean with respect to any Person at any
date, any corporation, limited or general partnership, limited liability
company, trust, association or other entity (i) the accounts of which would be
consolidated with those of such Person in such Person's consolidated financial
statements if such financial statements were prepared in accordance with GAAP or
(ii) of which more than 50% of (A) the outstanding Capital Stock having (in the
absence of contingencies) ordinary voting power to elect a majority of the board
of directors of such corporation, (B) the interest in the capital or profits of
such partnership or limited liability company or (C) the beneficial interest in
such trust or estate is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such Person.
"TRANSACTION DOCUMENTS" shall mean this Agreement, the
Certificate of Designation, the Stockholders Agreement, Amendment No. 4 to the
Existing Securities Exchange Agreement and the amended and restated Notes and
guarantees contemplated thereby.
"WARN" shall have the meaning set forth in Section 4.19.
References to this "AGREEMENT" shall mean this Exchange
Agreement, including all amendments, modifications and supplements and any
exhibits or schedules to any of the foregoing, and shall refer to the Agreement
as the same may be in effect at the time such reference becomes operative.
Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
consistently applied. That certain terms or computations are explicitly modified
by the phrase "in accordance with GAAP" shall in no way be construed to limit
the foregoing. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole, including the Exhibits and
Schedules hereto, as the same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or clause contained
in this Agreement. Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter.
10
ARTICLE 2
THE PURCHASE OF PREFERRED STOCK
2.1 AUTHORIZATION OF ISSUE. Prior to the Closing, the Company shall
have duly authorized the delivery to each of Noteholders of the number of shares
of Preferred Stock set forth in Section 2.2 below in the exchange set forth
below.
2.2 EXCHANGE OF NOTES. Subject to the terms and conditions set forth in
this Agreement, each of the Noteholders exchanges its pro rata share of the
Exchange Notes on the Closing Date for its pro rata share of 905 shares of the
Preferred Stock, on the terms and subject to the conditions set forth herein and
containing the terms, preferences and limitations set forth in the Certificate
of Designation, such shares of Preferred Stock to be issued to the Noteholders
on a pro rata basis as follows: (a) Cerberus to receive 416.51 shares; (b) GSCP
to receive 318.78 shares; and (c) Foothill to receive 169.71 shares.
2.3 CLOSING. The closing of the exchange of the Notes for Preferred
Stock (the "CLOSING") shall take place on December 29, 2000, or such date and
time as shall be mutually agreed to by the parties hereto (the "CLOSING DATE"),
but in any event no later than December 31, 2000, at the offices of Weil,
Gotshal & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, or such other place
as shall be mutually agreed to by the parties hereto.
On the Closing Date, the Company will deliver to each
Noteholder, in exchange for its pro rata share of the Exchange Notes,
certificates representing such Noteholder's pro rata share of the Preferred
Stock registered in such names and in such denominations as such Noteholder
requests.
ARTICLE 3
NOTEHOLDERS' REPRESENTATIONS
Each Noteholder, severally and not jointly, makes the
following representations and warranties to the Company, each and all of which
shall survive the execution and delivery of this Agreement and the Closing
hereunder:
3.1 INVESTMENT INTENTION. Such Noteholder is acquiring the Preferred
Stock for its own account, for investment purposes and not with a view to the
distribution thereof. Such Noteholder will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of any of the
Preferred Stock (or solicit any offers to buy, purchase, or otherwise acquire
any of the Preferred Stock), except in compliance with the Securities Act.
3.2 ACCREDITED INVESTOR. Such Noteholder is an "accredited investor"
(as that term is defined in Rule 501 of Regulation D under the Securities Act)
and by reason of its
11
business and financial experience, it has such knowledge, sophistication and
experience in business and financial matters as to be capable of evaluating the
merits and risks of the prospective investment, is able to bear the economic
risk of such investment and is able to afford a complete loss of such
investment. Such Noteholder's investment in the Company is reasonable in
relation to such Noteholder's net worth and financial needs, and such Noteholder
is able to bear the economic risk of losing its entire investment in the
Preferred Stock. Such Noteholder has adequate means of providing for such
Noteholder's current needs and contingencies, has no need for liquidity in the
investment contemplated hereby, and is able to bear the risk of loss of such
Noteholder's entire investment.
3.3 CORPORATE EXISTENCE. Such Noteholder is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization.
3.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution,
delivery and performance by such Noteholder of this Agreement and the other
Transaction Documents to be executed by it: (i) are within such Noteholder's
corporate or partnership power, as the case may be; (ii) have been duly
authorized by all necessary corporate or partnership action, as the case may be;
(iii) are not in contravention of any provision of such Noteholders' certificate
of incorporation, by-laws, partnership agreement or other similar organizational
document; and (iv) will not violate any law or regulation, or any order or
decree of any court or governmental instrumentality binding on such Noteholder.
This Agreement and the other Transaction Documents to which such Noteholder is a
party have each been duly executed and delivered by such Noteholder and
constitute the legal, valid and binding obligations of such Noteholder,
enforceable against it in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
3.5 OWNERSHIP OF EXCHANGE NOTES. Such Noteholder is the beneficial
owner of, and has good and marketable title to, the Exchange Notes it will
exchange pursuant to terms of this Agreement and on the Closing Date will
deliver for exchange their interests in such Exchange Notes free and clear of
all Liens, options, purchase rights, contracts, equities claims and demands.
Such Noteholder is not a party to any option, warrant purchase right or other
contract or commitment that could require such Noteholder to sell, transfer or
dispose of any of such Exchange Notes.
3.6 INFORMATION. Such Noteholder is in a position regarding the
Company, which, based upon its relationship or economic bargaining power,
enabled and enables such Noteholder to obtain information from the Company in
order to evaluate the merits and risks of such Noteholder's investment in the
Preferred Stock. The Company has made available to such Noteholder, at a
reasonable time prior to its purchase of the Preferred Stock, the opportunity to
ask questions of, and receive answers from, the Company concerning the terms and
conditions of the offering and to obtain any additional
12
information relating to the Company, to the extent that the Company possesses
such information or can acquire it without unreasonable effort or expense, which
is necessary to verify the accuracy of the information given to it or otherwise
to make an informed investment decision. No statement, printed material or
inducement was given or made by the Company or anyone on its behalf which is
contrary to the written information disclosed to such Noteholder.
3.7 NO GENERAL SOLICITATION. Such Noteholder has not been offered the
Preferred Stock by any form of general solicitation or general advertising,
including but not limited to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
3.8 CALIFORNIA BLUE SKY. Foothill understands that the sale of the
Preferred Stock that are the subject of this Agreement has not been qualified
with the Commissioner of Corporation of the State of California and the issuance
of the Preferred Stock or the payment or receipt of any part of the
consideration therefor prior to the qualification is unlawful, unless the sale
of Preferred Stock is exempt from the qualification by Section 25100, 25102, or
25105 of the California Corporations Code. Such Noteholder further understands
that the rights of all parties to this Agreement are expressly conditioned upon
the qualification being obtained, unless the sale is so exempt.
3.9 NEW YORK BLUE SKY. Each of Cerberus and GSCP is a "financial
institution" or "institutional buyer" as defined in Section 359-e of the New
York General Business Law.
ARTICLE 4
COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company makes the following representations and warranties
to each Noteholder as of the date hereof, each and all of which shall survive
the execution and delivery of this Agreement and the Closing hereunder:
4.1 AUTHORIZED AND OUTSTANDING SHARES OF CAPITAL STOCK. After giving
effect to the Closing, the authorized capital stock of the Company consists of
1,000,000 shares of Common Stock, of which 1,000 shares are issued and
outstanding, and 10,000 shares of preferred stock, $0.001 par value per share,
of the Company, of which only the shares of Preferred Stock being issued
pursuant to this Agreement will be issued and outstanding. All of such issued
and outstanding shares, including, without limitation, the Preferred Stock, are
validly issued, fully paid and non-assessable. Schedule 4.1 hereto contains a
complete and correct list of all stockholders of the Company and the number of
shares owned by each. Except as set forth on Schedule 4.1, (i) there is no
existing option, warrant, call, commitment or other agreement to which the
Company is a party requiring, and there are no convertible securities of the
Company outstanding which upon
13
conversion would require or permit, the issuance of any additional shares of
Stock of the Company or other securities convertible into shares of equity
securities of the Company, other than, under certain circumstances, the issuance
of Common Stock or Preferred Stock in lieu of cash dividends on the Preferred
Stock, and (ii) there are no agreements to which the Company is a party or, to
the knowledge of the Company, to which any stockholder or warrant holder of the
Company is a party, with respect to the voting or transfer of the Stock of the
Company or with respect to any other aspect of the Company's affairs, other than
the Stockholders Agreement. There are no stockholders' preemptive rights or
rights of first refusal or other similar rights with respect to the issuance of
Stock by the Company, other than pursuant to the Transaction Documents. True and
correct copies of the certificate of incorporation, as amended to the date
hereof, and by-laws, as amended to the date hereof, of the Company have been
delivered to Noteholders.
4.2 AUTHORIZATION AND ISSUANCE OF PREFERRED STOCK. The issuance of the
Preferred Stock has been duly authorized by all necessary corporate action on
the part of the Company and, upon delivery to Noteholders of certificates
therefor in exchange for Exchange Notes in accordance with the terms hereof, the
Preferred Stock will have been validly issued and fully paid and non-assessable,
free and clear of all pledges, liens, encumbrances and preemptive rights, except
as provided in the Stockholders Agreement.
4.3 SECURITIES LAWS. In reliance on the investment representations
contained in Section 3.1, the offer, issuance, sale and delivery of the
Preferred Stock, as provided in this Agreement, are exempt from the registration
requirements of the Securities Act and all applicable state securities laws, and
are otherwise in compliance with such laws. Neither the Company nor any Person
acting on its behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Company under circumstances
which would require the integration of such offering with the offering of the
Preferred Stock under the Securities Act and the rules and regulations of the
SEC thereunder) which might subject the offering, issuance or sale of the
Preferred Stock to the registration requirements of Section 5 of the Securities
Act.
4.4 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. The Company and each of
its Subsidiaries, if any, (i) is a corporation, limited liability company,
limited partnership or unincorporated joint venture duly organized, validly
existing and in good standing under the laws of the state of its organization,
(ii) has all requisite power and authority to conduct its business as now
conducted and as presently contemplated and to execute and deliver each
Transaction Document to which it is a party and consummate the transactions
contemplated thereby, and (iii) is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties owned or
leased by it or in which the transaction of its business makes such
qualification necessary except where the failure to be qualified or in good
standing is not reasonably likely to have a Material Adverse Effect.
4.5 SUBSIDIARIES. Schedule 4.5 is a complete and correct description of
the name, jurisdiction of incorporation and ownership of the outstanding Stock
of all Subsidiaries of
14
the Company in existence on the date hereof. All of the issued and outstanding
shares of Stock of such Subsidiaries have been validly issued and are fully paid
and nonassessable, and the holders thereof are not entitled to any preemptive,
first refusal or other similar rights. Except as indicated on such Schedule, all
such Stock is owned by the Company directly or indirectly through one or more of
its wholly-owned Subsidiaries, free and clear of all Liens, and there are no
options, warrants, rights to purchase or similar rights covering Stock for any
such Subsidiary.
4.6 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by the Company of this Agreement, the other
Transaction Documents to which it is a party and all instruments and documents
to be delivered by the Company, the issuance and sale of the Preferred Stock and
the consummation of the other transactions contemplated by any of the foregoing:
(i) have been duly authorized by all necessary action, (ii) except for such
conflicts for which consents have been obtained, do not and will not contravene
its charter or by-laws, its limited liability company or operating agreement or
its certificate of partnership or partnership agreement, as applicable, or any
applicable law or any material contractual restriction binding on or otherwise
affecting its operations or any of its properties, (iii) do not and will not
result in or require the creation of any Lien (other than pursuant to any
Transaction Document) upon or with respect to any of its properties, and (iv)
except as set forth in Schedule 4.6, do not and will not result in any
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to its operations or any of its
properties, except where such contravention, creation, suspension, revocation,
impairment, forfeiture or nonrenewal is not reasonably likely to have a Material
Adverse Effect. This Agreement and each of the other Transaction Documents being
delivered on the date hereof have been duly executed and delivered by the
Company and Subsidiaries named therein and will be the legal, valid and binding
obligation of the Company and each Subsidiary that is a party thereto,
enforceable against such party in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights and to general principles of
equity.
4.7 FINANCIAL CONDITION. (a) Except as set forth on Schedule 4.7, since
September 30, 2000 no event or development has occurred that has had or is
reasonably likely to have a Material Adverse Effect.
(b) The Company has heretofore furnished to the
Noteholders consolidated balance sheets and statements of operations and cash
flows of Holdings dated as of December 31, 1999, which have been audited by and
accompanied by the opinion of independent public accountants. Such balance
sheets and statements of operations and cash flows present fairly in all
material respects the consolidated financial condition and results of operations
of Holdings and its consolidated Subsidiaries as of the dates and for the
periods indicated, and such audited balance sheets and the notes thereto
disclose all material liabilities, direct or contingent, of Holdings and its
consolidated Subsidiaries, as of the dates thereof.
15
4.8 PROPERTIES. Except as disclosed on Schedule 4.8, (i) each of the
Company and its Subsidiaries has good and marketable title to, or valid
leasehold interests in, all property and assets material to its business, free
and clear of all Liens except Permitted Liens. The properties are in good
working order and condition, ordinary wear and tear excepted. Schedule 4.8 sets
forth a complete and accurate list of all real property owned or leased by each
of the Company and its Subsidiaries, and (ii) each of the Company and its
Subsidiaries has complied with all obligations under all leases to which it is a
party and under which it is in occupancy, and all such leases are in full force
and effect, except for any instances of noncompliance and such failures of such
leases to be in full force and effect that, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect and each
of the Company and its Subsidiaries enjoys peaceful and undisturbed possession
under all such material leases.
4.9 ADVERSE AGREEMENTS, ETC. Other than the Chapter 11 Cases, none of
the Company nor its Subsidiaries is subject to any charter, limited liability
company agreement, partnership agreement or other corporate, partnership or
limited liability company restriction or any judgment, order or ruling of a
court or other Governmental Authority that is reasonably likely to have a
Material Adverse Effect.
4.10 ENVIRONMENTAL MATTERS. Except (A) as set forth on Schedule 4.10 or
(B) where such noncompliance, Release or Environmental Action is not reasonably
likely to have a Material Adverse Effect, (i) the operations of each of the
Company and its Subsidiaries are in compliance in all material respects with
Environmental Laws; (ii) there has been no Release at any of the properties
owned or operated by any of the Company and its Subsidiaries or a predecessor in
interest, or at any disposal or treatment facility which received Hazardous
Materials generated by any of the Company and its Subsidiaries or any
predecessor in interest which could have a Material Adverse Effect; (iii) no
Environmental Action has been asserted against any of the Company and its
Subsidiaries or any predecessor in interest nor does any of the Company and its
Subsidiaries have knowledge or notice of any threatened or pending Environmental
Action against any of the Company and its Subsidiaries or any predecessor in
interest which could have a Material Adverse Effect; and (iv) no Environmental
Actions have been asserted against any facilities that may have received
Hazardous Materials generated by any of the Company and its Subsidiaries or any
predecessor in interest which could have a Material Adverse Effect.
4.11 LABOR MATTERS. There is (i) no unfair labor practice complaint
pending or, to the best knowledge of any of the Company and its Subsidiaries,
threatened against any of the Company and its Subsidiaries before any
Governmental Authority and no grievance or arbitration proceeding pending or, to
the best knowledge of any of the Company and its Subsidiaries threatened against
any of the Company and its Subsidiaries which arises out of or under any
collective bargaining agreement, (ii) no strike, labor dispute, slowdown,
stoppage or similar action or grievance pending or, to the best knowledge of the
Company and its Subsidiaries, threatened against any of the Company and its
Subsidiaries, except employee grievances that are not reasonably likely to have
a Material Adverse Effect; and (iii) to the best knowledge of the Company and
any of its
16
Subsidiaries, no union representation question existing with respect to the
employees of the Company or any of its Subsidiaries and no union organizing
activity taking place with respect to any of the employees of any of them.
