Exhibit 10.1
INVESTMENT AGREEMENT
dated as of July 19, 1999
between
TPG MAGELLAN LLC
and
MAGELLAN HEALTH SERVICES, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.......................................................................2
Section 1.02. General Interpretive Principles..................................................14
ARTICLE II
SHARE PURCHASE
Section 2.01. Share Purchase...................................................................14
Section 2.02. Share Purchase Closing...........................................................15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01. Corporate Organization and Qualification.........................................15
Section 3.02. Authorization of Agreements......................................................16
Section 3.03. Consents; No Conflicts...........................................................16
Section 3.04. Capitalization; Securities.......................................................17
Section 3.05. Subsidiaries; Equity Investments.................................................18
Section 3.06. Dividends, Stock Repurchases, Etc................................................19
Section 3.07. Company Reports; Financial Statements............................................19
Section 3.08. Undisclosed Liabilities..........................................................20
Section 3.09. Absence of Certain Changes.......................................................21
Section 3.10. Property.........................................................................23
Section 3.11. Litigation.......................................................................23
Section 3.12. Compliance with Laws; Regulatory Approvals.......................................23
Section 3.13. Taxes............................................................................24
Section 3.14. ERISA and Other Employment Matters...............................................25
Section 3.15. Contracts........................................................................27
Section 3.16. Client Relations.................................................................27
Section 3.17. Financial Advisors and Brokers; Fairness Opinion.................................28
Section 3.18. Exemption from Registration......................................................28
Section 3.19. Insurance........................................................................28
Section 3.20. Rights Agreement.................................................................28
Section 3.21. Disclosure.......................................................................29
Section 3.22. Year 2000 Compliance.............................................................29
Section 3.23. Environmental Matters............................................................29
Section 3.24. Controls.........................................................................29
Section 3.25. Joint Venture Matters............................................................29
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
Section 4.01. Organization.....................................................................30
Section 4.02. Authorization of Agreements......................................................31
Section 4.03. Consents; No Conflicts...........................................................31
Section 4.04. Financial Advisors and Brokers...................................................31
Section 4.05. Ownership of Equity Securities; Purpose of Investment............................31
ARTICLE V
GOVERNANCE
Section 5.01. Board Size.......................................................................32
Section 5.02. Board Representation.............................................................32
Section 5.03. Committees; Meetings.............................................................33
ARTICLE VI
STANDSTILL
Section 6.01. Standstill Agreement.............................................................33
ARTICLE VII
PRE-CLOSING COVENANTS
Section 7.01. Taking of Necessary Action.......................................................35
Section 7.02. Conduct of Business..............................................................36
Section 7.03. Notifications....................................................................37
Section 7.04. Alternative Transactions.........................................................37
Section 7.05. Debenture Indentures.............................................................37
ARTICLE VIII
ADDITIONAL COVENANTS
Section 8.01. Financial and Other Information..................................................38
Section 8.02. Limitation on Dividend Payments and Repurchases..................................38
Section 8.03. Limitation on Indebtedness.......................................................39
Section 8.04. Acquisitions and Dispositions....................................................39
Section 8.05. Equity Issuances.................................................................39
Section 8.06. Publicity........................................................................41
Section 8.07. Status of Dividends..............................................................41
Section 8.08. Director and Officer Indemnification.............................................42
Section 8.09. Listing; Reservation.............................................................42
Section 8.10. Legend...........................................................................42
Section 8.11. Limitation on Restrictions on Payment of Dividends...............................43
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Section 8.12. Chief Executive Officer..........................................................43
Section 8.13. Shareholder Approval.............................................................43
ARTICLE IX
CONDITIONS
Section 9.01. Conditions to Investor's Obligations with Respect to the Share Purchase..........45
Section 9.02. Conditions of the Company's Obligations with Respect to the Share Purchase.......47
ARTICLE X
TERMINATION
Section 10.01. Termination of Agreement.........................................................48
Section 10.02. Effect of Termination............................................................48
ARTICLE XI
MISCELLANEOUS
Section 11.01. Fees and Expenses................................................................49
Section 11.02. Survival of Representations and Warranties.......................................49
Section 11.03. Specific Performance.............................................................50
Section 11.04. Indemnification..................................................................50
Section 11.05. Notices..........................................................................51
Section 11.06. Entire Agreement; Amendment......................................................52
Section 11.07. Counterparts.....................................................................52
Section 11.08. Governing Law....................................................................52
Section 11.09. Successors and Assigns...........................................................53
Section 11.10. No Third-Party Beneficiaries.....................................................54
Section 11.11. Allocation.......................................................................54
Section 11.12. Pre-emptive Rights...............................................................54
EXHIBIT A Form of Series A Certificate of Designations
EXHIBIT B Form of Series B Certificate of Designations
EXHIBIT C Form of Junior Certificate of Designations
EXHIBIT D Form of King & Spalding Opinion
EXHIBIT E Form of Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Opinion
EXHIBIT F Form of Escrow Agreement
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INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (the "AGREEMENT"), dated as of July 19,
1999, by and between TPG Magellan LLC, a Delaware limited liability company (the
"INVESTOR"), and Magellan Health Services, Inc., a Delaware corporation (the
"COMPANY").
W I T N E S S E T H:
WHEREAS, each of the Company and the Investor has determined
to enter into this Agreement pursuant to which the Investor has agreed to
purchase from the Company, and the Company has agreed to issue and sell to the
Investor, (i) 59,063 shares of the Company's Series A Cumulative Convertible
Preferred Stock, without par value (the "SERIES A PREFERRED STOCK"), having the
rights, preferences, privileges and restrictions set forth in the form of
Certificate of Designations attached hereto as Exhibit A (the "SERIES A
CERTIFICATE OF Designations"), each share convertible at the option of the
holder at any time following the Closing into shares (the "SERIES A CONVERSION
SHARES") of common stock, par value $0.25 per share (the "COMMON STOCK"), of the
Company, and (ii) 16,362 shares of the Company's Series B Cumulative Convertible
Preferred Stock, without par value (the "SERIES B PREFERRED STOCK," and together
with the Series A Preferred Stock, the "SENIOR PREFERRED Stock"), having the
rights, preferences, privileges and restrictions set forth in the form of
Certificate of Designations attached hereto as Exhibit B (the "SERIES B
CERTIFICATE OF DESIGNATIONS," and together with the Series A Certificate of
Designations, the "SENIOR CERTIFICATES OF DESIGNATIONS"), each share convertible
at the option of the holder at any time (A) prior to the Shareholder Approval
(as defined herein), into shares of the Company's Series C Junior Participating
Preferred Stock, par value $0.01 per share (the "Junior Preferred Stock"),
having the rights, preferences, privileges and restrictions set forth in the
form of Certificate of Designations attached hereto as Exhibit C (the "JUNIOR
CERTIFICATE OF DESIGNATIONS," and together with the Senior Certificates of
Designations, the "CERTIFICATES OF DESIGNATIONS"), or (B) following the
Shareholder Approval, shares of Common Stock (such shares of Common Stock,
together with the Series A Conversion Shares, the "CONVERSION SHARES"); and
WHEREAS, the Series A Preferred Stock is exchangeable under
certain circumstances at the option of the Company into Series A Junior
Subordinated Convertible Debentures Due 2009 of the Company (the "SERIES A
DEBENTURES"), having the terms and conditions provided for in Section 7.05
hereof, and the Series B Preferred Stock is exchangeable under certain
circumstances at the option of the Company into Series B Junior Subordinated
Convertible Debentures Due 2009 of the Company (the "SERIES B DEBENTURES," and
together with the Series A Debentures, the "DEBENTURES"), having the terms and
conditions provided for in Section 7.05 hereof; and
WHEREAS, the Company and the Investor desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated herein;
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained herein,
the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. As used in this Agreement, the
following terms shall have the meanings set forth below:
"ACCEPTANCE NOTICE" has the meaning set forth in
Section 8.05(b) hereof.
"AFFILIATE" has the meaning set forth in Rule 12b-2 under the
Exchange Act as in effect on the date hereof. The term "Affiliated" has a
correlative meaning. Notwithstanding the foregoing, for all purposes hereof, the
Investor, and each Person controlled by, controlling or under common control
with the Investor (each, a "TPG PERSON"), shall not be deemed an "Affiliate" of
any Designated Purchaser Person (as defined below), and no Designated Purchaser,
and no Person controlled by, controlling or under common control with such
Designated Purchaser (each, a "DESIGNATED PURCHASER PERSON"), shall be deemed an
"Affiliate" of any TPG Person or any other Designated Purchaser Person, in any
such case solely as a consequence of this Agreement or the transactions
contemplated hereby.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"ALTERNATIVE TRANSACTION" means any (A) direct or indirect
acquisition or purchase of any Equity Securities of the Company or any of its
Significant Subsidiaries or any tender offer or exchange offer, that if
consummated would result in any Person (other than the Investor or any of its
Affiliates or, solely as a result of an assignment by the Investor pursuant to
Section 11.09(b) hereof, a Designated Purchaser or any of its Affiliates)
Beneficially Owning 10% or more of any class of Equity Securities of the Company
or Equity Securities of any of its Significant Subsidiaries, (B) Control
Transaction, liquidation, dissolution or similar transaction involving the
Company or any of its Significant Subsidiaries (other than such a transaction
involving a Significant Subsidiary that does not involve the transfer of, or the
transfer of control of, all or a substantial portion of the assets of the
Company and its Subsidiaries, taken as a whole), or (C) other transaction the
consummation of which would prevent the consummation of the transactions
contemplated hereby or would delay the Closing Date to a date later than the
date set forth in Section 10.01(a) hereof; PROVIDED, HOWEVER, that,
notwithstanding the foregoing, (i) no transaction expressly permitted pursuant
to Section 7.02 hereof, (ii) no transaction set forth in the Proposed Asset Sale
Letter concluded on terms not materially worse to the Company than those terms
set forth in the Proposed Asset Sale Letter and (iii) no exercise of the
Rainwater-Magellan Warrant or Rainwater Pre-emptive Rights shall constitute an
Alternative Transaction.
"ALTERNATIVE TRANSACTION FEE" means $2,828,437.
"APPLICABLE INSURANCE DEPARTMENT" has the meaning set forth in
Section 3.07(c).
"BALANCE SHEET" has the meaning set forth in Section 3.08
hereof.
"BENEFICIALLY OWN" with respect to any securities means having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act as in effect on the date hereof, except that a Person
shall be deemed to Beneficially Own all such
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securities that such Person has the right to acquire whether such right is
exercisable immediately or after the passage of time); PROVIDED, that for all
purposes hereof, no Person shall be deemed to Beneficially Own any shares of
Series B Preferred Stock or securities issuable upon conversion or exchange of
the Series B Preferred Stock until such shares of Series B Preferred Stock have
been issued by the Company in accordance with the terms hereof. The terms
"Beneficial Ownership" and "Beneficial Owner" have correlative meanings.
Notwithstanding the foregoing, for all purposes hereof, no TPG Person shall be
deemed to Beneficially Own any securities that are held by any Designated
Purchaser Person, and no Designated Purchaser Person shall be deemed to
Beneficially Own any securities that are held by any TPG Person or any other
Designated Purchaser Person, in any such case solely as a consequence of this
Agreement or the transactions contemplated hereby.
"BIDDING PROCESS" has the meaning set forth in Section 6.01(b)
hereof.
"BOARD OF DIRECTORS" means the board of directors of the
Company.
"BUSINESS DAY" means 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.
"BYLAWS" means the Bylaws of the Company, as amended from time
to time.
"CAPITAL FUNDING REQUIREMENTS DISCLOSURE" has the meaning set
forth in Section 3.07(d) hereof.
"CERTIFICATE OF INCORPORATION" means the Restated Certificate
of Incorporation of the Company, as amended from time to time.
"CERTIFICATES OF DESIGNATIONS" has the meaning set forth in
the recitals hereto.
"CHARTER" means Charter Behavioral Health Systems, LLC.
"CLAIM" has the meaning set forth in Section 11.04(c) hereof.
"CLASS I" means the class of directors of the Board of
Directors with a term expiring at the annual meeting of stockholders of the
Company in 2000 and every third annual meeting thereafter.
"CLASS II" means the class of directors of the Board of
Directors with a term expiring at the annual meeting of stockholders of the
Company in 2001 and every third annual meeting thereafter.
"CLASS III" means the class of directors of the Board of
Directors with a term expiring at the annual meeting of stockholders of the
Company in 2002 and every third annual meeting thereafter.
"CLOSING" means the closing of the Share Purchase pursuant to
Section 2.02 hereof.
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"CLOSING DATE" has the meaning set forth in Section 2.02(a)
hereof.
"CLOSING PRICE" means, with respect to a share of Common Stock
on any day, the last reported sale price on that day or, in case no such
reported sale takes place on such day, the average of the last reported bid and
asked prices, regular way, on that day, in either case, as reported in the
consolidated transaction reporting system with respect to securities listed on
the NYSE.
"CODE" means the Internal Revenue Code of 1986, as amended,
and all regulations promulgated thereunder, as in effect from time to time.
"COMMISSION" means the U.S. Securities and Exchange
Commission.
"COMMON STOCK" has the meaning set forth in the recitals
hereto.
"COMPANY" has the meaning set forth in the preamble hereto.
"COMPANY DOCUMENTS" means each document, instrument or
certificate, other than the Transaction Agreements, to be executed and delivered
by the Company in connection with the consummation of the transactions
contemplated by this Agreement, including, without limitation, the Certificates
of Designations.
"COMPANY WARRANTS" means the 2002 Warrants, the 2006 Warrants,
the Crescent Warrants and the Rainwater-Magellan Warrant, as such terms are
defined in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998, as amended through the date hereof.
"CONTROL TRANSACTION" means any transaction (other than a
transaction set forth on Schedule 1.01(A) hereof) that involves a (i) merger,
consolidation, recapitalization (involving a business combination) or similar
business combination transaction involving the Company or a Significant
Subsidiary of the Company (other than such a transaction involving a Significant
Subsidiary that does not involve the transfer of, or the transfer of control of,
all or a substantial portion of the assets of the Company and its Subsidiaries,
taken as a whole), (ii) sale of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole, or (iii) sale or issuance of
Voting Securities of the Company to a Person or Group or an acquisition of
Equity Securities of the Company by a Person or Group which, following the
completion of such sale, issuance or acquisition, will Beneficially Own Voting
Securities of the Company representing a majority of the Voting Power of the
Voting Securities of the Company; PROVIDED, HOWEVER, that, notwithstanding the
foregoing, (i) no transaction expressly permitted pursuant to Section 7.02
hereof, (ii) no transaction set forth in the Proposed Asset Sale Letter
concluded on terms not materially worse to the Company than those terms set
forth in the Proposed Asset Sale Letter and (iii) no exercise of the
Rainwater-Magellan Warrant or Rainwater Pre-emptive Rights shall constitute a
Control Transaction.
"CONVERSION SHARES" has the meaning set forth in the recitals
hereto. For the purposes of determining the percentage of Conversion Shares that
is Beneficially Owned by the Investor, any Designated Purchaser or any of their
respective Affiliates, such calculation shall be made assuming all conditions
precedent to receipt of Conversion Shares in respect of the then-
4
outstanding shares of Senior Preferred Stock have occurred or been satisfied,
including, without limitation, receipt by the Company of the Shareholder
Approval and conversion of such Senior Preferred Stock in accordance with the
terms hereof.
"COVERED SECURITIES" has the meaning set forth in
Section 8.05(b) hereof.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of
February 12, 1998, among the Company, the banks and other financial institutions
named therein, and The Chase Manhattan Bank, as Administrative Agent, together
with all other documents entered into under or in connection with the Credit
Agreement, in each case, as the same may be amended, restated, supplemented,
extended, renewed or increased from time to time, replaced, substituted,
refunded or refinanced or otherwise modified from time to time, in whole or in
part, and any successive replacements, substitutions, refundings or
refinancings.
"DEBENTURES" has the meaning set forth in the recitals hereto.
"DERIVATIVE SECURITIES" means any subscriptions, options,
conversion rights, warrants, or other agreements, securities or commitments of
any kind obligating the Company or any of its Significant Subsidiaries to issue,
grant, deliver or sell, or cause to be issued, granted, delivered or sold, any
Equity Securities of the Company or any of its Significant Subsidiaries.
"DESIGNATED PURCHASER" has the meaning set forth in
Section 11.09(b) hereof.
"DESIGNATED PURCHASER PERSON" has the meaning set forth in the
definition of "Affiliate."
"DIVIDEND SHARES" means securities issued as dividends in
respect of Senior Preferred Stock.
"DGCL" means the Delaware General Corporation Law.
"DGCL SECTION 203" has the meaning set forth in
Section 3.02(a) hereof.
"EMPLOYMENT AGREEMENT" means any employment or consulting
agreement or other similar arrangement between the Company or any of its
Significant Subsidiaries, on the one hand, and any Representative of the Company
or any of its Significant Subsidiaries, on the other.
"ENVIRONMENTAL LAWS" means any federal, state or local law,
statute, ordinance, order, decree, rule or regulation relating to releases,
discharges, emissions or disposals to air, water, land or groundwater of
Hazardous Materials; to the use handling or disposal of polychlorinated
byphenyls, asbestos or urea formaldehyde or any other Hazardous Material; to the
treatment, storage, disposal or management of Hazardous Materials; to exposure
to toxic, hazardous or other controlled, prohibited or regulated substances; and
to the transportation, release or any other use of Hazardous Materials,
including the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. 9601, et seq. ("CERCLA"), the Resource Conservation and Recovery
Act, 42 U.S.C. 6901, et seq. ("RCRA"), the Toxic Substances Control Act, 15
U.S.C. 2601, et seq. ("TSCA"), the Occupational, Safety and Health Act, ▇▇
▇
▇.▇.▇. ▇▇▇, et seq., the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal
Water Pollution Control Act, 33 U.S.C. 1251, et seq., the Safe Drinking ▇▇▇▇▇
▇▇▇, ▇▇ ▇.▇.▇. ▇▇▇▇, et seq., the Hazardous Materials Transportation act, 49
U.S.C. 1802 et seq. ("HMTA") and the Emergency Planning and Community Right to
Know Act, 42 U.S.C. 11001 et seq. ("EPCRA"), and other comparable state and
local laws and all rules and regulations promulgated pursuant thereto or
published thereunder.
"EQUITY SECURITIES" of any Person, means any and all common
stock, preferred stock and any other class of capital stock of, and any
partnership or limited liability company interests in, such Person or any other
similar interests of any Person that is not a corporation, partnership or
limited liability company.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all regulations promulgated thereunder, as in effect from
time to time.
"ESCROW AGENT" has the meaning set forth in the Escrow
Agreement.
"ESCROW AGREEMENT" means the escrow agreement to be executed
by the Investor, the Company and the Escrow Agent as of the Closing Date in the
form of Exhibit F hereto.
"ESCROW FUND" has the meaning set forth in the Escrow
Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder from time to time.
"EXCLUSIVITY PERIOD" has the meaning set forth in
Section 7.04(b) hereof.
"FUND AMOUNT" has the meaning set forth in Section 2.01(b)
hereof.
"GAAP" means U.S. generally accepted accounting principles as
in effect at the relevant time or for the relevant period.
"GOVERNMENTAL ENTITY" means any government or political
subdivision or department thereof, any governmental or regulatory body,
commission, board, bureau, agency or instrumentality, or any court or arbitrator
or alternative dispute resolution body, in each case whether federal, state,
local or foreign.
"GROUP" has the same meaning as is used with respect to that
term in Rule 13d-5 under the Exchange Act as in effect on the date hereof.
"GUARANTEE" means any direct or indirect obligation,
contingent or otherwise, to guarantee (or having the economic effect of
guaranteeing) Indebtedness in any manner, including, without limitation, any
monetary obligation to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness (whether arising by agreement to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise).
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"HAZARDOUS MATERIALS" shall mean each and every element,
compound, chemical mixture, contaminant, pollutant, material, waste or other
substance which is defined, determined or identified as hazardous or toxic under
Environmental Laws or the release of which is regulated under Environmental
Laws. Without limiting the generality of the foregoing, the term includes:
"hazardous substances" as defined in CERCLA; "extremely hazardous substances" as
defined in EPCRA; "hazardous waste" as defined in RCRA; "hazardous materials" as
defined in HMTA; "chemical substance or mixture" as defined in TSCA; crude oil,
petroleum products or any fraction thereof; radioactive materials including
source, byproduct or special nuclear materials; asbestos or asbestos-containing
materials; chlorinated fluorocarbons ("CFCS"); and radon.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and the regulations promulgated thereunder.
"INDEBTEDNESS" means, with respect to any Person, without
duplication, (i) all obligations of such Person for money borrowed, (ii) all
obligations of such Person evidenced by bonds, debentures, notes, or other
similar instruments, (iii) all obligations of such Person upon which interest
charges are customarily paid, (iv) all obligations of such Person under
conditional sale or other title retention agreements relating to property or
assets purchased by such Person, (v) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding (x)
trade accounts payable and accrued obligations incurred in the ordinary course
of business and (y) deferred earn-out and other performance-based payment
obligations incurred in connection with any Permitted Acquisition (as such term
is defined in the Credit Agreement as in effect on the date hereof) or any
similar transactions consummated prior to February 12, 1998), (vi) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (vii) all Guarantees by such Person of
Indebtedness of others, (viii) all capital lease obligations of such Person,
(ix) all obligations (determined on the basis of actual, not notional,
obligations) of such Person in respect of interest rate protection agreements,
foreign currency exchange agreements or other interest or exchange rate hedging
arrangements and (x) all obligations of such Person as an account party in
respect of letters of credit and bankers' acceptances issued in support of
obligations that constitute Indebtedness under any other clause of this
definition (unless such obligations are fully cash collateralized), PROVIDED
that all obligations in respect of letters of credit shall be deemed
Indebtedness to the extent drawings thereunder are unreimbursed (after any
applicable grace period) regardless of the purpose for which such letter of
credit was issued. The Indebtedness of any Person shall include the recourse
Indebtedness of any partnership in which such Person is a general partner.
Notwithstanding the foregoing, no portion of Indebtedness that becomes the
subject of a defeasance (whether a legal defeasance or a "covenant" or "in
substance" defeasance) shall, at any time that such defeasance remains in
effect, be treated as Indebtedness for purposes hereof.
"INDEMNIFIED COMPANY PARTIES" has the meaning set forth in
Section 11.04(b) hereof.
"INDEMNIFIED PARTIES" has the meaning set forth in
Section 11.04(a) hereof.
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"INDENTURE" means the Indenture entered into between the
Company and Marine Midland Bank, as Trustee, dated as of February 12, 1998, as
the same may be amended, restated, supplemented, extended, renewed or increased
from time to time, replaced, substituted, refunded or refinanced or otherwise
modified from time to time, in whole or in part, and any successive
replacements, substitutions, refundings or refinancings.
"INSOLVENCY EVENT" means (i) the Company or any of its
Subsidiaries commences a voluntary case concerning itself under Title 11 of the
United States Code as now or hereafter in effect, or under any state insolvency,
liquidation, rehabilitation or similar statute or any successor statutes thereto
("INSOLVENCY STATUTES"); (ii) an involuntary case is commenced against the
Company or any of its Subsidiaries under an Insolvency Statute; (iii) a
custodian is appointed under any applicable Insolvency Statute for, or takes
charge of, all or any substantial part of the property of the Company or any of
its Subsidiaries; (iv) any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution or similar law
of any jurisdiction, whether now or hereafter in effect, relating to the Company
or any of its Subsidiaries is commenced (a) by the Company or any of its
Subsidiaries or (b) by any other Person; (v) the Company or any of its
Subsidiaries is adjudicated insolvent or bankrupt; (vi) any order of relief or
other order approving any such case or proceeding is entered; (vii) the Company
or any of its Subsidiaries makes a general assignment for the benefit of
creditors; or (viii) the Company or any of its Subsidiaries shall state in
writing that it is unable to pay, or shall be unable to pay, its debts,
generally as they become due.
"INSOLVENCY STATUTES" has the meaning set forth in the
definition of "Insolvency Event."
"INTELLECTUAL PROPERTY" means all intellectual property rights
including, but not limited to, patents, patent rights, trade secrets, know-how,
trademarks, service marks, trade names, copyrights, licenses and proprietary
processes and formulae.
"INVESTOR" has the meaning set forth in the preamble hereto.
"INVESTOR DOCUMENTS" means each document, instrument or
certificate, other than the Transaction Agreements, to be executed and delivered
by the Investor in connection with the consummation of the transactions
contemplated by this Agreement.
"INVESTOR GROUP" means, collectively, the Investor, the
Designated Purchasers, if any, and the respective Affiliates of such Persons.
"INVESTOR INFORMATION" has the meaning set forth in
Section 8.13(b) hereof.
"INVESTOR NOMINEES" has the meaning set forth in
Section 5.02(a) hereof.
"INVESTOR ORIGINAL NUMBER OF CONVERSION SHARES" means that
number of the Original Number of Conversion Shares Beneficially Owned by the
Investor and its Affiliates, in the aggregate, as of the Closing. For the
purposes of this definition, from and after the original issuance of shares of
the Series B Preferred Stock in accordance with the terms hereof, the Conversion
Shares issuable in respect of such shares of Series B Preferred Stock as of the
time of the original issuance thereof shall be deemed to have existed as of and
following the Closing.
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For the purposes of determining the percentage of the Investor Original Number
of Conversion Shares that is Beneficially Owned by the Investor or any of its
Affiliates, such calculation shall be made assuming all conditions precedent to
the receipt of Conversion Shares in respect of then-outstanding shares of Senior
Preferred Stock have occurred or been satisfied, including, without limitation,
receipt by the Company of the Shareholder Approval and conversion of the Senior
Preferred Stock in accordance with the terms hereof.
"INVESTOR PRICE" has the meaning set forth in Section 8.05(b)
hereof.
"JOINT VENTURES" means (i) Charter and its Subsidiaries and
(ii) the entities listed on Schedule 1.01(B) hereto.
"JUNIOR CERTIFICATE OF DESIGNATIONS" has the meaning set forth
in the recitals hereto.
"JUNIOR PREFERRED STOCK" has the meaning set forth in the
recitals hereto.
"JUNIOR SHARES" means the shares of Junior Preferred Stock
issued or issuable upon conversion of the Series B Preferred Stock.
"TO THE KNOWLEDGE OF THE COMPANY AND ITS SUBSIDIARIES" and
similar phrases with respect to the Company or to the Company and its
Subsidiaries, mean to the actual knowledge of any of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇.
"LAW" means any law, treaty, statute, ordinance, code, rule,
regulation, judgment, decree, order, writ, award, injunction or determination of
any Governmental Entity.
"LIEN" means any mortgage, pledge, lien, security interest,
claim, voting agreement, conditional sale agreement, title retention agreement,
restriction, option or encumbrance of any kind, character or description
whatsoever.
"LOSSES" has the meaning set forth in Section 11.04(a) hereof.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
the financial condition, results of operations, prospects, business, or
regulatory status of the Company and its Subsidiaries taken as a whole.
"NOLS" has the meaning set forth in Section 3.13(d) hereof.
"NOTICE DATE" has the meaning set forth in Section 8.05(b)
hereof.
"NYSE" means the New York Stock Exchange, Inc.
"NYSE RULES" has the meaning set forth in Section 3.03(c)
hereof.
"OFFER TO PURCHASE" has the meaning set forth in Section
8.05(b) hereof.
9
"OPTION PLANS" means the Company's 1989 Deferred Compensation
Plan, 1992 Stock Option Plan, 1994 Stock Option Plan, 1996 Stock Option Plan,
1997 Stock Option Plan, 1998 Stock Option Plan, 1992 Directors' Stock Option
Plan and Directors' Unit Award Plan, 1996 Directors' Stock Option Plan, the 1997
Employee Stock Purchase Plan and the 2000 Employee Stock Purchase Plan.