4.12 HOLDING COMPANY AND INVESTMENT COMPANY ACTS. None of the Company
or any of its Subsidiaries is (i) a "holding company" or a "subsidiary company"
of a "holding company" or an "affiliate" of a "holding company", as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended, or
(ii) an "investment company" or an "affiliated person" or "promoter" of, or
"principal underwriter" of or for, an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended.
4.13 TAXES. All Federal, state and local tax returns and other reports
required by applicable law to be filed by the Company or its Subsidiaries have
been filed, or extensions have been obtained, and all taxes, assessments and
other governmental charges imposed upon the Company or its Subsidiaries or any
property of the Company or its Subsidiaries and which have become due and
payable on or prior to the date hereof have been paid, except (i) to the extent
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves have been set aside for the payment thereof; or (ii)
where the failure to make such filing, extension or payment is not reasonably
likely to have a Material Adverse Effect. As of the date hereof, except as set
forth on Schedule 4.13 no federal income tax returns of the Company or its
Subsidiaries are being audited by the IRS, and neither the Company nor its
Subsidiaries has as of the date hereof requested or been granted any extension
of time to file any federal, state, local or foreign tax return. Except as set
forth on Schedule 4.13, none of the Company nor its Subsidiaries is a party to
or has any obligation under any tax sharing agreement.
4.14 LITIGATION. Except as set forth in Schedule 4.14, there is no
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened action, suit or proceeding affecting the Company or any of its
Subsidiaries before any court or other Governmental Authority or any arbitrator
that is reasonably likely to have a Material Adverse Effect or relates to any
Transaction Document, the Plan or any transaction contemplated hereby or thereby
or that, if adversely determined, is reasonably likely to have a Material
Adverse Effect.
4.15 BROKERS. Except as set forth on Schedule 4.15, no broker or finder
acting on behalf of the Company or any of its Subsidiaries brought about the
consummation of the transactions contemplated pursuant to this Agreement and
neither the Company nor any of its Subsidiaries has any obligation to any Person
in respect of any finder's or brokerage fees (or any similar obligation) in
connection with the transactions contemplated by this Agreement. The Company is
solely responsible for the payment of all such finder's or brokerage fees.
4.16 GOVERNMENTAL APPROVALS. No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority is
required in connection
17
with the due execution, delivery and performance by any of the Company or its
Subsidiaries of any Transaction Document to which it is or will be a party,
except (i) as set forth in Schedule 4.16 or (ii) where the failure to obtain
such authorization or approvals, or to provide such notice or filing, with any
Governmental Authority is not reasonably likely to have a Material Adverse
Effect.
4.17 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Each of the Company
and its Subsidiaries owns or licenses or otherwise has the right to use all
licenses, permits, trademarks, trademark applications, patents, patent
applications, service marks, tradenames, copyrights, copyright applications,
franchises, authorizations and other intellectual property rights that are
necessary for the operations of its businesses, without infringement upon or
conflict with the rights of any other Person with respect thereto, except for
such infringements and conflicts which, individually or in the aggregate, could
not have a Material Adverse Effect. Set forth on Schedule 4.17 hereto is a
complete and accurate list as of the date hereof of all trademarks, trademark
applications and tradenames, material licenses, permits, patents, patent
applications, service marks, copyrights, copyright applications, franchises,
authorizations and other intellectual property rights of each of the Company and
its Subsidiaries. No slogan or other advertising device, product, process,
method, substance, part or other material now employed, or now contemplated to
be employed, by the Company or its Subsidiaries infringes upon or conflicts with
any rights owned by any other Person, and no claim or litigation regarding any
of the foregoing is pending or threatened, except for such infringements and
conflicts which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect. To the best knowledge of each of the
Company and its Subsidiaries, no patent, invention, device, application,
principle or any statute, law, rule, regulation, standard or code is pending or
proposed, which, individually or in the aggregate, that is reasonably likely to
have a Material Adverse Effect.
4.18 COMPLIANCE WITH LAWS, ETC. None of the Company nor its
Subsidiaries is in violation of its organizational documents, any material law,
rule, regulation, judgment or order of any Governmental Authority applicable to
it or any of its material property or assets, including, without limitation, any
Physician Self-Referral Laws, and no Default or Event of Default has occurred
and is continuing.
4.19 ERISA. Except (A) as set forth on Schedule 4.19 or (B) where any
violation is not reasonably likely to have a Material Adverse Effect, (i) each
Employee Plan is in substantial compliance with ERISA and the IRC, (ii) no
Termination Event has occurred nor is reasonably expected to occur with respect
to any Employee Plan, (iii) the most recent annual report (Form 5500 Series)
with respect to each Employee Plan, including any required Schedule B (Actuarial
Information) thereto, copies of which have been filed with the IRS and delivered
to the Noteholders, is complete and correct and fairly presents the funding
status of such Employee Plan, and since the date of such report there has been
no material adverse change in such funding status, (iv) no Employee Plan had an
accumulated or waived funding deficiency or permitted decreases which would
create a deficiency in its funding standard account or has applied for an
extension of any amortization period within the meaning of Section 412 of the
IRC at any time during the previous 60 months, and (v) no Lien imposed under the
IRC or ERISA exists or is likely to arise on account of any Employee Plan within
the meaning of Section 412 of the IRC at any time during the
18
previous 60 months. Except as set forth on Schedule 4.19, none of the Company,
its Subsidiaries or any of their ERISA Affiliates have incurred any withdrawal
liability under ERISA with respect to any Multiemployer Plan, or are aware of
any facts indicating that the Company, its Subsidiaries or any of their ERISA
Affiliates may in the future incur any such withdrawal liability. Except as
required by Section 4980B of the IRC, none of the Company, its Subsidiaries or
any of their ERISA Affiliates maintains an employee welfare benefit plan (as
defined in Section 3(1) of ERISA) which provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employee of the Company, its Subsidiaries or any of its ERISA Affiliates or
coverage after a participant's termination of employment. None of the Company,
its Subsidiaries or any of their ERISA Affiliates has incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act ("WARN")
or similar state law, which remains unpaid or unsatisfied.
4.20 REGISTRATION UNDER EXCHANGE ACT; REGISTRATION RIGHTS. Neither the
Company nor any of its Subsidiaries has registered any class of its securities
pursuant to Section 12 of the Exchange Act and no such registration is required
by the Exchange Act. Except as set forth in Schedule 4.20 hereto, neither the
Company nor any of its Subsidiaries is under any obligation to register, under
the Securities Act, any of its presently outstanding securities or any
securities which may hereafter be issued.
4.21 FULL DISCLOSURE. Each of the Company and its Subsidiaries has
disclosed to the Noteholders all agreements, instruments and corporate or other
restrictions to which it is subject, and all other matters known to it, that are
reasonably likely to have a Material Adverse Effect. None of the other reports,
financial statements, certificates or other information taken as a whole
furnished by or on behalf of any of the Company and its Subsidiaries to the
Noteholders in connection with the negotiation of this Agreement or delivered
hereunder (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which it was made, not misleading; provided, however, that, with respect
to projected financial information, the Company represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.
4.22 INSURANCE. Each of the Company and its Subsidiaries keeps its
property adequately insured and maintains (i) insurance to such extent and
against such risks, including fire, as is customary with companies in the same
or similar businesses, (ii) workmen's compensation insurance in the amount
required by applicable law, (iii) public liability insurance, which shall
include product liability insurance, in the amount customary with the Company in
the same or similar business against claims for personal injury or death on
properties owned, occupied or controlled by it, and (iv) such other insurance as
may be required by law or as may be reasonably required by the Noteholders.
Schedule 4.22 sets forth a list of all insurance maintained by each of the
Company and its Subsidiaries on the date hereof.
19
4.23 JOINT VENTURES. The Company and its Subsidiaries does not and
shall not own, directly or indirectly, any equity interest in any Person other
than the Subsidiaries listed on Schedule 4.5 and the Joint Ventures listed on
Schedule 4.23, which Schedule 4.23 sets forth as of the date hereof a list of
all Joint Ventures in which any of the Company and its Subsidiaries has an
equity interest and the direct or indirect percentage ownership interest of such
Person therein.
4.24 PERMITS, ETC. Except as set forth on Schedule 4.24, (A) each of
the Company and its Subsidiaries has, and is in compliance with, all material
permits, licenses, authorizations, approvals, entitlements and accreditations
required for such Person lawfully to own, lease, manage or operate, or to
acquire, each business currently owned, leased, managed or operated, or to be
acquired, by such Person, except where the failure to possess or noncompliance
is not reasonably likely to have a Material Adverse Effect and (B) no condition
exists or event has occurred which, in itself or with the giving of notice or
lapse of time or both, would result in the suspension, revocation, impairment,
forfeiture or non-renewal of any such permit, license, authorization, approval,
entitlement or accreditation, and there is no claim that any thereof is not in
full force and effect.
Article 5
COVENANTS
5.1 AFFIRMATIVE AND FINANCIAL COVENANTS. The Company covenants and
agrees that from and after the date hereof (except as otherwise provided herein,
or unless the Noteholders have given their prior written consent) so long as any
of the shares of Preferred Stock are outstanding:
(a) Books and Records. The Company shall, and shall
cause its Subsidiaries to, keep adequate records and books of account with
respect to their business activities, in which proper entries, reflecting all of
their financial transactions, are made in accordance with GAAP.
(b) Financial and Business Information.
(i) Monthly Information. Commencing with the
month ending December 31, 2000, the Company will deliver to Noteholders as soon
as practicable after the end of each month, but in any event within 45 days of
each month ending December 31, 2000, January 31, 2001 and February 28, 2001 and
within 35 days of the end of each month thereafter: (A) an unaudited
consolidated balance sheet of Holdings and its consolidated Subsidiaries, if
any, at the end of such month; and (B) unaudited consolidated statements of
operations, retained earnings and cash flows of Holdings and its consolidated
Subsidiaries, if any, for such month and for the portion of such year ending
with such month;
(ii) Quarterly Information. The Company will
deliver to Noteholders as soon as practicable after the end of each of the first
three quarterly
20
fiscal periods in each fiscal year of Holdings, but in any event within 45 days
thereafter, (A) an unaudited consolidated balance sheet of Holdings and its
consolidated Subsidiaries, if any, as at the end of such quarter, and (B)
unaudited consolidated statements of operations, retained earnings and cash
flows of Holdings and its consolidated Subsidiaries, if any, for such quarter
and (in the case of the second and third quarters) for the portion of the fiscal
year ending with such quarter, setting forth in comparative form the actual
consolidated figures for the comparable period of the prior fiscal year. Such
statements shall be (1) prepared in accordance with GAAP, (2) in reasonable
detail and (3) certified by the principal financial or accounting officer of
Holdings.
(iii) Annual Information. The Company will
deliver to Noteholders as soon as practicable after the end of each fiscal year
of Holdings, but in any event within 90 days thereafter, (A) an audited
consolidated balance sheet of Holdings and its consolidated Subsidiaries, if
any, as at the end of such year, and (B) audited consolidated statements of
operations, retained earnings and cash flows of Holdings and its consolidated
Subsidiaries, if any, for such year; setting forth in each case in comparative
form the figures for the previous year. Such statements shall be (1) prepared in
accordance with GAAP, (2) in reasonable detail and (3) opined upon by Ernst &
Young LLP or such other firm of independent certified public accountants of
recognized national standing selected by Holdings and reasonably acceptable to
the Noteholders.
(iv) Filings. The Company will deliver to
Noteholders, promptly upon their becoming available, one copy of each report,
notice or proxy statement sent by Holdings and/or the Company to its
stockholders generally, and of each regular or periodic report (pursuant to
the Exchange Act) and any registration statement, prospectus or other writing
(other than transmittal letters) (including, without limitation, by electronic
means) pursuant to the Securities Act filed by Holdings and/or the Company with
(i) the SEC or (ii) any securities exchange on which shares of Common Stock of
Holdings and/or the Company are listed.
(v) Projections. Commencing with the Fiscal
Year ended December 31, 2001, the Company will deliver to Noteholders within 15
days prior to the beginning of each Fiscal Year:
(1) projected consolidated balance
sheets of Holdings and its consolidated Subsidiaries, if any, for such Fiscal
Year, on a monthly basis;
(2) projected consolidated cash
flow statements of Holdings and its consolidated Subsidiaries, if any, including
summary details of cash disbursements (including for capital expenditures), for
such Fiscal Year, on a monthly basis; and
21
(3) projected consolidated
statements of operations of Holdings and its consolidated Subsidiaries, if any,
for such Fiscal Year, on a monthly basis; in each case, approved by the Board of
Directors of the Company, together with appropriate supporting details.
(vi) Customer Complaints; Other Information.
The Company will promptly notify Noteholders of any material customer complaints
concerning the Company's products and services. If requested by any Noteholder,
the Company will deliver to such Noteholder such other information respecting
the Company's or any of its Subsidiaries' business, financial condition or
prospects as such Noteholder may, from time to time, reasonably request.
(vii) Business Plan. On or before January
30, 2001 the Company shall furnish to the Noteholders a Business Plan through
December 31, 2001. The Business Plan will be prepared such that it is believed
by the Company at the time furnished to be reasonable, have been prepared on a
reasonable basis and in good faith by the Company, and have been based on
assumptions believed by the Company to be reasonable at the time made and upon
the best information then reasonably available to the Company, and such that the
Company was not aware of any facts or information that would lead it to believe
that such projections, are incorrect or misleading in any material respect.
(c) COMMUNICATION WITH ACCOUNTANTS. Subject to
execution of a confidentiality agreement and applicable securities laws, the
Company authorizes each Noteholder to communicate directly with its independent
certified public accountants and tax advisors and authorizes those accountants
to disclose to such Noteholder any and all financial statements and other
supporting financial documents and schedules including copies of any management
letter with respect to the business, financial condition and other affairs of
the Company and any of its Subsidiaries.
(d) TAX COMPLIANCE. The Company shall pay all
transfer, excise or similar taxes (not including income or franchise taxes) in
connection with the issuance, sale, delivery or transfer by the Company to
Noteholders of the Preferred Stock and any Common Stock or Preferred Stock
issued in lieu of cash dividends on the Preferred Stock, and shall indemnify and
save each Noteholder harmless without limitation as to time against any and all
liabilities with respect to such taxes. The Company shall not be responsible for
any taxes in connection with the transfer of the Preferred Stock or such Common
Stock by the holder thereof. The obligations of the Company under this Section
5.1(d) shall survive the payment, prepayment or redemption of the Preferred
Stock and the termination of this Agreement.
(e) INSURANCE. The Company shall and shall cause each
Subsidiary of the Company to maintain insurance covering, without limitation,
fire, theft, burglary, public liability, property damage, product liability,
workers' compensation, directors' and officers' insurance and insurance on all
property and assets material to the operation of
22
the business, all in amounts customary for the industry. The Company shall, and
shall cause each of its Subsidiaries to, pay all insurance premiums payable by
them.
(f) COMPLIANCE WITH LAW. The Company shall, and shall
cause each of its Subsidiaries to, comply with all laws, including Environmental
Laws, applicable to it, except where the failure to comply would not be
reasonably likely to result in a Material Adverse Effect.
(g) MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS.
The Company shall, and shall cause each of its Subsidiaries to: (i) do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence, and its rights and franchises; (ii) except as permitted
hereunder, at all times maintain, preserve and protect all of its patents,
trademarks and trade names, and preserve all the remainder of its material
assets, in use or useful in the conduct of its business and keep the same in
good repair, working order and condition (taking into consideration ordinary
wear and tear) and from time to time make, or cause to be made, all needful and
proper repairs, renewals and replacements, betterments and improvements thereto
consistent with industry practices and (iii) continue to conduct businesses
related to the business that the Company is engaged in on the date hereof.
(h) ACCESS. The Company shall permit representatives
of Noteholders to visit and inspect any of the properties of the Company and its
Subsidiaries, to examine the corporate books and make copies or extracts
therefrom and to discuss the affairs, finances and accounts of the Company and
its Subsidiaries with the principal officers of the Company, all at such
reasonable times, upon reasonable notice and as often as such Noteholder may
reasonably request.