"ORIGINAL NUMBER OF CONVERSION SHARES" means the number of
Conversion Shares as of the Closing (assuming that all conditions precedent to
receipt of Conversion Shares in respect of the then-outstanding shares of Senior
Preferred Stock has occurred, including, conversion of the Senior Preferred
Stock), which number shall be adjusted in accordance with any adjustment made to
the number of Conversion Shares issuable upon conversion of the Senior Preferred
Stock pursuant to the provisions set forth in Article IX of each Senior
Certificate of Designations. For the purposes of this definition, from and after
the original issuance of shares of the Series B Preferred Stock in accordance
with the terms hereof, the Conversion Shares issuable in respect of such shares
of Series B Preferred Stock as of the time of the original issuance thereof
shall be deemed to have existed as of and following the Closing. For the
purposes of determining the percentage of the Original Number of Conversion
Shares that is Beneficially Owned by the Investor, any Designated Purchaser or
any of their respective Affiliates, such calculation shall be made assuming all
conditions precedent to receipt of Conversion Shares in respect of the
then-outstanding shares of Senior Preferred Stock have occurred or been
satisfied, including, without limitation, receipt by the Company of the
Shareholder Approval and conversion of the Senior Preferred Stock.
"PERSON" means any individual, corporation, company,
association, partnership, limited liability company, joint venture, trust,
unincorporated organization, or Governmental Entity.
"PLACEMENT FEE" means $1,875,000.
"PLAN" has the meaning set forth in Section 3.14(a) hereof.
"POLICIES" has the meaning set forth in Section 3.19 hereof.
"PREFERRED STOCK" means the Junior Preferred Stock and the
Senior Preferred Stock.
"PRIVATE PLACEMENT LEGEND" has the meaning set forth in
Section 8.10(a) hereof.
"PROCEEDING" has the meaning set forth in Section 3.11 hereof.
"PROPOSAL" means any inquiry, indication of interest, proposal
or offer from any Person relating to an Alternative Transaction.
"PROPOSED ASSET SALE LETTER" means the letter from the Company
to the Investor dated as of the date hereof.
"PROXY STATEMENT" has the meaning set forth in Section 8.13
hereof.
10
"PURCHASE AGREEMENT" means a legal, valid and binding
agreement of a Person or Persons (each, a "PURCHASER") pursuant to which such
Purchaser or Purchasers agrees to purchase Covered Securities which agreement is
enforceable against such Purchaser or Purchasers in accordance with its terms
(subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principles of equity).
"RAINWATER-MAGELLAN WARRANT" has the meaning set forth in the
definition of "Company Warrants."
"RAINWATER PRE-EMPTIVE RIGHTS" means the pre-emptive rights
set forth in Section 5.11 of the Stock and Warrant Purchase Agreement dated as
of December 22, 1995 between the Company and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement of even date herewith between the Company and the Investor, which
agreement shall not become effective until the Closing.
"REGULATORY APPROVALS" means (i) any and all certificates,
permits, licenses, franchises, concessions, grants, consents, approvals, orders,
registrations, authorizations, waivers, variances or clearances from, or filings
or registrations with, Governmental Entities, and (ii) any and all waiting
periods imposed by applicable laws.
"REPRESENTATIVES" means, with respect to any Person, any of
such Person's officers, directors, employees, agents, attorneys, accountants,
consultants, equity financing partners or financial advisors or other Person
associated with, or acting on behalf of, such Person.
"REQUIRED REGULATORY APPROVAL" means a Regulatory Approval (i)
necessary under the HSR Act or required under the Securities Act, the Exchange
Act or the securities laws of the several states of the United States, for or in
connection with the consummation by the parties thereto of the transactions
contemplated by the Transaction Agreements; (ii) consisting of the filing by the
Company of the Certificates of Designations with the Secretary of State of the
State of Delaware; or (iii) set forth on Schedule 1.01(C) hereto.
"RESPONSE PERIOD" has the meaning set forth in Section 8.05(b)
hereof.
"REVOCATION NOTICE" has the meaning set forth in
Section 2.01(b) hereof.
"RIGHTS" has the meaning set forth in Section 3.20 hereof.
"RIGHTS PLAN" has the meaning set forth in Section 3.20
hereof.
"SEC REPORTS" has the meaning set forth in Section 3.07(a)
hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder from time to time.
11
"SENIOR CERTIFICATES OF DESIGNATIONS" has the meaning set
forth in the recitals hereto.
"SENIOR PREFERRED STOCK" has the meaning set forth in the
recitals hereto.
"SENIOR SUBORDINATED NOTES" means the Senior Subordinated
Notes of the Company issued pursuant to the Indenture.
"SERIES A CERTIFICATE OF DESIGNATIONS" has the meaning set
forth in the recitals hereto.
"SERIES A DEBENTURES" has the meaning set forth in the
recitals hereto.
"SERIES A PREFERRED STOCK" has the meaning set forth in the
recitals hereto.
"SERIES B CERTIFICATE OF DESIGNATIONS" has the meaning set
forth in the recitals hereto.
"SERIES B DEBENTURES" has the meaning set forth in the
recitals hereto.
"SERIES B PREFERRED STOCK" has the meaning set forth in the
recitals hereto.
"SHARE PURCHASE" has the meaning set forth in Section 2.01(a)
hereof.
"SHARE PURCHASE PRICE" has the meaning set forth in Section
2.01(a) hereof.
"SHAREHOLDER APPROVAL" means the approval by the stockholders
of the Company, in accordance with the DGCL and in accordance with and in
satisfaction of Paragraph 312.00 of the NYSE's Listed Company Manual and the
related NYSE Rules and interpretations, of (i) the issuance of Common Stock in
respect of accrued and unpaid dividends on the Senior Preferred Stock upon the
conversion or exchange of the Senior Preferred Stock, (ii) the issuance of
Common Stock upon the conversion or exchange of the Series B Preferred Stock,
and (iii) the vesting of voting rights in respect of the Series B Preferred
Stock, in each case in accordance with the terms hereof, the Series A
Certificate of Designations and the Series B Certificate of Designations.
"SHAREHOLDER APPROVAL PROPOSAL" has the meaning set forth in
Section 8.13(b) hereof.
"SHAREHOLDER MEETING" has the meaning set forth in
Section 8.13(a) hereof.
"SIGNIFICANT SUBSIDIARY" means any direct or indirect
Subsidiary of the Company listed on Schedule 1.01(D) hereto.
"SOLICITATION DATE" means, with respect to any Covered
Securities, the earlier of (i) the eleventh day following the day on which an
Offer to Purchase with respect to such Covered Securities is given and (ii) the
date on which the Investor shall have, or shall be deemed
12
to have, declined to purchase such Covered Securities, in each case pursuant to
Section 8.05(b) hereof.
"STANDSTILL PERIOD" has the meaning set forth in
Section 6.01(a) hereof.
"STATE STATUTORY ACCOUNTING PRACTICES" has the meaning set
forth in Section 3.07(c) hereto.
"SUBSEQUENT REPORTS" has the meaning set forth in
Section 3.07(a) hereof.
"SUBSIDIARY" means as to any Person, any other Person of which
more than 50% of the shares of the voting stock or other voting interests are
owned or controlled, or the ability to select or elect more than 50% of the
directors or similar managers is held, directly or indirectly, by such first
Person or one or more of its Subsidiaries or by such first Person and one or
more of its Subsidiaries; PROVIDED, HOWEVER, that no Joint Venture shall be
considered (i) a "Subsidiary" of the Company or (ii) a "Subsidiary" of any
Subsidiary of the Company.
"TAX" or "TAXES" means all taxes, including any interest,
liabilities, fines, penalties or additions to tax that may become payable in
respect thereof, imposed by any Governmental Entity, which taxes shall include,
without limiting the generality of the foregoing, income taxes (including, but
not limited to, United States federal income taxes and state income taxes),
payroll and employee withholding taxes, unemployment insurance, social security,
sales and use taxes, excise taxes, franchise taxes, gross or net receipts taxes,
occupation taxes, real and personal property taxes, AD VALOREM taxes, stamp
taxes, transfer taxes, capital taxes, import duties, withholding taxes, workers'
compensation, and other obligations of the same or of a similar nature whether
arising before, on or after the Closing Date.
"TPG PERSON" has the meaning set forth in the definition of
"Affiliate."
"TRADING DAY" means any day on which the NYSE is open for
trading.
"TRANSACTION AGREEMENTS" means this Agreement, the Escrow
Agreement and the Registration Rights Agreement.
"VOTING POWER" means, with respect to any Voting Securities,
the aggregate number of votes attributable to such Voting Securities that could
generally be cast by the holders thereof for the election of directors at the
time of determination (assuming such election were then being held).
"VOTING SECURITIES" means, (i) with respect to the Company,
the Equity Securities of the Company entitled to vote generally for the election
of directors of the Company, and (ii) with respect to any other Person, any
securities of or interests in such Person entitled to vote generally for the
election of directors or any similar managing person of such Person.
"WHOLLY-OWNED SUBSIDIARY" means, as to any Person, a
Subsidiary of such Person of which 100% of the Equity Securities (other than
directors' qualifying shares or similar shares) is owned, directly or
indirectly, by such Person.
13
"YEAR 2000 PROBLEM" means the risk that computer hardware or
software applications will not record, store, process, calculate and present
calendar dates falling on and after January 1, 2000, and calculate information
dependent upon or relating to such dates, in the same manner and with the same
functionality, data integrity and performance as such products record, store,
process, calculate and present calendar dates falling on or before December 31,
1999, and calculate information dependent on or relating to such dates.
SECTION 1.02. GENERAL INTERPRETIVE PRINCIPLES . Whenever used
in this Agreement, except as otherwise expressly provided or unless the context
otherwise requires, any noun or pronoun shall be deemed to include the plural as
well as the singular and to cover all genders. The name assigned this Agreement
and the section captions used herein are for convenience of reference only and
shall not be construed to affect the meaning, construction or effect hereof.
Unless otherwise specified, the terms "hereof," "herein" and similar terms refer
to this Agreement as a whole (including the exhibits and schedules hereto), and
references herein to Articles or Sections refer to Articles or Sections of this
Agreement.
ARTICLE II
SHARE PURCHASE
SECTION 2.01. SHARE PURCHASE. (a) Upon the terms and subject
to the conditions set forth in this Agreement, and in reliance upon the
representations and warranties hereinafter set forth, at the Closing, (i) the
Company will issue, sell and deliver to the Investor, and the Investor will
purchase from the Company 59,063 shares of Series A Preferred Stock, free and
clear of all Liens, for an aggregate purchase price of $59,063,000 (the "SERIES
A AMOUNT"), and (ii) the Investor will deposit into Escrow with the Escrow Agent
$16,362,000 (the "SERIES B AMOUNT" and together with the Series A Amount, the
"SHARE PURCHASE PRICE") in accordance with the terms of the Escrow Agreement, in
full satisfaction of the Investor's obligation to purchase and pay for 16,362
shares of Series B Preferred Stock pursuant to the terms hereof. The
transactions described in clauses (i) and (ii) that are to take place at the
Closing are referred to herein as the "SHARE PURCHASE."
(b) In the event (i) the Company does not obtain the
Shareholder Approval on or prior to March 5, 2000 and (ii) the holders of at
least 60% of the Conversion Shares then Beneficially Owned by members of the
Investor Group deliver a written notice (a "REVOCATION NOTICE") to the Company
and the Escrow Agent on or prior to March 20, 2000 requesting that the Fund
Amount (as defined below) be paid to the Investor, the Fund Amount shall be paid
to the Investor as provided below, and the Company shall have no obligation to
issue, sell and deliver, and the Investor shall have no obligation to purchase,
the shares of Series B Preferred Stock referred to in Section 2.01(a) hereof.
The Company shall cause the Fund Amount to be paid to the Investor no later than
the third Business Day after the delivery of the Revocation Notice as provided
in the preceding sentence. Within three Business Days of the earliest to occur
of (A) the Shareholder Approval (provided that the Company obtains the
Shareholder Approval on or prior to March 5, 2000) and (B) March 20, 2000
(provided no Revocation Notice has been delivered on or prior to such date), the
Company shall issue and deliver to the Investor 16,362 shares of
14
Series B Preferred Stock, free and clear of all Liens, and the delivery by the
Investor of the Series B Amount to the Escrow Agent pursuant to Section 2.01(a)
hereof shall constitute full payment to the Company for such shares, and,
pursuant to the Escrow Agreement, the Fund Amount shall be released to the
Company. The "FUND AMOUNT" shall equal (i) the Series B Amount, plus (ii) all
interest and investment income earned with respect to the Escrow Fund.
SECTION 2.02. SHARE PURCHASE CLOSING. (a) Subject to the
satisfaction or, if permissible, waiver of the conditions set forth in Sections
9.01 and 9.02 hereof, the Closing shall take place at the offices of Cleary,
Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, One Liberty Plaza, New York, New York, at 10:00
a.m., New York City time, on the third Business Day following satisfaction or,
if permissible, waiver, of the conditions set forth in Sections 9.01 and 9.02
hereof, or at such other time and place as the parties may agree (the date on
which the Closing occurs, the "CLOSING DATE").
(b) At the Closing, (i) the Company will deliver to the
Investor certificates representing the shares of Series A Preferred Stock to be
purchased by, and sold to, the Investor pursuant to Section 2.01 hereof
(registered in the names and in the denominations designated by the Investor at
least two Business Days prior to the Closing Date), together with the other
documents, certificates and opinions to be delivered pursuant to Section 9.01
hereof, and (ii) the Investor, in full payment for the shares of Senior
Preferred Stock to be purchased by, and sold to, the Investor pursuant to
Section 2.01 hereof, will pay to the Company and deposit into escrow under the
Escrow Agreement, in each case as provided in Section 2.01 hereof, an aggregate
amount equal to the Share Purchase Price, against which amount to be paid to the
Company any amounts due to the Investor pursuant to Section 11.01(a) hereof or
otherwise shall be netted (PROVIDED, that the Investor shall continue to be
entitled to seek reimbursement after the Closing for amounts that are properly
reimbursable pursuant to Section 11.01(a) hereof), in immediately available
funds, and the Investor shall deliver to the Company the other documents,
certificates and opinions to be delivered pursuant to Section 9.02 hereof. The
amount to be paid to the Company will be paid by wire transfer to First Union
National Bank, Macon, Georgia, Acct. Name: Magellan Health Services, Inc., Acct.
No.: 2080000077640, ABA No. ▇▇▇▇▇▇▇▇▇. The amount to be deposited into escrow
under the Escrow Agreement by the Investor will be deposited with the Escrow
Agent in accordance with the terms of the Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to, and agrees
with, the Investor as follows:
SECTION 3.01. CORPORATE ORGANIZATION AND QUALIFICATION. Each
of the Company and each of its Significant Subsidiaries is a corporation or
limited liability company duly organized or formed, as the case may be, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite power and authority to own or lease and
operate its properties and to conduct its business as it is currently being
conducted and is proposed to be conducted. Each of the Company and each of its
Significant Subsidiaries is duly licensed, authorized or qualified as a foreign
corporation or limited liability company for
15
the transaction of business and is in good standing under the laws of each other
jurisdiction in which its ownership, lease or operation of property or conduct
of business requires such qualification, except where its failure to be so
licensed, authorized or qualified would not have, individually or in the
aggregate, a Material Adverse Effect. The Company has delivered to the Investor
a complete and correct copy of the certificate of incorporation and the bylaws
or comparable governing instruments of the Company and each of its Significant
Subsidiaries, each as amended to date and each of which as so delivered is in
full force and effect. The Company has delivered to the Investor a complete and
correct copy of the minute books of the Company and each of its Significant
Subsidiaries, and each such minute book includes minutes of the meetings of, and
resolutions adopted by, the stockholders or members of such entity, the board of
directors or comparable governing body of such entity and the committees of the
board of directors or comparable governing body of such entity to date.
SECTION 3.02. AUTHORIZATION OF AGREEMENTS. (a) The Company has
all requisite corporate power and authority to execute, deliver and perform its
obligations under the Transaction Agreements and the Company Documents. The
execution, delivery and performance of the Transaction Agreements and the
Company Documents, and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action on the part of the Company. The Board of Directors has approved
the entry by the Company into this Agreement and has approved the consummation
of the transactions contemplated by the Transaction Agreements for all purposes
under the DGCL, including for purposes of paragraph (a)(1) of Section 203 of the
DGCL ("DGCL SECTION 203"). The Company has delivered to the Investor true and
correct copies of resolutions adopted by the Board of Directors to the foregoing
effects.
(b) This Agreement and the Registration Rights Agreement have
been duly executed and delivered by the Company, and each such agreement
constitutes, and when executed and delivered by the Company, the Escrow
Agreement will constitute, a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and to general principles of equity.
SECTION 3.03. CONSENTS; NO CONFLICTS. (a) Except for the
Required Regulatory Approvals, no Regulatory Approval from, or registration,
disclosure, declaration or filing with, any Governmental Entity is required to
be made or obtained by the Company or any of its Significant Subsidiaries in
connection with the execution, delivery and performance of the Transaction
Agreements and the Company Documents and the consummation of the transactions
contemplated thereby.
(b) Except as set forth on Schedule 3.03(b) hereto, the
execution and delivery of each of this Agreement and the Registration Rights
Agreement does not, and the execution and delivery of each of the Escrow
Agreement and the Company Documents will not, and, subject to the receipt of the
Required Regulatory Approvals, the performance of the obligations set forth
herein and therein and the consummation of the transactions contemplated hereby
and thereby will not, (i) violate any provision of the Certificate of
Incorporation or the Bylaws or the comparable governing instruments of any of
the Significant Subsidiaries; (ii) give rise to any preemptive rights, rights of
first refusal or other similar rights on behalf of any Person under any
16
applicable Law or any provision of the Certificate of Incorporation or Bylaws or
any agreement or instrument applicable to the Company or any of its Significant
Subsidiaries; (iii) conflict with, contravene or result in a breach or violation
of any of the terms or provisions of, or constitute a default (with or without
notice or the passage of time) under, or result in or give rise to a right of
termination, cancellation, acceleration or modification of any right or
obligation under, or give rise to a right to put or to compel a tender offer for
outstanding securities of the Company or any of its Significant Subsidiaries
under, or require any consent, waiver or approval under, any note, bond, debt
instrument (including, without limitation, the Credit Agreement), indenture,
mortgage, deed of trust, lease, loan agreement, joint venture agreement,
Regulatory Approval, contract or any other agreement, instrument or obligation
to which the Company or any of its Significant Subsidiaries is a party or by
which the Company or any of its Significant Subsidiaries or any property of the
Company or any of its Significant Subsidiaries is bound (other than in each case
in connection with a "Change in Control," as such term is defined in the Credit
Agreement, or a "Change of Control," as such term is defined in the Indenture,
resulting from the appointment of members of the Board of Directors pursuant to
Section D of Article VIII of the Senior Certificates of Designations or
resulting from any action taken by the Investor or any of its Affiliates that is
permitted under Section 6.01(b) hereof); (iv) result in the creation or
imposition of any Lien upon any assets or properties of the Company or any of
its Significant Subsidiaries or (v) violate any Law applicable to the Company or
any of its Significant Subsidiaries.
(c) Except the Shareholder Approval, no consent or approval of
the Company's stockholders is required by Law, the Certificate of Incorporation,
the Bylaws, the rules and regulations of the NYSE (the "NYSE RULES"), or
otherwise, for the execution, delivery and performance by the Company of the
Transaction Agreements and the Company Documents and the consummation of the
transactions contemplated thereby.
(d) The execution and delivery of the Transaction Agreements
and the consummation of transactions contemplated hereby and thereby will not
constitute a "Change of Control" or "Change in Control" (or similar concept) as
such term (or concept) is defined in the Credit Agreement, the Indenture or any
other material contract, agreement, indenture, mortgage, note, lease or other
instrument to which the Company or any of its Significant Subsidiaries is a
party or by which the Company or any such Subsidiary is bound or to which the
properties of the Company or any such Subsidiary is subject (other than in
connection with a "Change in Control," as such term is defined in the Credit
Agreement, or a "Change of Control," as such term is defined in the Indenture,
resulting from the appointment of additional members of the Board of Directors
pursuant to Section D of Article VIII of the Senior Certificates of Designations
or resulting from any action taken by the Investor or any of its Affiliates that
is permitted under Section 6.01(b) hereof).
SECTION 3.04. CAPITALIZATION; SECURITIES. (a) As of the date
hereof, the authorized capital stock of the Company consists of (i) 80,000,000
shares of Common Stock, of which 31,788,288 shares were outstanding as of July
13, 1999, 6,034,079 are reserved for issuance under the Option Plans, 4,732,333
are reserved for issuance pursuant to the Company Warrants and 23,262 shares are
reserved for issuance pursuant to the option granted to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, which
is disclosed on Schedule 3.04(d) hereto, and (ii) 10,000,000 shares of preferred
stock, without par value, of which no shares are outstanding, no shares have
been designated and
17
no shares are reserved for issuance. All of such outstanding shares of Common
Stock were duly authorized and validly issued and are fully paid and
non-assessable and are validly listed for trading on the NYSE.
(b) Except for the Company Warrants and the options granted
pursuant to the Option Plans or as set forth on Schedule 3.04(b) hereto, there
are no authorized or outstanding (or any obligations to authorize or issue)
Derivative Securities.
(c) As of the date hereof, the Company and its Subsidiaries
have no outstanding Indebtedness other than (i) Indebtedness outstanding
pursuant to the Credit Agreement not in excess of $500,000,000 in principal
amount in the aggregate, (ii) Senior Subordinated Notes with an aggregate
principal amount of $625,000,000, (iii) inter-company Indebtedness among
Subsidiaries of the Company or among Subsidiaries of the Company and the
Company, and (iv) other Indebtedness not in excess of $25,000,000 in principal
amount in the aggregate. A true, complete and correct copy of each of the Credit
Agreement, the Indenture and each other instrument or agreement governing
Indebtedness of the Company or any of its Subsidiaries the principal amount of
which exceeds $10,000,000, including the respective exhibits and schedules
thereto and any other material documents executed in connection therewith, has
been delivered to the Investor.
(d) Subject to the filing of the Certificates of Designations
with the Secretary of State of the State of Delaware, the shares of Preferred
Stock to be issued pursuant to this Agreement have been duly and validly
authorized and, when issued as contemplated by this Agreement, will have been
validly issued and will be fully paid and nonassessable. The Conversion Shares
have been duly and validly authorized and validly reserved for issuance, and
when issued upon the conversion of the Senior Preferred Stock will have been
validly issued and will be fully paid and non-assessable. Except as set forth in
Schedule 3.04(d) hereto, the registration of the Senior Preferred Stock, Junior
Shares, Conversion Shares, Dividend Shares or Debentures pursuant to the
Registration Rights Agreement will not give rise to any registration rights on
behalf of any Person under any agreement or instrument applicable to the Company
(other than the Registration Rights Agreement). Except as set forth in Schedule
3.04(d) hereto, other than pursuant to the Registration Rights Agreement, no
Person has any right to require the Company to register securities of the
Company under the Securities Act, and there are no shareholder or similar
agreements to which the Company is a party. Prior to the issuance thereof, the
Debentures will have been duly and validly authorized by the Company and, upon
execution and delivery thereof in accordance with the terms of the Senior
Preferred Stock, will constitute legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and to general principles of equity.
SECTION 3.05. SUBSIDIARIES; EQUITY INVESTMENTS. (a) Schedule
3.05(a) hereto lists, for each Significant Subsidiary of the Company, the name
of such Subsidiary, together with (i) the jurisdiction and nature (e.g.,
corporation, partnership, limited liability company) of its organization, (ii)
the number and percentage of shares of each class of such Subsidiary's Equity
Securities owned by the Company or any of its Wholly-Owned Subsidiaries, (iii)
the identity of the record holder(s) and the name and number of shares of each
class of such Subsidiary's Equity Securities owned by any Person other than the
Company or its Wholly-
18
Owned Subsidiaries, and (iv) the identity of any Person other than the Company
or its Wholly-Owned Subsidiaries that has the right (including upon the passage
of time or upon the occurrence of specified events) to acquire any of such
Subsidiary's Equity Securities. Such list is true, correct and complete as of
the date hereof. The Equity Securities of each such Subsidiary owned, directly
or indirectly, by the Company are held free and clear of all Liens except as set
forth on Schedule 3.05(a), and all Equity Securities of such Subsidiary have
been duly authorized and validly issued and are fully paid and nonassessable.
(b) Except for the Equity Securities of the Subsidiaries of
the Company, the Equity Securities listed on Schedule 3.05(b) hereto, and any
Equity Securities acquired after the date hereof in transactions permitted
pursuant to Section 7.02(a) hereof, the Company does not, directly or
indirectly, (i) Beneficially Own or own of record any Equity Securities of, or
any other equity interest in, any other Person or (ii) have any other equity
investment or other ownership interest in any other Person other than, in each
case, such investments or other ownership interests valued at less than
$1,000,000 individually and $5,000,000 in the aggregate.
(c) Other than as set forth on Schedule 3.05(c) hereto, as of
the date hereof, neither the Company nor any of its Significant Subsidiaries is
obligated, pursuant to any agreement or instrument applicable to the Company or
such Subsidiary, to purchase any Equity Securities of, or make any other equity
investment in, any Person, other than such Equity Securities or other equity
investments valued at less than $1,000,000 individually and $5,000,000 in the
aggregate.
(d) Schedule 1.01(D) hereto includes all Subsidiaries of the
Company that are "Significant Subsidiaries" (as such term is defined in
Regulation S-X under the Exchange Act, as in effect on the date hereof) of the
Company.
SECTION 3.06. DIVIDENDS, STOCK REPURCHASES, ETC. Other than as
set forth on Schedule 3.06 hereto, pursuant to this Agreement, the Indenture (as
in effect on the date hereof) or the Credit Agreement (as in effect on the date
hereof), or as restricted or limited by applicable Law, there are no contractual
or other restrictions or limitations on the ability of the Company or any of its
Significant Subsidiaries to pay any dividends or make any other distributions
on, or to purchase, redeem or otherwise acquire, any of its Equity Securities.
SECTION 3.07. COMPANY REPORTS; FINANCIAL STATEMENTS. (a) The
Company has delivered to the Investor a true and complete copy of (i) the
Company's Annual Report on Form 10-K for each of the fiscal years ended
September 30, 1998, 1997, 1996, 1995 and 1994; (ii) the Company's Quarterly
Report on Form 10-Q for each of the periods ended December 31, 1998 and March
31, 1999 and (iii) each registration statement, report on Form 8-K, proxy
statement, information statement or other report or statement filed by the
Company with the Commission since September 30, 1994 and prior to the date
hereof, in each case in the form (including exhibits and any amendments thereto)
filed with the Commission (collectively, the "SEC REPORTS"). As of their
respective dates, the SEC Reports and any registration statement, report, proxy
statement, information statement or other statement filed by the Company with
the Commission before the Closing Date (collectively, the "SUBSEQUENT REPORTS")
(i) was, or will be, as the case may be, timely filed with the Commission; (ii)
complied, or will comply, as the case may be, in all material respects, with the
applicable requirements of the Exchange Act and the
19
Securities Act, and (iii) did not, or will not, as the case may be, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Other than the
SEC Reports or, with respect to Subsequent Reports required to be filed after
the date hereof, such filings as have been made, the Company has not filed or
been required to file any other reports or statements with the Commission since
September 30, 1994.
(b) Each of the consolidated balance sheets (including the
related notes and schedules) included in or incorporated by reference into the
SEC Reports or any Subsequent Reports fairly presents, or will fairly present,
as the case may be, in all material respects, the consolidated financial
position of the entities to which it applies as of the date thereof, and each of
the consolidated statements of income (or statements of results of operations),
stockholders' equity and cash flows (including the related notes and schedules)
included in or incorporated by reference into the SEC Reports or any Subsequent
Reports, fairly presents or will fairly present, as the case may be, in all
material respects, the results of operations, retained earnings and cash flows,
as the case may be, of the entities to which it applies (on a consolidated
basis) for the periods or as of the dates, as the case may be, set forth
therein, in each case in accordance with GAAP applied on a consistent basis
throughout the periods covered (except as stated therein or in the notes
thereto) and in compliance with the rules and regulations of the Commission.
(c) The Annual Statements and Quarterly Statements of each
Subsidiary of the Company that is required to file such statements (each, a
"REGULATED SUBSIDIARY"), as filed with the Department of Insurance,
Superintendent of Insurance or similar insurance regulatory authority of the
state of domicile of such Regulated Subsidiary (with respect to each Regulated
Subsidiary, its "APPLICABLE INSURANCE DEPARTMENT") for the fiscal year ended
September 30, 1998 and the quarters ended December 31, 1998 and March 31, 1999,
respectively, together with any notes, exhibits and schedules thereto, have been
prepared in accordance with the accounting practices prescribed or permitted by
the Applicable Insurance Department for purposes of financial reporting to the
applicable state's insurance regulators ("STATE STATUTORY ACCOUNTING
PRACTICES"), and such accounting practices have been applied on a basis
consistent with State Statutory Accounting Practices throughout the periods
involved, except as expressly set forth in any notes, exhibits and schedules
thereto.
(d) The regulatory capital funding requirements of the
Regulated Subsidiaries are, in all material respects, as previously disclosed by
the Company to the Investor (the "CAPITAL FUNDING REQUIREMENTS DISCLOSURE").
(e) The Company is eligible to register securities for offer
and sale on Form S-3 under the Securities Act.
SECTION 3.08. UNDISCLOSED LIABILITIES. Except as disclosed on
Schedule 3.08 hereto, at September 30, 1998, there were no liabilities or
obligations of any nature (whether accrued, absolute, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due) required
by GAAP to be set forth on (i) the Balance Sheet (as defined below) of the
Company except as reflected or reserved against on the consolidated balance
sheet of the Company at September 30, 1998 as set forth in the SEC Reports (the
"BALANCE SHEET") or in the notes thereto or (ii) the consolidated balance sheet
of any other entity
20
included in the SEC Reports except as reflected or reserved against on such
balance sheet included in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998, as amended through the date hereof, or in
the notes thereto. Since September 30, 1998, the Company has not incurred any
liabilities or obligations except such as would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.09. ABSENCE OF CERTAIN CHANGES. Except for
transactions contemplated by the Transaction Agreements (including, without
limitation, transactions expressly permitted pursuant to Section 7.02 hereof),
transactions with respect to which the Investor shall have given its prior
written consent, or transactions disclosed in the SEC Reports, on Schedule 3.09
hereto or in the Proposed Asset Sale Letter, from September 30, 1998 to the
Closing, the Company and its Significant Subsidiaries have conducted their
business in the ordinary and usual course, and there has not been any of the
following:
(i) any change or amendment to the Certificate of
Incorporation or Bylaws or the certificate or articles of
incorporation, bylaws or other organizational documents of any
Significant Subsidiaries of the Company;
(ii) any issuance or sale, or any direct or indirect purchase,
redemption or other acquisition of any shares of their respective
Equity Securities or any Derivative Securities by the Company or any of
its Significant Subsidiaries, other than pursuant to this Agreement,
the Company Warrants or the Option Plans;
(iii) any dividend or other distribution declared, set aside,
paid or made with respect to their respective Equity Securities by the
Company or any of its Significant Subsidiaries, except (x) dividends or
other distributions made to the Company or to any Subsidiary of the
Company and (y) dividends and distributions declared, set aside, paid
or made by any joint venture in which the Company or any Significant
Subsidiary owns an equity interest, which dividends and distributions
were declared, set aside, paid or made in accordance with the
organizational documents or related service agreements of such joint
venture as in effect on the date of such payment;
(iv) any acquisition or disposition of assets by the Company
and its Subsidiaries having a fair value or for a purchase price in
excess of $5,000,000, in the aggregate, other than acquisitions or
dispositions made in the ordinary course of business and acquisitions
or dispositions among the Company and its Subsidiaries or among such
Subsidiaries;
(v) any increase in excess of $5,000,000 in the Indebtedness
of the Company and its Subsidiaries, taken as a whole, other than (x)
advances to the Company pursuant to the revolving credit facility under
the Credit Agreement in an amount not in excess of $60,000,000, in the
aggregate, outstanding at any time and (y) changes in inter-company
Indebtedness among the Company and its Subsidiaries or among
Subsidiaries of the Company, which changes were permitted under the
Credit Agreement (as in effect on the date hereof);
21
(vi) any amendment of any mortgage, Lien, lease, Regulatory
Approval, loan agreement, indenture or other agreement, instrument or
document, which amendment is material to the Company and its
Subsidiaries, taken as a whole;
(vii) any default, event of default or breach (or any event
which, with notice or the passage of time or both, would constitute a
default, event of default or breach) by the Company or any of its
Subsidiaries of any credit, financing or other agreement or instrument
relating to any Indebtedness (including, without limitation, the Credit
Agreement or the Indenture), which default, event of default or breach
is material to the Company and its Subsidiaries, taken as a whole;
(viii) any damage, destruction, theft or other casualty loss
(whether or not covered by insurance) that is material to the Company
and its Subsidiaries taken as a whole;
(ix) any commitment, agreement or transaction entered into,
amended, or terminated (or any waiver of any rights or remedies under
any of the foregoing) by the Company or any of its Subsidiaries
(including any agreement with respect to any ongoing or threatened
litigation) that is material to the Company and its Subsidiaries, taken
as a whole, other than in the ordinary course of business;
(x) any entry into or amendment of any material employment,
severance, compensation, consulting, retention, change of control or
similar agreement with, or any material increase in the compensation or
benefits payable or to become payable by the Company or any of its
Subsidiaries to, any employee of the Company or any of its Subsidiaries
(other than agreements terminable without penalty or similar payment by
the Company or such Subsidiary, as the case may be, on not more than 30
days' notice and increases in compensation payable or to become payable
to employees (other than directors or officers) in the ordinary course
of business consistent with past practice);
(xi) any change in the financial accounting methods,
principles or practices of the Company and its Subsidiaries for
financial accounting purposes, except as required by GAAP or applicable
Law;
(xii) any adoption of any agreement or understanding with
respect to any Control Transaction, merger, consolidation or other
reorganization with respect to the Company or any of its Significant
Subsidiaries, or any adoption of any plan, agreement or arrangement
with respect to, or resolutions providing for, the liquidation or
dissolution of the Company or any of its Significant Subsidiaries;
(xiii) any settlement or compromise of any Proceeding other
than those in which the amount paid (to the extent not reimbursed with
the proceeds of any Policy) does not exceed $2,000,000;
(xiv) any change, condition, occurrence, circumstance or other
event that, individually or in the aggregate, has had or is reasonably
likely to have a Material Adverse Effect; or
22
(xv) any commitment or agreement to do any of the foregoing,
except as otherwise required or expressly permitted by this Agreement.
SECTION 3.10. PROPERTY. (a) Except as set forth on Schedule
3.10(a) hereto, each of the Company and its Significant Subsidiaries has good
and marketable title to all property owned by each of them, in each case free
and clear of any Liens, except for Liens created pursuant to the Credit
Agreement (as in effect on the date hereof) or permitted to exist under Section
6.02 under the Credit Agreement (as in effect on the date hereof), and any real
property and buildings held under lease by the Company or any such Subsidiary
are held under a valid, subsisting and enforceable lease, with such exceptions
as are not material and do not interfere with the use made or proposed to be
made of such property and buildings by the Company or such Subsidiary.
(b) Each of the Company and its Significant Subsidiaries owns
or possesses the rights to use, and is in compliance with, in all material
respects, all Intellectual Property that is used or required by it in the
conduct of its business and all such Intellectual Property is in full force and
effect and will not cease to be in full force and effect in accordance with its
terms by virtue of the consummation of the transactions contemplated by the
Transaction Agreements. Neither the Company nor any of its Subsidiaries has
received any notice of, and they have no knowledge of, (i) any infringement of
or conflict with asserted rights of others with respect to any Intellectual
Property owned or used by the Company or any of its Subsidiaries, (ii) any
challenge to the ownership of or validity or effectiveness of any license for
the use of any Intellectual Property owned or used by the Company or any of its
Subsidiaries, or (iii) any claim against the use by the Company or any of its
Subsidiaries of any Intellectual Property owned or used by it, except, in each
case, for such matters that would not, individually or in the aggregate, have a
Material Adverse Effect.
SECTION 3.11. LITIGATION. Except as expressly disclosed in the
SEC Reports or on Schedule 3.11 hereto, there are no claims, suits, actions,
proceedings, arbitrations or investigations (each, a "PROCEEDING") pending or,
to the knowledge of the Company or its Subsidiaries, explicitly threatened,
against or affecting the Company or any of its Subsidiaries, that involve a
claim against the Company or any of its Subsidiaries in a stated amount in
excess of $5,000,000, that may involve criminal liability or result in or
involve criminal proceedings, that may affect the status of any Regulatory
Approval maintained by the Company or any Subsidiary, that may affect the
authority of the Company or any Subsidiary to participate in the federal
Medicare program, any state Medicaid program or any other material third party
payor program or that, individually or in the aggregate, are reasonably likely
to have a Material Adverse Effect; and except as so disclosed, there are no
judgments, decrees, injunctions, rules, stipulations or orders outstanding
against or applicable to the Company or any of its Subsidiaries or against or
applicable to any of their respective properties or businesses that,
individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect. It is understood that this Section 3.11 shall not apply to any
Joint Venture.
SECTION 3.12. COMPLIANCE WITH LAWS; REGULATORY APPROVALS.
Except as disclosed in the SEC Reports or in Schedule 3.12 hereto, since January
1, 1994, the businesses of the Company and its Significant Subsidiaries have
been conducted, and the businesses of the Company and its Significant
Subsidiaries currently are being conducted, in compliance with all
23
applicable Laws in all material respects. Since January 1, 1994, all material
Regulatory Approvals required by the Company and its Significant Subsidiaries to
conduct their respective businesses have been obtained, and all material
Regulatory Approvals required by the Company and its Significant Subsidiaries to
conduct their respective businesses as now conducted by them are in full force
and effect. Except as disclosed in the SEC Reports or on Schedule 3.12 hereto,
the Company and its Significant Subsidiaries are in compliance with the terms
and requirements of such Regulatory Approvals in all material respects. Except
as disclosed on Schedule 3.12 hereto, since January 1, 1994, none of the Company
or any of its Significant Subsidiaries has received any written notice or other
written communication from or on behalf of any Governmental Entity regarding (i)
any prior, pending, threatened or possible revocation, withdrawal, suspension,
termination or modification of, or the imposition of any material conditions
with respect to, any Regulatory Approval or the participation by the Company, or
any such Subsidiary, in the federal Medicare program, any state Medicaid
program, or any other third party payor program, except for any such revocation,
withdrawal, suspension, termination, modification or condition that would not
have a Material Adverse Effect, (ii) any material violation of any Law by the
Company or any such Subsidiary, (iii) any prior, pending, threatened or possible
investigation involving or otherwise relating to any material Regulatory
Approval or the participation by the Company, or any such Subsidiary, in the
federal Medicare Program, any state Medicaid program, or any other material
third party payor program or (iv) any other limitations on the conduct of
business by the Company or any such Subsidiary that would have a Material
Adverse Effect. To the knowledge of the Company and its Subsidiaries, no
currently proposed Law or proposed change in existing Law is reasonably likely
to have a Material Adverse Effect. It is understood that this Section 3.12 shall
not apply to any Joint Venture.
SECTION 3.13. TAXES. (a) Except as disclosed on Schedule 3.13
hereto, the Company and its Subsidiaries have timely filed (taking into account
available extensions) all U.S. federal, state, local, foreign and other tax
returns (including any information returns), reports and statements that are
required to have been filed with the appropriate taxing authorities. All
information provided in such returns, reports and statements is complete and
accurate in all material respects. The Company and its Subsidiaries have paid
all amounts due in respect of Taxes (whether or not actually shown on such
returns, reports or statements), or have otherwise set up reserves in accordance
with GAAP in respect of all Taxes for the periods covered by such Tax Returns,
as well as all other Taxes, penalties, interest, fines, deficiencies,
assessments and governmental charges that have become due or payable (including,
without limitation, all Taxes that the Company and its Subsidiaries are
obligated to withhold from amounts paid or payable to or benefits conferred upon
employees, creditors and third parties). As of the date hereof, there is no
proposed liability for any material Tax to be imposed upon the Company or any of
the Subsidiaries for the fiscal year ended September 30, 1998 and all prior
years for which there is not an adequate reserve, considering such reserves in
the aggregate.
(b) Except as disclosed on Schedule 3.13 hereto, no audits or
investigations relating to any Taxes for which the Company or its Subsidiaries
may be liable are pending or threatened in writing by any taxing authority.
Except as disclosed on Schedule 3.13 hereto, there are no agreements or
applications by the Company or any of its Subsidiaries for the extension of the
time for filing any tax return or paying any Tax nor have there been any waivers
of any statutes of limitation for the assessment of any Taxes.
24
(c) Neither the Company nor any of its Subsidiaries is a party
to any agreements relating to the sharing or allocation of Taxes.
(d) As of October 1, 1998, for federal income tax purposes,
the Company had net operating loss carryforwards ("NOLS") arising in the years,
and for each such year, in the amounts, disclosed on Schedule 3.13(d) hereto.
Except as disclosed on Schedule 3.13(d) hereto, to the knowledge of the Company
and its Subsidiaries, based on their reasonable good faith analysis of the
applicable facts (which, to the knowledge of the Company and its Subsidiaries,
have in all material respects been disclosed to, or have otherwise been obtained
by, the Investor and the accounting firm representing the Investor in connection
with this Agreement) and relevant legal authorities: (i) assuming the Series A
Preferred Stock and Series B Preferred Stock were deemed to be issued on the
date of this Agreement, (a) the NOLs of the Company and its Subsidiaries are not
subject to limitation under Code section 382 and will not become subject to
limitation under Code section 382 immediately following such deemed issuance of
the Series A Preferred Stock and Series B Preferred Stock, and (b) taking into
account such deemed issuance, the increase in the percentage of the Company's
stock owned by one or more 5% shareholders, within the meaning of Code section
382 and the relevant Treasury Regulations promulgated thereunder, during the
three-year testing period ending on the date of such deemed issuance, relative
to the lowest percentage of stock owned by such shareholders during such testing
period, does not exceed 35%; (ii) the NOLs of the Company and its Subsidiaries
are not separate return limitation year ("SRLY") losses within the meaning of
Code section 1502 and the Treasury Regulations promulgated thereunder; and (iii)
the Investor and the accounting firm representing the Investor are aware of all
transfers or issuances of the Company's shares which have occurred during the
three-year testing period ending on the date of issuance of the Series A
Preferred Stock and Series B Preferred Stock of which the Company has knowledge
and which involve more than 5% of the Company's outstanding shares or which were
issued to, or acquired by, an owner of more than 5% of the Company's outstanding
shares. The representations made in clause (i) of this Section 3.13(d), when
reaffirmed by the Company as of the Closing Date pursuant to Section 9.01(a)
hereof, shall be modified by taking into account the actual issuance of the
Series A Preferred Stock at the Closing.
(e) Except as disclosed on Schedule 3.13(e) hereto, the
Company or its Subsidiaries have withheld from its employees and timely paid to
the appropriate taxing authority proper and accurate amounts in all material
respects through all periods in compliance in all material respects with all
employee Tax withholding provisions of all applicable Laws.
SECTION 3.14. ERISA AND OTHER EMPLOYMENT MATTERS.
(a) Schedule 3.14(a) lists each material employee benefit plan
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), whether or not subject to ERISA, and each
material bonus, incentive or deferred compensation, stock option or other equity
based, severance, termination, or fringe benefit or other material benefit,
plan, program or policy, maintained, sponsored or contributed to by the Company
or any of its Subsidiaries or to which any such Person is or has been obligated
to contribute (collectively, the "PLANS"). Neither the Company nor any of its
Subsidiaries is or, within the preceding six years, has been obligated to
contribute to any "multiemployer plan" as defined in Section 3(37) of ERISA.
Except as set forth on Schedule 3.14(a), none of the
25
Company nor any of its Subsidiaries has an express or implied commitment, (i) to
create, incur liability with respect to or cause to exist any material employee
benefit plan, program or arrangement other than the Plans or (ii) except for
amendments necessary or appropriate to comply with applicable Law, to modify,
change or terminate any Plan. Schedule 3.14(a) indicates which of such Plans is
subject to ERISA.
(b) Except as set forth in Schedule 3.14(b), neither the
execution and delivery of the Transaction Agreements nor the consummation of the
transactions contemplated thereby will (i) accelerate the time of payment,
vesting or funding of, or increase or modify the amount or terms of, any
compensation or benefits that are or may become payable from or by the Company
or any of its Subsidiaries to or in respect of any current or former executive
officer or other key employee of any such Person, or (ii) constitute a Change in
Control under any of the Employment Agreements with any such executive officer
or other key employee.
(c) All employer and employee contributions, premiums and
expenses payable to or in respect of any Plan or required by Law or any Plan or
labor agreement or arrangement have been timely paid, or, if not yet due, have
been fully and adequately accrued as a liability on the Company's financial
statements included in the SEC Reports and no Plan is subject to Section 412 of
the Code or Section 302 of ERISA.
(d) Except as set forth on Schedule 3.14(d), (i) no trade or
business, whether or not incorporated, is or has been treated as a single
employer together with the Company for any purpose under ERISA or Section 414 of
the Code other than the Company's Subsidiaries, (ii) no material liability under
Title I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans or employee compensation has been incurred
(directly or indirectly, including as a result of any indemnification obligation
or agreement) by the Company or any of its Subsidiaries and is still
outstanding, and no event, transaction or condition has occurred or exists which
is reasonably expected to result in any material liability to the Company, any
of its Subsidiaries or, following the Closing, the Investor or any Affiliate
thereof, and (iii) no reportable event, within the meaning of Section 4043 of
ERISA and the regulations of the PBGC promulgated thereunder, has occurred that
is reasonably expected to result in the imposition of any material liability to
the Company or any of its Subsidiaries, or will occur in connection with the
consummation of the transactions contemplated by this Agreement, with respect to
any Plan.
(e) Each Plan has been operated and administered and is in
compliance with all applicable Laws except for any failures that, individually
and in the aggregate, would not result in any material liability of the Company
or any of its Subsidiaries. Except as set forth in Schedule 3.14(e), each Plan
that is intended to qualify under Section 401(a) of the Code has received a
favorable determination from the Internal Revenue Service as to its
qualification and, to the knowledge of the Company and its Subsidiaries, no
event or condition has occurred or exists since the date of such letter that
could result in the disqualification of such Plan.
(f) Except for the agreements set forth on Schedule 3.14(f),
none of the Company or any of its Subsidiaries is a party to any collective
bargaining agreements and there are no labor unions or other organizations
representing, or to the knowledge of the Company and its
26
Subsidiaries, purporting to represent or attempting to represent, any employee
of the Company or any of its Subsidiaries.
(g) Neither the Company nor any of its Subsidiaries has
violated any provision of Law regarding the terms and conditions of employment
of employees, former employees or prospective employees or other labor related
matters, including, without limitation, Laws relating to discrimination, fair
labor standards and occupational health and safety, wrongful discharge or
violation of the personal rights of employees, former employees or prospective
employees, which is reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect.
SECTION 3.15. CONTRACTS. (a) Except as set forth on Schedule
3.15(a) hereto and other than the Option Plans, neither the Company nor any of
its Subsidiaries is a party or subject to any of the following (whether written
or oral, express or implied): (i) any Employment Agreement or understanding or
obligation, with respect to severance, termination, retention or change in
control, to pay liabilities or fringe benefits, with any present or former
Representative of the Company or any of its Subsidiaries, who is or may be
entitled to receive pursuant to the terms thereof, compensation in excess of
$400,000 upon termination of such Person's employment or engagement; or (ii) any
plan, contract or understanding providing for bonuses, pensions, options,
deferred compensation, retirement payments, royalty payments, profit sharing or
similar payment or benefit with respect to any present or former Representative
of the Company or any of its Subsidiaries, who is or may be entitled to receive
pursuant to the terms thereof, base compensation in excess of $400,000 in any
single year.
(b) Except as set forth on Schedule 3.15(b) hereto, none of
the Company, any of its Subsidiaries, or to the knowledge of the Company and its
Subsidiaries, any other party, is in breach or violation or in default in the
performance or observance of any term or provision of any contract, agreement,
indenture, mortgage, loan agreement, note, lease or other instrument to which
the Company or any such Subsidiary is a party or by which the Company or any
such Subsidiary is bound or to which any of the properties of the Company or any
such Subsidiary is subject, which breach, violation or default is reasonably
likely to, individually or in the aggregate, involve a claim against the Company
or any of its Subsidiaries in an amount in excess of $3,000,000 or have a
Material Adverse Effect.
(c) The maximum amount payable by the Company on or after the
date hereof pursuant to deferred earn-out and other performance-based payment
obligations in connection with any acquisition or similar transaction effected
prior to the date hereof will not exceed $294,000,000, in the aggregate.
SECTION 3.16. CLIENT RELATIONS. Schedule 3.16 hereto contains
an accurate and complete listing for the Company and its Subsidiaries, taken as
a whole, of the clients that generated in excess of $6,000,000 in revenues and
the revenues for each such client for the fiscal year ended September 30, 1998.
Except as set forth on Schedule 3.16 hereto, as of the date hereof, no current
client of the Company or any of its Subsidiaries that in the fiscal year ended
September 30, 1998 generated in excess of $6,000,000 in revenues has advised the
Company or any of its Subsidiaries that it is not continuing, or is terminating,
or is making a material adverse change with respect to, its business with the
Company or any of its Subsidiaries.
27
SECTION 3.17. FINANCIAL ADVISORS AND BROKERS; FAIRNESS
OPINION. (a) Except for Evercore Partners, Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
no Person has acted, directly or indirectly, as a broker, finder or financial
advisor of the Company in connection with the Transaction Agreements or the
transactions contemplated thereby, and no Person is entitled to receive any
broker's, finder's or similar fee or commission in respect thereof based in any
way on any agreement, arrangement or understanding made by or on behalf of the
Company, any of its Subsidiaries or any of their respective directors, officers
or employees. True and correct copies of all agreements between the Company, on
the one hand, and Evercore Partners, Inc. or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ (or any
of their respective Affiliates), on the other, have been delivered to the
Investor.
(b) The Company has received an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ to the effect that the consideration to be paid to the Company for the
shares of Series A Preferred Stock and Series B Preferred Stock to be sold
hereunder is fair, from a financial point of view, to the Company.
SECTION 3.18. EXEMPTION FROM REGISTRATION. Assuming the
representations and warranties of the Investor set forth in Article IV hereof
are true and correct in all material respects, the offer and sale of the Senior
Preferred Stock made pursuant to this Agreement and the acquisition of the
Conversion Shares upon conversion of the Senior Preferred Stock will be in
compliance with the Securities Act and any applicable state securities laws and
will be exempt from the registration requirements of the Securities Act and such
state securities laws.
SECTION 3.19. INSURANCE. Set forth on Schedule 3.19 hereto is
a description that is correct and complete in all material respects (specifying
the insurer, the policy number or covering note number with respect to binders
and amount of coverage) of insurance policies, binders, contracts or instruments
(collectively, the "POLICIES") to which the Company or any of its Subsidiaries
is a party or by which any of their assets or any of their employees, officers
or directors (in such capacity) are covered by property, fire, professional
liability, fiduciary and other insurance. True and complete copies of all such
Policies have been made available to the Investor. Except as set forth on
Schedule 3.19 hereto, all such Policies are in full force and effect in
accordance with their respective terms and will remain in full force and effect
after the Closing. Except as set forth on Schedule 3.19 hereto, neither the
Company nor any of its Subsidiaries has received any notice of default with
respect to any provision of any such Policies, or any notice that the Insurer is
unwilling to renew any such Policy following the currently scheduled expiration
of such Policy or intends to materially modify any term of any such renewed
Policy as compared to the existing Policy. With respect to its directors' and
officers' liability insurance policies, neither the Company nor any of its
Subsidiaries has failed to give any notice or present any claim thereunder in
due and timely fashion or as required by any such policies so as to jeopardize
full recovery under such Policies.
SECTION 3.20. RIGHTS AGREEMENT. No "Distribution Date" or
"Stock Acquisition Date" (as such terms are defined in the Rights Agreement,
dated as of July 21, 1992, between the Company and First Union Bank of North
Carolina, as Rights Agent (the "RIGHTS PLAN")) has occurred as of this date. The
execution and delivery of the Transaction Agreements and the consummation of the
transactions contemplated hereby will not result in the ability of any Person to
exercise any rights ("RIGHTS") issued under the "Rights Plan" or cause the
Rights
28
to separate from the shares of Common Stock to which they are attached or to be
triggered or become exercisable.
SECTION 3.21. DISCLOSURE. No representation or warranty by the
Company in this Agreement, and no exhibit, document, statement, certificate or
schedule furnished or to be furnished to the Investor pursuant to the terms
hereof, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary to make the statements or
facts contained herein or therein not misleading or necessary to provide the
Investor with adequate and complete information as to the Company, its
Significant Subsidiaries or its Subsidiaries, as the case may be, and the
businesses, assets and liabilities of the Company, its Significant Subsidiaries
or its Subsidiaries, as the case may be.
SECTION 3.22. YEAR 2000 COMPLIANCE. The Company has carried
out a review to evaluate the extent to which the business or operations of the
Company or any of its Subsidiaries will be affected by the Year 2000 Problem.
The Year 2000 Problem will not have a Material Adverse Effect or result in any
material loss or interference with the business or operations of the Company or
its Subsidiaries. The Company reasonably believes, after due inquiry, that the
suppliers, vendors, customers or other material third parties used or served by
the Company and its Subsidiaries are addressing or will address the Year 2000
Problem in a timely manner. The Company is in compliance in all material
respects with all applicable requirements of any Governmental Entity or
applicable Law relating to the Year 2000 Problem. The Company has delivered to
the Investor complete and accurate copies of all of its internal plans,
including estimates of the anticipated associated costs, for addressing the Year
2000 Problem as it relates to the Company and its Subsidiaries.
SECTION 3.23. ENVIRONMENTAL MATTERS. Except as set forth on
Schedule 3.23 hereto, the Company and its Subsidiaries are (i) in compliance in
all material respects with any and all applicable Environmental Laws, (ii) have
received and are in compliance in all material respects with all permits,
licenses or other approvals required under applicable Environmental Laws for the
conduct of their respective businesses, and (iii) have not received notice of
any actual or potential material liability for the investigation or remediation
of any disposal or release of Hazardous Materials.
SECTION 3.24. CONTROLS. The Company and each of its
Subsidiaries maintains internal information systems and controls sufficient to
provide reasonable assurance that (i) material transactions are executed in
accordance with management's general or specific authorizations, and (ii)
material transactions (including payment of claims and collection of
receivables) are executed in accordance with their terms and applicable Law and
are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability.
SECTION 3.25. JOINT VENTURE MATTERS. Except as disclosed in
the SEC Reports or in Schedule 3.25 hereto, to the knowledge of the Company and
its Subsidiaries, since January 1, 1994 (or with respect to any Joint Venture
(and only with respect to such Joint Venture), if later, the date on which the
Company or any of its Subsidiaries first acquired an equity interest in such
Joint Venture or any of the businesses conducted by such Joint Venture),
29
none of the following has occurred that, individually or in the aggregate, has
had, or would be reasonably likely to have, a Material Adverse Effect:
(a) the failure of any Joint Venture to comply with all
applicable Laws and Regulatory Approvals in the conduct of its
business;
(b) the failure of any Joint Venture to obtain and maintain in
full force and effect all Regulatory Approvals necessary to conduct its
business;
(c) the revocation, withdrawal, suspension or termination of,
or any threatened or pending revocation, withdrawal, suspension or
termination of, or the imposition of any material conditions with
respect to, any Regulatory Approval necessary for any Joint Venture to
conduct its business;
(d) the revocation, withdrawal, suspension or termination of,
or any threatened or pending revocation, withdrawal, suspension or
termination of, or the imposition of any material conditions with
respect to, the participation by any Joint Venture in the federal
Medicare program, any state Medicaid program, or any other third party
payor program;
(e) the initiation of, or explicit threat of initiation of,
any Proceeding by any Person, or the initiation of, or explicit threat
of initiation of, any investigation by any Governmental Entity, against
or affecting any Joint Venture, that may involve criminal liability or
result in or involve criminal proceedings, that may affect the status
of any Regulatory Approval maintained by such Joint Venture that is
necessary for such Joint Venture to conduct its business, or that may
affect the authority of such Joint Venture to participate in the
federal Medicare program, any state Medicaid program or any other third
party payor program;
(f) the institution of any judgment, decree, injunction, rule,
stipulation or order against or applicable to any Joint Venture or
against or applicable to any of its properties or businesses; or
(g) any other event or occurrence with respect to any Joint
Venture that has had, or would be reasonably likely to have, a Material
Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to, and agrees with, the
Company as follows:
SECTION 4.01. ORGANIZATION. The Investor is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite power and authority to
own or lease and operate its properties and to conduct its business as it is now
being conducted and is proposed to be conducted.