(i) EXCESS CASH. The Company shall invest all excess
cash in cash and Cash Equivalents.
(j) EXCHANGE OF STOCK CERTIFICATES. The Company will,
at its expense, promptly upon surrender of any certificates representing shares
of Preferred Stock at the office of the Company referred to in, or designated
pursuant to, Section 10.1 hereof, execute and deliver to any Noteholder so
surrendering such certificates a new certificate or certificates in
denominations specified by such Noteholder for an aggregate number of shares of
Preferred Stock equal to the number of shares of such stock represented by the
certificates surrendered.
(k) LOST, STOLEN, DESTROYED OR MUTILATED STOCK
CERTIFICATES. Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of any certificate for shares of
Preferred Stock and, in the case of loss, theft or destruction, upon delivery of
an indemnity reasonably satisfactory to the Company (which may be an undertaking
by a Noteholder to so indemnify the Company), or, in the case of mutilation,
upon surrender and cancellation thereof, the Company will issue a new
certificate of like tenor for a number of shares of Preferred Stock equal to the
23
number of shares of such stock represented by the certificate lost, stolen,
destroyed or mutilated.
(l) FURTHER ASSURANCES. Take such action and execute,
acknowledge and deliver, and cause each of its Subsidiaries to take such action
and execute, acknowledge and deliver, at their sole cost and expense, such
agreements, instruments or other documents as the Noteholders may reasonably
require from time to time in order (i) to carry out more effectively the
purposes of this Agreement and the other Transaction Documents; (ii) to
establish and maintain the validity and effectiveness of any of the Transaction
Documents; and (iii) to better assure, convey, grant assign, transfer and
confirm unto the Noteholders the rights now or hereafter intended to be granted
to the Noteholders under this Agreement or any other Transaction Documents. The
Company shall and shall cause its Subsidiaries to negotiate, execute and deliver
such amendments, supplements or other modifications of this Agreement and the
other Transaction Documents as shall be deemed by the Noteholders to be
necessary, desirable or advisable to reflect the terms set forth in the Term
Sheet attached hereto as Exhibit D, as approved by the United States Bankruptcy
Court for the District of Delaware.
5.2 NEGATIVE COVENANTS. The Company covenants and agrees that from and
after the date hereof (except as otherwise provided herein, or unless the
Noteholders have given their prior written consent) so long as shares of
Preferred Stock are outstanding:
(a) PERMITTED ACQUISITIONS OR INVESTMENTS. The
Company shall not, and shall not permit any of its Subsidiaries to, directly,
enter into or indirectly in any transaction or related series of transactions,
acquire or invest in, whether for cash, debt, Stock, or other property or assets
or by guaranty of any obligation, any assets or business of any Person other
than (i) acquisitions by the Company or wholly-owned Subsidiaries of the Company
from the Company or any such wholly-owned Subsidiary or investments therein;
(ii) acquisitions in the ordinary course of business; and (iii) acquisitions
involving an aggregate purchase price of not more than the Acquisition
Threshold, (iii) investments in Cash Equivalents, or (iv) investments existing
on the date hereof, as set forth on Schedule 5.2(a), but not any increase in the
amount thereof as set forth on such Schedule or any other modification of the
terms thereof; provided, however, the Company may cumulatively make loans or
advances or issue Guaranteed Indebtedness in an aggregate amount of up to
$3,000,000 and the Company may conduct such transactions as are required under
agreements that are in existence on (and as constituted on) the Closing Date
with respect to joint ventures, partnerships, non-wholly owned Subsidiaries and
Subsidiaries of Holdings organized under the laws of Canada. Except as provided
in this paragraph (a), the Company shall not, and shall not permit any of its
Subsidiaries to, invest in any Person if, after giving effect thereto, such
Person would be an Affiliate, but not a Subsidiary, of the Company.
(b) SALES OF ASSETS; LIQUIDATION. Except to the
extent required by any Governmental Authority possessing jurisdiction over the
business or operations of the Company or any of its Subsidiaries, the Company
shall not, and shall not permit any Subsidiary of the Company to, (i) sell,
transfer, convey or otherwise dispose of any assets
24
or properties, including accounts receivable, or (ii) liquidate, dissolve or
wind up the Company, or any of its Subsidiaries, except for transfers to the
Company, whether voluntary or involuntary; provided, however, that the foregoing
shall not prohibit (i) the sale of assets in the ordinary course of business,
(ii) the sale of surplus or obsolete equipment and fixtures, or (iii) transfers
resulting from any casualty or condemnation of assets or properties.
(c) CAPITAL STOCK. Except with respect to shares
issued in lieu of cash dividends in accordance with the Certificate of
Designation, the Company shall not issue any additional senior or pari passu
securities. The Company's authorized capital Stock shall not include any Stock
senior to or pari passu with the Preferred Stock.
(d) TRANSACTIONS WITH AFFILIATES. The Company shall
not and shall not permit any Subsidiary of the Company to enter into or be a
party to any transaction with any Affiliate of the Company or such Subsidiary,
except (i) transactions expressly permitted hereby, (ii) transactions in the
ordinary course of and pursuant to the reasonable requirements of the Company's
or such Subsidiary's business and upon fair and reasonable terms that are fully
disclosed to Noteholders and are no less favorable to the Company or such
Subsidiary than would be obtained in a comparable arm's-length transaction with
a Person not an Affiliate of the Company or such Subsidiary, (iii) transactions
between the Company and its wholly-owned Subsidiaries or the joint ventures
listed in Schedule 4.23 or between such Subsidiaries or joint ventures and (iv)
payment of compensation to employees and directors' fees.
(e) LIENS, ETC. The Company shall not and shall not
permit its Subsidiaries to create, incur, assume or suffer to exist any Lien
upon or with respect to any of its properties, whether now owned or hereafter
acquired, to file or suffer to exist under the Uniform Commercial Code or any
similar law or statute of any jurisdiction, a financing statement (or the
equivalent thereof) that names Company or any of its Subsidiaries as debtor, to
sign or suffer to exist any security agreement authorizing any secured party
thereunder to file such financing statement (or the equivalent thereof), to sell
any of its property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets (including sales
of accounts receivable) with recourse to the Company or any of its Subsidiaries
or assign or otherwise transfer, or permit any of its Subsidiaries to assign or
otherwise transfer, any account or other right to receive income, other than
Permitted Liens.
(f) INDEBTEDNESS. The Company shall not and shall not
permit any Subsidiary of the Company to incur or suffer to exist any
Indebtedness except Permitted Indebtedness. The Company shall not and shall not
permit any Subsidiary of the Company to directly or indirectly prepay, redeem,
purchase or retire any Indebtedness, other than Capital Lease Obligations, or to
amend or otherwise modify any Indebtedness, other than Capital Lease
Obligations, to the extent such amendment or modification would be adverse to
the Noteholders in any material respect.
25
(g) RESTRICTED PAYMENTS. The Company shall not and
shall not permit any Subsidiary of the Company to make any Restricted Payments
nor shall the Company permit any Subsidiary to make such payments with respect
to the Company's Stock; provided, however, that the Company may (a) declare and
pay cash dividends on the Preferred Stock and (b) redeem the Preferred Stock in
accordance with its terms.
(h) SALE AND LEASEBACK TRANSACTIONS. The Company
shall not and shall not permit any Subsidiary to enter into any arrangement,
directly or indirectly, with any Person whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
that it intends to use for substantially the same purpose or purposes as the
property being sold or transferred, except that the Company or any Subsidiary
may enter into any such arrangement so long as the aggregate amount of
Indebtedness incurred in connection with such arrangements does not exceed
$5,000,000 at any time outstanding.
5.3 CERTAIN TAX MATTERS. (a) In the event (i) of a Final Determination
(as defined below) that, due to any reason (including by reason of any of the
terms of Preferred Stock) other than an act or failure to act of any Noteholder
(including by reason of the application of IRC Section 246(c) or IRC Section
246A) or any Noteholder being other than a corporation, dividends paid or
accrued or deemed paid or accrued on the Preferred Stock are not eligible for
the dividends received deduction provided under the Dividends Deduction Laws
(the "DIVIDENDS-RECEIVED DEDUCTION"), (ii) any Dividends Deduction Law or any
similar or corresponding state or local law is amended to reduce or eliminate or
otherwise limit the Dividends-Received Deduction available to any Noteholder or
(iii) any dividend with respect to the Preferred Stock does not constitute, in
whole or in part, a dividend for federal income tax purposes or such dividend is
subject to Section 1059 of the IRC (in either case, an "EXCESS DISTRIBUTION"),
the Company shall pay to Noteholders with respect to each such dividend payment,
no later than the Payment Date (as defined below), an additional payment (the
"GROSS-UP PAYMENT") such that the net amount of such Gross-Up Payment received
and retained by such Noteholder after payment by such Noteholder of any federal,
state and local income tax payable with respect to such Gross-Up Payment shall
equal, in the case of (i) or (ii) above, the difference between (x) the federal,
state and local income tax payable by such Noteholder with respect to such
dividend in its taxable year in which the dividend was paid or deemed paid and
(y) the federal, state and local income tax which would have been payable by
such Noteholder in its taxable year in which the dividend was paid or deemed
paid if the events described in (i) or (ii) had not occurred and in the case of
(iii) above, an amount which, when taken together with the aggregate
distributions (whether treated as dividends or Excess Distributions for federal
income tax purposes) paid or deemed paid to such Noteholder during any taxable
year, would cause such Noteholders' net yield in dollars (after taking into
effect the federal income tax consequences of treating the Excess Distributions
received by such Noteholder as capital gain received upon the taxable sale or
exchange of Preferred Stock) to be equal to the net yield in dollars which would
have been received by such Noteholder had none of the distributions paid or
26
deemed paid to such Noteholder during such taxable year constituted Excess
Distributions, in all cases together with any interest or penalties actually
payable by such Noteholder to the IRS or any other applicable taxing authority
by reason of such events.
(a) A "FINAL DETERMINATION" shall mean (i) a
decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
or (ii) a closing agreement entered into under Section 7121 (or any successor to
such Section) of the IRC or any corresponding provision of state or local law,
or any other settlement agreement entered into in connection with an
administrative or judicial proceeding and consented to by a Noteholder or any
member of its consolidated group. The "PAYMENT DATE" shall mean the date that is
90 days after the end of the relevant taxable year.
(b) If any Noteholder is notified formally or
informally of any audit, examination or proceeding by the IRS or any other
taxing authority with respect to the availability of the Dividends-Received
Deduction, such Noteholder shall promptly notify the Company of such audit,
examination or proceeding; provided, however, that such Noteholder's failure to
give such notice or to keep the Company fully informed concerning a Contest (as
defined below) shall not affect the Company's obligation to make Gross-Up
Payments in accordance with this Section. Such Noteholder shall have exclusive
control and responsibility to conduct any audit, examination, proceeding or
litigation (a "CONTEST") with respect to such issue.
(c) All subsequent holders of the Preferred Stock
shall be entitled to all of the benefits of this Section; provided that any such
subsequent holder qualifies for the Dividends-Received Deduction under the then
current Dividend Deductions Laws at the time of its acquisition of the Preferred
Stock.
5.4 STATUS OF DIVIDENDS. The Company will not (i) in any income tax
return or claim for refund of income tax or other submission to the IRS or other
taxing authority claim a deduction in respect of amounts paid or payable under
the Preferred Stock, whether as interest or pursuant to any other statutory
provisions or regulation now in effect or hereafter enacted or adopted, except
to the extent that any such deduction shall not, in the opinion of counsel
satisfactory to the Noteholders, operate to jeopardize the availability to any
Noteholder of the dividends received deduction provided by Section 243(a)(1) of
the IRC, or any successor provision or any similar or corresponding provision
under state or local law (collectively, the "DIVIDENDS DEDUCTION LAWS"), (ii) in
any report to stockholders, or to any governmental body having jurisdiction over
the Company or otherwise treat the Preferred Stock other than as equity capital
or the dividends paid thereon other than as dividends paid on equity capital
unless required to do so by a governmental body having jurisdiction over the
accounts of the Company or by a change in GAAP required as a result of action by
an authoritative accounting standards-setting body, and (iii) except to the
extent permitted in clause (i) above and other than as expressly permitted by
this Agreement or the Company's Certificate of Incorporation take any action
which would result in the dividends paid by the Company on the Preferred Stock
out of the Company's current or accumulated earnings and profits
27
being ineligible for the dividends received deduction provided by any Dividends
Deduction Laws.
Article 6
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT. The obligation of each Noteholder to purchase
the Preferred Stock pursuant to Section 2.2 hereof, is subject to the condition
that such Noteholder shall have received, on the Closing Date, the following,
each dated the Closing Date unless otherwise indicated, in form and substance
satisfactory to the Noteholders:
(a) Favorable opinions of ▇▇▇▇ ▇▇▇▇▇ LLP, counsel to
the Company, and ▇▇▇▇▇ ▇▇▇▇▇▇, general counsel of the Company substantially in
the forms attached hereto as Exhibit C, it being understood that to the extent
that such opinion of counsel to the Company shall rely upon any other opinion of
counsel, each such other opinion shall be in form and substance reasonably
satisfactory to the Noteholders and shall provide that Noteholders may rely
thereon.
(b) Resolutions of the board of directors of the
Company, certified by the Secretary or Assistant Secretary of the Company, as of
the Closing Date, to be duly adopted and in full force and effect on such date,
authorizing (i) the consummation of each of the transactions contemplated by
this Agreement and (ii) specific officers to execute and deliver this Agreement
and each other Transaction Document to which it is a party.
(c) Governmental certificates, dated the most recent
practicable date prior to the Closing Date, with telegram updates where
available, showing that the Company is organized and in good standing in the
jurisdiction of its organization.
(d) True and correct copies, certified by the
Secretary or Assistant Secretary of the Company, of the document evidencing the
terms of the Preferred Stock, which shall contain the terms set forth in Exhibit
A attached hereto and evidence of the filing of the Certificate of Designation
with the Secretary of State of the State of Delaware.
(e) A copy of the organizational charter and all
amendments thereto of the Company, certified as of a recent date by the
Secretary of State of the State of Delaware, and copies of the Company's
by-laws, certified by the Secretary or Assistant Secretary of the Company as
true and correct as of the Closing Date.
(f) The Stockholders Agreement duly executed by the
parties thereto.
28
(g) Certificates of the Secretary or an Assistant
Secretary of the Company, dated the Closing Date, as to the incumbency and
signatures of the officers of the Company executing this Agreement, the
Preferred Stock, each other Transaction Document to which it is a party and any
other certificate or other document to be delivered pursuant hereto or thereto,
together with evidence of the incumbency of such Secretary or Assistant
Secretary.
6.2 ADDITIONAL CONDITIONS. The obligation of each Noteholder to
purchase the Preferred Stock pursuant to Section 2.2 is subject to the
additional conditions precedent that:
(a) Except as disclosed pursuant to Article IV, there
shall not have occurred any event or condition since September 30, 2000 which
could have a Material Adverse Effect.
(b) All of the representations and warranties of the
Company contained herein or in the other Transaction Documents shall be true and
correct on and as of the Closing Date as if made on such date and no breach of
any covenant contained in Article V shall have occurred or would result from the
Closing hereunder.
(c) The Closing shall have occurred no later than
December 31, 2000.
(d) The issuance of an order by the United States
Bankruptcy Court for the District of Delaware (a) approving the transactions
contemplated by this Agreement, (b) approving of amendments to the Remaining
Notes to result in the Remaining Notes bearing an interest rate of 9% per annum,
payable quarterly in arrears, and a maturity of June 30, 2001, and (c)
determining that the transactions contemplated in this Agreement shall not
affect, prejudice or impair the rights or claims of the Noteholders with respect
to the Notes and that any equitable claims for relief affecting the Noteholders
or their claims with respect to the Notes shall be determined as though the
transactions contemplated in this Agreement had not occurred.