30
SECTION 4.02. AUTHORIZATION OF AGREEMENTS. (a) The Investor
has all requisite power and authority as a limited liability company to execute,
deliver and perform its obligations under the Transaction Agreements and the
Investor Documents. The execution, delivery and performance of the Transaction
Agreements and the Investor Documents, and the consummation by the Investor of
the transactions contemplated thereby, have been duly authorized by all
necessary action on the part of the Investor.
(b) This Agreement and the Registration Rights Agreement have
been duly executed and delivered by the Investor, and each such agreement
constitutes, and when executed and delivered by the Investor, the Escrow
Agreement will constitute, a legal, valid and binding obligation of the
Investor, enforceable against the Investor in accordance with its terms, subject
to applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and to general principles of equity.
SECTION 4.03. CONSENTS; NO CONFLICTS. (a) Except for the
Required Regulatory Approvals, no Regulatory Approval from, or registration,
declaration or filing with, any Governmental Entity is required to be made or
obtained by the Investor in connection with the execution, delivery and
performance of the Transaction Agreements and the consummation of the
transactions contemplated thereby.
(b) The execution and delivery of this Agreement and the
Registration Rights Agreement does not, and the execution and delivery of each
of the Investor Documents and the Escrow Agreement will not, and subject to the
receipt of the Required Regulatory Approvals, the performance of the obligations
set forth herein and therein and the consummation of the transactions
contemplated hereby and thereby will not, (i) violate any provision of the
certificate of formation of the Investor; (ii) conflict with, contravene or
result in a breach or violation of any of the terms or provisions of, or
constitute a default (with or without notice or the passage of time) under, or
result in or give rise to a right of termination, cancellation, acceleration or
modification of any right or obligation under, or require any consent, waiver or
approval under, any note, bond, debt instrument, indenture, mortgage, deed of
trust, lease, loan agreement, joint venture agreement, Regulatory Approval,
contract or any other agreement, instrument or obligation to which the Investor
is a party or by which the Investor or any of its property is bound, or (iii)
violate any Law applicable to the Investor.
SECTION 4.04. FINANCIAL ADVISORS AND BROKERS. No Person has
acted directly or indirectly as a broker, finder or financial advisor of the
Investor in connection with the Transaction Agreements or the transactions
contemplated thereby, and no Person is entitled to receive any broker's,
finder's or similar fee or commission in respect thereof based in any way on any
agreement, arrangement or understanding made by or on behalf of the Investor or
any of its directors, officers or employees.
SECTION 4.05. OWNERSHIP OF EQUITY SECURITIES; PURPOSE OF
INVESTMENT. Except as permitted pursuant to Section 11.09 hereof, the Investor
is acquiring the Senior Preferred Stock under this Agreement for its own account
solely for the purpose of investment and not with a view to, or for sale in
connection with, any distribution thereof in violation of the Securities Act.
The Investor acknowledges that the Senior Preferred Stock and the Conversion
Shares have not been registered under the Securities Act and may be sold or
disposed of in the
31
absence of such registration only pursuant to an exemption from the registration
requirements of the Securities Act. As of the date hereof, other than pursuant
to this Agreement, the Investor does not Beneficially Own, directly or
indirectly, or have any option or right to acquire, any securities of the
Company.
ARTICLE V
GOVERNANCE
SECTION 5.01. BOARD SIZE. For so long as the Investor is
entitled to designate an Investor Nominee for election to the Board of
Directors, the Board of Directors shall consist of no more than 12, nor less
than 7, directors.
SECTION 5.02. BOARD REPRESENTATION. (a) The Board of Directors
shall elect a total of three nominees designated in writing by the Investor
prior to the Closing (such persons, or replacements designated by the Investor,
the "INVESTOR NOMINEES"), to the Board of Directors effective as of the Closing
Date, to be allocated to Class I, Class II and Class III as specified by the
Investor. Commencing with the annual meeting of stockholders of the Company the
record date for which next follows the Closing Date, and at each annual meeting
of stockholders of the Company thereafter, the Investor shall be entitled to
present to the Board of Directors or the nominating committee thereof a number
of nominees for election to the class of directors up for election to the Board
of Directors at such annual meeting equal to the number of Investor Nominees in
such class immediately prior to such election and the Company shall use its best
efforts to cause the election to the Board of Directors of such Investor
Nominees. If the Board of Directors shall cease to be a classified board, the
Investor shall be entitled to present to the Board of Directors or the
nominating committee thereof three nominees for election to the Board of
Directors at each annual meeting of stockholders of the Company. In the event of
the death, disability, resignation or removal of an Investor Nominee, the
Investor shall designate a replacement for such director, which replacement the
Company shall cause to be elected to the Board of Directors.
(b) The Company shall cause each Investor Nominee designated
for election to the Board of Directors pursuant to Section 5.02(a) hereof to be
included in the slate of nominees recommended by the Board of Directors to the
stockholders of the Company for election as directors at the relevant annual
meeting of the stockholders, and shall use its best efforts to cause the
election of each such Investor Nominee, including soliciting proxies in favor of
the election of such person.
(c) Notwithstanding the foregoing provisions of this Section
5.02, the Investor shall not be entitled to designate Investor Nominees for
election to the Board of Directors in the event that the Investor and its
Affiliates Beneficially Own, in the aggregate, less than 50% of the Investor
Original Number of Conversion Shares. In the event that the Investor shall not
be entitled to designate Investor Nominees for election to the Board of
Directors, the Investor Nominees shall resign from the Board of Directors no
later than the thirtieth day after the day on which the Investor becomes aware
that the aggregate Beneficial Ownership of it and its Affiliates is reduced
below the threshold ownership level of Investor Original Number of Conversion
Shares specified in this Section 5.02(c). If an Investor Nominee does not resign
on or prior to
32
such thirtieth day as required pursuant to the immediately preceding sentence, a
majority of the Board of Directors (excluding any Investor Nominees) shall have
the right to remove such Investor Nominee from the Board of Directors.
(d) If the Board of Directors shall determine in good faith in
the exercise of its fiduciary duties, that nomination of any person designated
by the Investor for election to the Board of Directors would be contrary to the
best interests of the Company, then the Company shall promptly notify the
Investor of such determination (either in person, if such determination shall be
made at a Board of Directors meeting at which an Investor Nominee is present or
by telephone (promptly confirmed in writing), if such determination shall be
made at a Board of Directors meeting at which an Investor Nominee is not
present) and thereafter the Investor shall have a period of no less than five
Business Days to designate a new person for nomination for election to the Board
of Directors as an Investor Nominee. The Board of Directors has approved the
executives of the Investor set forth on Schedule 5.02(d) hereto as Investor
Nominees for all purposes hereof as of the date hereof.
SECTION 5.03. COMMITTEES; MEETINGS. (a) Effective as of the
Closing Date, and for so long as an Investor Nominee serves as a member of the
Board of Directors, the Investor shall have the option to have one Investor
Nominee appointed as a member to any committee of the Board of Directors;
PROVIDED, HOWEVER, that in the event the rules of the primary national
securities exchange or national quotation system on which the Common Stock is
then listed or quoted prohibits the appointment of an Investor Nominee to one of
the committees of the Board of Directors, no Investor Nominee shall be appointed
to such committee. In the event the Investor elects to have an Investor Nominee
appointed to a committee of the Board of Directors, the Investor shall so notify
the Company in writing, and the Company shall appoint such nominee to such
committee within 10 days of the delivery of such notice by the Investor.
(b) From and after the Closing Date, for so long as an
Investor Nominee serves as a member of the Board of Directors, each Investor
Nominee shall be invited to attend all regular and special meetings of the Board
of Directors and any committee of the Board of Directors of which such Investor
Nominee is a member. The Company shall notify each Investor Nominee of any such
meeting no later than the time at which it notifies any other member of the
Board of Directors of such meeting. So long as the Investor has the right to
have Investor Nominees elected to committees of the Board of Directors, the
Board of Directors shall have an audit committee and a compensation committee.
ARTICLE VI
STANDSTILL
SECTION 6.01. STANDSTILL AGREEMENT. (a) The Investor covenants
and agrees with the Company that, from the date hereof through the Closing Date
and thereafter (subject to paragraphs (b) and (c) below) for a period of two
years following the Closing Date (the "STANDSTILL PERIOD"), the Investor and its
Affiliates shall not, without the prior approval of the Board of Directors:
33
(i) acquire, seek, propose or offer to acquire or agree to
acquire (other than (w) in accordance with the terms of this Agreement
and the Certificates of Designations; (x) as a result of a stock split,
stock dividend or other recapitalization by the Company or the exercise
of rights or warrants distributed to stockholders; (y) as a result of
transfers among members of the Investor Group of Senior Preferred Stock
acquired pursuant to Article II hereof or Voting Securities acquired
pursuant to the exercise or conversion of, or in respect of dividends
payable on, any Senior Preferred Stock acquired pursuant to Article II
hereof, PROVIDED that the transferor did not itself acquire the
transferred securities in violation of this Section 6.01(a); or (z) in
a transaction in which the Investor and/or its Affiliates acquire
Beneficial Ownership of more than 50% of the Voting Power of the Voting
Securities of a previously non-Affiliated business entity that owns
less than 5% of the aggregate Voting Power of the outstanding Voting
Securities of the Company if such acquisition is not made in
contemplation of any acquisition prohibited under this subparagraph
(a)), or commence or propose to commence any tender offer or exchange
offer seeking to acquire, Beneficial Ownership of any additional Voting
Securities of the Company;
(ii) become a member of a Group with respect to the Voting
Securities of the Company, other than a Group (x) composed solely of
itself and its Affiliates, or (y) to the extent of any Senior Preferred
Stock acquired pursuant to Article II hereof or Voting Securities
acquired pursuant to the exercise or conversion of, or in respect of
dividends payable on, any Senior Preferred Stock acquired pursuant to
Article II hereof, composed of members of the Investor Group;
(iii) solicit any proxies or stockholder consents, or become a
participant (other than by voting), or encourage any Person to become a
participant, in a proxy or consent solicitation with respect to any of
the Company's Voting Securities, in each case other than solicitations
to holders of shares of Preferred Stock with respect to matters as to
which the Preferred Stock is entitled to vote;
(iv) call any special meeting of holders of Common Stock; or
(v) make any public disclosure, or take any action which could
require the Company to make any public disclosure, with respect to an
offer, proposal or transaction that if made or consummated without the
prior approval of the Board of Directors, would not be permitted under
this Section 6.01.
(b) Notwithstanding anything to the contrary in this Section
6.01, the provisions of Section 6.01(a) shall cease to be applicable in the
event that (i) the Company enters into a definitive agreement with respect to a
Control Transaction; (ii) a bona fide offer (other than an offer made only to
the Investor and its Affiliates) is made by any Person (other than the Investor
or an Affiliate of the Investor) to acquire more than 20% of any class of the
Company's Voting Securities; (iii) an Insolvency Event occurs; (iv) the Company
is in default on any of its Indebtedness the outstanding principal amount of
which is in excess of $10,000,000, which default is not cured or waived for 75
days and as a result of which default the maturity of such Indebtedness has been
accelerated or the holders thereof have the right to accelerate the maturity of
such Indebtedness; or (v) the Board of Directors (other than the Investor
Nominees) so
34
determines. In the event the Company is soliciting proposals or offers with
respect to a Control Transaction from any Person (a "BIDDING PROCESS") (other
than the Investor or an Affiliate of the Investor), the Company shall release
the Investor and its Affiliates from the restrictions contained in Section
6.01(a) to the extent necessary for the Investor and its Affiliates to be
permitted, on the same terms as bidders approved by the Company, to make such a
proposal or offer; PROVIDED, HOWEVER, that if the Investor withdraws from the
bidding process or the Company terminates the bidding process, the Investor
shall thereafter continue to be subject to the restrictions contained in Section
6.01(a).
(c) Notwithstanding anything to the contrary in Section
6.01(a) hereof, during the Standstill Period, the Investor and its Affiliates
may acquire, seek, propose or offer to acquire or agree to acquire, or commence
or propose to commence any tender offer seeking to acquire Beneficial Ownership
of Voting Securities of the Company (in addition to any Senior Preferred Stock
acquired pursuant to Article II hereof or Voting Securities acquired pursuant to
the exercise or conversion of, or in respect of dividends payable on, any Senior
Preferred Stock acquired pursuant to Article II hereof) representing up to 10%
of the Voting Power of the then-outstanding Voting Securities of the Company or,
if the Investor has received or is entitled to receive the Fund Amount pursuant
to Section 2.01(b) hereof, up to 15% of the Voting Power of the then-outstanding
Voting Securities of the Company; PROVIDED that no such action shall be taken
if, as a result thereof, the Voting Securities of the Company Beneficially Owned
by the Investor and its Affiliates, in the aggregate, would represent in excess
of 34.9% of the aggregate Voting Power of the outstanding Voting Securities of
the Company.
(d) The Company shall use its best efforts to prevent the
consummation of any of the transactions permitted by this Section 6.01 from
resulting in the ability of any Person to exercise any Rights issued under the
Rights Plan (or similar device adopted after the date hereof) or causing the
Rights to separate from the shares of Common Stock to which they are attached or
to be triggered or become exercisable.
(e) Section 6.01(a) hereof shall not apply to, nor in any
manner restrict or limit, any Investor Nominee in his or her capacity as a
director of the Company.
ARTICLE VII
PRE-CLOSING COVENANTS
SECTION 7.01. TAKING OF NECESSARY ACTION. Each of the parties
hereto agrees to use its best efforts promptly to take or cause to be taken all
actions and promptly to do or cause to be done all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement in accordance with the terms of
the Agreement. Without limiting the foregoing, the Investor and the Company will
use their best efforts to make all filings with respect to (including filings
under the HSR Act), and obtain, all Required Regulatory Approvals and other
Regulatory Approvals necessary or, in the opinion of the Investor or the
Company, advisable, in order to permit the consummation of the transactions
contemplated hereby.
35
SECTION 7.02. CONDUCT OF BUSINESS. (a) From the date hereof
until the Closing Date, except as set forth on Schedule 7.02 hereto or as
provided in Section 7.02(b) hereof, the Company shall conduct its business and
shall cause its Subsidiaries to conduct their respective businesses in, and only
in, the ordinary course and shall use, and shall cause its Subsidiaries to use,
their best efforts to preserve intact their respective present business
organizations, operations, goodwill and relationships with third parties
(including, without limitation, clients and providers) and to keep available the
services of the present directors, officers and key employees. Without limiting
the generality of the foregoing, from the date hereof until the Closing Date,
without the prior written consent of the Investor (except as expressly permitted
or required by this Agreement):
(i) the Company shall not, and shall cause each of its
Subsidiaries not to, sell any of the assets of the Company or its
Subsidiaries (or the securities of entities holding the same) to any
Person, other than the Company or a Wholly-Owned Subsidiary of the
Company, in one transaction or a series of related transactions, in
which the fair value of the assets being sold, or the total
consideration (in the form of cash or property and including any
contingent consideration and any Indebtedness or other obligations
assumed) to be received by the Company and its Subsidiaries, exceeds
$2,000,000;
(ii) other than in the ordinary course of business consistent
with past practice, the Company shall not, and shall cause each of its
Subsidiaries not to, acquire any assets, in one transaction or series
of related transactions, in which the total consideration (in the form
of cash or property and including any contingent consideration and any
Indebtedness or other obligations assumed) to be paid by the Company
and its Subsidiaries exceeds $2,000,000;
(iii) the Company shall not, and shall cause each of its
Subsidiaries or Significant Subsidiaries, as the case may be, not to
take any of the actions or enter into any of the agreements,
commitments or transactions described in clause (i), (ii), (iii), (v),
(vi), (ix), (x), (xi), (xii) or (xiii) of Section 3.09 hereof;
(iv) the Company shall not, and shall cause each of its
Subsidiaries not to, take any action that it knows or has reason to
believe would cause a representation or warranty of the Company set
forth herein to be untrue in any material respect if made at such time,
or a covenant of the Company set forth in Article VIII to fail to be
satisfied as of the Closing Date; and
(v) the Company shall not, and shall cause each of its
Subsidiaries not to, commit or agree to do any of the foregoing.
(b) Notwithstanding anything to the contrary in Section
7.02(a) hereof, the Company and its Subsidiaries may sell the assets described
in the Proposed Asset Sale Letter on terms not materially worse to the Company
than those set forth in the Proposed Asset Sale Letter. Notwithstanding anything
to the contrary in Section 7.02(a) hereof, nothing in Section 7.02(a) hereof
shall restrict the Company or any of its Subsidiaries from paying dividends,
making distributions, paying Indebtedness owed to the Company or any other
Subsidiaries, making loans or advances to the Company or any other Subsidiaries,
or selling, leasing or
36
transferring any properties or assets to the Company or any of its Subsidiaries,
in each case to the extent that any such restriction would be prohibited by
Section 6.06(b) of the Credit Agreement (as in effect on the date hereof) or
Section 4.05 of the Indenture (as in effect on the date hereof).
SECTION 7.03. NOTIFICATIONS. At all times prior to the Closing
Date, the Investor shall promptly notify the Company and the Company shall
promptly notify the Investor in writing of any fact, change, condition,
circumstance or occurrence or nonoccurrence of any event which will or is
reasonably likely to result in the failure to satisfy the conditions to be
complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery
of any notice pursuant to this Section 7.03 shall not limit or otherwise affect
the remedies available hereunder to any party receiving such notice.
SECTION 7.04. ALTERNATIVE TRANSACTIONS. (a) The Company shall
immediately cease and terminate any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any Persons conducted
heretofore by the Company, its Subsidiaries or any of their respective
Representatives with respect to any proposed, potential or contemplated
Alternative Transaction.
(b) From the date hereof until the earlier of (i) the Closing
Date and (ii) the termination of this Agreement (the "EXCLUSIVITY PERIOD"), the
Company shall not, shall not permit any of its Subsidiaries or Affiliates to,
and shall not authorize or permit any of its or their Representatives to,
directly or indirectly, (A) solicit or initiate, or encourage the submission of,
any Proposal, (B) participate in any discussions or negotiations regarding, or
furnish to any Person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Proposal or Alternative Transaction,
other than a transaction with the Investor or its Affiliates, or (C) authorize,
engage in, or enter into any agreement or understanding with respect to, any
Alternative Transaction; PROVIDED that the Company may, in response to an
unsolicited written Proposal from a third party, engage in the activities
specified in clause (B) and (C) of this Section 7.04(b), if (x) in the opinion
of the Company's outside legal counsel, such action is required for the Board of
Directors to comply with its fiduciary duties under applicable Law, (y) the
Company shall have notified the Investor not later than 24 hours after having
received the relevant Proposal (which notice shall identify the Person making
the Proposal and set forth the material terms thereof) and (z) the Company shall
have refrained from taking any action specified in clause (C) of this Section
7.02(b) until the third day following the receipt by the Investor of the
notification referred to in clause (y) of this Section 7.02(b). The Company will
keep the Investor fully informed of the status and details of any such Proposal
or request and any related discussions or negotiations. The Company will
promptly notify the Investor of any Proposal (which notice shall identify the
Person making the Proposal and set forth the material terms thereof) that the
Company, any of its Subsidiaries or Affiliates or any of its or their
Representatives may receive during the Exclusivity Period.
SECTION 7.05. DEBENTURE INDENTURES. Prior to the Closing, the
Company and the Investor shall jointly prepare an indenture or indentures having
the same economic terms as the Series A Preferred Stock and Series B Preferred
Stock (including, without limitation, interest rates that are the same as the
respective dividend rates on the Series A Preferred Stock and Series B Preferred
Stock) and having other terms substantially identical to the terms of the
37
Series A Preferred Stock and Series B Preferred Stock, respectively, and
otherwise mutually acceptable in form and substance, with respect to each of the
Series A Debentures and Series B Debentures.
ARTICLE VIII
ADDITIONAL COVENANTS
SECTION 8.01. FINANCIAL AND OTHER INFORMATION. (a) So long as
members of the Investor Group Beneficially Own, in the aggregate, at least 10%
of the Original Number of Conversion Shares, the Company shall (and shall cause
each of its Subsidiaries to) afford to members of the Investor Group that then
Beneficially Own Conversion Shares and their Representatives reasonable access,
upon reasonable notice and in such manner as will not unreasonably interfere
with the conduct of the Company's (or such Subsidiary's) business, to their
respective properties, books, contracts, commitments and records (including
information regarding any pending or threatened Proceeding to which the Company
or any of its Subsidiaries is, or reasonably expects to be, a party) and to
discuss the business, affairs, finances, regulatory status and other matters
related to the purchase and Beneficial Ownership of the Senior Preferred Stock
and Conversion Shares with Representatives of the Company; PROVIDED, HOWEVER,
that neither the Company nor any Subsidiary shall be required to disclose any
such information pursuant to this Section 8.01 to the extent that, in the
opinion of outside legal counsel to the Company, such disclosure would result in
the Company's inability to assert the attorney-client privilege with respect to
such information; and PROVIDED, FURTHER, that any such inspection shall be
subject to all reasonable health, safety and patient confidentiality procedures
regularly enforced by the Company and its Subsidiaries.
(b) Upon the written request of the Company, each member of
the Investor Group shall inform the Company of the number of Conversion Shares
and Original Number of Conversion Shares then Beneficially Owned by such member
of the Investor Group. Such information shall be delivered to the Company within
five Business Days of the delivery of such request to such member of the
Investor Group. To the extent such information is not available to the public,
the Company shall keep such information confidential.
SECTION 8.02. LIMITATION ON DIVIDEND PAYMENTS AND REPURCHASES.
From and after the Closing, so long as members of the Investor Group
Beneficially Own, in the aggregate, at least 50% of the Original Number of
Conversion Shares, the Company shall not, without the prior written approval of
the holders of at least 60% of the Conversion Shares then Beneficially Owned by
members of the Investor Group, (i) declare or pay any dividend on, or make any
other distribution with respect to, any of its Equity Securities (other than the
Preferred Stock), or (ii) purchase, redeem or otherwise acquire, and shall cause
its Subsidiaries not to purchase, redeem or otherwise acquire, any of the Equity
Securities (other than the Preferred Stock) or debt securities of the Company
(including, without limitation, the Senior Subordinated Notes, but not including
any debt securities issued in exchange for the Senior Preferred Stock), except
with respect to (x) the Senior Subordinated Notes or Indebtedness outstanding
pursuant to the Credit Agreement, as may be required pursuant to the terms of
the Indenture or the Credit Agreement, and (y) purchases of Equity Securities of
the Company or any of its Subsidiaries from executives and other
management-level employees of the Company or any of its
38
Subsidiaries in connection with customary employment and severance arrangements.
Nothing set forth in this Section 8.02 shall prohibit the Company from making
principal payments on any Indebtedness outstanding on the date of this Agreement
or permitted to be incurred pursuant to this Agreement.
SECTION 8.03. LIMITATION ON INDEBTEDNESS. From and after the
Closing, so long as members of the Investor Group Beneficially Own, in the
aggregate, at least 50% of the Original Number of Conversion Shares, the Company
shall not, without the prior written approval of the holders of at least 60% of
the Conversion Shares then Beneficially Owned by members of the Investor Group,
incur or permit its Subsidiaries to incur Indebtedness in excess of
$100,000,000, in the aggregate, in any twelve-month period. Notwithstanding the
foregoing, an incurrence of Indebtedness pursuant to a bank revolving credit
facility (including the revolving credit facility under the Credit Agreement) or
short-term credit facility which Indebtedness is repaid in whole or in part
during the same twelve-month period in which such Indebtedness was incurred,
shall not constitute an incurrence of Indebtedness to the extent of such
repayment for purposes of the preceding sentence from and after such repayment.
SECTION 8.04. ACQUISITIONS AND DISPOSITIONS. Except with
respect to transactions disclosed in the Proposed Asset Sale Letter concluded on
terms not materially worse to the Company than those terms set forth in the
Proposed Asset Sale Letter, from and after the Closing, so long as members of
the Investor Group Beneficially Own, in the aggregate, at least 50% of the
Original Number of Conversion Shares, the Company shall not, without the prior
written approval of the holders of at least 60% of the Conversion Shares then
Beneficially Owned by members of the Investor Group, approve, authorize, engage
in, or enter into any agreement or understanding with respect to, transactions
to (i) acquire assets (other than the acquisition of "Violet" as described in
Schedule 7.02 hereof) having a fair value, or for which consideration is paid
(in the form of cash or property and including any contingent consideration and
any Indebtedness or other obligations assumed), in excess of $100,000,000, in
the aggregate, in any twelve-month period or (ii) dispose of assets having a
fair value, or for which consideration is received (in the form of cash or
property and including any contingent consideration and any Indebtedness or
other obligations assumed), in excess of $100,000,000 in the aggregate, in any
twelve-month period.
SECTION 8.05. EQUITY ISSUANCES. (a) From and after the
Closing, so long as members of the Investor Group Beneficially Own, in the
aggregate, at least 50% of the Original Number of Conversion Shares, the Company
and each of its Subsidiaries shall not, without the prior written approval of
the holders of at least 60% of the Conversion Shares then Beneficially Owned by
members of the Investor Group, issue or sell any Equity Securities of the
Company or any Significant Subsidiary or any Derivative Securities in a
transaction or series of related transactions (such transaction or series of
related transactions, a "10% TRANSACTION") as a direct or indirect result of
which any Person (other than any institutionally managed, publicly held mutual
fund registered with the Commission) or Group would have, or have the right to
acquire, Beneficial Ownership of Equity Securities representing 10% or more of
the aggregate Voting Power of the then-outstanding Voting Securities of the
Company or any such Significant Subsidiary; PROVIDED, HOWEVER, that the Company
may issue its Equity Securities in a 10% Transaction without any such approval
if (i) the consideration to be received by the Company in such transaction is
solely in the form of cash, (ii) the transaction is completed pursuant to a
39
Purchase Agreement, and (iii) the Company has complied with the procedures set
forth in Section 8.05(b) hereof with respect to such transaction; and PROVIDED
FURTHER, that, notwithstanding the foregoing none of the following shall
constitute a 10% Transaction: (i) any transaction expressly permitted pursuant
to Section 7.02 hereof, (ii) any transaction set forth in the Proposed Asset
Sale Letter concluded on terms not materially worse to the Company than those
terms set forth in the Proposed Asset Sale Letter and (iii) any exercise of the
Rainwater-Magellan Warrant or Rainwater Pre-emptive Rights and (iv) the issuance
of the Series B Preferred Stock pursuant to the terms hereof.
(b) (i) Prior to any offer or sale by the Company of any of
its Equity Securities (the "COVERED SECURITIES") in a 10% Transaction,
the Company shall give written notice (a "PROPOSED SALE NOTICE") to the
Investor of the Company's desire to sell the Covered Securities, which
notice shall identify (A) the number of Covered Securities, (B) the
terms of the Covered Securities and (C) any other material terms and
conditions of the proposed offer or sale (other than a proposed sale
price). The date on which such Proposed Sale Notice is given is
referred to herein as the "NOTICE DATE." On and prior to the
Solicitation Date with respect to any Covered Securities, and following
the Solicitation Date if the Company shall have delivered an Acceptance
Notice with respect to such Covered Securities, the Company shall not,
shall not permit any of its Subsidiaries or Affiliates to, and shall
not authorize or permit any of its or their Representatives to,
directly or indirectly, solicit or encourage the submission of any
proposal from any Person (other than the Investor and its Affiliates),
participate in any discussion or negotiations with any Person (other
than the Investor and its Affiliates), or authorize, engage in or enter
any agreement or understanding with any Person (other than the Investor
and its Affiliates), with respect to the issuance or sale of such
Covered Securities.
(ii) The Investor shall have forty days following the Notice
Date (the "RESPONSE PERIOD") to notify the Company in writing (such
notification, an "OFFER TO PURCHASE") of its offer, or an offer by any
of its Affiliates, to purchase in cash all (but not less than all) of
the Covered Securities referred to in the relevant Proposed Sale
Notice. During the Response Period, if requested by the Investor or any
of its Affiliates, the Company shall negotiate in good faith with the
Investor or such Affiliate with respect to the terms of a proposed
purchase of Covered Securities by the Investor or such Affiliate. Any
Offer to Purchase shall set forth a proposed cash purchase price for
such Covered Securities (the "INVESTOR PRICE") and the proposed closing
date for the purchase and may include other material terms and
conditions of the proposed purchase. The Investor shall not be
obligated to deliver an Offer to Purchase, and if an Offer to Purchase
is not given prior to the end of the Response Period, the Investor
shall be deemed to have declined to purchase such Covered Securities.
(iii) The Company shall have ten days following the delivery
of an Offer to Purchase to accept the offer made by the Investor or its
Affiliates to purchase all (but not less than all) of the Covered
Securities on the terms and subject to the conditions set forth in the
Offer to Purchase by giving the Investor written notice to that effect
(an "ACCEPTANCE NOTICE"). If, in accordance with the terms of the
preceding sentence, the Company accepts the offer made by the Investor
or its Affiliates to purchase such
40
Covered Securities on the terms and subject to the conditions set forth
in the Offer to Purchase, the closing for such transaction shall take
place at a time and place reasonably acceptable to the Investor and the
Company. If the Company does not give an Acceptance Notice in
accordance with the terms of the first sentence of this paragraph, the
Company shall be deemed to have rejected the offer set forth in the
relevant Offer to Purchase.
(iv) If the Company has complied with the foregoing provisions
of this Section 8.05(b) and shall not have given an Acceptance Notice
with respect to any Covered Securities following the Solicitation Date
with respect to such Covered Securities, the Company may enter into a
Purchase Agreement with any other Person with respect to all (but not
less than all) of such Covered Securities within forty days following
such Solicitation Date (or within sixty days following such
Solicitation Date, if such Purchase Agreement constitutes a customary
underwriting agreement (an "UNDERWRITING AGREEMENT") that contemplates
a bona fide offering of the Covered Securities to the public that is
registered under the Securities Act) and sell all (but not less than
all) of the Covered Securities pursuant to such Purchase Agreement
within seventy days following such Solicitation Date (or within one
hundred days following such Solicitation Date if such sale is made
pursuant to an Underwriting Agreement and constitutes a bona fide
offering of the Covered Securities to the public that is registered
under the Securities Act); PROVIDED that (i) the purchase price for
such Covered Securities in such sale is at least 105% of the related
Investor Price, if any, and (ii) the terms and conditions of such sale
are otherwise not materially worse for the Company than those set forth
in the related Offer to Purchase. If the Company has not executed a
Purchase Agreement with respect to such Covered Securities within forty
days or sixty days, as the case may be, following the relevant
Solicitation Date, or has not completed a sale of all of such Covered
Securities within seventy days or one hundred days, as the case may be,
following the relevant Solicitation Date, the Company shall no longer
be permitted to sell such Covered Securities without again fully
complying with all the provisions of this Section 8.05, and all the
restrictions contained in this Section 8.05 shall again be in effect
with respect to such Covered Securities.
SECTION 8.06. PUBLICITY. Except as required by Law or by
obligations pursuant to any listing agreement with or requirement of any
national securities exchange or national quotation system on which the Common
Stock is listed, admitted to trading or quoted, neither the Company (nor any of
its Affiliates) nor the Investor (nor any of its Affiliates) shall, without the
prior written consent of each other party hereto, which consent shall not be
unreasonably withheld or delayed, make any public announcement or issue any
press release with respect to the transactions contemplated by this Agreement.
Prior to making any public disclosure required by applicable Law or pursuant to
any listing agreement with or requirement of any relevant national exchange or
national quotation system, the disclosing party shall consult with the other
parties hereto, to the extent feasible, as to the content and timing of such
public announcement or press release.
SECTION 8.07. STATUS OF DIVIDENDS. The Company agrees to treat
the Series A Preferred Stock and Series B Preferred Stock as equity for all Tax
purposes unless the Company determines that there is no reasonable basis for
such position. The Company shall take
41
no action (other than as required by Law) that would jeopardize the availability
of the dividends received deduction under Section 243(a)(1) of the Code for the
distributions on the Series A Preferred Stock and Series B Preferred Stock that
are paid out of current or accumulated earnings and profits, if any.
SECTION 8.08. DIRECTOR AND OFFICER INDEMNIFICATION. (a) So
long as any Investor Nominee serves as a member of the Board of Directors or as
an officer of the Company, the Company shall provide to each such individual
indemnification and directors' and officers' insurance having terms and
provisions no less favorable to such individuals than the indemnification and
directors' and officers' insurance provided to other directors and officers of
the Company (including, without limitation, coverage for matters based in whole
or in part on, or arising in whole or in part out of, any matter existing or
occurring while such Investor Nominee was a director, even though such Investor
Nominee may no longer be a director at the time any claim for indemnification or
coverage under insurance is made).
(b) So long as any Investor Nominee serves as a member of the
Board of Directors or as an officer of the Company, the Company shall not amend
the Certificate of Incorporation or Bylaws so as to adversely affect the rights
of any such person with respect to indemnification by the Company for any Losses
incurred by such person in such person's capacity as an officer or director of
the Company.
SECTION 8.09. LISTING; RESERVATION. (a) So long as any member
of the Investor Group Beneficially Owns Conversion Shares, Junior Shares or
Dividend Shares, the Company shall use its best efforts to ensure that the
Common Stock continues to be listed for trading on the NYSE. The Company will
use its best efforts so that upon issuance all Conversion Shares and Dividend
Shares will be listed for trading on the NYSE.
(b) From and after the Closing, the Company shall at all times
reserve and keep available, out of its authorized and unissued Common Stock,
solely for the purpose of issuing Common Stock upon the conversion of the Senior
Preferred Stock and Junior Shares, such number of shares of Common Stock free of
preemptive rights as shall be sufficient to issue Common Stock upon the
conversion of all outstanding shares of Senior Preferred Stock and Junior
Shares.
SECTION 8.10. LEGEND. (a) The Investor agrees to the placement
on (i) certificates representing Senior Preferred Stock purchased by the
Investor pursuant to the terms hereof, (ii) certificates representing Conversion
Shares, Junior Shares or Dividend Shares, and (iii) any certificate issued at
any time in exchange or substitution for any certificate bearing such legend, a
legend (the "PRIVATE PLACEMENT LEGEND") substantially as set forth below:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY
NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION
42
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS.
(b) The Private Placement Legend shall be removed from a
certificate representing Senior Preferred Stock, Conversion Shares, Junior
Shares or Dividend Shares if the securities represented thereby are sold
pursuant to an effective registration statement under the Securities Act or
there is delivered to the Company such satisfactory evidence, which may include
an opinion of independent counsel, as reasonably may be requested by the
Company, to confirm that neither such legend nor the restrictions on transfer
set forth therein are required to ensure that transfers of such securities will
not violate the registration and prospectus delivery requirements of the
Securities Act.
SECTION 8.11. LIMITATION ON RESTRICTIONS ON PAYMENT OF
DIVIDENDS. From and after the Closing, without the prior written approval of the
holders of at least 60% of the Conversion Shares then Beneficially Owned by
members of the Investor Group, except (i) as provided in this Agreement, the
Credit Agreement (as in effect on the date hereof) or the Indenture (as in
effect on the date hereof), (ii) as permitted under Section 6.06(b)(B),
6.06(b)(C) (PROVIDED that in the case of 6.06(b)(C) such encumbrance or
restriction applies only to such acquired "Subsidiary" or "Guarantor," as such
terms are used in such Section), 6.06(b)(E), 6.06(b)(F) or 6.06(b)(G) of the
Credit Agreement (as in effect on the date hereof), or Section 4.05(1)-(12) of
the Indenture (as in effect on the date hereof), or (iii) as permitted under
comparable provisions of any Credit Agreement or any Indenture to those
specified in clause (ii) above so long as such comparable provisions do not
permit any restrictions in addition to those set forth under the provisions
specified in clause (ii) above, the Company shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, create, cause or suffer to exist
or become effective any contractual or other restrictions or limitations on the
ability of the Company or any of its Subsidiaries to pay any dividends or make
any other distributions on, or to purchase, redeem or otherwise acquire, any of
its Equity Securities.
SECTION 8.12. CHIEF EXECUTIVE OFFICER. From and after the
Closing, for so long as members of the Investor Group Beneficially Own, in the
aggregate, at least 50% of the Original Number of Conversion Shares, the Company
shall not, without the prior written approval of the holders of at least 60% of
the Conversion Shares then Beneficially Owned by members of the Investor Group,
hire, terminate or materially limit the responsibilities of the chief executive
officer of the Company.
SECTION 8.13. SHAREHOLDER APPROVAL. (a) The Company shall
take, in accordance with applicable Law, the Certificate of Incorporation and
Bylaws, all action necessary to present the Shareholder Approval Proposal (as
defined below) for a vote at the first meeting of stockholders of the Company
held after the execution of this Agreement (such meeting, and each meeting
thereafter at which the Shareholder Approval is considered, a "SHAREHOLDER
MEETING"). The Company shall use its best efforts to obtain the required
approval of the Shareholder Approval Proposal by its stockholders in order to
give effect to the Shareholder Approval under the Certificate of Incorporation,
the Bylaws, the DGCL and the NYSE Rules. The Company shall file with the
Commission the Proxy Statement (as defined below) with respect to the first
Shareholder Meeting held after the execution of this Agreement
43
no later than January 15, 2000, and the Company shall use its best efforts to
hold such Shareholder Meeting no later than March 5, 2000.
(b) The Company's proxy statement for a Shareholder Meeting
(as amended or supplemented, the "PROXY STATEMENT") shall include a proposal to
consider and vote on the Shareholder Approval (the "SHAREHOLDER APPROVAL
PROPOSAL"). The Proxy Statement shall contain the recommendation of the Board of
Directors that the stockholders approve the Shareholder Approval Proposal. The
Company shall notify the Investor promptly of the receipt by it of any comments
from the Commission or its staff and of any request by the Commission for
amendments or supplements to the Proxy Statement or for additional information,
and will supply the Investor with copies of all correspondence between the
Company and its representatives, on the one hand, and the Commission or the
members of its staff or of any other Governmental Entities, on the other hand,
with respect to the Proxy Statement. The Company shall give the Investor and its
counsel a reasonable opportunity to review and comment on those portions of the
Proxy Statement describing or referring to the Shareholder Approval Proposal or
any member of the Investor Group (the "INVESTOR INFORMATION") prior to the
filing of the Proxy Statement with the Commission and shall give the Investor
and its counsel a reasonable opportunity to review and comment on all amendments
and supplements to the Investor Information and all responses to requests for
additional information and replies to comments prior to their being filed with,
or sent to, the Commission with respect to the Investor Information. The Company
shall give reasonable consideration to any comments the Investor or its counsel
may provide with respect to the Investor Information or any amendment or
supplement thereto.
(c) In the event the Shareholder Approval Proposal is not duly
approved by the stockholders of the Company at the first Shareholder Meeting
held following the execution of this Agreement, the Company shall take all
action necessary, in accordance with applicable Law, to present, and the Board
of Directors shall recommend the adoption of, the Shareholder Approval Proposal,
at each meeting of the stockholders of the Company held thereafter until the
Shareholder Approval Proposal is duly adopted by the stockholders of the Company
unless, in the opinion of outside legal counsel to the Company, the Shareholder
Approval is not required under the NYSE Rules to permit the issuance of Common
Stock in respect of accrued and unpaid dividends on the Senior Preferred Stock
upon the conversion or exchange of the Senior Preferred Stock, the issuance of
Common Stock upon the conversion of the Series B Preferred Stock, and the
vesting of voting rights in respect of the Series B Preferred Stock, in each
case in accordance with the terms hereof, the Series A Certificate of
Designations and the Series B Certificate of Designations.
(d) The Proxy Statement, as of the date it is mailed to
stockholders of the Company and as of the date of the relevant Shareholder
Meeting, will not include any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; PROVIDED, HOWEVER, that this Section 8.13(d) shall not apply to
any information provided to the Company in writing by any member of the Investor
Group with respect to such member expressly for inclusion in the Proxy
Statement.
44
ARTICLE IX
CONDITIONS
SECTION 9.01. CONDITIONS TO INVESTOR'S OBLIGATIONS WITH
RESPECT TO THE SHARE PURCHASE. The obligation of the Investor to purchase and
pay for the Series A Preferred Stock and deposit the Series B Amount into Escrow
pursuant to Section 2.01 hereof at the Closing is subject to satisfaction or
waiver of each of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of the Company set forth in Article III
hereof qualified as to materiality shall have been true and correct in
all respects, and those not so qualified shall have been true and
correct in all material respects, on and as of the date hereof and as
of the Closing as if made on the Closing Date (except where such
representation and warranty speaks by its terms as of a different date,
in which case it shall be true and correct as of such date, or except
where such representation and warranty is not true or correct solely as
a result of actions expressly permitted by Section 7.02 hereof). The
Company shall have performed in all material respects all obligations
and complied with all agreements, undertakings, covenants and
conditions required hereunder to be performed by it at or prior to the
Closing. The Company shall have delivered to the Investor at the
Closing a certificate in form and substance reasonably satisfactory to
the Investor dated the Closing Date and signed by the chief executive
officer and the chief financial officer of the Company to the effect
that the conditions set forth in this Section 9.01(a) have been
satisfied.
(b) OPINIONS OF COUNSEL. The Investor shall have received at
the Closing (i) from King & Spalding, special counsel to the Company, a
written opinion dated the Closing Date, substantially as set forth in
Exhibit D hereto and (ii) from special regulatory counsel to the
Company, which counsel is reasonably acceptable to the Investor, a
written opinion dated the Closing Date, in form and substance
reasonably satisfactory to the Investor.
(c) FAIRNESS OPINION. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ shall have
delivered a written opinion to the Board of Directors to the effect
that the consideration paid to the Company for the shares of Series A
Preferred Stock and Series B Preferred Stock sold hereunder is fair,
from a financial point of view, to the Company, and a true and correct
copy of such opinion shall have been delivered to the Investor.
(d) ESTABLISHMENT OF PREFERRED STOCK. (i) The Company shall
have amended the Certificate of Incorporation by filing with the
Secretary of State of the State of Delaware the Certificates of
Designations in the form of Exhibits A, B and C hereto containing the
resolutions of the Board of Directors of the Company creating the
Preferred Stock and setting forth the terms and conditions of the
Preferred Stock. A copy of the revised Certificate of Incorporation
(including the Certificates of Designations), certified by the State of
Delaware, shall have been delivered to the Investor. (ii) The Company
shall have executed and delivered to the Investor the shares of Series
A Preferred Stock to be purchased by the Investor pursuant to
Section 2.01 hereof.
45
(e) COMPLIANCE WITH LAWS; NO ADVERSE ACTION OR DECISION. Since
the date hereof, (i) no Law shall have been promulgated, enacted or
entered that restrains, enjoins, prevents, materially delays, prohibits
or otherwise makes illegal the performance of any of the Transaction
Agreements or Company Documents; (ii) no preliminary or permanent
injunction or other order by any Governmental Entity that restrains,
enjoins, prevents, delays, prohibits or otherwise makes illegal the
performance of any of the Transaction Agreements or Company Documents
shall have been issued and remain in effect; and (iii) no Governmental
Entity shall have instituted any Proceeding that seeks to restrain,
enjoin, prevent, delay, prohibit or otherwise make illegal the
performance of any of the Transaction Agreements or Company Documents.
(f) CONSENTS. All Regulatory Approvals (including, without
limitation, the Required Regulatory Approvals) from any Governmental
Entity and all consents, waivers or approvals from any other Person
(including, without limitation, under the Credit Agreement) required
for or in connection with the execution and delivery of the Transaction
Agreements and the Company Documents and the consummation of the
transactions contemplated thereby shall have been obtained or made on
terms reasonably satisfactory to the Investor, and all waiting periods
specified under applicable Law (including, without limitation, the
waiting period under the HSR Act), the expiration of which is necessary
for such consummation, shall have expired or been terminated.
(g) PROCEEDINGS. All corporate and other proceedings to be
taken by the Company in connection with the Transaction Agreements and
the Company Documents with respect to the transactions contemplated
thereby to be completed at the Closing and documents incident thereto
shall have been completed in form and substance reasonably satisfactory
to the Investor, and the Investor shall have received all such
counterpart originals or certified or other copies of the Transaction
Agreements and the Company Documents and such other documents as it may
reasonably request.
(h) BOARD REPRESENTATION. (i) As contemplated by Section 5.02
hereof, three Investor Nominees designated by the Investor shall have
been elected to the Board of Directors effective as of the Closing
Date. (ii) Directors' and officers' liability insurance shall be
available to the Investor Nominees on terms satisfactory to the
Investor and in an amount of coverage at least equal to $50,000,000.
(i) NO MATERIAL ADVERSE EFFECT; NO INSOLVENCY EVENT; NO
ALTERNATIVE TRANSACTION OR CONTROL TRANSACTION. No event shall have
occurred which has had, or is reasonably likely to have, a Material
Adverse Effect; no Insolvency Event shall have occurred; and no Control
Transaction or Alternative Transaction shall have been consummated or
agreement, understanding, or arrangement with respect thereto entered
into.
(j) AGREEMENTS. (i) The Registration Rights Agreement shall be
in full force and effect, and (ii) the Escrow Agreement shall have been
executed and delivered by the Company and the Escrow Agent and shall be
in full force and effect.
46
SECTION 9.02. CONDITIONS OF THE COMPANY'S OBLIGATIONS WITH
RESPECT TO THE SHARE PURCHASE. The obligation of the Company to issue and sell
the Series A Preferred Stock pursuant to Section 2.01 hereof at the Closing is
subject to satisfaction or waiver of each of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of the Investor set forth in Article IV
hereof qualified as to materiality shall have been true and correct in
all respects, and those not so qualified shall have been true and
correct in all material respects, on and as of the date hereof and as
of the Closing as if made on the Closing Date (except where such
representation and warranty speaks by its terms as of a different date,
in which case it shall be true and correct as of such date). The
Investor shall have performed in all material respects all obligations
and complied with all agreements, undertakings, covenants and
conditions required by it to be performed at or prior to the Closing,
and the Investor shall have delivered to the Company at the Closing a
certificate in form and substance reasonably satisfactory to the
Company dated the Closing Date and signed on behalf of a member of the
Investor to the effect that the conditions set forth in this Section
9.02(a) have been satisfied.
(b) OPINION OF COUNSEL. The Company shall have received at the
Closing from Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the
Investor, a written opinion dated the Closing Date, to the effect set
forth in Exhibit E hereto.
(c) COMPLIANCE WITH LAWS; NO ADVERSE ACTION OR DECISION. Since
the date hereof, (i) no Law shall have been promulgated, enacted or
entered that restrains, enjoins, prevents, materially delays, prohibits
or otherwise makes illegal the performance of any of the Transaction
Agreements or the Company Documents with respect to the transactions
contemplated thereby to be completed at the Closing; (ii) no
preliminary or permanent injunction or other order by any Governmental
Entity that restrains, enjoins, prevents, delays, prohibits or
otherwise makes illegal the performance of any of the Transaction
Agreements or the Company Documents with respect to the transactions
contemplated thereby to be completed at the Closing shall have been
issued and remain in effect; and (iii) no Governmental Entity shall
have instituted any action, claim, suit, investigation or other
proceeding that seeks to restrain, enjoin, prevent, delay, prohibit or
otherwise make illegal the performance of any of the Transaction
Agreements or the Company Documents with respect to the transactions
contemplated thereby to be completed at the Closing.
(d) CONSENTS. All Regulatory Approvals (including, without
limitation, the Required Regulatory Approvals) from any Governmental
Entity and all consents, waivers or approvals from any other Person
(including, without limitation, under the Credit Agreement) required
for or in connection with the execution and delivery of the Transaction
Agreements and the Company Documents and the consummation of the
transactions contemplated thereby shall have been obtained or made on
terms reasonably satisfactory to the Company, and all waiting periods
specified under applicable Law (including, without limitation, the
waiting period under the HSR Act), the expiration of which is necessary
for such consummation, shall have expired or been terminated.
47
(e) ESCROW AGREEMENT. The Escrow Agreement shall have been
executed and delivered by the Investor and shall be in full force and
effect.
ARTICLE X
TERMINATION
SECTION 10.01. TERMINATION OF AGREEMENT. Subject to Section
10.02 hereof, this Agreement may be terminated by notice in writing at any time
prior to the Closing by:
(a) the Investor or the Company, if the Closing shall not have
occurred on or before September 30, 1999; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 10.01(a) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur on or before
such date;
(b) the Investor or the Company, if any Governmental Entity of
competent jurisdiction shall have issued any judgment, injunction, order, ruling
or decree or taken any other action restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated by the Transaction
Agreements and such judgment, injunction, order, ruling, decree or other action
becomes final and nonappealable; PROVIDED that the party seeking to terminate
this Agreement pursuant to this clause (b) shall have used its best efforts to
have such judgment, injunction, order, ruling or decree lifted, vacated or
denied;
(c) the Investor, if the Company shall have taken any action
described in clause (B) or (C) of Section 7.04(b) hereof; or
(d) the Investor or the Company, if the Investor and the
Company so mutually agree in writing.
SECTION 10.02. EFFECT OF TERMINATION. (a) If this Agreement is
terminated in accordance with Section 10.01 hereof and the transactions
contemplated hereby are not consummated, this Agreement shall become null and
void and of no further force and effect except that (i) the terms and provisions
of this Section 10.02, Section 8.06 and Article XI hereof shall remain in full
force and effect and (ii) any termination of this Agreement shall not relieve
any party hereto from any liability for any breach of its obligations hereunder.
(b) If (i) this Agreement is terminated in accordance with
Section 10.01(a) hereof and as of the date set forth in Section 10.01(a) hereof
the conditions set forth in Section 9.01(a) hereof shall not have been
satisfied, (ii) a Proposal is made to the Company or any of its Representatives
with respect to an Alternative Transaction (whether or not the same Alternative
Transaction as is ultimately consummated or as to which a written agreement,
letter of intent, agreement in principle, memorandum of understanding or similar
writing is ultimately entered into) prior to the Cut-Off Date (as defined below)
or a Proposal with respect to an Alternative Transaction is publicly announced
by the Person contemplating such transaction or a Representative of such Person
prior to the Cut-Off Date, and (iii) an agreement with respect to a Control
Transaction or Alternative Transaction is entered into or a Control Transaction
or Alternative Transaction is consummated within eighteen months after the
Cut-Off Date, the
48
Company shall pay the Investor (or its assignees) the Alternative Transaction
Fee on the earlier of (A) the date on which such agreement with respect to an
Alternative Transaction is entered into and (B) the date on which an Alternative
Transaction is consummated. The term "CUT-OFF DATE" shall mean the date of
termination of this Agreement.
(c) If this Agreement is terminated in accordance with Section
10.01(c) hereof, the Company shall pay the Investor (or its assignees) the
Alternative Transaction Fee on the second Business Day following such
termination.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. FEES AND EXPENSES. (a) Except as provided below
or in the Registration Rights Agreement or the Escrow Agreement, each party
shall be responsible for the payment of all expenses incurred by it in
connection with the Transaction Agreements and the transactions contemplated
thereby, including, without limitation, all fees and expenses of its legal
counsel and all third-party consultants engaged by it to assist in such
transactions. Notwithstanding the foregoing, in the event this Agreement is
terminated, the Company shall reimburse the Investor for all expenses incurred
by the Investor in connection with the Transaction Agreements and the
transactions contemplated thereby, including, without limitation, all fees and
expenses of the Investor's legal counsel and all third-party consultants engaged
by the Investor to assist in such transactions; PROVIDED, that no amount in
excess of $1,500,000 shall be payable pursuant to this sentence; and PROVIDED,
FURTHER, that no amount whatsoever shall be payable pursuant to this sentence if
the Alternative Transaction Fee is paid by the Company pursuant to Section
10.02(b) hereof. In the event the Share Purchase is consummated, upon the
Closing, the Company shall pay the Investor the Placement Fee. In the event the
Investor or any of its Affiliates commences a tender offer for the Common Stock
that is approved by the Board of Directors prior to the commencement thereof,
the Company shall reimburse the Investor or such Affiliate an amount equal to
50% of all expenses incurred by the Investor and its Affiliates in connection
with such tender offer, including, without limitation, all fees and expenses of
their legal counsel and all third-party consultants engaged by them to assist in
the tender offer. Such reimbursements shall be due to the Investor at the
Closing, or promptly following any earlier termination of this Agreement for any
reason, as the case may be, or in the case of fees and expenses incurred
thereafter, promptly upon demand therefor.
(b) All amounts payable under this Agreement shall be paid in
immediately available funds to an account or accounts designated by the
recipient of such amounts.
SECTION 11.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Notwithstanding any investigation conducted or notice or knowledge obtained by
or on behalf of any party hereto, each representation or warranty in this
Agreement or in the Schedules hereto or certificates delivered pursuant to this
Agreement shall survive the Closing for a period of two years; PROVIDED,
HOWEVER, that each representation and warranty made in Sections 3.13 and 3.23
hereof or in any Schedule or certificate related thereto, shall survive the
Closing until the sixtieth day following the expiration of the applicable
statute of limitations with respect to any action that may be brought relating
to the matters described in such representation and warranty; and
49
PROVIDED FURTHER, HOWEVER, that each representation and warranty made in
Sections 3.03, 3.09, 3.11 and 3.12 hereof or in any Schedule or certificate
related thereto, shall survive the Closing for a period of four years. Any claim
for indemnification under this Article XI arising out of the inaccuracy or
breach of any representation or warranty must be made prior to the termination
of the applicable survival period.
SECTION 11.03. SPECIFIC PERFORMANCE. The parties hereto
specifically acknowledge that monetary damages are not an adequate remedy for
violations of this Agreement, and that any party hereto may, in its sole
discretion, apply to a court of competent jurisdiction for specific performance
or injunctive or such other relief as such court may deem just and proper in
order to enforce this Agreement or prevent any violation hereof and, to the
extent permitted by applicable law and to the extent the party seeking such
relief would be entitled on the merits to obtain such relief, each party waives
any objection to the imposition of such relief.
SECTION 11.04. INDEMNIFICATION. (a) The Company agrees to
indemnify and hold harmless the Investor, each Designated Purchaser, each member
thereof, each limited or general partner of each such member, each limited or
general partner of each such limited or general partner, each of their
Affiliates and each of their Representatives (collectively, the "INDEMNIFIED
PARTIES") from and against any and all losses, penalties, judgments, suits,
costs, claims, liabilities, damages and expenses (including, without limitation,
reasonable attorneys' fees and disbursements but excluding Taxes imposed as a
result of being a direct or indirect owner of the Senior Preferred Stock or
realizing income or gain with respect thereto) (collectively, "LOSSES"),
incurred by, imposed upon or asserted against any of the Indemnified Parties as
a result of, relating to or arising out of, (i) the breach of any
representation, warranty, agreement or covenant made by the Company or the
Escrow Agent in any Transaction Agreement or in any certificate delivered by the
Company pursuant to any Transaction Agreement (each of which shall be deemed to
have been made for the benefit of all members of the Investor Group) and (ii)
the purchase and/or direct or indirect ownership of the Senior Preferred Stock,
Junior Shares, Dividend Shares or Conversion Shares (including, without
limitation, any litigation to which an Indemnified Party is made party as a
result thereof), PROVIDED, HOWEVER, that nothing in this clause (ii) shall
require the Company to indemnify any Indemnified Party with respect to any Loss
resulting solely from a decline in the market value of the Senior Preferred
Stock, Junior Shares, Dividend Shares or Conversion Shares.
(b) The Investor agrees to indemnify and hold harmless the
Company and each of its Representatives (collectively, the "INDEMNIFIED COMPANY
PARTIES") from and against any and all Losses incurred by any of the Indemnified
Company Parties as a result of, or arising out of, the breach of any
representation, warranty, agreement or covenant made by the Investor in the
Transaction Agreements or in any certificate delivered by the Investor pursuant
to the Transaction Agreements.