Article 7
SECURITIES LAW MATTERS
7.1 LEGENDS. Each certificate representing the Preferred Stock shall
bear a legend substantially in the following form:
"THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED BY THE HOLDER FOR INVESTMENT PURPOSES ONLY AND NOT
FOR RESALE, TRANSFER OR DISTRIBUTION, HAVE BEEN ISSUED
PURSUANT TO EXEMPTIONS FROM THE REGISTRATION
29
REQUIREMENTS OF APPLICABLE STATE AND FEDERAL SECURITIES LAWS,
AND MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER
THAN PURSUANT TO EFFECTIVE REGISTRATION UNDER SUCH LAWS, OR IN
TRANSACTIONS OTHERWISE IN COMPLIANCE WITH OR EXEMPT FROM SUCH
LAWS, AND UPON EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY
OF COMPLIANCE WITH OR EXEMPTION FROM SUCH LAWS, AS TO WHICH
THE COMPANY MAY RELY UPON AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY."
Article 8
INDEMNIFICATION
The Company agrees to indemnify and hold harmless each
Noteholder and its Affiliates and their respective officers, directors and
employees from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind ("LOSSES") which may be imposed upon, incurred by
or asserted against such Noteholder or such other indemnified Persons in any
manner relating to or arising out of any untrue representation, breach of
warranty or failure to perform any covenants or agreement by the Company
contained herein or in any certificate or document delivered pursuant hereto or
arising out of any Environmental Law applicable to the Company or its
Subsidiaries or otherwise relating to or arising out of the transactions
contemplated hereby.
Article 9
EXPENSES
The Company shall pay all reasonable out-of-pocket expenses of
(i) Noteholders in connection with the preparation of the Transaction Documents
and the transactions contemplated thereby including all legal expenses, and (ii)
the Noteholders in connection with (A) any amendment, modification or waiver, or
consent with respect to, any of the Transaction Documents, and (B) any attempt
to enforce any rights of Noteholders against the Company, any Subsidiary of the
Company or any other Person, that may be obligated to any Noteholder by virtue
of any of the Transaction Documents (including the reasonable fees and expenses
of all of its counsel and consultants retained in connection with the
Transaction Documents and the transactions contemplated thereby).
30
Article 10
MISCELLANEOUS
10.1 NOTICES. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon any of the parties by another, or whenever any of the
parties desires to give or serve upon another any such communication with
respect to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and either shall be
delivered in person with receipt acknowledged or by registered or certified
mail, return receipt requested, postage prepaid, or by telecopy and confirmed by
telecopy answerback addressed as follows:
(a) If to the Company at:
Coram, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
and
General Counsel
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇ - East Tower
Washington, D.C. 20005-3317
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Noteholders:
Cerberus Partners, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
31
▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit Partners L.P.
c/o Goldman, Sachs & Co.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇ ▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Foothill Capital Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇ ▇▇▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, telecopied and confirmed by telecopy answerback, or
three (3) Business Days after the same shall have been deposited with the United
States mail.
10.2 BINDING EFFECT; BENEFITS. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties to
this Agreement and their respective successors and permitted assigns. Nothing in
this Agreement, express or implied, is intended or shall be construed to give
any person other than the parties to this Agreement or their respective
successors or assigns any legal or equitable right, remedy or claim under or in
respect of any agreement or any provision contained herein.
10.3 AMENDMENT. No amendment or waiver of any provision of this
Agreement or any other Transaction Document nor consent to any departure by the
Company therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Company and all of the Noteholders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action, of
compliance with any representations, warranties, covenants
32
or agreements contained herein. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any preceding or succeeding breach and no failure by either party to exercise
any right or privilege hereunder shall be deemed a waiver of such party's rights
or privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same at any subsequent time or times hereunder.
10.4 SUCCESSORS AND ASSIGNS; ASSIGNABILITY. Neither this Agreement nor
any right, remedy, obligation or liability arising hereunder or by reason hereof
shall be assignable by the Company without the prior written consent of all of
the Noteholders. Any right, remedy, obligation or liability arising hereunder or
by reason hereof shall be assignable by Noteholders without the prior written
consent of the Company, except the obligation of Noteholders to purchase the
Preferred Stock at Closing. All covenants contained herein shall bind and inure
to the benefit of the parties hereto and their respective successors and
assigns.
10.5 REMEDIES. Each Noteholder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate. In any action or proceeding brought to enforce
any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
10.6 SECTION AND OTHER HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
10.7 SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Agreement shall not be in any way impaired.
10.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
10.9 PUBLICITY. Neither Noteholders nor the Company shall issue any
press release or make any public disclosure regarding the transactions
contemplated hereby unless such press release or public disclosure is approved
by the other party in advance. Notwithstanding the foregoing, each of the
parties hereto may, in documents required to be filed by it with the SEC or
other regulatory bodies, make such statements with respect to the transactions
contemplated hereby as each may be advised by counsel is legally
33
necessary or advisable, and may make such disclosure as it is advised by its
counsel is required by law.
10.10 GOVERNING LAW; WAIVER OF JURY TRIAL. This Agreement shall be
governed by, construed and enforced in accordance with, the laws of the State of
New York without regard to the principles thereof relating to conflict of laws.
Each of the parties hereby submits to personal jurisdiction and waives any
objection as to venue in the federal or state courts located in the County of
New York, State of New York. Service of process on the parties in any action
arising out of or relating to this Agreement shall be effective if mailed to the
parties in accordance with Section 10.1 hereof. The parties hereto waive all
right to trial by jury in any action or proceeding to enforce or defend any
rights under this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
34
IN WITNESS WHEREOF, the Company and each Noteholder has
executed this Agreement as of the day and year first above written.
CORAM, INC.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and Treasurer
NOTEHOLDERS:
▇▇▇▇▇▇▇ ▇▇▇▇▇ CAPITAL PARTNERS, L.P.
By: /S/ ▇▇▇ ▇▇▇▇▇
------------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title:
CERBERUS PARTNERS, L.P.
By: /S/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Operating Officer
FOOTHILL CAPITAL CORPORATION
By: /S/ ▇▇ ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇ ▇▇▇▇▇▇
Title: Senior Vice President
[SIGNATURE PAGE OF THE EXCHANGE AGREEMENT]
35
Exhibit A
Certificate of Designation - Preferred Stock
A-2
CORAM, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS THEREOF
------------------------
Pursuant to Section 151 of the
Delaware General Corporation Law
------------------------
Coram, Inc. (the "Company"), a corporation organized and
existing under the laws of the State of Delaware, hereby certifies that pursuant
to the provisions of Section 151 of the Delaware General Corporation Law, its
Board of Directors, by unanimous written consent, dated December 28, 2000
adopted the following resolution, which resolution remains in full force and
effect as of the date hereof:
WHEREAS, in order to effectuate the issuance of the Series A
Preferred Stock (as set forth below), the Board deems it in the best interest of
the Corporation and its stockholder to create a series of preferred stock,
designated as Series A Preferred Stock, with certain rights, designations,
preferences, qualifications and/or restrictions.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
vested in the Board by Section 151 of the DGCL and in accordance with the
provisions of its Certificate of Incorporation, as amended and restated as of
the date hereof, a class of preferred stock of the Corporation to be known as
Series A Preferred Stock be, and it hereby is, created and provided for, and the
Board hereby fixes, states and expresses the terms, designations, relative
rights, preferences and limitations of such class in the particulars as set
forth in the Certificate of Designation attached as EXHIBIT A hereto (the
"CERTIFICATE OF DESIGNATION"); and be it
FURTHER RESOLVED, that the President or the Treasurer or any
other officer of the Corporation (each, an "AUTHORIZED OFFICER") be, and each of
them hereby is, authorized, empowered and directed, on behalf of the Corporation
and in its name, to execute and deliver any and all documents in connection with
the foregoing, to execute, deliver and file with the Secretary of State of the
State of Delaware, in accordance with the requirements of the DGCL, the
Certificate of Designation and to take any and all action as he may deem
necessary or appropriate in connection with the foregoing, all on such terms and
conditions he deems necessary or appropriate; and be it
FURTHER RESOLVED, that the Authorized Officer be, and each of
them hereby is, authorized, empowered and directed to take all such action as he
deems necessary or appropriate to implement and carry out the intent of the
foregoing resolutions.
A-2
TERMS, PREFERENCES, RIGHTS AND LIMITATIONS
of
SERIES A PREFERRED STOCK
of
CORAM, INC.
The relative rights, preferences, powers, qualifications,
limitations and restrictions granted to or imposed upon the Series A Preferred
Stock or the holders thereof are as follows:
1. DEFINITIONS. For purposes of this Designation, the
following definitions shall apply:
"Appraised Value" shall mean, in respect of any share of
Common Stock on any date herein specified, the fair market value of such share
of Common Stock (determined without giving effect to the discount for (i) a
minority interest or (ii) any lack of liquidity of the Common Stock or to the
fact that Company may have no class of equity registered under the Exchange Act)
as of the last day of the most recent fiscal month to end within 60 days prior
to such date specified, based on the fair market value of the Company (the
"Company Value"), as determined by a nationally reputable appraisal firm or
investment banking firm selected by the Company and the holders of the Common
Stock (the "Company's Investment Banking Firm"), divided by the number of Fully
Diluted Outstanding shares of Common Stock.
The Required Holders shall have a period of 15 days after
delivery of the Appraised Value to present in writing to the Company's
Investment Bank (with a copy to the Company and the holders of the Common Stock)
any objections the Required Holders may have to any of the matters set forth
therein, which objections shall be set forth in reasonable detail. If no
objections are raised within such 15-day period, the Company Value shall be
deemed accepted and approved by the Required Holders, on the one hand, and by
the Company and the holders of the Common Stock, on the other hand.
If the Required Holders shall raise any objections within such
15-day period, a nationally reputable appraisal firm or investment banking firm
selected by the Required Holders (the "Required Holders' Investment Banking
Firm") and the Company's Investment Banking Firm shall attempt to resolve the
matter or matters in dispute and, if resolved, such firms shall send a joint
notice to the Company, the holders of the Common Stock and the Required Holders,
stating the manner in which the dispute was resolved, whereupon the confirmed or
revised Company Value shall be final and binding on such parties.
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If such dispute cannot be resolved by the Company and the
holders of the Common Stock, on the one hand, and the Required Holders, on the
other hand, nor by such Investment Banking Firms within 30 days after the date
of the delivery of the objection by Required Holders, then the specific matters
in dispute shall be submitted to a nationally reputable appraisal firm or
investment banking firm mutually selected by the Company's Investment Banking
Firm and the Required Holders' Investment Banking Firm (the "Mutual Investment
Banking Firm"), which Mutual Investment Banking Firm shall make a final and
binding determination as to such matter or matters. The Mutual Investment
Banking Firm shall send its written determination to the Company, the holders of
the Common Stock, the Required Holders, the Company's Investment Banking Firm
and the Required Holders' Investment Banking Firm. The Company's Investment
Banking Firm shall then send to the Company, the holders of the Common Stock and
the Required Holders a confirmation of the Company Value, as determined by the
Mutual Investment Banking Firm, and the Required Holders' Investment Banking
Firm shall send a letter to the Company, the holders of the Common Stock and the
Required Holders confirming that such confirmed or revised Company Value is in
accordance with such determination, whereupon the confirmed or revised Company
Value shall be binding on such parties.
The parties hereto shall cooperate with each other and each
other's authorized representatives and with Mutual Investment Banking Firm in
order that any and all matters in dispute shall be resolved as soon as
practicable and that a final determination of the Company Value and the
Appraised Value shall be made.
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Common Stock" shall mean the Common Stock, $1.00 par value
per share, of the Company.
"Company" shall mean Coram, Inc., a Delaware corporation.
"Dividend Rate" shall mean a cumulative compound annual rate
of 15%, calculated on a 360 day per year basis, based on the actual number of
days elapsed.
"Event of Default" shall have the meaning assigned to it in
the Exchange Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar Federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Securities Exchange
Act of 1934, as amended,
A-2
shall include reference to the comparable section, if any, of any such similar
Federal statute.
"Exchange Agreement" shall mean the Exchange Agreement, dated
as of December 29, 2000, by and among the Company and the Persons named therein,
as it may be amended from time to time, a copy of which is on file at the
principal office of the Company.
"Fully Diluted Outstanding" shall mean, with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock outstanding at such date and all shares
of Common Stock issuable upon the exercise or conversion of options or warrants
to purchase, or securities convertible into, shares of Common Stock outstanding
on such date which would be deemed outstanding in accordance with GAAP for
purposes of determining book value or net income per share (other than shares of
Common Stock issuable by the Company as a dividend, prior to such issuance).
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time.
"Liquidation Preference" shall mean $120,802 per share.
"Noteholders" shall have the meaning assigned to it in the
Exchange Agreement.
"Organic Change" shall mean (A) any sale, lease, exchange or
other transfer of more than 50% of the property and assets of the Company, (B)
any liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, (C) any merger or consolidation to which the Company is a party and
which the holders of the voting securities of the Company immediately prior
thereto own less than a majority of the outstanding voting securities of the
surviving entity immediately following such transaction, or (D) any Person or
group of Persons (as such term is used in Section 13(d) of the Exchange Act),
other than the Noteholders, shall beneficially own (as defined in Rule 13d-3
under the Exchange Act) securities of the Company representing 50% or more of
the voting securities of the Company then outstanding. For purposes of the
preceding sentence, "voting securities" shall mean securities, the holders of
which are ordinarily, in the absence of contingencies, entitled to elect the
corporate directors (or Persons performing similar functions).
"Original Issue Date" shall mean the date of the original
issuance of shares of Preferred Stock.
"Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
A-2
"Preferred Stock" shall refer to shares of Series A Preferred
Stock, $0.001 par value per share, of the Company.
"Redemption Date" shall mean the date on which any shares of
Preferred Stock are redeemed by the Company.
"Redemption Price" has the meaning set forth in Section
6(a)(i) of this Certificate of Designation.
"Required Holders" shall mean the holders of all of the
outstanding shares of Preferred Stock.
"Subsidiary" of any Person means any corporation or other
entity of which a majority of the voting power or the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
"Trading Day" shall mean a Business Day or, if the Common
Stock is listed or admitted to trading on any national securities exchange or
Nasdaq market, a day on which such exchange or market is open for the
transaction of business.
"Vote Multiple" has the meaning set forth in Section 5(a) of
this Certificate of Designation.
2. DESIGNATION; NUMBER OF SHARES. The designation of the
preferred stock authorized by this resolution shall be "Series A Preferred
Stock" and the number of shares of Series A Preferred Stock designated hereby
shall be 1125 shares.
3. DIVIDENDS.
(a) So long as any shares of Preferred Stock shall be
outstanding, the holders of such Preferred Stock shall be entitled to receive
out of any funds legally available therefor, preferential dividends at the
Dividend Rate on the Liquidation Preference hereunder, payable quarterly on the
last Business Day of each calendar quarter. Such dividends shall be cumulative
and begin to accrue from the Original Issue Date, whether or not declared and
whether or not there shall be net profits or net assets of the Company legally
available for the payment of those dividends.
(b) The dividend will be payable (i) prior to the
effective date of a Chapter 11 plan of reorganization with respect to the
Company, in the form of additional shares of Preferred Stock having a
Liquidation Preference equal to such dividend amount, or (ii) following the
effective date of a Chapter 11 plan of reorganization with respect to the
Company and at the Company's election, in cash or in shares of Common Stock
having an Appraised Value equal to such cash dividend payment.
(c) So long as any shares of Preferred Stock shall be
outstanding, (i) no dividend whatsoever shall be paid or declared, and no
distribution shall be made, on account of any Common Stock until all dividends
in respect of the Preferred Stock for all
A-2
past and current dividend periods have been paid and all amounts in respect of
the redemption of Preferred Stock pursuant to Section 6 have been paid, and (ii)
no shares of Common Stock shall be purchased, redeemed or acquired by the
Company and no funds shall be paid into or set aside or made available for a
sinking fund for the purchase, redemption or acquisition thereof until all
dividends in respect of the Preferred Stock for all past and current dividend
periods have been paid and all amounts in respect of the redemption of Preferred
Stock pursuant to Section 6 have been paid.
(d) Notwithstanding anything to the contrary contained
herein, if, on any date, an Event of Default shall have occurred and be
continuing, whether or not by reason of the absence of legally available funds
therefor, then the Dividend Rate on the shares of Preferred Stock shall be
increased to a compound annual rate of 16%, for as long as such Event of Default
is continuing.
4. LIQUIDATION RIGHTS OF PREFERRED STOCK.
(a) In the event of any sale, liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the holders of
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Company available for distribution to its stockholders, whether such
assets are capital, surplus or earnings, before any payment or declaration and
setting apart for payment of any amount shall be made in respect of any shares
of Common Stock or any share of any other class or series of the Company's
preferred stock ranking junior to the Preferred Stock with respect to the
payment of dividends or distribution of assets on the sale, liquidation,
dissolution or winding up of the Company, an amount equal to the Liquidation
Preference plus all declared or accrued and unpaid dividends in respect of any
sale, liquidation, dissolution or winding up consummated.
(b) If upon any sale, liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary, the assets to be
distributed among the holders of Preferred Stock shall be insufficient to permit
the payment to such stockholders of the full preferential amounts aforesaid,
then the entire assets of the Company to be distributed shall be distributed
ratably among the holders of Preferred Stock, based on the full preferential
amounts for the number of shares of Preferred Stock held by each holder.
(c) After payment to the holders of Preferred Stock of
the amounts set forth in Section 4(a), the entire remaining assets and funds of
the Company legally available for distribution, if any, shall be distributed
among the holders of any preferred stock of the Company entitled to a preference
over the Common Stock in accordance with the terms thereof and, thereafter, to
the holders of Common Stock and Preferred Stock, in proportion to their
ownership of such shares.
5. VOTING RIGHTS. In addition to any voting rights
provided by law, the holders of shares of Preferred Stock shall have the
following voting rights:
A-2
(a) Subject to the provisions for dilution hereinafter
set forth, so long as any of the Preferred Stock is outstanding, each share of
Preferred Stock shall entitle the holder thereof to vote on all matters voted on
by the holders of Common Stock, voting together as a single class with other
shares entitled to vote at all meetings of the stockholders of the Company. The
number of votes which a holder of Preferred Stock is entitled to cast, as the
same may be adjusted from time to time as hereinafter provided, is hereinafter
referred to as the "VOTE MULTIPLE," which, as of the Original Issue Date, will
be equal to one. In the event the Corporation shall at any time after Original
Issue Date declare or pay any dividend on Common Stock payable in shares of
Common Stock, or effect a subdivision or split or a combination, consolidation
or reverse split of the outstanding shares of Common Stock into a greater or
lesser number of shares of Common Stock, or issue additional shares of Common
Stock at a purchase price which is less than the Appraised Value of such shares
on the date of issuance, then in each such case the Vote Multiple thereafter
applicable to the determination of the number of votes per share to which
holders of shares of Preferred Stock shall be entitled after such event shall be
the Vote Multiple immediately prior to such event multiplied by a fraction the
numerator of which is the number of shares of Common Stock and Preferred Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock and Preferred Stock that were outstanding
immediately prior to such event.
(b) The unanimous affirmative vote of all of the shares
of Preferred Stock, voting together as a class, in person or by proxy, at a
special or annual meeting of stockholders called for the purpose, or pursuant to
a written consent of stockholders shall be necessary to:
(i) authorize, adopt or approve an amendment to the
Certificate of Incorporation or By-laws of the Company, including, without
limitation, (A) to increase the size of the Board, (B) reduce the stated value
or Liquidation Preference of, or Dividend Rate on, the Preferred Stock, (C)
change the place or currency of payment of stated value or Liquidation
Preference of, or Dividend Rate on, the Preferred Stock (D) impair the right to
institute suit for the enforcement of any payment on or with respect to the
Preferred Stock, or (E) reduce the percentage of outstanding shares of Preferred
Stock necessary to modify or amend the terms hereof or to grant waivers;
(ii) issue any shares of the capital stock of the Company
ranking senior to, or pari passu with (either as to dividends or upon voluntary
or involuntary liquidation, dissolution or winding up) the Preferred Stock, or
issue any securities convertible into or exchangeable for such shares, except
shares of Common Stock; or
(iii) take any action which would result in an Organic Change.
(c) The holders of shares of Preferred Stock shall have,
in addition to the other voting rights set forth herein, the exclusive right,
voting separately as a single class, to elect three directors of the Company;
provided, however, that if the holders of
A-2
shares of Preferred Stock do not elect any directors to the Board of Directors,
such holders will have the right to appoint an observer to the Board.
(d) If, on any date, an Event of Default shall have
occurred and be continuing, whether or not by reason of the absence of legally
available funds therefor, then the holders of shares of Preferred Stock shall
have, in addition to their other voting rights set forth herein, the exclusive
right, voting separately as a single class, to elect two additional directors of
the Company in accordance with this Section 5.
(e) (i) The foregoing rights of holders of shares of
Preferred Stock to take any actions as provided in this Section 5 may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any adjournment
thereof or pursuant to any written consent of stockholders.
(ii) If (A) the annual meeting of stockholders of the Company
is not, for any reason, held within the time fixed in the by-laws of the
Company, or (B) vacancies shall exist in the offices of directors elected by the
holders of Preferred Stock, or (C) the holders of the Preferred Stock have the
right to elect additional directors pursuant to Section 5(d) above, a proper
officer of the Company, upon the written request of the holders of record of at
least ten percent (10%) of the shares of Preferred Stock then outstanding,
addressed to the Secretary of the Company, shall call a special meeting in lieu
of the annual meeting of stockholders or a special meeting of the holders of
Preferred Stock, for the purpose of electing or, if necessary, removing
directors. Any such meeting shall be held at the earliest practicable date at
the place for the holding of the annual meetings of stockholders. If such
meeting shall not be called by the proper officer of the Company within twenty
(20) days after personal service of said written request upon the Secretary of
the Company, or within twenty (20) days after mailing the same within the United
States by certified mail, addressed to the Secretary of the Company at its
principal executive offices, then the holders of record of at least ten percent
(10%) of the outstanding shares of Preferred Stock may designate in writing one
of their member to call such meeting at the expense of the Company, and such
meeting may be called by the person so designated upon the notice required for
the annual meetings of stockholders of the Company and shall be held at the
place for holding the annual meetings of stockholders. Any holder of Preferred
Stock so designated shall have access to the lists of stockholders to be called
pursuant to the provisions hereof.
(f) Any vacancy occurring in the office of director
elected by the holders of Preferred Stock or any additional director to be
elected pursuant to Section 5(d) above may be filled by the remaining
director(s) elected by the holders of Preferred Stock unless and until such
vacancy shall be filled by the holders of Preferred Stock. The term of office of
the directors elected by the holders of Preferred Stock shall terminate upon the
election of their successors at any meeting of stockholders held for the purpose
of electing directors.
A-2
(g) The directors elected by the holders of shares of
Preferred Stock voting separately as a single class may be removed from office
with or without cause by the vote of the holders of at least a majority of the
outstanding shares of Preferred Stock. A special meeting of the holders of
shares of Preferred Stock may be called in accordance with the procedures set
forth in Section 5(e) above.
6. REDEMPTION OF PREFERRED STOCK.
(a) The Company may, at any time, redeem, and the holders
of the outstanding Preferred Stock shall sell to the Company, at the redemption
price equal to the sum of the Liquidation Preference per share plus an amount
equal to all accrued and unpaid dividends per share (the "Redemption Price"),
all or a portion of the outstanding Preferred Stock.
(b) (i) At least thirty (30) days prior to the date fixed
for the redemption of the Preferred Stock, written notice (the "Redemption
Notice") shall be mailed, postage prepaid, to each holder of record of the
Preferred Stock at its post office address last shown on the records of the
Company. The Redemption Notice shall state:
(1) the number of shares of Preferred
Stock held by the holder that the Company intends to redeem;
(2) the date fixed for redemption and
the Redemption Price; and
(3) that the holder is to surrender to
the Company, in the manner and at the place designated, its certificate or
certificates representing the shares of Preferred Stock to be redeemed.
(ii) On or before the Redemption Date, each holder of
Preferred Stock shall surrender the certificate or certificates representing
such shares of Preferred Stock to the Company, in the manner and at the place
designated in the Redemption Notice, and thereupon the Redemption Price for such
shares shall be payable in cash on the Redemption Date to the person whose name
appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be cancelled and retired. In the event that less
than all of the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(c) Dividends on the Preferred Stock called for
redemption shall cease to accumulate on the Redemption Date, and the holders of
such shares redeemed shall cease to have any further rights with respect thereto
on the Redemption Date.
(d) If, at the time of any redemption pursuant to this
Section 6, the funds of the Company legally available for redemption of
Preferred Stock are insufficient to redeem the number of shares required to be
redeemed, those funds which are legally available shall be used to redeem the
maximum possible number of such shares, pro rata
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based upon the number of shares to be redeemed. At any time thereafter when
additional funds of the Company become legally available for the redemption of
Preferred Stock, such funds shall immediately be used to redeem the balance of
the shares of Preferred Stock which the Company has become obligated to redeem
pursuant to this subparagraph, but which it has not redeemed.
(e) The Company may not otherwise redeem or repurchase
the Preferred Stock.
7. CERTAIN COVENANTS. Any registered holder of Preferred
Stock may proceed to protect and enforce its rights and the rights of such
holders by any available remedy by proceeding at law or in equity to protect and
enforce any such rights, whether for the specific enforcement of any provision
in this Certificate of Designation or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
8. NO REISSUANCE OF PREFERRED STOCK. No Preferred Stock
acquired by the Company by reason of redemption, purchase, or otherwise shall be
reissued, and all such shares shall be cancelled, retired and eliminated from
the shares which the Company shall be authorized to issue.
9. NOTICES. All notices to the Company permitted
hereunder shall be personally delivered or sent by first class mail, postage
prepaid, addressed to its principal office located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ or to such other address at which its principal
office is located and as to which notice thereof is similarly given to the
holders of the Preferred Stock at their addresses appearing on the books of the
Company.
IN WITNESS WHEREOF, Coram, Inc. has caused this Certificate to
be signed by an appropriate officer on this 29th day of December, 2000.
-------------------------
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Exhibit B
Stockholders Agreement
B-1
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "STOCKHOLDER AGREEMENT") is made and
entered into as of the 29th day of December, 2000, by and among CORAM, INC., a
Delaware corporation (the "COMPANY"), CERBERUS PARTNERS, L.P., a New York
limited partnership ("CERBERUS"), FOOTHILL CAPITAL CORPORATION, a California
corporation ("FOOTHILL"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO., a New York corporation
("GOLDMAN"). Cerberus, Foothill, and Goldman and each holder of the Company's
stock which becomes a party to this Agreement after the date hereof are
individually referred to herein as a "STOCKHOLDER," and collectively as the
"STOCKHOLDERS."
W I T N E S S E T H
WHEREAS, pursuant to that certain Exchange Agreement (herein so
defined), of even date herewith, by and among the Company and the Stockholders,
(a) Cerberus has acquired 416.51 shares of the Company's Preferred Stock (as
hereinafter defined), (b) Foothill has acquired 169.71 shares of the Company's
Preferred Stock, and (c) Goldman has acquired 318.78 shares of the Company's
Preferred Stock;
WHEREAS, the Company's Preferred Stock held by Cerberus, Foothill, and
Goldman constitute all of the shares of the Preferred Stock outstanding of the
Company on the date hereof; and
WHEREAS, the parties hereto wish to state herein their mutual
understandings, agreements and obligations and to impose certain restrictions on
the rights and benefits with respect to the voting and disposition of the Shares
(as hereinafter defined) now or hereafter owned by the Stockholders.
NOW, THEREFORE, for and in consideration of the foregoing, the
agreements set forth below, and other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, and intending to be legally
bound hereby, the parties agree as follows:
1. DEFINITIONS.
The following capitalized terms are used in this Agreement with the
meanings thereafter ascribed:
"AFFILIATE" of a Person means any other Person that, directly or
indirectly, controls, is controlled by, or is under common control with such
other Person. For purposes of the foregoing definition: (a) with respect to any
Person which is not an individual, "CONTROL" shall mean the direct or indirect
power to direct or cause the direction of the management of a Person, by
ownership of equity securities, by contract or otherwise, and shall be deemed to
exist with respect to any entity as to which the Person in question owns or is
the beneficiary of, directly or indirectly, fifty percent (50%) or more of the
outstanding voting rights or equity interests; and (b) with respect to any
Person who is an individual, the term "PERSON" shall include, in addition to
such individual, such individual's ancestors and descendants (including by
adoption), spouse, spouse's ancestors and descendants, and any other individual
as to whom there exists a family
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relationship with the first individual which is close enough to indicate a
commonality of interest between such individual and the first individual.
"AGREEMENT" means this Stockholder Agreement, together with any addenda
and amendments made in the manner described in this Agreement.
"CERTIFICATE OF DESIGNATION" means the Certificate of Designation of
the Company filed with the Secretary of State of the state of Delaware on
December 29, 2000.
"COMMISSION" means the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.
"COMMON STOCK" means the $1.00 par value per share common stock of the
Company.
"DISPOSITION" means any transfer of all or any part of the rights and
incidents of ownership of the Shares, including the right to vote, and the right
to possession of the Shares as collateral for indebtedness, whether such
transfer is outright or conditional, inter vivos or testamentary, voluntary or
involuntary, or for or without consideration.
"DESIGNATED HEALTH SERVICES" shall have the meaning set forth under
▇▇▇▇▇ II.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the time.
"IMPERMISSIBLE INVESTOR" means any Person who is not a Permissible
Investor.
"NON-REFERRAL AGREEMENT" means a written agreement in form and
substance acceptable to the Company, and executed and delivered by an
Impermissible Investor, pursuant to which such Impermissible Investor agrees
that it will not make any referral (as defined under ▇▇▇▇▇ II) of patients to
the Company for Designated Health Services during such period of time as the
Impermissible Investor is a Stockholder or Stockholder Owner hereunder.
"PERMITTED DISPOSITION" means a Disposition effected by a Stockholder
to a Permissible Investor as to which the transferor shall have obtained and
delivered to the Company (a) the written agreement of the proposed transferee,
in form and substance reasonably satisfactory to the Company, that the proposed
transferee will be bound by, and that the Shares proposed to be transferred to
the proposed transferee will be subject to, this Agreement, and (b) (unless
waived by the Company in its discretion) an opinion of counsel, reasonably
satisfactory to the Company, (i) that such transfer of interest does not require
registration under the Securities Act or any applicable state securities laws
and (ii) that such proposed transferee is a Permissible Investor. Such written
agreement and opinion of counsel shall be attached as an addendum to this
Agreement and thereby incorporated as a part of this Agreement, whereupon the
proposed transferee shall have adopted this Agreement, and thereafter shall be a
party hereto, and the term "Stockholders" as used herein shall thereafter mean
and include such transferee.
"PERMISSIBLE INVESTOR" means any Person other than (a) a physician who
is in a position to make any referrals (as defined under ▇▇▇▇▇ II) of patients
to the Company for Designated Health Services for which payment may be made
under Title XVIII of the Social Security Act
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(42 U.S.C. Section 1395 et seq.) or under Title XIX of the Social Security Act
(42 U.S.C. Section 1396 et seq.) (a "REFERRING PHYSICIAN"), (b) a member of a
Referring Physician's immediate family (as defined under ▇▇▇▇▇ II) (a "REFERRING
PHYSICIAN FAMILY MEMBER"), or (c) a Person in which a Referring Physician or a
Referring Physician Family Member, directly or indirectly, owns or holds any
ownership or equity interest (as a shareholder, partner, member, or otherwise);
provided, however, that a Person who would be deemed a Referring Physician under
clause (a) above shall not be deemed a Referring Physician and shall be a
Permissible Investor if such Person enters into a Non-Referral Agreement with
the Company and does not at any time breach such Non-Referral Agreement.
"PERSON" means an individual, corporation, partnership, joint venture,
trust, limited liability company, government, or other legal entity of any
nature whatsoever.
"PREFERRED STOCK" means the $0.001 par value per share preferred stock
of the Company.