(c) The following provisions shall apply to claims for Losses
from claims by a third party ("CLAIM"). The indemnifying party shall have the
absolute right, in its sole discretion and expense, to elect to defend, contest
or otherwise protect against any such Claim with legal counsel of its own
selection. The Indemnified Parties or the Indemnified Company Parties, as the
case may be, shall have the right, but not the obligation, to participate, at
their own expense,
50
in the defense thereof through counsel of their own choice and shall have the
right, but not the obligation, to assert any and all crossclaims or
counterclaims they may have. The Indemnified Parties or the Indemnified Company
Parties, as the case may be, shall, and shall cause their Affiliates to, at all
times cooperate in all reasonable ways with, make their relevant files and
records available for inspection and copying by, and make their employees
available or otherwise render reasonable assistance to, the indemnifying party
(i) in its defense of any action for which indemnity is sought hereunder and
(ii) its prosecution under the last sentence of this Section 11.04(c) of any
related claim, cross-complaint, counterclaim or right of subrogation. In the
event the indemnifying party fails timely to defend, contest or otherwise
protect against any such suit, action, investigation, claim or proceeding, the
Indemnified Parties or the Indemnified Company Parties, as the case may be,
shall have the right, but not the obligation, to defend, contest, assert
cross-claims or counterclaims or otherwise protect against the same. No claim or
action subject hereto may be settled unless the Indemnified Parties or the
Indemnified Company Parties, as the case may be, and the indemnifying party
consent thereto, such consent not to be unreasonably withheld. The indemnifying
party shall be subrogated to the claims or rights of the Indemnified Parties or
the Indemnified Company Parties, as the case may be, as against any other
persons with respect to any Loss paid by the indemnifying party under this
Section 11.04(c).
(d) All payments under this Section 11.04 shall be due
promptly following the occurrence of the related Loss; PROVIDED, HOWEVER, that
if a final, non-appealable judicial determination is made that an Indemnified
Party or Indemnified Company Party is not entitled to any such payment it will
promptly repay the appropriate amounts to the appropriate indemnifying party.
SECTION 11.05. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given, if
delivered personally, by telecopier or sent by first class mail, postage
prepaid, as follows:
(i) If to the Company, to:
Magellan Health Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Attention: General Counsel
With a copy to:
King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
51
(ii) If to the Investor, to:
TPG MAGELLAN LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
With a copy to:
Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
If to any other holder of shares of Preferred Stock, Debentures, or Conversion
Shares, addressed to such holder at the address of such holder in the record
books of the Company; or to such other address or addresses as shall be
designated in writing. All notices shall be effective when received.
SECTION 11.06. ENTIRE AGREEMENT; AMENDMENT. This Agreement and
the documents described herein or attached or delivered pursuant hereto
(including, without limitation, the Registration Rights Agreement, the Escrow
Agreement and the Certificates of Designations) set forth the entire agreement
between the parties hereto with respect to the transactions contemplated by this
Agreement and supersedes the letter agreement dated July 2, 1999, between the
Company and the Investor which is terminated in its entirety hereby. Any
provision of this Agreement may only be amended, modified or supplemented in
whole or in part at any time by an agreement in writing among the parties hereto
executed in the same manner as this Agreement. No failure on the part of any
party to exercise, and no delay in exercising, any right shall operate as waiver
thereof, nor shall any single or partial exercise by either party of any right
preclude any other or future exercise thereof or the exercise of any other
right. No investigation by the Investor of the Company prior to or after the
date hereof shall stop or prevent the Investor from exercising any right
hereunder or be deemed to be a waiver of any such right.
SECTION 11.07. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the same document.
SECTION 11.08. GOVERNING LAW. This Agreement shall be governed
by, and interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed in that State without reference
to its conflict of laws rules. The parties hereto agree that the appropriate and
exclusive forum for any disputes arising out of this Agreement solely between
the Company and the Investor shall be the United States District Court for the
Southern District of New York, and, if such court will not hear any such suit,
the
52
courts of the state of the Company's incorporation, and the parties hereto
irrevocably consent to the exclusive jurisdiction of such courts, and agree to
comply with all requirements necessary to give such courts jurisdiction. The
parties hereto further agree that the parties will not bring suit with respect
to any disputes arising out of this Agreement except as expressly set forth
below for the execution or enforcement of judgment, in any jurisdiction other
than the above specified courts. Each of the parties hereto irrevocably consents
to the service of process in any action or proceeding hereunder by the mailing
of copies thereof by registered or certified airmail, postage prepaid, to the
address specified in Section 11.05 hereof. The foregoing shall not limit the
rights of any party hereto to serve process in any other manner permitted by the
law or to obtain execution of judgment in any other jurisdiction. The parties
further agree, to the extent permitted by law, that final and unappealable
judgment against any of them in any action or proceeding contemplated above
shall be conclusive and may be enforced in any other jurisdiction within or
outside the United States by suit on the judgment, a certified or exemplified
copy of which shall be conclusive evidence of the fact and the amount of
indebtedness. The parties agree to waive any and all rights that they may have
to a jury trial with respect to disputes arising out of this Agreement.
SECTION 11.09. SUCCESSORS AND ASSIGNS. (a) Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the Company's successors and assigns. Except as provided in
Section 11.09(b) hereof, neither this Agreement nor any rights hereunder shall
be assignable by any party hereto without the prior written consent of the other
party hereto; PROVIDED, HOWEVER, that the Investor may assign all or part of its
interest in this Agreement and its rights hereunder to any of its Affiliates
and, thereafter, the term "Investor," as applied to the assigning Investor,
shall include any such Affiliate to the extent of such assignment and shall mean
the assigning Investor and such Affiliates taken collectively.
(b) Notwithstanding the foregoing, prior to the Closing the
Investor may assign its rights with respect to the purchase of up to 49% of the
Senior Preferred Stock to be purchased by the Investor hereunder to any Person
or Persons not Affiliated with the Investor, and following the Closing until the
date of the original issuance of the Series B Preferred Stock, the Investor may
assign its rights to receive shares of Series B Preferred Stock to any Person or
Persons not Affiliated with the Investor (each such Person, a "DESIGNATED
PURCHASER"). The Investor shall not assign pursuant to this Section 11.09(b) any
of its rights under this Agreement other than the right to purchase or receive
Senior Preferred Stock. Except as expressly provided in this Agreement, no
Designated Purchaser shall have any rights under this Agreement or any rights of
the Investor (other than rights that by their terms are available to all holders
of Senior Preferred Stock and Conversion Shares generally) under the
Certificates of Designations. As a condition to any assignment pursuant to this
Section 11.09(b), each Designated Purchaser shall deliver to the Company a
letter, dated as of the Closing Date or if later the date of such assignment, in
form and substance reasonably satisfactory to the Company, pursuant to which
such Designated Purchaser shall (i) make the representation set forth in Section
4.05 hereof, (ii) agree to comply with the provisions set forth in Sections
8.01(b) and 8.06 hereof as if it were the Investor thereunder and (iii) if as a
result of an assignment contemplated by this Section 11.09(b) such Designated
Purchaser would as of the Closing, or if later the date of such assignment,
Beneficially Own Voting Securities of the Company representing more than 5% of
the Voting Power of the Voting Securities of the Company, agree to comply with
the provisions of Article
53
VI hereof as if it were the Investor thereunder. Any assignment to such
Designated Purchaser that does not comply with the preceding provisions of this
Section 11.09(b) shall be null and void, and (i) at the Closing if such
assignment is made at or prior to the Closing, the Investor shall purchase all
Senior Preferred Stock that would have been purchased by such Designated
Purchaser, and (ii) if such assignment is made after the Closing with respect to
the Series B Preferred Stock, the Investor shall be issued all shares of Series
B Preferred Stock that would have been issued to such Designated Purchaser.
SECTION 11.10. NO THIRD-PARTY BENEFICIARIES. This Agreement is
for the sole benefit of the parties hereto and their respective successors and
permitted assigns and nothing herein, express or implied, is intended or shall
confer upon any other Person any legal or equitable right, benefit or remedy of
any nature whatsoever under or by reason of this Agreement, except that the
provisions of Section 8.08 shall inure to the benefit of and be enforceable by
the Investor Nominees and the provisions of Section 11.04 shall inure to the
benefit of and be enforceable by each Indemnified Party.
SECTION 11.11. ALLOCATION. The Investor shall reasonably
determine, and the Company shall accept, the allocation of the Share Purchase
Price among the Series A Preferred Stock and Series B Preferred Stock issued to
the Investor pursuant to Section 2.01 hereof.
SECTION 11.12. PRE-EMPTIVE RIGHTS. In the event the purchase
and sale of the Senior Preferred Stock hereunder give rise to any pre-emptive
rights on behalf of any Person to purchase shares of Senior Preferred Stock and
such rights are validly exercised by such Person, to the extent necessary under
the Certificate of Incorporation, the Bylaws, the NYSE Rules or applicable Law
to permit the Closing to occur without first obtaining the approval of the
stockholders of the Company, the number of shares of Series A Preferred Stock to
be purchased by the Investor hereunder and the Series A Amount shall be reduced
appropriately and a corresponding increase shall be made in the number of shares
of Series B Preferred Stock to be purchased by the Investor hereunder and the
Series B Amount.
SECTION 11.13. NOL LETTER. On the date of the original
issuance of the Series B Preferred Stock, the Company shall deliver a letter to
the Investor restating the matters set forth in Section 3.13(d) hereof updated
as necessary to reflect the then-current circumstances. Such letter shall
constitute a representation and warranty of the Company hereunder.
SECTION 11.14. CERTAIN AMENDMENTS TO THE SERIES B CERTIFICATE
OF DESIGNATIONS. For so long as members of the Investor Group Beneficially Own,
in the aggregate, at least 50% of the Original Number of Conversion Shares, the
Company shall not, without the prior written approval of the holders of at least
60% of the Conversion Shares then Beneficially Owned by members of the Investor
Group, (i) amend, alter or repeal any provision of the Certificate of
Incorporation or the Bylaws, if the amendment, alteration or repeal alters or
changes the powers, preferences or special rights of the Series B Preferred
Stock so as to affect them adversely; or (ii) authorize or take any other action
if such action alters or changes any of the rights of the Series B Preferred
Stock in any respect or otherwise would be inconsistent with the provisions of
this Certificate of Designations and the holders of any class or series of the
capital stock of the Corporation is entitled to vote thereon. Notwithstanding
anything in the foregoing to the contrary, the restrictions set forth in the
previous sentence shall apply only
54
during the period commencing on the Closing Date and ending on the earlier of
(x) the date of the original issuance of the Series B Preferred Stock and (y)
the date of delivery of a Revocation Notice.
55
IN WITNESS WHEREOF, this Agreement has been executed on behalf
of the parties hereto by their respective duly authorized officers, all as of
the date first above written.
TPG MAGELLAN LLC
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
MAGELLAN HEALTH SERVICES, INC.
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
56
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
OF
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
MAGELLAN HEALTH SERVICES, INC.
(PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW)
--------------
Magellan Health Services, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"CORPORATION"), hereby certifies that the following resolutions were adopted by
the Board of Directors of the Corporation (the "BOARD OF DIRECTORS") pursuant to
authority of the Board of Directors as required by Section 151 of the General
Corporation Law of the State of Delaware:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors in accordance with the provisions of the Restated
Certificate of Incorporation of the Corporation, as amended (the "CERTIFICATE OF
INCORPORATION"), the Board of Directors hereby creates a series of the
Corporation's previously authorized preferred stock, without par value (the
"PREFERRED STOCK"), and hereby states the designation and number thereof, and
fixes the voting powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions
thereof, as follows:
Series A Cumulative Convertible Preferred Stock:
I. DESIGNATION AND AMOUNT
The designation of this series of shares shall be "Series A
Cumulative Convertible Preferred Stock" (the "SERIES A PREFERRED STOCK"); the
stated value per share shall be $1,000 (the "STATED VALUE"); and the number of
shares constituting such series shall be [_________]. The number of shares of
the Series A Preferred Stock may be decreased from time to time by a resolution
or resolutions of the Board of Directors; PROVIDED, HOWEVER, that such number
shall not be decreased below the aggregate number of shares of the Series A
Preferred Stock then outstanding.
II. RANK
A. With respect to dividend rights, the Series A Preferred
Stock shall rank (i) junior to each other class or series of Preferred Stock
which by its terms ranks senior to the Series A Preferred Stock as to payment of
dividends, (ii) on a parity with each other class or series of Preferred Stock
which by its terms ranks on a parity with the Series A Preferred Stock as to
payment of dividends, including the Series B Cumulative Convertible Preferred
Stock, without par value (the "SERIES B PREFERRED STOCK"), of the Corporation,
and (iii) prior to the
A-1
Corporation's Common Stock, par value $0.25 per share (the "COMMON STOCK"),
and, except as specified above, all other classes and series of capital stock
of the Corporation hereafter issued by the Corporation. With respect to
dividends, all equity securities of the Corporation to which the Series A
Preferred Stock ranks senior, including the Common Stock, are collectively
referred to herein as the "JUNIOR DIVIDEND SECURITIES"; all equity securities
of the Corporation with which the Series A Preferred Stock ranks on a parity,
including the Series B Preferred Stock, are collectively referred to herein
as the "PARITY DIVIDEND SECURITIES"; and all equity securities of the
Corporation (other than convertible debt securities) to which the Series A
Preferred Stock ranks junior, with respect to dividends, are collectively
referred to herein as the "SENIOR DIVIDEND SECURITIES."
B. With respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the Series A Preferred Stock shall rank (i) junior to each other
class or series of Preferred Stock which by its terms ranks senior to the Series
A Preferred Stock as to distribution of assets upon liquidation, dissolution or
winding up, (ii) on a parity with each other class or series of Preferred Stock
which by its terms ranks on a parity with the Series A Preferred Stock as to
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, including the Series B Preferred Stock, and (iii) prior to the
Common Stock, and, except as specified above, all other classes and series of
capital stock of the Corporation hereinafter issued by the Corporation. With
respect to the distribution of assets upon liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, all equity securities
of the Corporation to which the Series A Preferred Stock ranks senior, including
the Common Stock, are collectively referred to herein as "JUNIOR LIQUIDATION
SECURITIES" (and together with the Junior Dividend Securities are referred to
herein as the "JUNIOR SECURITIES"); all equity securities of the Corporation
(other than convertible debt securities) to which the Series A Preferred Stock
ranks on parity, including the Series B Preferred Stock, are collectively
referred to herein as "PARITY LIQUIDATION SECURITIES" (and together with the
Parity Dividend Securities are referred to herein as the "PARITY SECURITIES");
and all equity securities of the Corporation to which the Series A Preferred
Stock ranks junior are collectively referred to herein as "SENIOR LIQUIDATION
SECURITIES" (and together with the Senior Dividend Securities are referred to
herein as the "SENIOR SECURITIES").
III. DIVIDENDS
A. DIVIDENDS. Shares of Series A Preferred Stock shall
accumulate dividends at a rate of 6.50% PER ANNUM, payment of which shall be
made in cash except as otherwise provided in this Article III. Dividends shall
be paid in four equal quarterly installments on the last day of March, June,
September and December of each year, or if any such date is not a Business Day,
on the Business Day next preceding such day (each such date, regardless of
whether any dividends have been paid or declared and set aside for payment on
such date, a "DIVIDEND PAYMENT DATE"), to holders of record (the "REGISTERED
HOLDERS") as they appear on the stock record books of the Corporation on the
fifteenth day prior to the relevant Dividend Payment Date; PROVIDED, HOWEVER,
that the Corporation may elect not to make any dividend payment due hereunder on
any Dividend Payment Date (other than as required in connection with any
redemption of shares of Series A Preferred Stock or any liquidation, dissolution
or winding up of the Corporation), and any such amount then due in respect of
dividends shall constitute an Arrearage (as defined below). Dividends shall be
paid only when, as and if declared by the
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Board of Directors out of funds at the time legally available for the payment
of dividends. Dividends shall begin to accumulate on outstanding shares of
Series A Preferred Stock from the date of issuance and shall be deemed to
accumulate from day to day whether or not earned or declared until paid.
Dividends shall accumulate on the basis of a 360-day year consisting of
twelve 30-day months (four 90-day quarters) and the actual number of days
elapsed in the period for which payable.
B. ACCUMULATION. Dividends on the Series A Preferred Stock
shall be cumulative, and from and after any Dividend Payment Date on which any
dividend that has accumulated or been deemed to have accumulated through such
date has not been paid in full or any payment date set for a redemption on which
such redemption payment has not been paid in full, additional dividends shall
accumulate in respect of the amount of such unpaid dividends or unpaid
redemption payment (such amount, the "ARREARAGE") at the annual rate then in
effect as provided in Section A of this Article III (or such lesser rate as may
be the maximum rate that is then permitted by applicable law). Such additional
dividends in respect of any Arrearage shall be deemed to accumulate from day to
day whether or not earned or declared until the Arrearage is paid, shall be
calculated as of such successive Dividend Payment Date and shall constitute an
additional Arrearage from and after any Dividend Payment Date to the extent not
paid on such Dividend Payment Date. References in any Article herein to
dividends that have accumulated or that have been deemed to have accumulated
with respect to the Series A Preferred Stock shall include the amount, if any,
of any Arrearage together with any dividends accumulated or deemed to have
accumulated on such Arrearage pursuant to the immediately preceding two
sentences. Additional dividends in respect of any Arrearage may be declared and
paid at any time, in whole or in part, without reference to any regular Dividend
Payment Date, to Registered Holders as they appear on the stock record books of
the Corporation on such record date as may be fixed by the Board of Directors
(which record date shall be no less than 10 days prior to the corresponding
payment date).
C. PAYMENT IN COMMON STOCK. Notwithstanding the provisions of
Section A of this Article III, (i) any dividend payment (such payment, a
"NON-ARREARAGE PAYMENT") made in full on the first Dividend Payment Date on
which such payment is due (without taking into account the proviso to the second
sentence of Section A of this Article III in determining the first Dividend
Payment Date on which such payment is due) and (ii) any payment (such payment,
an "ARREARAGE PAYMENT") made at any time prior to the second anniversary of the
original issuance of the Series A Preferred Stock in respect of any Arrearage,
may be made in the form of shares of Common Stock; PROVIDED that:
(i) the Common Stock is then validly listed for trading on the
NYSE or other national securities exchange or quoted on a nationally
recognized quotation system;
(ii) such shares of Common Stock have been duly authorized and
when issued in connection with such payment, will be validly issued,
fully paid and non-assessable;
(iii) the issuance of such shares of Common Stock in
satisfaction of such payment does not: (a) violate any provision of the
Certificate of Incorporation or the Bylaws; (b) give rise to any
preemptive rights, rights of first refusal or other similar rights on
behalf of any Person under any applicable Law or any provision of the
Certificate of
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Incorporation or the Bylaws or any agreement or instrument
applicable to the Corporation or any of its Subsidiaries; (c)
conflict with, contravene or result in a breach or violation of any
of the terms or provisions of, or constitute a default (with or
without notice or the passage of time) under, or result in or give
rise to a right of termination, cancellation, acceleration or
modification of any right or obligation under, or give rise to a
right to put or to compel a tender offer for outstanding securities
of the Corporation or any of its Subsidiaries under, or require any
consent, waiver or approval under, any note, bond, debt instrument,
indenture, mortgage, deed of trust, lease, loan agreement, joint
venture agreement, Regulatory Approval, contract or any other
agreement, instrument or obligation to which the Corporation or any
of its Subsidiaries is a party or by which the Corporation or any of
its Subsidiaries or any property of the Corporation or any of its
Subsidiaries is bound (assuming for the purpose of this clause (c)
that all conditions precedent to the conversion of Series A
Preferred Stock have been satisfied and that all outstanding shares
of the Series A Preferred Stock have been converted into Common
Stock); (d) result in the creation or imposition of any Lien upon
any assets or properties of the Corporation or any of its
Subsidiaries; or (e) violate any Law applicable to the Corporation
or any of its Subsidiaries;
(iv) (a) no default or event of default, or event that with
notice or the passage of time would constitute a default or event of
default, has occurred and is continuing (or will occur as a result of
the issuance of shares of Common Stock in satisfaction of such
payment), under any contract, agreement, indenture, mortgage, note,
lease or other instrument evidencing Indebtedness of the Corporation or
any of its Subsidiaries (other than inter-company Indebtedness between
the Corporation and any of its Subsidiaries or between Subsidiaries of
the Corporation) the outstanding principal amount of which is in excess
of $10,000,000 and as a result of such default, event of default or
event the holders thereof have accelerated or have the right to
accelerate (or would have the right to accelerate with notice or the
passage of time) the maturity thereof, and (b) the Corporation has not
been notified that a breach of the Investment Agreement or the terms of
the Series A Preferred Stock or Series B Preferred Stock has occurred
and is continuing;
(v) (a) with respect to any Non-Arrearage Payment, the
Trailing Average Value (as defined below) is equal to or greater than
the product of (A) 0.40, multiplied by (B) the Conversion Price, and
(b) with respect to any Arrearage Payment, the Trailing Average Value
(as defined below) is equal to or greater than the product of (A) 0.60,
multiplied by (B) the Conversion Price;
(vi) (a) with respect to any Non-Arrearage Payment, the
average daily trading volume in the Common Stock during the period used
to calculate the Trailing Average Value is at least 50% of the average
daily trading volume in the Common Stock for the 180-day period ending
on the date of the Investment Agreement, and (b) with respect to any
Arrearage Payment, the average daily trading volume in the Common Stock
during the period used to calculate the Trailing Average Value is at
least 67% of the average daily trading volume in the Common Stock for
the 180-day period ending on the date of the Investment Agreement;
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(vii) the issuance of such shares of Common Stock in
satisfaction of such payment does not require the approval or
affirmative vote of the holders of any class or series of the
Corporation's Equity Securities; and
(viii) as of the relevant Dividend Payment Date, the Shelf
Registration Statement (as such term is defined in the Registration
Rights Agreement) is effective under the Securities Act and is
available for use in connection with the offer and sale of such shares
of Common Stock by those holders of Series A Preferred Stock that have
such right under the Registration Rights Agreement (it being understood
that if a Shelf Suspension (as such term is defined in the Registration
Rights Agreement) is in effect, the Shelf Registration Statement shall
not be deemed effective or available for use); PROVIDED, HOWEVER, that
in the case of any Non-Arrearage Payment (and only in the case of a
Non-Arrearage Payment), this clause (viii) shall not prohibit the
issuance of shares of Common Stock in satisfaction of such payment if
the Shelf Registration Statement is not effective or not available for
use in accordance with Section 2.1(c) of the Registration Rights
Agreement.
For the purpose of this Section C, the value of a share of Common Stock used to
pay dividends on the Series A Preferred Stock shall equal (the "TRAILING AVERAGE
VALUE") the average of the Closing Prices per share of Common Stock for the
twenty consecutive Trading Days ending on the second Trading Day prior to the
relevant Dividend Payment Date ; PROVIDED, HOWEVER, that in the event that an
adjustment to the Conversion Price takes effect pursuant to Section B of Article
IX hereof during the period used to compute such average, the Closing Prices
used to compute such average for all Trading Days ended prior to the time such
adjustment takes effect shall be similarly adjusted. Except as otherwise
expressly provided in this Section C, Common Stock may not be used to make any
payment in respect of any Arrearage.
D. METHOD OF PAYMENT. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at the
time accumulated and payable on all outstanding shares of Series A Preferred
Stock shall be allocated pro rata on a share-by-share basis among all such
shares then outstanding. Notwithstanding the provisions of Section C of this
Article III, any such partial payment shall be made in cash. Dividends that are
declared and paid in an amount less than the full amount of dividends
accumulated on the Series A Preferred Stock (and on any Arrearage) shall be
applied first to the earliest dividend which has not theretofore been paid. All
cash payments of dividends on the shares of Series A Preferred Stock shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
IV. LIQUIDATION PREFERENCE
In the event of a liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of
then-outstanding shares of Series A Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets are capital or surplus
of any nature, an amount per share equal to the sum of (i) the dividends, if
any, accumulated or deemed to have accumulated thereon to the date of final
distribution to such holders, whether or not such dividends are declared, and
(ii) the Stated Value thereof, and no more, before any payment shall be made or
any assets distributed to the holders of any Junior
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Liquidation Securities. After any such payment in full, the holders of Series
A Preferred Stock shall not, as such, be entitled to any further
participation in any distribution of assets of the Corporation. All the
assets of the Corporation available for distribution to stockholders after
the liquidation preferences of any Senior Liquidation Securities shall be
distributed ratably (in proportion to the full distributable amounts to which
holders of Series A Preferred Stock and Parity Liquidation Securities, if
any, are respectively entitled upon such dissolution, liquidation or winding
up) among the holders of the then-outstanding shares of Series A Preferred
Stock and Parity Liquidation Securities, if any, when such assets are not
sufficient to pay in full the aggregate amounts payable thereon.
Neither a consolidation or merger of the Corporation with or
into any other Person or Persons, nor a sale, conveyance, lease, exchange or
transfer of all or part of the Corporation's assets for cash, securities or
other property to a Person or Persons shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this Article IV,
but the holders of shares of Series A Preferred Stock shall nevertheless be
entitled from and after any such consolidation, merger or sale, conveyance,
lease, exchange or transfer of all or part of the Corporation's assets to the
rights provided by this Article IV following any such transaction. Notice of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when, and the place or places
where, the amounts distributable to each holder of shares of Series A Preferred
Stock in such circumstances shall be payable, shall be given by first-class
mail, postage prepaid, mailed not less than 45 days prior to any payment date
stated therein, to holders of record as they appear on the stock record books of
the Corporation as of the date such notices are first mailed.
V. MANDATORY CONVERSION AND REDEMPTION
A. MANDATORY CONVERSION. (a) If the 180-Day Average Price and
the related Two-Week Average Price for any 180-Day Reference Period (which
Reference Period shall have ended no earlier than the first anniversary of the
original issuance of the Series A Preferred Stock and no later than the second
anniversary of the original issuance of the Series A Preferred Stock), both
exceed 200% of the Conversion Price, then the Corporation shall have the right,
at its option and election, to exchange the Series A Preferred Stock, in whole
and not in part, for shares of Common Stock, as if such shares of Series A
Preferred Stock had been converted by the holders thereof pursuant to Article IX
hereof on the date of such exchange.
(b) If the 45-Trading Day Average Price and the related
Two-Week Average Price for any 45-Trading Day Reference Period (which Reference
Period shall have ended no earlier than the second anniversary of the original
issuance of the Series A Preferred Stock), both exceed 200% of the Conversion
Price, then the Corporation shall have the right, at its option and election, to
exchange the Series A Preferred Stock, in whole and not in part, for shares of
Common Stock, as if such shares of Series A Preferred Stock had been converted
by the holders thereof pursuant to Article IX hereof on the date of such
exchange.
(c) Notwithstanding anything in this Section A to the
contrary, the Corporation shall not have the right to exchange the Series A
Preferred Stock for Common Stock pursuant to this Section A unless (i) the
Common Stock shall have been validly listed for trading on the NYSE or other
national securities exchange or quoted on a nationally recognized quotation
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system on each day in the relevant Reference Period and as of the date of such
exchange, (ii) the average daily trading volume in the Common Stock during the
relevant Reference Period and during the two-week calendar period ending on the
last day of the relevant Reference Period is at least 50% of the average daily
trading volume in the Common Stock for the 180-day period ending on the date of
the Investment Agreement, (iii) the Corporation shall have obtained the
Shareholder Approval, (iv) as of the date of such exchange, the Shelf
Registration Statement (as such term is defined in the Registration Rights
Agreement) is effective under the Securities Act and is available for use in
connection with the offer and sale of such shares of Common Stock by those
holders that have such right under the Registration Rights Agreement (it being
understood that if a Shelf Suspension (as such term is defined in the
Registration Rights Agreement) is in effect, the Shelf Registration Statement
shall not be deemed effective or available for use), and (v) the Corporation
simultaneously exchanges the Series B Preferred Stock pursuant to subsection (a)
or (b) of Section A of Article V of the Certificate of Designations for the
Series B Preferred Stock. The Corporation may not effect any such exchange if
such exchange would: (a) violate any provision of the certificate of
incorporation or the bylaws of the Corporation; (b) conflict with, contravene or
result in a breach or violation of any of the terms or provisions of, or
constitute a default (with or without notice or the passage of time) under, or
result in or give rise to a right of termination, cancellation, acceleration or
modification of any right or obligation under, or give rise to a right to put or
to compel a tender offer for outstanding securities of the Corporation or any of
its Subsidiaries under, or require any consent, waiver or approval under, any
note, bond, debt instrument, indenture, mortgage, deed of trust, lease, loan
agreement, joint venture agreement, Regulatory Approval, contract or any other
agreement, instrument or obligation to which the Corporation or any of its
Subsidiaries is a party or by which the Corporation or any of its Subsidiaries
or any property of the Corporation or any of its Subsidiaries is bound; (c)
result in the creation or imposition of any Lien upon any assets or properties
of the Corporation or any of its Subsidiaries; or (d) violate any Law applicable
to the Corporation or any of its Subsidiaries.