"QUALIFIED PUBLICLY TRADED COMPANY" means any legal entity whatsoever
the ownership of which by a Referring Physician or a Referring Physician Family
Member would not violate ▇▇▇▇▇ II by virtue of the fact that such ownership
would fall within the exception under ▇▇▇▇▇ II for the ownership of publicly
traded securities and mutual funds.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"SHARES" means and includes as to each Stockholder, all shares of the
equity securities of the Company, including without limitation the Common Stock
and the Preferred Stock, now or in the future owned of record or beneficially by
such Stockholder (including without limitation, all Common Stock, Preferred
Stock or other equity securities of the Company hereafter acquired pursuant to
the exercise of any option, warrant, or other right granted by the Company to
such Stockholder).
"SHARE VALUE" shall have the meaning ascribed to it in Section 3.3(d)
below.
"▇▇▇▇▇ II" means the Medicare and Medicaid physician self-referral
statutory provisions at 42 U.S.C. Sections 1395nn and 1396b(s), as amended,
together with all rules and regulations promulgated thereunder, as the same may
be amended from time to time.
"STOCKHOLDER OWNER" means any Person who, directly or indirectly, owns
or holds any ownership or equity interest (as a shareholder, partner, member, or
otherwise) in a Stockholder.
"TERM SHEET" means that Term Sheet agreed to by the Company and the
Stockholders dated December 28, 2000, as approved by the United States
Bankruptcy Court for the District of Delaware.
2. STOCKHOLDER REPRESENTATIONS AND WARRANTIES.
2.1. QUALIFICATION AS PERMISSIBLE INVESTOR. Each Stockholder hereby
represents and warrants that (a) it and each of its Stockholder Owners qualifies
as a Permissible Investor
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hereunder or (b) it is a Permissible Investor and it has duly promulgated to its
Stockholder Owners the notice attached hereto as EXHIBIT A.
2.2. ACCREDITED INVESTOR. Each Stockholder hereby represents and
warrants that (a) it satisfies the definition of "accredited investor" as set
forth in Rule 501(a) of Regulation D under the Securities Act and/or is a
"sophisticated investor"; and (b) it has acquired the Shares for its own
investment account and not (i) with a view to the resale or distribution of
all or any part thereof or (ii) on behalf of another Person who has not made
the foregoing representation.
3. SHARE CONTROL.
3.1. RESTRICTIONS UPON TRANSFER OF SHARES. Notwithstanding any
provision of this Agreement to the contrary and except as otherwise permitted in
this Agreement, during the Term (a) neither the Company nor any Stockholder
shall make any Disposition of its Shares, except for a Permitted Disposition,
and (b) each Stockholder shall at all times during its ownership of any Shares
maintain its status as a Permissible Investor.
3.2. RESTRICTION ON OWNERSHIP OF STOCKHOLDER. Except as otherwise
provided in this Section 3.2, during the Term all Stockholders shall at all
times ensure that all of their respective Stockholder Owners are Permissible
Investors; provided, however, that a Person who would otherwise be an
Impermissible Investor hereunder shall not be prohibited from directly or
indirectly owning or holding an ownership or equity interest (as a shareholder,
partner, member, or otherwise) in a Stockholder Owner which is Qualified
Publicly Traded Company. Notwithstanding the foregoing, if any Stockholder or
any of its Affiliates desires to enter into a transaction pursuant to which an
Impermissible Investor would become a Stockholder Owner with respect to such
Stockholder in a manner which is prohibited under the immediately preceding
sentence, such Stockholder shall first either (a) have such Person enter into a
Non-Referral Agreement with the Company or (b) submit to the Company's Board of
Directors a written opinion of legal counsel describing the proposed transaction
in detail and setting forth a legal opinion to the effect that the proposed
transaction would not result in a violation of ▇▇▇▇▇ II. In the event a written
opinion of counsel is submitted as provided in part (b) of the preceding
sentence, and the Company's Board of Directors agrees, in its discretion, that
the proposed transaction would not result in a violation of ▇▇▇▇▇ II (which such
agreement by the Company's Board of Directors shall include the approval of at
least one (1) of each of the Cerberus Directors, the Foothill Directors, and the
Goldman Directors), such Stockholder or its Affiliate, as the case may be, may
consummate the proposed transaction but only in the manner described in the
applicable opinion of counsel approved by the Company's Board of Directors.
3.3. COMPANY OPTION TO PURCHASE SHARES.
(a) In the event any Shares are at any time legally or
beneficially owned by any Impermissible Investor, the Company shall at all times
thereafter have the option to (i) require that the Impermissible Investor
immediately enter into a Non-Referral Agreement with the Company or (ii) if the
Impermissible Investor fails to immediately enter into such a Non-Referral
Agreement of if the Company otherwise elects in its discretion, purchase such
Shares in accordance with this Section 3.3. Such option shall be exercised by
the Company providing written notice (the "ELECTION NOTICE") to the
Impermissible Investor. In the event the Company elects to purchase the Shares,
the exercise of such purchase option shall be at a price equal to the Share
Value and shall be payable as set forth in Section 3.3(d) below.
(b) In the event a Stockholder Owner is at any time an
Impermissible Investor, the Company shall at all times thereafter have the
option to (i) require such Stockholder Owner to
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immediately enter into a Non-Referral Agreement with the Company or (ii) if such
Stockholder Owner fails to immediately enter into such a Non-Referral Agreement,
or if the Company otherwise elects in its discretion, purchase all Shares owned
by the Stockholder in question in accordance with this Section 3.3. Such option
shall be exercised by the Company providing an Election Notice (x) to the
Impermissible Investor in the event of the exercise of the option set forth in
clause (i) of the preceding sentence or (y) to the Stockholder in question in
the event of the exercise of the option set forth in clause (ii) of the
preceding sentence. In the event the Company elects to purchase the Shares, the
exercise of such purchase option shall be at a price equal to the Share Value
and shall be payable as set forth in Section 3.3(d) below.
(c) The total purchase price for Shares purchased under
Sections 3.3(a) and (b) above (the "PURCHASE PRICE") shall be paid in cash or by
certified check, except that at the option of the Company, and to the extent
permissible under ▇▇▇▇▇ II, up to ninety percent (90%) of the total Purchase
Price may be paid by the unsecured promissory note of the Company (the "NOTE"),
with principal payable in equal annual installments over a period of not more
than three (3) years, and with simple interest at the lowest rate which would
result in there being no unstated interest for purposes of Section 483 of the
Internal Revenue Code of 1986, payable upon each anniversary of the Note. The
Company shall have the right to repay the principal and accrued interest
outstanding under the Note without penalty at any time and from time to time.
(d) The "SHARE VALUE" at any time shall be the fair market
value price per Share at such time as determined by the Board. The Board shall
agree on a value according to such criteria as it deems relevant, which may
include any valuation of Shares made in connection with any investment in the
Company, the restricted nature of the Shares, book value, earnings and earnings
prospects of the Company and a comparison to other companies in the same
industry as the Company. If the Board of Directors is unable to approve any
determination of the Share Value, then the Share Value shall be the fair market
value of a Share as determined by an independent appraiser selected and approved
by the Board of Directors.
(e) The closing of any purchase and sale of Shares under this
Section 3.3 shall be held not more than one hundred twenty (120) days after the
Company's issuance of an Election Notice with respect to a purchase of Shares
and shall take place at the principal office of the Company (or such other
location as may be agreed to by all parties involved). At the closing, the
Person selling Shares shall deliver the certificates for the Shares being sold,
duly endorsed for transfer and free and clear of any lien, claim, charge,
pledge, security interest, or encumbrance whatsoever.
4. GOVERNANCE PROVISIONS.
4.1. VOTING RIGHTS. The holders of the shares of Preferred Stock hereby
acknowledge and agree that the voting rights set forth in Section 5 of the
Certificate of Designation shall not be effective (and shall not be exercised by
the holders of the shares of Preferred Stock) prior to the effective date of a
Chapter 11 plan of reorganization with respect to the Company. Prior to such
date, the holders of the shares of Preferred Stock shall have the following
voting rights in lieu of the voting rights set forth in Section 5 of the
Certificate of Designation:
(a) The holders of shares of Preferred Stock shall have the
exclusive right, voting separately as a single class, to elect two directors of
the Company; provided, however, that if the holders of shares of Preferred Stock
do not elect any directors to the Board of Directors, such holders will have the
right to appoint an observer to the Board of Directors.
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(b) Any vacancy occurring in the office of director elected by
the holders of Preferred Stock or any additional director to be elected pursuant
to Section 4.1(a) or 4.1(b) above may be filled by the remaining director(s)
elected by the holders of Preferred Stock unless and until such vacancy shall be
filled by the holders of of the shares of Preferred Stock. The term of office of
the directors elected by the holders of the shares of Preferred Stock shall
terminate upon the election of their successors at any meeting of stockholders
held for the purpose of electing directors.
(c) The directors elected by the holders of the shares of
Preferred Stock voting separately as a single class may be removed from office
with or without cause by the vote of the holders of at least a majority of the
outstanding shares of Preferred Stock.
(d) From and after the effective date of a Chapter 11 plan or
reorganization with respect to the Company, the foregoing rights of the holders
of the shares of Preferred Stock to elect directors of the Company in accordance
with this Section 4.1 shall no longer be effective (and shall not be exercised
by the holders of the shares of Preferred Stock) and shall be replaced with the
rights of the holders of shares of Preferred Stock to elect directors of the
Company in accordance with Sections 5 of the Certificate of Designation.
5. COMPANY COVENANTS
5.1. FURTHER ASSURANCES. The Company agrees to negotiate, execute and
deliver such amendments, supplements or other modifications of this Stockholder
Agreement as shall be deemed by the Stockholders to be necessary, desirable or
advisable to reflect the terms set forth in the Term Sheet.
6. STOCKHOLDERS' COVENANTS
6.1. FURTHER ASSURANCES. Each Stockholder agrees to negotiate, execute
and deliver such amendments, supplements or other modifications of this
Stockholder Agreement as shall be deemed by the Company to be necessary,
desirable or advisable to reflect the terms set forth in the Term Sheet.
7. INDEMNIFICATION
7.1. INDEMNIFICATION BY STOCKHOLDERS. Each Stockholder (the
"STOCKHOLDER INDEMNITOR") hereby agrees to defend, indemnify, and hold the
Company and all other Stockholders, and their respective officers, directors,
agents, representatives, Affiliates, successors and assigns (collectively, the
"INDEMNITEES"), harmless from and against any claim, liability, obligation,
expense, loss, or other damage (including, without limitation, reasonable
attorneys' fees and expenses) (collectively, "CLAIMS") asserted against, imposed
upon, or incurred by any of them in respect of:
(a) Any and all Claims resulting from any misrepresentation or
breach of warranty or violation of any covenant made by such Stockholder
Indemnitor hereunder, or in any certificate or agreement furnished or to be
furnished by the Stockholder Indemnitor or any Stockholder Owner or Affiliate
with respect to such Stockholder Indemnitor hereunder (including, without
limitation, any Non-Referral Agreement). It is hereby expressly understood and
agreed that for the purposes of the foregoing indemnification, the term Claim
shall include
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the full amount of the Purchase Price paid by the Company, and all other costs
and expenses whatsoever which the Company incurs, in connection with the
Company's purchase of any Shares pursuant to Section 3.3 above;
(b) Any and all Claims arising from or in connection with any
act, omission, or status of the Stockholder Indemnitor creating liability for
violations of ▇▇▇▇▇ II; and
(c) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses incident to any item to which the
foregoing indemnity relates.
7.2. CLAIMS PROCESS. As soon as is reasonably practicable after any
party entitled to indemnification pursuant to Section 6.1 above (the
"INDEMNIFIED PARTY") becomes aware of any Claim that it has and which is covered
under Section 6.1 above, such Indemnified Party shall notify the party obligated
to provide indemnification under such sections (the "INDEMNIFYING PARTY") in
writing, which notice shall describe the Claim in reasonable detail, and shall
indicate the amount (estimated, if necessary to the extent feasible) of the
Claim. The failure of any Indemnified Party to promptly give any Indemnifying
Party such notice shall not preclude such Indemnified Party from obtaining
indemnification under Section 6.1 above, except to the extent that such
Indemnified Party's failure has prejudiced the Indemnifying Party's rights or
increased its liabilities and obligations hereunder. In the event of a third
party Claim which is subject to indemnification under Section 6.1 above, the
Indemnifying Party shall promptly defend such Claim by counsel of its own
choosing, subject to the approval of the Indemnified Party, which approval shall
not unreasonably be withheld, and the Indemnified Party shall cooperate with the
Indemnifying Party in the defense of such Claim including the settlement of the
matter on the basis stipulated by the Indemnifying Party (with the Indemnifying
Party being responsible for all costs and expenses of such settlement). Any such
settlement shall include a complete and unconditional release of the Indemnified
Party from the Claim. If the Indemnifying Party within a reasonable time after
notice of a Claim fails to defend the Indemnified Party, or if the Indemnifying
Party is, or at any time during the Term of this Agreement was, an Impermissible
Investor, the Indemnified Party shall be entitled to undertake the defense,
compromise, or settlement of such Claim at the expense of and for the account
and risk of the Indemnifying Party.
8. GENERAL PROVISIONS.
8.1. TERM. The term of this Agreement ("TERM") shall commence upon the
date hereof and shall terminate on the first to occur of (a) a single Person or
a Person and its Affiliates becoming the holder of all Shares, (b) the effective
date of a written agreement signed by all Stockholders providing for the
termination of this Agreement, (c) a Sale of the Company, (d) the voluntary
dissolution of the Company, or (e) the date upon which the Company is a
Qualified Publicly Traded Company.
8.2. LEGEND. During the Term, each certificate representing the Shares
shall bear the following legend, or a similar legend reasonably deemed by the
Company to constitute an appropriate notice of the provisions hereof and the
applicable securities laws (any such certificate not having such legend shall be
surrendered upon demand by the Company and so endorsed):
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On the face of the certificate:
TRANSFER OF THIS STOCK IS RESTRICTED IN ACCORDANCE WITH CONDITIONS
PRINTED ON THE REVERSE OF THIS CERTIFICATE.
On the reverse:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND
TRANSFERABLE ONLY IN ACCORDANCE WITH THAT CERTAIN STOCKHOLDER AGREEMENT (THE
"AGREEMENT") BY AND AMONG CORAM, INC. (THE "COMPANY") AND CERTAIN STOCKHOLDERS
THEREOF, DATED DECEMBER 29, 2000, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY AND MAY BE INSPECTED DURING NORMAL BUSINESS HOURS. NO
TRANSFER OR PLEDGE OF THE SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN
ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SAID AGREEMENT. IN ADDITION,
THE COMPANY IS ENTITLED UNDER THE AGREEMENT TO ACQUIRE THE SHARES OF THE
COMPANY'S STOCK OWNED BY A STOCKHOLDER, OR HELD BY A TRANSFEREE OF SUCH SHARES,
IN THE EVENT OF CERTAIN VIOLATIONS OF THE AGREEMENT. BY ACCEPTANCE OF THIS
CERTIFICATE, ANY HOLDER, TRANSFEREE, OR PLEDGEE HEREOF AGREES TO BE BOUND BY ALL
OF THE PROVISIONS OF SAID AGREEMENT.
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY
THE HOLDER FOR INVESTMENT PURPOSES ONLY AND NOT FOR RESALE, TRANSFER OR
DISTRIBUTION, HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE STATE AND FEDERAL SECURITIES LAWS, AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO EFFECTIVE
REGISTRATION UNDER SUCH LAWS, OR IN TRANSACTIONS OTHERWISE IN COMPLIANCE WITH OR
EXEMPT FROM SUCH LAWS, AND UPON EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY
OF COMPLIANCE WITH OR EXEMPTION FROM SUCH LAWS, AS TO WHICH THE COMPANY MAY RELY
UPON AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY.
Each Stockholder shall promptly surrender the certificates
representing its Shares to the Company so that the Company may affix the
foregoing legends thereto. A copy of this Agreement shall be kept on file in the
principal office of the Company. Upon termination of all applicable restrictions
set forth herein and upon tender to the Company of the appropriate stock
certificates, the Company shall reissue to the holder of such stock certificates
new stock certificates which shall contain only the second paragraph of the
restrictive legend set forth above. This legend may be modified from time to
time by the Board of Directors of the Company to conform to applicable law or to
this Agreement.
8.3. SPECIFIC ENFORCEMENT. The Stockholders expressly agree that they
will be irreparably damaged if this Agreement is not specifically enforced. Upon
a breach or threatened
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breach of the terms, covenants and/or conditions of this Agreement by any
Stockholder, any other Stockholder shall, in addition to all other remedies
available with respect to such breach, be entitled to a temporary or permanent
injunction, without showing any actual damage, and/or a decree for specific
performance, in accordance with the provisions hereof.
8.4. NOTICES. All notices, requests, consents, and other communications
required or permitted hereunder shall be in writing and shall be effective when
delivered in person or by "confirmed" facsimile transmission or one day after
deposit with a nationally recognized overnight delivery carrier properly
addressed and deposited prior to the applicable deadline for receipt of
overnight packages, or five days after deposit in the U.S. Mail, certified or
registered mail, return receipt requested, postage prepaid, in each case
addressed as follows (or at such other address for the parties as shall be
specified by like notice):
if to the Company: Coram, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
with a copy (which shall
not constitute notice) to: ▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esquire
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
If to Stockholders:
Cerberus Partners, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇ ▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Foothill Capital Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
B-1
Attn: ▇▇ ▇▇▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇. ▇▇▇▇▇▇, Esq.
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
8.5. ASSIGNMENT. Except as specifically provided herein, this Agreement
shall not be assignable by any of the parties hereto without the written consent
of the other parties.
8.6. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Delaware, irrespective of the
choice of law provisions thereof.
8.7. AMENDMENT. Except as otherwise provided herein, this Agreement may
be amended, supplemented, or interpreted at any time, but only by a written
instrument executed by the Company and by Stockholders holding a majority of the
Shares, so long as such Stockholders also include Cerberus, Foothill, and
Goldman.
8.8. FACSIMILE SIGNATURE; COUNTERPARTS. This Agreement may be executed
by facsimile signature and in two or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.
8.9. ENTIRE AGREEMENT. This Agreement, together with the other
documents delivered pursuant hereto or incorporated by reference herein, contain
the entire agreement between the parties hereto concerning the transactions
contemplated herein and supersede all prior agreements or understandings between
the parties hereto relating to the subject matter hereof. No oral
representation, agreement, or understanding made by any party hereto shall be
valid or binding upon such party or any other party hereto.
8.10. EFFECT OF OTHER LAWS AND AGREEMENTS. The rights and obligations
of the parties under this Agreement shall be subject to any restrictions on the
purchase of stock which may be imposed by the General Corporation Law of the
State of Delaware or any agreement now or hereafter entered into between the
Company and any financial institution with respect to loans or other financial
accommodations made to the Company. Nothing contained herein shall be deemed to
limit the obligations and duties imposed upon officers and directors in
accordance with state and federal laws.
8.11. FURTHER ASSURANCE. Each party hereto shall do and perform, or
cause to be done and performed, all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any other party hereto may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
B-1
8.12. CAPTIONS AND SECTION HEADINGS. Except as used in Section 1,
captions and section headings used herein are for convenience only and are not a
part of this Agreement and shall not be used in construing it.
8.13. WAIVER. Any waiver by any party hereto of any of his or its
rights hereunder shall be without prejudice of his or its future assertion of
any such rights, and any delay in exercising any rights shall not operate as a
waiver thereof.
8.14. SEVERABILITY OF PROVISIONS. If any one or more of the provisions
of this Agreement shall be determined to be invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions of this
Agreement shall not be impaired in any way.
8.15. SPECIFIC PERFORMANCE. In any action or proceeding to specifically
enforce the provisions of this Agreement, any Person (including the Company)
against whom such action or proceeding is brought hereby waives the claim or
defense therein that the plaintiff or claimant has an adequate remedy at law,
and such Person shall not urge in any such action or proceeding the claim or
defense that such remedy at law exists. The provisions of this paragraph shall
not prevent any party from seeking a remedy at law in connection with any breach
of this Agreement.
8.16. STOCKHOLDER OBLIGATIONS. The obligations of the Stockholders
hereunder are several and not joint.
8.17. INTERPRETATION. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement and that consequently any rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party is not applicable in the interpretation of this Agreement or
any exhibits hereto.
8.18. MATERIAL CHANGE IN LAW. In the event that, after the date of this
Agreement, there is a material change in law which results in this Agreement or
the parties' performance of their obligations hereunder being in violation of
applicable law, the parties shall negotiate in good faith with one another to
amend this Agreement so as to eliminate such violation, PROVIDED, that such
amendment shall conform as closely as possible to the original terms of this
Agreement. If the parties are unable to agree upon either: (a) whether there has
been a material change in law which results in this Agreement or the parties'
performance of their obligations hereunder being in violation of applicable law;
or (b) the terms or form of such amendment, then either party may submit the
matter to binding arbitration before a single arbitrator in Denver, Colorado in
accordance with the rules and regulations of the American Arbitration
Association then in effect, and judgment upon the award of the arbitrator may be
entered in any court having jurisdiction. If the arbitrator determines that it
is more likely than not that a material change in law after the date of this
Agreement has resulted in this Agreement or the parties' performance of their
obligations hereunder is in violation of applicable law, such arbitrator shall
either: (a) draft and require the parties to enter into an amendment to this
Agreement which eliminates the violation of law and conforms as closely as
possible to the original terms of this Agreement; or (b) if the arbitrator
determines that no such amendment is feasible, order the termination of this
Agreement. Until any such matter is resolved through mutual agreement or binding
arbitration, each party shall
B-1
continue to observe all other terms of this Agreement. This Section 7.18 shall
not be construed to require that the parties arbitrate any matter under this
Agreement other than as expressly described in this Section 7.18.
B-1
IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
CORAM, INC.
By:
--------------------------------------------------
Its:
-------------------------------------------------
CERBERUS PARTNERS, L.P.
By:
--------------------------------------------------
Its: GENERAL PARTNER
-----------------------------------------------
By:
--------------------------------------------------
Its:
-------------------------------------------------
FOOTHILL CAPITAL CORPORATION
By:
--------------------------------------------------
Its:
-------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
By:
--------------------------------------------------
Its:
-------------------------------------------------
B-1
EXHIBIT A
Based on a recent transaction converting pre-existing debt to preferred stock,
[name of partnership] (the "PARTNERSHIP") holds an equity interest in Coram,
Inc. (the "COMPANY"). The Partnership continues to hold debt issued by the
Company as well. This Notice addresses certain requirements of federal law which
prohibit an individual with a direct or indirect ownership or investment
interest in a health care provider from making Medicare or Medicaid referrals to
that provider for certain services. The purpose of this Notice is to assure that
you are aware of these requirements so that the Company and its investors can
maintain compliance with this law.
The federal law, referred to as "▇▇▇▇▇ II," prohibits physicians from making
Medicare and Medicaid referrals to an entity in which they have an ownership or
investment interest (subject to certain exceptions not applicable here). SEE
GENERALLY 42 U.S.C. Section 1395nn. These prohibitions apply to physician
ownership or investment in the Company because the Company and its subsidiaries
provide (i) parenteral and enteral nutrients, equipment, and supplies, (ii)
outpatient prescription drugs, (iii) infusion pumps (durable medical equipment),
and (iv) home health services and supplies. These items and services are
Designated Health Services which trigger the ▇▇▇▇▇ II prohibitions. Violations
of the statute could result in payment denials, refund obligations, and certain
penalties against the party making or receiving a prohibited referral.
As noted, ▇▇▇▇▇ II also prohibits referrals by physicians whose "IMMEDIATE
FAMILY MEMBERS" have an ownership or investment interest in a company that
provides Designated Health Services. The proposed ▇▇▇▇▇ II regulations define
"IMMEDIATE FAMILY MEMBER" to include the following:
[H]usband or wife; natural or adoptive parent, child, or
sibling; stepparent, stepchild, stepbrother, or stepsister;
father-in-law, mother-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law; grandparent or grandchild;
and spouse of a grandparent or grandchild.
63 Fed. Reg. at 1721-22 (1998) (proposed 42 C.F.R. Section 411.351). Thus, a
physician who refers patients to the Company for Designated Health Services and
who has an immediate family member who has an ownership or investment interest
in the Company would be making an improper referral under ▇▇▇▇▇ II, absent
exceptions which are not applicable here.
▇▇▇▇▇ II potentially applies to your indirect interest in the Company in two
ways.
First, if you are a physician who is in a position to make Medicare or
Medicaid referrals of Designated Health Services to the Company, such
referrals would be prohibited. If you are in a position to make such
referrals and wish to continue as an investor in the Partnership, you will
need to enter into an agreement that you will not make Medicare or Medicaid
referrals of Designated Health Services to the Company.
Second, if you have an immediate family member who is a physician who is in a
position to make Medicare or Medicaid referrals of Designated Health Services
to the Company, such referrals would also be prohibited. If you have an
immediate family member who is in a position to make such referrals and you
wish to continue as an investor in the
B-1 Exhibit A
Partnership, you need to promptly advise the family member that it would be
improper for him/her to make Medicare or Medicaid referrals of Designated
Health Services to the Company.
If you have an questions regarding ▇▇▇▇▇ II or the issues addressed in this
Notice, please contact [name, title, phone number].
B-1 Exhibit A
Exhibit C
Opinions of Counsel
▇-▇
▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit Partners L.P.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Foothill Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Cerberus Partners L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: CORAM, INC.
Ladies and Gentlemen:
We have acted as counsel for Coram, Inc., a Delaware corporation (the
"COMPANY"), in connection with the transactions contemplated by the Exchange
Agreement (herein so defined) of even date herewith by and among the Company and
▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit Partners L.P., a Bermuda limited partnership ("GOLDMAN"),
Foothill Capital Corporation, a California corporation ("FOOTHILL"), and
Cerberus Partners L.P., a New York limited partnership ("CERBERUS") (each of
Goldman, Foothill and Cerberus a "HOLDER" and collectively, the "HOLDERS")
Capitalized terms used but not defined herein shall have, unless the context
otherwise requires, the respective meanings assigned to them in the Exchange
Agreement.
For purposes of this opinion, we have examined, among other things, the
following documents, each dated as of the date hereof, unless otherwise
specified:
(i) executed counterparts of the Exchange Agreement;
(ii) the Certificate of Designation filed with the Secretary of State
of the State of Delaware on December 29, 2000;
(iii) executed counterparts of the Stockholders' Agreement (herein so
defined) of even date herewith by and among the Company and Foothill, Cerberus
and ▇▇▇▇▇▇▇ Sachs & Co., a New York corporation;
(iv) copies of the Certificate of Amendment and Restatement of
Certificate of Incorporation filed with the Secretary of State of the State of
Delaware on December 29, 2000 and the bylaws of the Company, as amended as of
the date hereof (collectively, the "CHARTER DOCUMENTS");
(v) certificate of the Secretary of State of the State of Delaware
attesting to, as of December 28, 2000, the legal existence and the good standing
of the Company in the State of Delaware (the "CERTIFICATE"); and
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(vi) the Order dated December 28, 2000 entered by the United States
Bankruptcy Court for the District of Delaware.
The documents, agreements and instruments referred to in paragraphs (i)
through (iii) above are referred to herein as the "TRANSACTION DOCUMENTS."
In making such examination and in rendering the opinions set forth below, we
have assumed the genuineness of all signatures (other than those of the
Company), the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as
certified or photostat copies and the authenticity of the originals of such
latter documents.
We have assumed that each of the parties to the Transaction Documents (other
than the Company) has the power and authority and has taken the action
necessary to authorize the execution and delivery of, and the performance of
its obligations under, the Transaction Documents to which it is a party, that
such Transaction Documents have been validly executed and delivered by each
such party and are binding thereon, that no consent, approval, authorization,
declaration or filing by or with any governmental commission, board or
agency, which has not been obtained or made, is required for the valid
execution or delivery by such party of, or the performance of its obligations
under, the Transaction Documents.
As to matters of fact that have not been independently established, we have
relied with your permission upon the representations and warranties made by
the Company in the Transaction Documents and in certificates of public
officials and of officers of the Company, and we have assumed that such
representations and warranties and certificates are accurate, complete and
valid as of the date hereof.
We have assumed with your permission that (i) the State of New York is the
principal place of business of each of Goldman and Cerberus, and (ii) the
State of California is the principal place of business of Foothill.
The law covered by the opinions expressed herein is limited to the law of the
State of New York, and the Federal law of the United States, and, in respect
of the opinions set forth in paragraphs 1 through 5 below, the General
Corporation Law of the State of Delaware, and, in respect of the opinion in
the last sentence of paragraph 2 below as it concerns the enforceability
against the Company of the Stockholders' Agreement, the law of the State of
Delaware.
Based upon the foregoing, and subject to the exceptions, qualifications,
limitations, assumptions and reliances stated herein, it is our opinion that:
1. The Company is validly existing as a corporation in good
standing under the laws of the State of Delaware.
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2. The Company has the corporate power and authority to execute,
deliver and perform its obligations under the Transaction Documents. The
execution, delivery and performance by the Company of the Transaction Documents
have been duly authorized by all necessary corporate action on the part of the
Company. Each of the Transaction Documents has been duly executed and delivered
by the Company and constitutes the Company's legal, valid and binding obligation
enforceable against the Company in accordance with its terms.
3. The execution and delivery by the Company of, and performance
by it of its agreements in, the Transaction Documents do not (a) violate any
provision of the Charter Documents or (b) violate any statute, rule or
regulation of any governmental authority of the United States or the State of
New York, or any provision of the General Corporation Law of the State of
Delaware, known to us to which the Company is subject.
4. The issuance, sale and delivery of the Series A Preferred
Stock have been duly authorized by all requisite corporation action by the
Company and, when sold and delivered in the manner contemplated by the Exchange
Agreement, will be duly and validly issued and outstanding, fully paid and
non-assessable and free of any adverse claims, limitations on voting rights,
options and other encumbrances, other than as specified in the Transaction
Documents.
5. No authorization, approval, or other action by, and no notice
to or filing with, any governmental authority, which has not been obtained or
made, is required for the execution, delivery and performance of the Transaction
Documents (except for notice filings that may be required by applicable state
"blue sky" laws and federal securities laws).
6. Based upon the representations and warranties of the Company
and the Holders in the Transaction Documents with respect to factual matters, it
is not necessary in connection with the offer, sale and delivery of the Series A
Preferred Stock to the Holders under the Exchange Agreement to register the
Series A Preferred Stock under the Securities Act of 1933, as amended, or under
any applicable state securities or "blue sky" laws, other than notice filings
which may be required in connection therewith.
The opinions expressed herein are subject in all respect to the following
further qualifications, limitations and exclusions:
a. The opinions set forth in paragraph 2 above with respect to
enforceability are further subject to the effects of laws relating to fraudulent
conveyances, transfers and obligations, including, without limitation,
Bankruptcy Code Section 548, the Uniform Fraudulent Transfer Act and other laws
IN PARI MATERIA. Moreover, provisions of the Transaction Documents that permit
the Holders to take action or make determinations, or
C-1
to benefit from indemnities and similar undertakings of the Company, may be
subject to a requirement that such action be taken or such determinations be
made, and that any action or inaction by any of the Holders that may give rise
to a request for payment under such an undertaking be taken or not taken, on a
reasonable basis and in good faith. The foregoing opinions with respect to
enforceability are further qualified by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditor's rights
generally and by general principles of equity, public policy considerations,
judicial discretion and general requirements of good faith and fair dealing and
commercial reasonableness (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
b. We express no opinion as to how the transaction contemplated
by the Transaction Documents (the "TRANSACTION") may be characterized or treated
under the laws of the State of New York relating to licensure of home care
service agencies or by any governmental agency, including without limitation the
New York State Department of Health or the New York Public Health Council,
charged with the enforcement of such laws. We further express no opinion as to
the effect on the Company or its performance under the Transaction Documents of
any governmental agency's failure to approve a change of ownership and/or
control deemed to have resulted from the Transaction, including without
limitation the Company's continued indirect ownership of Coram Healthcare
Corporation of Greater New York, a New York corporation, and/or Coram Healthcare
Corporation of New York, a New York corporation.
c. The enforceability of provisions in the Transaction Documents
to the effect that terms may not be waived or modified except in writing may be
limited under certain circumstances.
d. We express no opinion as to any provisions in the Transaction
Documents relating to the waiver of any defenses or rights, jurisdiction or
release of any party.
e. We express no opinion as to the enforceability of the
indemnification provisions contained in any of the Transaction Documents insofar
as said provisions contravene public policy or might require indemnification or
payments with respect to any litigation against a party to any of the
Transaction Documents determined adversely to the other party(ies) to such
litigation, or any loss, cost or expense arising out of an indemnified party's
gross negligence or willful misconduct or any violation by an indemnified party
of statutory duties, general principles of equity or public policy.
f. Except as expressly set forth in paragraphs 5 and 6 above, no
opinion is given as to the application of any securities laws.