(d) Notice of an exchange of shares of Series A Preferred
Stock pursuant to this Section A (a "NOTICE OF EXCHANGE") shall be sent to the
holders of record of the shares of Series A Preferred Stock by first class mail,
postage prepaid, at each such holder's address as it appears on the stock record
books of the Corporation, not more than 45 nor fewer than 15 days prior to the
last day of the relevant Reference Period. The Notice of Exchange shall set
forth the date fixed for the exchange (the "EXCHANGE DATE") and shall set forth
in reasonable detail the calculations and supporting data used by the
Corporation in its determination that it had the right to effect such exchange.
From and after the Exchange Date, all dividends on shares of Series A Preferred
Stock shall cease to accumulate and all rights of the holders thereof as holders
of Series A Preferred Stock shall cease and terminate, except if the Corporation
shall default in its obligation to deliver shares of Common Stock and cash in
lieu of fractional shares to holders on the Exchange Date, in which case all
such rights shall continue unless and until such shares are exchanged (or
redeemed or converted) in accordance with the terms hereof. Prior to the
Exchange Date, each holder shall provide a written notice to the Corporation
specifying the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If no such notice is
delivered, such shares of Common Stock and cash in lieu of fractional shares, if
any, shall be delivered to such holder. In case such notice shall specify a name
or names other than that of such holder, such notice shall be accompanied by
payment of all transfer taxes payable upon the issuance of shares of Common
Stock in such name or names.
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Other than such taxes, the Corporation will pay any and all issue and other
taxes (other than taxes based on income) that may be payable in respect of
any issue or delivery of shares of Common Stock on exchange of Series A
Preferred Stock pursuant to this Section A. On or after the Exchange Date,
each holder of shares of Series A Preferred Stock shall surrender the
certificate evidencing shares of Series A Preferred Stock to the Corporation
at the place designated in the Notice of Exchange. As promptly as practical,
and in any event within three Business Days after the Exchange Date, the
Corporation shall deliver or cause to be delivered as directed by the holder
of shares of Series A Preferred Stock being exchanged (i) certificates
representing the number of validly issued, fully paid and nonassessable full
shares of Common Stock to which such holder shall be entitled and (ii) cash
in lieu of fractional shares, if any, to which such holder shall be entitled.
Except as otherwise specified in this Article V, for the purposes hereof,
such exchange shall be deemed a conversion effected pursuant to Article IX
and the terms and procedures set forth in Article IX shall apply. For such
purpose, the applicable Conversion Date shall be the Exchange Date.
(e) In the event the Corporation delivers a Notice of
Exchange, the Corporation shall be obligated to effect the exchange described
therein, PROVIDED that each of the conditions to such exchange set forth in
subsections (a), (b) and (c) above is (i) satisfied or (ii) waived by the
holders of a majority of the shares of Series A Preferred Stock then
outstanding.
(f) Notwithstanding anything to the contrary in the
Registration Rights Agreement, in the event the Corporation effects an exchange
pursuant to this Section A, the Corporation shall not exercise its right to
declare a Shelf Suspension (as such term is defined in the Registration Rights
Agreement) pursuant to Section 2.1(c) of the Registration Rights Agreement
during the period beginning on the Exchange Date and ending 90 days after the
Exchange Date.
B. MANDATORY REDEMPTION. The Corporation shall not have any
right to redeem any shares of Series A Preferred Stock prior to the Mandatory
Redemption Date (as defined below). On the tenth anniversary of the original
issuance of the Series A Preferred Stock (the "MANDATORY REDEMPTION DATE"), the
Corporation shall redeem (the "MANDATORY REDEMPTION") all outstanding shares of
Series A Preferred Stock by paying the redemption price therefor in cash out of
funds legally available for such purpose. The redemption price for each share of
Series A Preferred Stock shall equal the sum of (i) the amount, if any, of all
unpaid dividends accumulated thereon to the date of actual payment of the
Redemption Price, whether or not such dividends have been declared, and (ii) the
Stated Value thereof ("REDEMPTION PRICE").
C. NOTICE AND REDEMPTION PROCEDURES. Notice of the
redemption of shares of Series A Preferred Stock pursuant to Section B of
this Article V (a "NOTICE OF REDEMPTION") shall be sent to the holders of
record of the shares of Series A Preferred Stock to be redeemed by first
class mail, postage prepaid, at each such holder's address as it appears on
the stock record books of the Corporation, not more than 100 nor fewer than
60 days prior to the date fixed for redemption, which date shall be set forth
in such notice (the "REDEMPTION DATE"); PROVIDED, HOWEVER, that failure to
give such Notice of Redemption to any holder, or any defect in such Notice of
Redemption to any holder shall not affect the validity of the proceedings for
the redemption of any shares of Series A Preferred Stock held by any other
holder. In order to facilitate the redemption of shares of Series A Preferred
Stock, the Board of Directors may fix a
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record date for the determination of the holders of shares of Series A
Preferred Stock to be redeemed, in each case, not more than 10 days prior to
the date the Notice of Redemption is mailed. On or after the Redemption Date,
except with respect to shares of Series A Preferred Stock for which the
Conversion Date has occurred on or prior to such Redemption Date, each holder
of the shares called for redemption shall surrender the certificate
evidencing such shares to the Corporation at the place designated in such
notice and shall thereupon be entitled to receive payment of the Redemption
Price. From and after the Redemption Date, all dividends on shares of Series
A Preferred Stock shall cease to accumulate and all rights of the holders
thereof as holders of Series A Preferred Stock shall cease and terminate,
except if the Corporation shall default in payment of the Redemption Price on
the Redemption Date in which case all such rights shall continue unless and
until such shares are redeemed and such price is paid in accordance with the
terms hereof.
D. CHANGE OF CONTROL. In the event there occurs a Change of
Control, any holder of record of shares of Series A Preferred Stock, in
accordance with the procedures set forth in Section E of this Article V, may
require the Corporation to redeem any or all of the shares of Series A Preferred
Stock held by such holder in an amount per share equal to the sum of (i) the
amount, if any, of all unpaid dividends accumulated thereon to the date of
actual payment thereof, whether or not such dividends have been declared, and
(ii) 101% of Stated Value (the "CHANGE OF CONTROL PRICE"). By accepting a share
of Series A Preferred Stock the holder thereof shall be deemed to have
acknowledged and agreed that (a) such holder's right, to receive payment of the
Change in Control Price is subject and subordinated in right of payment to the
payment in full and discharge of all amounts of principal, interest and fees
(however denominated) then outstanding under the Credit Agreement and the Senior
Subordinated Notes and (b) until payment in full of all such amounts (however
denominated) under the Credit Agreement and the Senior Subordinated Notes has
been made in cash, no payment, whether directly or indirectly, by exercise of
any right of set off or otherwise in respect of the Change of Control Price
shall be made by the Corporation, and, notwithstanding anything to the contrary
in Section F of this Article V, no deposit in respect of the Change of Control
Price shall be made pursuant to Section F of this Article V. In the event that
any payment by, or distribution of the assets of, the Corporation of any kind or
character (whether in cash, property or securities, whether directly or
indirectly, by exercise of any right of set-off or otherwise and whether as a
result of a bankruptcy proceeding with respect to the Corporation or otherwise)
shall be received by a holder of Series A Preferred Stock at any time when such
payment is prohibited by this paragraph, such payment shall be held in trust for
the benefit of, and shall be paid over to, the lenders under the Credit
Agreement or the holders of Senior Subordinated Notes, as the case may be, as
their interests may appear. The preceding two sentences address the relative
rights of holders of Series A Preferred Stock or Debentures, on the one hand,
and the lenders under the Credit Agreement or the holders of Senior Subordinated
Notes, as the case may be, on the other hand, and nothing in this Certificate of
Designations shall impair, as between the Corporation and the holders of Series
A Preferred Stock or Debentures, the obligation of the Corporation, which is
absolute and unconditional, to pay amounts due in respect of the Series A
Preferred Stock and Debentures in accordance with their terms. Upon a Change of
Control, the Corporation shall pay all amounts outstanding under the Credit
Agreement and the Indenture to the extent necessary in order to permit the
payment of the Change of Control Price hereunder.
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E. CHANGE OF CONTROL NOTICE AND REDEMPTION PROCEDURES. Notice
of any Change of Control shall be sent to the holders of record of the
outstanding shares of Series A Preferred Stock not more than five days following
a Change of Control, which notice (a "CHANGE OF CONTROL NOTICE") shall describe
the transaction or transactions constituting such Change of Control and set
forth each holder's right to require the Corporation to redeem any or all shares
of Series A Preferred Stock held by him or her out of funds legally available
therefor, the redemption date, which date shall be not less than 30 nor more
than 45 days from the date of such Change of Control Notice, (the "CHANGE OF
CONTROL REDEMPTION DATE") and the procedures to be followed by such holders in
exercising his or her right to cause such redemption; PROVIDED, HOWEVER, that if
shares of Series A Preferred Stock are owned by more than 50 holders or groups
of Affiliated holders and if the Series A Preferred Stock is listed on any
national securities exchange or quoted on any national quotation system, the
Corporation shall give such Change of Control Notice by publication in a
newspaper of general circulation in the Borough of Manhattan, The City of New
York, within 30 days following such Change of Control and, in any case, a
similar notice shall be mailed concurrently to each holder of shares of Series A
Preferred Stock. Failure by the Corporation to give the Change of Control Notice
as prescribed by the preceding sentence, or the formal insufficiency of any such
Change of Control Notice, shall not prejudice the rights of any holder of shares
of Series A Preferred Stock to cause the Corporation to redeem any such shares
held by him or her. In the event a holder of shares of Series A Preferred Stock
shall elect to require the Corporation to redeem any or all such shares of
Series A Preferred Stock pursuant to Section D hereof, such holder shall
deliver, prior to the Change of Control Redemption Date as set forth in the
Change of Control Notice, or, if the Change of Control Notice is not given as
required by this Section E, at any time following the last day the Corporation
was required to give the Change of Control Notice in accordance with this
Section E (in which case the Change of Control Redemption Date shall be the date
which is the later of (x) 45 days following the last day the Corporation was
required to give the Change of Control Notice in accordance with this Section E
and (y) 30 days following the delivery of such election by such holder), a
written notice, in the form specified by the Corporation (if the Corporation did
in fact give the notice required by this Section E), to the Corporation so
stating, and specifying the number of shares to be redeemed pursuant to Section
D of this Article V; PROVIDED, HOWEVER, that if all of the shares of the Series
A Preferred Stock are owned by 50 or fewer holders or groups of affiliated
holders, such holders or groups may deliver a notice or an election to redeem at
any time within 90 days following the occurrence of a Change of Control without
awaiting receipt of a Change of Control Notice or the expiration of the time
allowed for the delivery of a Change of Control Notice hereunder. The
Corporation shall redeem the number of shares so specified on the Change of
Control Redemption Date fixed by the Corporation or as provided in the preceding
sentence. The Corporation shall comply with the requirements of Rules 13e-4 and
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the shares of Series A Preferred Stock as a result of a
Change of Control. From and after the time the Change of Control Redemption
Price is paid in accordance with the terms hereof with respect to any share of
Series A Preferred Stock, all dividends on such share of Series A Preferred
Stock shall cease to accumulate and all rights of the holder thereof as a holder
of Series A Preferred Stock shall cease and terminate.
F. DEPOSIT OF FUNDS. The Corporation shall, no later than
11:00 a.m., New York City time, on any Redemption Date or Change of Control
Redemption Date pursuant to this
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Article V, deposit with its transfer agent or other redemption agent in the
Borough of Manhattan, The City of New York having a capital and surplus of at
least $500,000,000, as a trust fund for the benefit of the holders of the
shares of Series A Preferred Stock to be redeemed, cash that is sufficient in
amount to redeem the shares to be redeemed in accordance with the Notice of
Redemption or Change of Control Notice, with irrevocable instructions and
authority to such transfer agent or other redemption agent to pay to the
respective holders of such shares, as evidenced by a list of such holders
certified by an officer of the Corporation, the Redemption Price or Change of
Control Redemption Price, as the case may be, upon surrender of their
respective share certificates. Such deposit shall be deemed to constitute
full payment of such shares to the holders, and from and after the date of
such deposit, all rights of the holders of the shares of Series A Preferred
Stock that are to be redeemed as stockholders of the Corporation with respect
to such shares, except the right to receive the Redemption Price upon the
surrender of their respective certificates and all rights under Articles IX
and XI hereof, shall cease and terminate. In case holders of any shares of
Series A Preferred Stock called for redemption shall not, within two years
after such deposit, claim the cash deposited for redemption thereof, such
transfer agent or other redemption agent shall, upon demand, pay over to the
Corporation the balance so deposited. Thereupon, such transfer agent or other
redemption agent shall be relieved of all responsibility to the holders
thereof and the sole right of such holders, with respect to shares to be
redeemed, shall be to receive the Redemption Price as general creditors of
the Corporation. Any interest accrued on any funds so deposited shall belong
to the Corporation, and shall be paid to it from time to time on demand.
VI. EXCHANGE OF SERIES A PREFERRED STOCK FOR DEBENTURES
A. The Series A Preferred Stock shall be exchangeable, at any
time, at the option of the Corporation and to the extent permitted by applicable
law and the terms of the instruments governing the Corporation's
then-outstanding Indebtedness, in whole but not in part, on any Dividend Payment
Date for unsecured Junior Subordinated Convertible Debentures (issued pursuant
to an indenture (the "SERIES A INDENTURE") prepared in accordance with the
Investment Agreement), in principal amount of $1,000 per share of Series A
Preferred Stock (a "DEBENTURE" and, collectively, the "DEBENTURES"), in
accordance with this Article VI:
(i) Each share of Series A Preferred Stock shall be
exchangeable at the offices of the Corporation and at such other place
or places, if any, as the Board of Directors may designate. Except with
the prior written consent of the holders of all outstanding shares of
Series A Preferred Stock, the Corporation may not exchange any shares
of Series A Preferred Stock if (a) full cumulative dividends through
the date of exchange, have not been paid, accrued or set aside for
payment on all outstanding shares of the Series A Preferred Stock, (b)
the Corporation has failed to amend its Certificate of Incorporation in
accordance with Delaware law to confer the power to vote upon holders
of the Debentures as shall be contemplated by the Series A Indenture or
(c) such exchange could result in any adverse tax consequence to any
such holder.
(ii) Prior to giving notice of its intention to exchange, the
Corporation shall execute and deliver to a bank or trust company and,
if required by applicable law, qualify under the Trust Indenture Act of
1939, as amended, the Series A Indenture.
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(iii) The Corporation shall mail written notice of its
intention to exchange Series A Preferred Stock for Debentures (the
"EXCHANGE NOTICE") to each holder of record of shares of Series A
Preferred Stock not less than 60 nor more than 100 days prior to the
date fixed for exchange. The Exchange Notice shall notify holders of
their right to deliver an Objection Notice (as defined below) pursuant
to Section B of this Article VI.
(iv) Prior to effecting any exchange provided above, the
Corporation shall deliver to each holder of shares of Series A
Preferred Stock an opinion of nationally recognized legal counsel to
the effect that: (a) each of the Series A Indenture and the Debentures
have been duly authorized and executed by the Corporation and, when
delivered by the Corporation in exchange for shares of Series A
Preferred Stock, will constitute valid and legally binding obligations
of the Corporation enforceable against the Corporation in accordance
with their terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general
principles of equity; (b) the exchange of the Debentures for the shares
of Series A Preferred Stock will not violate the provisions of this
Article VI or of the Delaware General Corporation Law, including
Section 221 thereof; and (c) the exchange of the Debentures for the
shares of Series A Preferred Stock is exempt from the registration
requirements of the Securities Act or that the exchange of such
Debentures has been duly registered under the Securities Act.
(v) The Corporation may not effect any exchange provided above
if such exchange would: (a) violate any provision of the certificate of
incorporation or the bylaws of the Corporation; (b) conflict with,
contravene or result in a breach or violation of any of the terms or
provisions of, or constitute a default (with or without notice or the
passage of time) under, or result in or give rise to a right of
termination, cancellation, acceleration or modification of any right or
obligation under, or give rise to a right to put or to compel a tender
offer for outstanding securities of the Corporation or any of its
Subsidiaries under, or require any consent, waiver or approval that has
not been obtained or granted under, any note, bond, debt instrument,
indenture, mortgage, deed of trust, lease, loan agreement, joint
venture agreement, Regulatory Approval, contract or any other
agreement, instrument or obligation to which the Corporation or any of
its Subsidiaries is a party or by which the Corporation or any of its
Subsidiaries or any property of the Corporation or any of its
Subsidiaries is bound; (c) result in the creation or imposition of any
Lien upon any assets or properties of the Corporation or any of its
Subsidiaries; or (d) violate any Law applicable to the Corporation or
any of its Subsidiaries;
(vi) Upon the exchange of shares of Series A Preferred Stock
for Debentures, the rights of the holders of shares of Series A
Preferred Stock as stockholders of the Corporation shall terminate and
such shares shall no longer be deemed outstanding; and
(vii) Before any holder of shares of Series A Preferred Stock
shall be entitled to receive Debentures, such holder shall surrender
the certificate or certificates therefor, at the office of the
Corporation or at such other place or places, if any, as the Board of
Directors shall have designated, and shall state in writing the name or
names (with addresses) in which he or she wishes the certificate or
certificates for the Debentures to be issued. The Corporation will, as
soon as practicable thereafter, issue and deliver at
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said office or place to such holder of shares of Series A Preferred
Stock, or to his or her nominee or nominees, certificates for the
Debentures to which he or she shall be entitled as aforesaid. Shares
of Series A Preferred Stock shall be deemed to have been exchanged
as of the close of business on the date fixed for exchange as
provided above, and the Person or Persons entitled to receive the
Debentures issuable upon such exchange shall be treated for all
purposes (including the accrual and payment of interest) as the
record holder or holders of such Debentures as of the close of
business on such date.
B. For purposes of clause (c) of paragraph (i) of Section A of
this Article VI, an exchange of shares of Series A Preferred Stock shall be
deemed to be an exchange that could result in a tax consequence to any holder
which is materially adverse only if such holder shall have delivered to the
Corporation a written notice to such effect on or before the fifteenth day after
its receipt of the Exchange Notice (an "OBJECTION NOTICE"), which Objection
Notice shall specify in reasonable detail the nature of such tax consequence
which could result from the exchange. If the Corporation receives an Objection
Notice, then the Corporation shall not exchange the shares of Series A Preferred
Stock and the Corporation shall, within 15 days after its receipt of the
Objection Notice mail written notice to the effect that it is canceling the
proposed exchange of shares of Series A Preferred Stock to each holder of record
of shares of Series A Preferred Stock to which it mailed the Exchange Notice.
Notwithstanding the foregoing, if the Corporation, based on the advice of
nationally recognized tax counsel, believes that the tax consequences described
in an Objection Notice are incorrect, the Corporation may contact the holder who
delivered such notice to discuss the tax consequences described therein. If such
holder withdraws such notice within 15 days of its delivery, the Corporation
shall be permitted to consummate the proposed exchange.
VII. RESTRICTIONS ON DIVIDENDS
So long as any shares of the Series A Preferred Stock are
outstanding, the Board of Directors shall not declare, and the Corporation shall
not pay or set apart for payment any dividend on any Junior Securities or Parity
Securities or make any payment on account of, or set apart for payment money for
a sinking or other similar fund for, the repurchase, redemption or other
retirement of, any Junior Securities or Parity Securities or any warrants,
rights or options exercisable for or convertible into any Junior Securities or
Parity Securities (other than the repurchase, redemption or other retirement of
debentures or other debt securities that are convertible or exchangeable into
any Junior Securities or Parity Securities), or make any distribution in respect
of the Junior Securities or Parity Securities, either directly or indirectly,
and whether in cash, obligations or shares of the Corporation or other property
(other than distributions or dividends in Junior Securities to the holders of
Junior Securities), and shall not permit any Person directly or indirectly
controlled by the Corporation to purchase or redeem any Junior Securities or
Parity Securities or any warrants, rights, calls or options exercisable for or
convertible into any Junior Securities or Parity Securities (other than the
repurchase, redemption or other retirement of debentures or other debt
securities that are convertible or exchangeable into any Junior Securities or
Parity Securities) unless prior to or concurrently with such declaration,
payment, setting apart for payment, repurchase, redemption or other retirement
or distribution, as the case may be, all accumulated and unpaid dividends on
shares of the Series A Preferred Stock not paid on the dates provided for in
Section A of Article III hereof (including Arrearages and accumulated dividends
thereon and regardless of whether the Corporation shall
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have had the right to elect to defer such payments as provided for in Article
III hereof) shall have been paid, except that when dividends are not paid in
full as aforesaid upon the shares of Series A Preferred Stock, all dividends
declared on the Series A Preferred Stock and any series of Parity Dividend
Securities shall be declared and paid pro rata so that the amount of
dividends so declared and paid on Series A Preferred Stock and such series of
Parity Dividend Securities shall in all cases bear to each other the same
ratio that accumulated dividends (including interest accrued on or additional
dividends accumulated in respect of such accumulated dividends) on the shares
of Series A Preferred Stock and such Parity Dividend Securities bear to each
other. Notwithstanding the foregoing, this paragraph shall not prohibit (i)
the acquisition, repurchase, exchange, conversion, redemption or other
retirement for value of shares of Series A Preferred Stock or any Parity
Dividend Security by the Corporation in accordance with the terms of such
securities or (ii) the acquisition, repurchase, exchange, conversion,
redemption or other retirement for value by the Corporation of any Junior
Dividend Securities by the Corporation in accordance with obligations in
existence at the time of original issuance of the Series A Preferred Stock.
VIII. VOTING RIGHTS
A. The holders of shares of Series A Preferred Stock shall
have no voting rights except as set forth below or as otherwise from time to
time required by law.
B. So long as any shares of the Series A Preferred Stock are
outstanding, each share of Series A Preferred Stock shall entitle the holder
thereof to vote on all matters voted on by holders of Common Stock, and the
shares of Series A Preferred Stock shall vote together with shares of Common
Stock (and any shares of Series B Preferred Stock entitled to vote) as a single
class. With respect to any such vote, each share of Series A Preferred Stock
shall entitle its holder to a number of votes equal to the number of shares of
Common Stock into which such share of Series A Preferred Stock is convertible at
the time of the record date with respect to such vote (assuming all conditions
precedent to such conversion have been satisfied and that such conversion had
occurred as of the record date for such vote). Notwithstanding the foregoing,
holders of shares of Series A Preferred Stock shall not be entitled to vote with
the holders of Common Stock on any proposal related to the approval of the
issuance of shares of Common Stock in payment of dividends on the Series A
Preferred Stock or upon the issuance of Common Stock with respect to Arrearages
upon the conversion of the Series A Preferred Stock into shares of Common Stock.
C. If on any date (i) dividends payable on the Series A
Preferred Stock or Series B Preferred Stock shall not have been paid in full
when required pursuant to the terms hereof or (ii) the Corporation shall have
failed to satisfy its obligation to redeem shares of Series A Preferred Stock or
Series B Preferred Stock pursuant to the terms of the relevant Certificate of
Designations (provided, that for the purpose of this Section C, any obligation
of the Corporation to repurchase shares of Series B Preferred Stock or make a
Make-Whole Payment pursuant to Section G of Article V of the Certificate of
Designations with respect to the Series B Preferred Stock, shall not be
considered an obligation to redeem such shares), then the number of directors
constituting the Board of Directors shall, without further action, be increased
by two, or if the requisite increase in the number of directors constituting the
Board of Directors would require the approval of the Corporation's stockholders
or is prohibited by the Investment Agreement,
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then the number of directors constituting the Board of Directors shall be
increased to the extent the approval of the Corporation's stockholders is not
required and the Investment Agreement would not be breached and a number of
directors (other than Investor Nominees) shall resign from the Board of
Directors so that the holders of shares of Series A Preferred Stock and, if
then entitled to vote with respect to such matters, the holders of shares of
Series B Preferred Stock, voting together as a single class without regard to
series, may elect two directors to the Board of Directors, and the holders of
a majority of the outstanding shares of Series A Preferred Stock and any
shares of Series B Preferred Stock entitled to vote with respect to such
matters, voting together as a single class without regard to series, shall
have, in addition to the other voting rights set forth herein, the exclusive
right to elect two directors (the "ADDITIONAL DIRECTORS") of the Corporation
to fill such newly-created or vacated directorships. Additional Directors
shall continue as directors and such additional voting right shall continue
until such time as (a) all dividends accumulated on the Series A Preferred
Stock and Series B Preferred Stock shall have been paid in full as required
pursuant to the terms hereof or (b) any redemption obligation with respect to
the Series A Preferred Stock or Series B Preferred Stock that has become due
shall have been satisfied or all necessary funds shall have been set aside
for payment, as the case may be, at which time such Additional Directors
shall cease to be directors and such additional voting right of the holders
of shares of Series A Preferred Stock and Series B Preferred Stock shall
terminate subject to revesting in the event of each and every subsequent
event of the character indicated above.
D. So long as members of the Investor Group Beneficially Own a
majority of the outstanding shares of Series A Preferred Stock and Series B
Preferred Stock, if any default or event of default has occurred and is
continuing under any contract, agreement, indenture, mortgage, note, lease or
other instrument evidencing Indebtedness of the Corporation or any of its
Subsidiaries (other than inter-company Indebtedness between the Corporation and
any of its Subsidiaries or between Subsidiaries of the Corporation) the
outstanding principal amount of which is in excess of $10,000,000, and as a
result of such default or event of default the holders thereof have accelerated
or have the right to accelerate the maturity thereof, and such default, event of
default or event is not cured or waived within 75 days of the occurrence
thereof, then the number of directors constituting the Board of Directors shall,
upon the request of members of the Investor Group who Beneficially Own a
majority of the outstanding shares of Series A Preferred Stock and Series B
Preferred Stock then Beneficially Owned by members of the Investor Group
delivered to the Corporation in writing, be increased by that number that is
necessary to enable the Investor Group to designate a majority of the members of
the Board of Directors (including the Investor Nominees), or if such requisite
increase in the number of directors constituting the Board of Directors would
require the approval of the Corporation's stockholders or is prohibited by the
Investment Agreement, then the number of directors constituting the Board of
Directors shall be increased to the extent the approval of the Corporation's
stockholders is not required and the Investment Agreement would not be breached
and a number of directors (other than Investor Nominees) shall resign from the
Board of Directors so as to enable the Investor Group to designate a majority of
the Board of Directors (including the Investor Nominees), and the holders of a
majority of the outstanding shares of Series A Preferred Stock then held by the
Investor Group and any shares of Series B Preferred Stock entitled to vote with
respect to such matters then held by the Investor Group, voting together as a
single class without regard to series, shall have, in addition to the other
voting rights set forth herein, the exclusive right, voting separately as a
class, to elect that number of
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directors (the "MAJORITY DIRECTORS") of the Corporation necessary to fill
such newly-created or vacated directorships. Majority Directors shall
continue as directors and such additional voting right shall continue until
such time as such default, event of default or event is cured, at which time
such Majority Directors shall cease to be directors and such additional
voting right of the Series A Preferred Stock and Series B Preferred Stock
shall terminate subject to revesting in the event of each and every
subsequent event of the character indicated above.