C-1
g. Our opinions are issued as of the date hereof and are limited
to the laws now in effect as to which our opinions relate and facts and
circumstances in existence on the date hereof, and we assume no undertaking to
advise you of any changes in the opinions expressed herein as a result of any
change in any laws, facts or circumstances which may come to our attention after
the date hereof.
h. References in this opinion letter to matters "known to us," a
statement made "to our knowledge" or words of similar import are intended to
indicate that, during the course of our representation of the Company, no
information that would give current actual knowledge of the inaccuracy of such
statement has come to the attention of those attorneys in this firm who have had
substantive involvement in the negotiation of the Transaction Documents.
Furthermore, with your permission we have made no independent investigation of
any such matter other than as set forth herein and no inferences to the contrary
should be drawn from our representation of the Company in this matter.
The opinions expressed herein are limited to matters governed by the laws of the
State of New York, the Delaware General Corporation Law in respect of the
opinions set forth in paragraphs 1 through 5 above (and the law of the State of
Delaware in respect of the opinion in the last sentence of paragraph 2 above as
it concerns the enforceability against the Company of the Stockholders'
Agreement), and the Federal laws of the United States of America, and our
opinions are limited accordingly. With respect to the opinions expressed in
paragraphs 5 and 6 above, to the extent that they are governed by the laws of
the State of California, our opinion is based solely upon our review of the
pertinent provisions of the CCH BLUE SKY LAW REPORTER as of the date hereof, and
our opinions are further limited accordingly.
This opinion letter is furnished solely for your benefit in connection with
matters relating to the Transaction Documents and may not be used or relied upon
by any other person or for any other purpose without our prior written consent.
Very truly yours,
▇-▇
▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital Partners L.P.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Foothill Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Cerberus Partners L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: CORAM, INC.
Ladies and Gentlemen:
I am Senior Vice President and General Counsel of Coram, Inc., a Delaware
corporation (the "COMPANY"). I am rendering this opinion in connection with the
transactions contemplated by the Exchange Agreement (herein so defined), dated
as of the date hereof, by and among the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit
Partners L.P., a Bermuda limited partnership ("GOLDMAN"), Foothill Capital
Corporation, a California corporation ("FOOTHILL") and Cerberus Partners L.P., a
New York limited partnership ("CERBERUS") (collectively, the "HOLDERS").
Capitalized terms used but not defined herein shall have, unless the context
otherwise requires, the respective meanings assigned to them in the Exchange
Agreement.
For purposes of this opinion, I have examined (i) the Exchange Agreement; (ii)
the Certificate of Designation filed with the Secretary of the State of Delaware
on the date hereof; (iii) the Stockholders' Agreement of even date herewith by
and among the Company, Foothill, Cerberus and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., a New York
corporation; (iv) Amendment No. 4 of even date herewith in respect of the
Securities Exchange Agreement (herein so defined) dated as of May 6, 1998 by and
among the Company, Coram Healthcare Corporation, a Delaware corporation ("CHC")
and the Holders; (v) Amended and Restated Series A Senior Subordinated Note of
even date herewith issued by the Company in favor of Foothill in the principal
amount of $11,477,677.64; (vi) Amended and Restated Series A Senior Subordinated
Note of even date herewith issued by the Company in favor of Goldman in the
principal amount of $21,560,340.08; (vii) Amended and Restated Series A Senior
Subordinated Note of even date herewith issued by the Company in favor of
Cerberus in the principal amount of $28,169,920.28; (viii) Amended and Restated
Series B Senior Subordinated Convertible Note of even date herewith issued by
the Company in favor of Goldman in the principal amount of $32,436,389.00; (ix)
Amended and
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Restated Series B Senior Subordinated Convertible Note of even date herewith
issued by the Company in favor of Foothill in the principal amount of
$17,267,558.00; (x) Amended and Restated Series B Senior Subordinated
Convertible Note of even date herewith issued by the Company in favor of
Cerberus in the principal amount of $42,280,152.00; and (xi) material agreements
to which the Company is bound and such other documents, originals or copies,
certified or otherwise identified to my satisfaction, as I deemed necessary or
advisable as a basis for the opinions hereinafter expressed.
The documents, agreements and instruments referred to in paragraphs (i)
through (xi) above are referred to herein as the "TRANSACTION DOCUMENTS."
I am of the following opinions:
1. The execution, delivery and performance by the Company of the
Transaction Documents and the consummation of the transactions therein
contemplated will not result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or conflict with any of the terms
or provisions of any material agreements to which the Company is bound, other
than (i) the Financing Agreement dated as of August 30, 2000 by and among the
Company, CHC and ▇▇▇▇▇▇▇▇▇ L.L.C., a Delaware limited liability company, (ii)
the Credit Agreement dated as of August 20, 1998 by and among the Company, CHC,
the Holders, the guarantors names therein and Foothill, as agent, and (iii) the
Securities Exchange Agreement, as amended prior to the date hereof.
2. The execution, delivery and performance by the Company of the
Transaction Documents and the consummation of the transactions therein
contemplated will not violate any court order or government authority order to
which the Company is subject on the date hereof.
I am licensed to practice law in the States of Colorado and Georgia, and my
opinion is limited accordingly.
This opinion may be relied upon by the addressees in connection with the
above transactions.
This opinion is not to be relied upon by the addressees for any other purpose,
or relied upon by any other person or for any other purpose without my prior
written consent.
Very truly yours,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇-▇
▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇
▇-▇
CORAM HEALTHCARE CORPORATION
CORAM, INC.
NOTE EXCHANGE TERM SHEET
This note exchange term sheet (the "TERM SHEET") sets forth the terms upon which
the Holders (as defined below) have agreed, subject to definitive documentation,
to exchange, effective December 31, 2000, certain Series A Notes (the "SERIES A
NOTES") and Series B Notes (the "SERIES B NOTES" and, together with the Series A
Notes, the "NOTES") issued by Coram, Inc. (the "ISSUER") and guaranteed by its
parent, Coram Healthcare Corporation (the "COMPANY"), and the subsidiaries of
Issuer named therein, to the Holders, for shares of a new series of Preferred
Stock of the Issuer having the rights, privileges and characteristics set forth
below.
DISCLAIMER: THIS TERM SHEET DOES NOT CONSTITUTE ANY FORM OF BINDING CONTRACT AND
THE SOLE PURPOSE THEREOF IS TO OUTLINE THE MATERIAL TERMS AS TO WHICH DEFINITIVE
AGREEMENTS MAY ULTIMATELY BE ENTERED INTO.
EXCHANGE
On the terms and subject to the conditions summarized below and to be set forth
in definitive agreements, the Holders will exchange up to approximately
$122,000,000 aggregate principal amount of Notes, which amount includes
approximately $11,200,000 of accrued but unpaid interest, for shares of
Preferred Stock. The Holders will continue to hold the actual amount of such
indebtedness that is not converted (estimated to be approximately $136,581,000
aggregate principal amount of Notes (the "REMAINING NOTES")) with such amended
terms as described below.
AMENDED REMAINING NOTES
The Remaining Notes will be amended to reflect a six-month maturity (June 30,
2001) and a coupon of 9% per annum, payable quarterly.
PREFERRED STOCK
COMPANY: Coram Healthcare Corporation.
ISSUER: Coram, Inc.
HOLDERS: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Credit Partners L.P., Foothill
Capital Corporation, Cereberus Partners L.P.
and any affiliate thereof.
LIQUIDATION PREFERENCE AMOUNT: $122,000,000 (or amount of debt converted)
total liquidation preference.
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DIVIDENDS: Cumulative compounding dividend at rate of
15% per annum of Liquidation Preference
Amount, payable quarterly in arrears on each
March 31, June 30, September 30 and December
31, out of legal available funds in
preference to dividends on Common Stock of
the Issuer.
Dividends will be payable (A) prior
to the effective date of a plan of
reorganization, in additional shares of
Preferred Stock having a Liquidation
Preference Amount equal to such dividend
amount or (B) following the effective date
of a plan of reorganization and at the
Company's election, in cash or shares of
Common Stock of the Issuer having a fair
market value equal to such cash dividend
payment, as determined by a consensus of
investment banking firms acceptable to the
Holders and the Issuer (the "DIVIDEND
SHARES") in lieu of cash dividends.
Dividends shall include such tax indemnities
and gross up provisions as are appropriate
and customary for transactions of this
nature.
POST-CHAPTER 11(1) VOTING RIGHTS: Each share of Preferred Stock shall have one
vote (subject to adjustment for dilution)
and shall vote together with the shares of
the Common Stock on all matters submitted to
a vote of the stockholders of the Issuer.
Amount of Common Stock and Preferred Stock
to be initially issued such that Preferred
Stock initially has 47.5% of total voting
power.
The unanimous affirmative vote of the
shares of Preferred Stock outstanding is
necessary to: (i) issue securities senior to
or securities on a parity with the Preferred
Stock; (ii) authorize or issue securities
convertible into such senior or parity
securities; (iii) amend the certificate of
incorporation or bylaws of the Issuer,
including to increase the size of the board
of directors; or (iv) enter into any
agreement(s) that would result in a change
of control, a merger, consolidation or other
combination by the Issuer, or a transfer of
all or a majority of the Issuer's assets.
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(1) In each case in this Term Sheet where a reference is made to "Post-Chapter
11" provisions, the effectiveness, force and effect of such provisions will be
suspended during the period prior to the effective date of a Chapter 11 plan of
reorganization for the Issuer.
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BOARD REPRESENTATION: Post-Chapter 11, Holders will have the right
to appoint three directors out of a total of
seven directors to the board of directors of
the Issuer and a quorum in meetings of the
board of directors shall be constituted by
the presence of a majority of the members of
the board, at least two of whom must be
directors appointed by the Holders. While
the Issuer's Chapter 11 case is pending, the
Holders will have the right to appoint two
directors to the Issuer's board of
directors. In the event that the Holders do
not appoint a director, Holders will have
observation rights.
MODIFICATION AND WAIVER: Modifications and amendments of the
Preferred Stock may be made by the Company
with the unanimous affirmative vote of
shares of the Preferred Stock outstanding,
including, without limitation, any action to
(a) reduce the stated value or liquidation
preference of, or dividend on the Preferred
Stock; (b) change the place or currency of
payment of stated value or liquidation
preference of, or dividend on, any Preferred
Stock; (c) impair the right to institute
suit for the enforcement of any payment on
or with respect to any Preferred Stock; or
(d) reduce the percentage of outstanding
Preferred Stock necessary to modify or amend
the terms thereof or to grant waivers.
COMPANY'S OPTION TO REDEEM: The Preferred Stock is redeemable at the
option of the Issuer, in whole or in part,
at any time, on not less than thirty (30)
days prior written notice, at the
Liquidation Preference Amount specified
above plus any accrued but unpaid dividends.
Redemption may be made in cash payment only.
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COVENANTS: The Preferred Stock will contain usual and
customary covenants for this type of
transaction, including the following: (i)
restrictions on incurring additional
indebtedness and liens (excepting the
Revolving Credit Facility and the Remaining
Notes); (ii) restrictions on any prepayment
or modification of indebtedness; (iii)
prohibitions on dividends or distributions
on, or redemption or repurchases of Common
Stock; (iv) prohibition on issuance of
senior or PARI PASSU securities; (v)
restrictions on acquisition of assets not in
the ordinary course of business and in
excess of specified thresholds; (vi)
prohibitions on making loans, advances or
guarantees in excess of $3 million, except
as required under existing agreements
relating to joint ventures, partnerships,
non-wholly owned consolidated subsidiaries
and the Company's Canadian subsidiaries;
(vii) restrictions on affiliated
transactions; (viii) information and
reporting requirements; (ix) restrictions on
sale and lease back transactions in excess
of $5 million; and (x) restrictions on any
transfer, sale or disposition of receivables
outside the ordinary course of business.
POST-CHAPTER 11 REMEDIES: The Preferred Stock will contain additional
remedy provisions, customary for securities
of this type, upon the occurrence of certain
events, including:
(i) the continuing breach of any covenants,
representations and warranties, expense or
indemnity provisions of the Preferred Stock;
(ii) non-payment of dividends; and
(iii) future bankruptcy of the Issuer or any
of its subsidiaries.
Such provisions will include the right to
elect two additional directors to the board
of directors of the issuer and a penalty
dividend rate.
REPRESENTATIONS AND WARRANTIES Customary representations relating to
organization and qualification, financial
statements, authorization, execution and
delivery, validity and enforceability of
agreements, issuance of the Preferred Stock,
SEC reports, actions pending, compliance
with laws and environmental regulations,
governmental consent, taxes, insurance
adequacy, no conflict with agreements and
charter provisions, capitalization, taxes,
ERISA and no material adverse change.
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ANTI-DILUTION PROTECTION: Shares of Preferred Stock shall be issued to
the Holders to provide standard
anti-dilution protection with respect to
voting rights, including adjustments for:
(i) extraordinary dividends; (ii)
recapitalization or subdivisions,
combinations or reclassifications of Common
Stock; (iii) full ratchet anti-dilution in
the event of issuance of any securities at
prices below the fair market value of such
shares of Common Stock. No adjustment will
be made for sale of equity securities at or
above the fair market value.
OTHER STANDARD POST-CHAPTER 11 The Preferred Shares will have tag along
RIGHTS: rights, pre-emptive rights, right of first
refusal, right of first offer, etc.
LIQUIDATION PREFERENCE: If the Issuer is sold, liquidated, dissolved
or if the business of the Issuer is wound up
for any reason, the Holders shall receive
the Liquidation Preference Amount of the
Preferred Stock plus accrued and unpaid
dividends, prior to any payments being made
to any other equity holders of the Issuer.
INDEMNITIES: The Company shall indemnify each Holder and
its respective directors, officers and
employees against all losses and damages
resulting from the transaction other than
such losses and damages which arise out of
the Holder's gross negligence or willful
misconduct.
CONDITIONS OF THE EXCHANGE: The exchange of the Notes for the Preferred
Stock would be subject to certain
conditions, including (i) the execution of a
stockholders' agreement to effect the voting
and other rights under the Preferred Stock;
(ii) amendment of the charter documents to
effect the issuance of the Preferred Stock
and the contemplated Board provisions; (iii)
the receipt of opinions of the Company's
counsel satisfactory to the Holders and any
required consents; (iv) order of the
Bankruptcy Court (a) approving the exchange,
issuance of the Preferred Stock and
amendments to the Remaining Notes
contemplated hereby, and (b) determining
that the Note Exchange shall not affect,
prejudice or impair the rights or claims of
the Holders and that any equitable claims
for relief affecting the Holders or their
claims shall be determined as though the
Note Exchange had not occurred.
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EXPENSES: The Company shall pay all reasonable outside
legal and consulting fees incurred by the
Holders in connection with the negotiations
between the parties, the transactions
contemplated hereby as well as any
amendments relating to the final
documentation and enforcement of the
Holders' rights related thereto.
Note Exchange Agreement to be governed
under New York law; terms of Preferred Stock
to be governed under Delaware law.
POST-CHAPTER 11 CONSENT TO Federal and state courts located in New York
JURISDICTION: City.
POST-CHAPTER 11 JURY WAIVER: The parties will waive all right to trial by
jury in any action, suit or proceeding
brought to enforce or defend any right or
remedy arising under or in connection with
this letter or any of the definitive
documents, whether grounded in tort,
contract or otherwise.
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