E. So long as the Investor or any of its Affiliates
Beneficially Owns any shares of Series A Preferred Stock, in the event that one
or more of the Investor Nominees required to be designated for election to the
Board of Directors pursuant to the Investment Agreement are not so designated or
are not elected to the Board of Directors, then the number of directors
constituting the Board of Directors shall, without further action, be increased
by the number of such Investor Nominees not elected to the Board of Directors
pursuant to the Investment Agreement, or if such requisite increase in the
number of directors constituting the Board of Directors would require the
approval of the Corporation's stockholders or is prohibited by the Investment
Agreement, then the number of directors constituting the Board of Directors
shall be increased to the extent the approval of the Corporation's stockholders
is not required and the Investment Agreement would not be breached and a number
of directors (other than Investment Nominees) shall resign from the Board of
Directors, so as to enable the Investor and its Affiliates to designate as
directors the number of Investor Nominees not elected to the Board of Directors
pursuant to the Investment Agreement, and the Investor and its Affiliates shall
have, in addition to the other voting rights set forth herein, the exclusive
right, voting separately as a single class, to elect a number of directors to
the Board of Directors equal to the number of such Investor Nominees not elected
to the Board of Directors. Directors elected pursuant to this Section E shall
continue as directors and such additional voting right shall continue until such
time as the requisite number of Investor Nominees are elected to the Board of
Directors pursuant to the Investment Agreement, at which time the directors
elected by the Investor and its Affiliates pursuant to this Section E shall
cease to be directors (unless elected as Investor Nominees), and such additional
voting rights shall terminate subject to revesting in the event of each and
every subsequent event of the character indicated above.
F. (a) The foregoing rights of holders of shares of Series A
Preferred Stock to take any action as provided in this Article VIII 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 by the written consent, delivered to the Secretary of the
Corporation, of the holders of the minimum number of shares required to take
such action. So long as such right to vote continues (and unless such right has
been exercised by written consent of the minimum number of shares required to
take such action), the Chairman of the Board of Directors may call, and upon the
written request of holders of record of 25% of the outstanding shares of Series
A Preferred Stock, addressed to the Secretary of the Corporation at the
principal office of the Corporation, shall call, a special meeting of the
holders of shares entitled to vote as provided herein. Such meeting shall be
held as soon as reasonably practicable after delivery of such request to the
Secretary, at the place and upon the notice provided by law and in the Bylaws
for the holding of meetings of stockholders.
(b) Each director elected pursuant to Section C, D or E hereof
shall serve until the next annual meeting or until his or her successor shall be
elected and shall qualify, unless the
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director's term of office shall have terminated pursuant to the provisions of
Section C, D or E hereof, as the case may be. In case any vacancy shall occur
among the directors elected pursuant to Section C, D or E hereof, such
vacancy shall be filled for the unexpired portion of the term by vote of the
remaining director or directors theretofore elected pursuant to the same
Section (or such director's or directors' successor in office), if any. If
any such vacancy is not so filled within 20 days after the creation thereof
or if all of the directors so elected shall cease to serve as directors
before their term shall expire, the holders of the shares of Series A
Preferred Stock then outstanding and entitled to vote for such director
pursuant to the provisions of Section C, D or E hereof, as the case may be,
may elect successors to hold office for the unexpired terms of any vacant
directorships, by written consent as provided herein, or at a special meeting
of such holders called as provided herein. The holders of a majority of the
shares entitled to vote for directors pursuant to Section C, D or E hereof,
as the case may be, shall have the right to remove with or without cause at
any time and replace any directors such holders have elected pursuant to such
section, by written consent as herein provided, or at a special meeting of
such holders called as provided herein.
G. Without the consent or affirmative vote of the holders of
at least sixty-seven percent (67%) of the outstanding shares of Series A
Preferred Stock, voting separately as a class, the Corporation shall not: (i)
authorize, create or issue, or increase the authorized amount of, (a) any Senior
Securities or (b) any class or series of capital stock or any security
convertible into or exercisable for any class or series of capital stock, that
is redeemable mandatorily or redeemable at the option of the holder thereof at
any time on or prior to the Mandatory Redemption Date (whether or not only upon
the occurrence of a specified event); (ii) amend, alter or repeal any provision
of the Certificate of Incorporation or the Bylaws, if the amendment, alteration
or repeal alters or changes the powers, preferences or special rights of the
Series A Preferred Stock so as to affect them adversely; or (iii) authorize or
take any other action if such action alters or changes any of the rights of the
Series A Preferred Stock in any respect or otherwise would be inconsistent with
the provisions of this Certificate of Designations and the holders of any class
or series of the capital stock of the Corporation is entitled to vote thereon.
H. OTHER SECURITIES. The Corporation shall not, from and after
the date of the original issuance of the Series A Preferred Stock, enter into
any agreement, amend or modify any existing agreement or obligation, or issue
any security that prohibits, conflicts or is inconsistent with, or would be
breached by, the Corporation's performance of its obligations hereunder.
IX. CONVERSION
A. CONVERSION. (a) At the option and election of the holder
thereof, each share of Series A Preferred Stock, including all unpaid dividends
accumulated thereon to the Conversion Date (as defined below), whether or not
such dividends have been declared, may be converted in the manner provided
herein at any time into fully paid and nonassessable shares of Common Stock. As
of the Conversion Date with respect to a share of Series A Preferred Stock,
subject to subsections (d) and (e) of this Section A, such share shall be
converted into that number of shares of Common Stock equal to the quotient of
(i) the sum of (A) the Stated Value plus (B) all unpaid dividends accumulated on
such share of Series A Preferred Stock to the Conversion Date whether or not
such dividends have been declared, divided by (ii) the Conversion Price in
effect on the Conversion Date.
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(b) Conversion of shares of the Series A Preferred Stock may
be effected by any holder thereof upon the surrender to the Corporation at the
principal office of the Corporation or at the office of any agent or agents of
the Corporation, as may be designated by the Board of Directors of the
Corporation and identified to the holders in writing upon such designation, of
the certificate for such shares of Series A Preferred Stock to be converted
accompanied by a written notice stating that such holder elects to convert all
or a specified whole number of shares represented by such certificate in
accordance with the provisions of this Section A and specifying the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. In case such notice shall specify a name or names
other than that of such holder, such notice shall be accompanied by payment of
all transfer taxes payable upon the issuance of shares of Common Stock in such
name or names. Other than such taxes, the Corporation will pay any and all issue
and other taxes (other than taxes based on income) that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
Series A Preferred Stock pursuant hereto. As promptly as practical, and in any
event within three Business Days after the Conversion Date, the Corporation
shall deliver or cause to be delivered as directed by the holder of shares of
Series A Preferred Stock being converted (i) certificates representing the
number of validly issued, fully paid and nonassessable full shares of Common
Stock to which such holder shall be entitled to, (ii) any cash that is required
to be paid pursuant to subsections (d) and (e) of this Section A, (iii)
certificates representing any shares of Series B Preferred Stock that are
required to be delivered pursuant to subsection (e) of this Section A, and (iv)
if less than the full number of shares of Series A Preferred Stock evidenced by
the surrendered certificate or certificates is being converted, a new
certificate or certificates, of like tenor, for the number of shares of Series A
Preferred Stock evidenced by such surrendered certificate or certificates less
the number of shares of Series A Preferred Stock being converted. Such
conversion shall be deemed to have occurred at the close of business on the date
(the "CONVERSION DATE") of the giving of such notice by the holder of the Series
A Preferred Stock to be converted and of such surrender of the certificate or
certificates representing the shares of Series A Preferred Stock to be converted
so that as of such time the rights of the holder thereof as to the shares being
converted shall cease except for the right to receive shares of Common Stock,
shares of Series B Preferred Stock and/or cash in accordance herewith, and the
person entitled to receive the shares of Common Stock and/or shares of Series B
Preferred Stock issued as a result of such conversion shall be treated for all
purposes as having become the holder of such shares of Common Stock and/or
shares of Series B Preferred Stock at such time.
(c) In the event that the Series A Preferred Stock is to be
redeemed pursuant to Article V hereof, from and after the Redemption Date, the
right of a holder to convert shares of Series A Preferred Stock pursuant to this
Section A shall cease and terminate, except if the Corporation shall default in
payment of the Redemption Price on the Redemption Date in which case all such
rights shall continue unless and until such shares are redeemed and such price
is paid in full in accordance with the terms hereof. Notwithstanding anything in
the foregoing to the contrary, if the Conversion Date shall occur with respect
to any shares of Series A Preferred Stock on or prior to any Redemption Date,
such shares of Series A Preferred Stock shall be converted by the Corporation
into Common Stock in the manner provided in this Section A.
(d) In connection with the conversion of any shares of Series
A Preferred Stock, no fractions of shares of Common Stock shall be issued, but
in lieu thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional
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interest multiplied by the Closing Price per share of Common Stock on the
Conversion Date (or on the Trading Day immediately preceding the Conversion
Date, if the Conversion Date is not a Trading Day). If more than one share of
Series A Preferred Stock shall be surrendered for conversion by the same
holder on the same Conversion Date, the number of full shares of Common Stock
issuable on conversion thereof shall be computed on the basis of the total
number of shares of Series A Preferred Stock so surrendered.
(e) Notwithstanding anything in the foregoing to the contrary,
in the event that a Conversion Date with respect to a share of Series A
Preferred Stock occurs prior to the date on which the Shareholder Approval is
obtained, as of such Conversion Date, subject to subsection (d) of this Section
A, such share shall be converted into that number of shares of Common Stock
equal to the quotient of (i) the Stated Amount thereof, divided by (ii) the
Conversion Price in effect on the Conversion Date, and upon delivery of such
shares in accordance with the terms hereof, the Corporation shall pay in cash
all accrued and unpaid dividends on such share as directed by the holder
thereof; PROVIDED, HOWEVER, that if, as of such Conversion Date, the Corporation
is prohibited by the terms of the Credit Agreement (as in effect on the date of
the Investment Agreement or any Credit Agreement containing restrictions
regarding such payments that are no more restrictive that those in effect on the
date of the Investment Agreement) or the Indenture (as in effect on the date of
the Investment Agreement or any Indenture containing restrictions regarding such
payments that are no more restrictive that those in effect on the date of the
Investment Agreement) from paying such accrued and unpaid dividends in cash as
required pursuant to this sentence, in satisfaction of such accrued and unpaid
dividends and in lieu of such cash payment, the Corporation may deliver shares
of Series B Preferred Stock having an aggregate stated value equal to the
aggregate amount of such accrued and unpaid dividends. Until the Shareholder
Approval is obtained, the Corporation shall not (A) utilize amounts available
under Section 6.06(a)(ii) of the Credit Agreement (or any comparable provision
of the Credit Agreement) for any purpose except to pay dividends in respect of
the Series A Preferred Stock in cash as required pursuant to this subsection (e)
or to make payments with respect to the Series B Preferred Stock, or (B) amend
the Credit Agreement in any manner so as to reduce the amounts available to pay
dividends in respect of the Series A Preferred Stock in cash under Section
6.06(a)(ii) of the Credit Agreement (or any comparable provision of the Credit
Agreement). Notwithstanding the foregoing, this paragraph shall not prohibit (i)
the acquisition, repurchase, exchange, conversion, redemption or other
retirement for value of shares of Series A Preferred Stock or any Parity
Dividend Security by the Corporation in accordance with the terms of such
securities, (ii) purchases of Equity Securities of the Corporation or any of its
Subsidiaries from executives and other management-level employees of the
Corporation or any of its Subsidiaries in connection with customary employment
and severance arrangements, or (iii) the acquisition, repurchase, exchange,
conversion, redemption or other retirement for value by the Corporation of any
Junior Dividend Securities by the Corporation in accordance with obligations in
existence at the time of original issuance of the Series A Preferred Stock.
(f) The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the Series A Preferred Stock in
accordance with the terms hereof, such number of its authorized but unissued
shares of Common Stock as will from time to time be sufficient to permit the
conversion of all outstanding shares of Series A Preferred Stock, and shall take
all action required to increase the authorized number of shares of Common Stock
if necessary to permit the conversion of all outstanding shares of Series A
Preferred Stock.
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B. ADJUSTMENT OF CONVERSION PRICE. Except in connection with
an Organic Change, which shall be subject to Section C below, the Conversion
Price shall be subject to adjustment from time to time as follows:
(a) STOCK DIVIDENDS. In case the Corporation after the date of
the original issuance of the Series A Preferred Stock shall pay a dividend or
make a distribution to all holders of shares of Common Stock in shares of Common
Stock, then in any such case the Conversion Price in effect at the opening of
business on the day following the record date for the determination of
stockholders entitled to receive such dividend or distribution shall be reduced
to a price obtained by multiplying such Conversion Price by a fraction of which
(x) the numerator shall be the number of shares of Common Stock outstanding at
the close of business on such record date and (y) the denominator shall be the
sum of such number of shares of Common Stock outstanding and the total number of
shares of Common Stock constituting such dividend or distribution, such
reduction to become effective immediately after the opening of business on the
day following such record date. For purposes of this subsection (a), the number
of shares of Common Stock at any time outstanding shall not include shares held
in the treasury of the Corporation but shall include shares issuable in respect
of scrip certificates issued in lieu of fractions of shares of Common Stock. The
Corporation will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Corporation.
(b) STOCK SPLITS AND REVERSE SPLITS. In case after the date of
the original issuance of the Series A Preferred Stock outstanding shares of
Common Stock shall be subdivided into a greater number of shares of Common
Stock, the Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall be
proportionately reduced, and, conversely, in case after the original issuance of
the Series A Preferred Stock outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Conversion Price
in effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately after
the opening of business on the day following the day upon which such subdivision
or combination becomes effective.
(c) ISSUANCES BELOW MARKET. In case the Corporation after the
date of the original issuance of the Series A Preferred Stock shall issue rights
or warrants to holders of shares of Common Stock entitling them to subscribe for
or purchase shares of Common Stock at a price per share less than the Closing
Price per share on the record date for the determination of stockholders
entitled to receive such rights or warrants, the Conversion Price in effect at
the opening of business on the day following such record date shall be adjusted
to a price obtained by multiplying such Conversion Price by a fraction of which
(x) the numerator shall be the number of shares of Common Stock outstanding at
the close of business on such record date PLUS the number of shares of Common
Stock that the aggregate offering price of the total number of shares so to be
offered would purchase at such Closing Price and (y) the denominator shall be
the number of shares of Common Stock outstanding at the close of business on
such record date PLUS the number of additional shares of Common Stock so to be
offered for subscription or purchase, such adjustment to become effective
immediately after the opening of business on the day following such record date;
PROVIDED, HOWEVER, that no adjustment shall be made if the Corporation issues or
distributes to each holder of Series A Preferred Stock the rights or warrants
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that each such holder would have been entitled to receive had the Series A
Preferred Stock held by such holder been converted prior to such record date.
For purposes of this subsection (c), the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the
Corporation but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Corporation shall not
issue any rights or warrants in respect of shares of Common Stock held in the
treasury of the Corporation. Rights or warrants issued by the Corporation to all
holders of Common Stock entitling the holders thereof to subscribe for or
purchase Equity Securities, which rights or warrants (i) are deemed to be
transferred with such shares of Common Stock, (ii) are not exercisable and (iii)
are also issued in respect of future issuances of Common Stock, including shares
of Common Stock issued upon conversion of shares of Series A Preferred Stock, in
each case in clauses (i) through (iii) until the occurrence of a specified event
or events (a "TRIGGER EVENT"), shall for purposes of this subsection (c) not be
deemed issued until the occurrence of the earliest Trigger Event.
(d) SPECIAL DIVIDENDS. In case the Corporation after the date
of the original issuance of the Series A Preferred Stock shall distribute to all
holders of shares of Common Stock evidences of its indebtedness or assets
(excluding any regular periodic cash dividend but including any extraordinary
cash dividend), Equity Securities (other than Common Stock) or rights to
subscribe (excluding those referred to in subsection (c) above) for Equity
Securities other than Common Stock, in each such case the Conversion Price in
effect immediately prior to the close of business on the record date for the
determination of stockholders entitled to receive such distribution shall be
adjusted to a price obtained by multiplying such Conversion Price by a fraction
of which (x) the numerator shall be the Closing Price per share of Common Stock
on such record date, LESS the then-current fair market value as of such record
date (as determined by the Board of Directors in its good faith judgment) of the
portion of assets or evidences of indebtedness or Equity Securities or
subscription rights so distributed applicable to one share of Common Stock, and
(y) the denominator shall be such Closing Price, such adjustment to become
effective immediately prior to the opening of business on the day following such
record date; PROVIDED, HOWEVER, that no adjustment shall be made (1) if the
Corporation issues or distributes to each holder of Series A Preferred Stock the
subscription rights referred to above that each such holder would have been
entitled to receive had the Series A Preferred Stock held by such holder been
converted prior to such record date or (2) if the Corporation grants to each
such holder the right to receive, upon the conversion of the Series A Preferred
Stock held by such holder at any time after the distribution of the evidences of
indebtedness or assets or Equity Securities referred to above, the evidences of
indebtedness or assets or Equity Securities that such holder would have been
entitled to receive had such Series A Preferred Stock been converted prior to
such record date. The Corporation shall provide any holder of Series A Preferred
Stock, upon receipt of a written request therefor, with any indenture or other
instrument defining the rights of the holders of any indebtedness, assets,
subscription rights or Equity Securities referred to in this subsection (d).
Rights or warrants issued by the Corporation to all holders of Common Stock
entitling the holders thereof to subscribe for or purchase Equity Securities,
which rights or warrants (i) are deemed to be transferred with such shares of
Common Stock, (ii) are not exercisable and (iii) are also issued in respect of
future issuances of Common Stock, including shares of Common Stock issued upon
conversion of shares of Series A Preferred Stock, in each case in clauses (i)
through (iii) until the occurrence of a Trigger Event, shall for purposes of
this subsection (d) not be deemed issued until the occurrence of the earliest
Trigger Event.
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(e) TENDER OR EXCHANGE OFFER. In case a tender or exchange
offer made by the Corporation or any subsidiary of the Corporation for all or
any portion of the Common Stock shall be consummated and such tender offer shall
involve an aggregate consideration having a fair market value (as determined by
the Board of Directors in its good faith judgment) at the last time (the "OFFER
TIME") tenders may be made pursuant to such tender or exchange offer (as it may
be amended) that, together with the aggregate of the cash plus the fair market
value (as determined by the Board of Directors in its good faith judgment), as
of the Offer Time, of consideration payable in respect of any tender or exchange
offer by the Corporation or any such subsidiary for all or any portion of the
Common Stock consummated preceding the Offer Time and in respect of which no
Conversion Price adjustment pursuant to this subsection (e) has been made,
exceeds 5% of the product of the Closing Price of the Common Stock at the Offer
Time multiplied by the number of shares of Common Stock outstanding (including
any tendered shares) at the Offer Time, the Conversion Price shall be reduced so
that the same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the Offer Time by a fraction of which (x)
the numerator shall be (i) the product of the Closing Price of the Common Stock
at the Offer Time multiplied by the number of shares of Common Stock outstanding
(including any tendered shares) at the Offer Time minus (ii) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly tendered and not
withdrawn as of the Offer Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "PURCHASED SHARES") and (y) the denominator
shall be the product of (i) such Closing Price at the Offer Time multiplied by
(ii) such number of outstanding shares at the Offer Time minus the number of
Purchased Shares, such reduction to become effective immediately prior to the
opening of business on the day following the Offer Time. For purposes of this
subsection (e), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Corporation but shall
include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock.
(f) CLOSING PRICE DETERMINATION. For the purpose of any
computation under subsections (c) and (d) of this Section B, the Closing Price
of Common Stock on any date shall be deemed to be the average of the Closing
Prices for the five consecutive Trading Days ending on the day in question (or
if such day is not a Trading Day, the next preceding Trading Day), PROVIDED,
HOWEVER, that (i) if the "ex" date for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Conversion Price pursuant to this Section occurs on or after the 20th Trading
Day prior to the day in question and prior to the "ex" date for the issuance or
distribution requiring such computation, the Closing Price for each Trading Day
prior to the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction which the Conversion Price is so
required to be adjusted as a result of such other event, (ii) if the "ex" date
for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
this Section occurs on or after the "ex" date for the issuance or distribution
requiring such computation and on or prior to the day in question, the Closing
Price for each Trading Day on and after the "ex" date for such other event shall
be adjusted by multiplying such Closing Price by the reciprocal of the fraction
by which the Conversion Price is so required to be adjusted as a result of such
other event, and (iii) if the "ex" date for the issuance or distribution
requiring such computation is on or prior to the day in question, after taking
into account any adjustment
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required pursuant to clause (ii) of this proviso, the Closing Price for each
Trading Day on or after such "ex" date shall be adjusted by adding thereto
the fair market value on the day in question (as determined by the Board of
Directors in a manner consistent with any determination of such value for the
purposes of subsection (d) of this Section B) of the assets, evidences of
indebtedness, Equity Securities or subscription rights being distributed
applicable to one share of Common Stock as of the close of business on the
day before such "ex" date. For the purposes of any computation under
subsection (e) of this Section B, the Closing Price on any date shall be
deemed to be the average of the daily Closing Prices for the five consecutive
Trading Days ending at the Offer Time; PROVIDED, HOWEVER, that if the "ex"
date for any event (other than the tender or exchange offer requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
this Section occurs on or after the date of commencement of such tender or
exchange offer and prior to the Offer Time for such tender or exchange offer,
the Closing Price for each Trading Day prior to the "ex" date for such other
event shall be adjusted by multiplying such Closing Price by the same
fraction by which the Conversion Price is so required to be adjusted as a
result of such other event. For purposes of this subsection (f), the term
"ex" date, (i) when used with respect to any issuance or distribution, means
the first date on which the Common Stock trades regular way on the NYSE or on
the relevant exchange or in the relevant market from which the Closing Price
was obtained without the right to receive such issuance or distribution, (ii)
when used with respect to any subdivision or combination of shares of Common
Stock, means the first date on which the Common Stock trades regular way on
the NYSE or such exchange or in such market after the time at which such
subdivision or combination becomes effective, and (iii) when used with
respect to any tender or exchange offer means the first date on which the
Common Stock trades regular way on the NYSE or such exchange or in such
market after the Offer Time of such tender or exchange offer.
(g) The Corporation may make such reductions in the Conversion
Price, in addition to those required by clauses (a), (b), (c), (d), (e) and (f)
of this Section B, as it considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock or from any event treated
as such for income tax purposes. Whenever the Conversion Price is reduced
pursuant to the preceding sentence, the Corporation shall mail to the holders of
then-outstanding shares of Series A Preferred Stock a notice of the reduction at
least fifteen (15) days prior to the date the reduced Conversion Price takes
effect, and such notice shall state the reduced Conversion Price and the period
it will be in effect.
(h) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Conversion Price; PROVIDED, HOWEVER, that any adjustments
which by reason of this subsection (h) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
(i) Notwithstanding any other provision of this Section B, no
adjustment to the Conversion Price shall reduce the Conversion Price below
$0.25, and any such purported adjustment shall instead reduce the Conversion
Price to $0.25. The Corporation hereby covenants not to take any action that
would or does result in any adjustment in the Conversion Price that, if made
without giving effect to the previous sentence, would cause the Conversion Price
to be less than $0.25.
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(j) Whenever the Conversion Price is adjusted as herein
provided, a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall promptly be mailed by the
Corporation to the holders of the Series A Preferred Stock.
C. ORGANIC CHANGE.
(a) CORPORATION SURVIVES. Upon the consummation of an Organic
Change (other than a transaction in which the Corporation is not the surviving
entity), then lawful provision shall be made as part of the terms of such
transaction whereby the terms hereof shall be modified, without payment of any
additional consideration by any holder, so as to provide that upon the
conversion of shares of Series A Preferred Stock following the consummation of
such Organic Change, the holder of Series A Preferred Stock shall have the right
to acquire and receive (in lieu of or in addition to the shares of Common Stock
acquirable and receivable prior to the Organic Change), without payment of
additional consideration therefor, such securities, cash and other property as
such holder would have received if such holder had converted such shares of
Series A Preferred Stock into Common Stock immediately prior to such Organic
Change. Lawful provision also shall be made as part of the terms of the Organic
Change so that all other terms hereof shall remain in full force and effect
following such an Organic Change. The provisions of this subsection (a) shall
similarly apply to successive Organic Changes of the character described in this
subsection (a).
(b) CORPORATION DOES NOT SURVIVE. The Corporation shall not
enter into an Organic Change that is a transaction in which the Corporation is
not the surviving entity unless lawful provision shall be made as part of the
terms of such transaction whereby the surviving entity shall issue new
securities to each holder of Series A Preferred Stock, without payment of any
additional consideration by such holder, with terms that provide that upon the
conversion of such securities, the holder of such securities shall have the
right to acquire and receive (in lieu of or in addition to the shares of Common
Stock acquirable and receivable prior to the Organic Change), without payment of
additional consideration therefor, such securities, cash and other property (the
"NEW SECURITIES") as such holder would have received if such holder had
converted such shares of Series A Preferred Stock into Common Stock immediately
prior to such Organic Change. The certificate or articles of incorporation or
other constituent document of the surviving entity shall provide for such
adjustments which, for events subsequent to the effective date of such
certificate or articles of incorporation or other constituent document, shall be
equivalent to the adjustments provided for in Section B of this Article IX. All
other terms of such New Securities shall be substantially equivalent to the
terms provided herein. The provisions of this subsection (b) shall similarly
apply to successive Organic Changes of the character described in of this
subsection (b).
D. CERTAIN EVENTS. If any event similar to or of the type
contemplated by the provisions of Section B or Section C of this Article IX, but
not expressly provided for by such provisions, occurs, then the Board of
Directors of the Corporation, will make an appropriate and equitable adjustment
in the Conversion Price so as to protect the rights of the holders of Series A
Preferred Stock; PROVIDED, that no such adjustment will decrease the number of
shares of Common Stock issuable upon conversion of the Series A Preferred Stock.
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E. NOTICE OF APPROVAL DATE. When and if the Approval Date
shall occur, the Corporation shall promptly mail or cause to be mailed a notice
of such occurrence to each holder of Series A Preferred Stock.
X. ADDITIONAL DEFINITIONS
For the purposes of this Certificate of Designations of Series
A Preferred Stock, the following terms shall have the meanings indicated:
"AFFILIATE" has the meaning set forth in Rule 12b-2 under the
Exchange Act as in effect on the date of the Investment Agreement. The term
"Affiliated" has a correlative meaning. Notwithstanding the foregoing, for all
purposes hereof, the Investor, and each Person controlled by, controlling or
under common control with the Investor (each, a "TPG PERSON"), shall not be
deemed an "Affiliate" of any Designated Purchaser Person (as defined below), and
no Designated Purchaser, and no Person controlled by, controlling or under
common control with such Designated Purchaser (each, a "DESIGNATED PURCHASER
PERSON"), shall be deemed an "Affiliate" of any TPG Person or any other
Designated Purchaser Person, in any such case solely as a consequence of this
Agreement or the transactions contemplated hereby.
"APPROVAL DATE" means the date, if any, on which the
Corporation obtains the Shareholder Approval.
"BENEFICIALLY OWN" with respect to any securities means having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act as in effect on the date of the Investment Agreement,
except that a Person shall be deemed to Beneficially Own all such securities
that such Person has the right to acquire whether such right is exercisable
immediately or after the passage of time). The terms "Beneficial Ownership" and
"Beneficial Owner" have correlative meanings. Notwithstanding the foregoing, for
all purposes hereof, no TPG Person shall be deemed to Beneficially Own any
securities that are held by any Designated Purchaser Person, and no Designated
Purchaser Person shall be deemed to Beneficially Own any securities that are
held by any TPG Person or any other Designated Purchaser Person, in any such
case solely as a consequence of the Investment Agreement or the transactions
contemplated thereby.
"BUSINESS DAY" means 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.
"BYLAWS" means the Bylaws of the Corporation, as amended
from time to time.
"CHANGE OF CONTROL" shall be deemed to have occurred if (a)
any person or group (within the meaning of Rule 13d-5 under the Exchange Act as
in effect on February 12, 1998) shall own directly or indirectly, beneficially
or of record, shares representing more than 35% of the aggregate ordinary voting
power represented by the issued and outstanding Equity Securities of the
Corporation, other than any Person or Group that owned at least 5% of such
Equity Securities on the Closing Date (as such term is defined in the Credit
Agreement as in effect on the date of the Investment Agreement); (b) a majority
of the seats (other than vacant seats) on the board of directors of the
Corporation shall at any time be occupied by persons who were neither
A-25
(i) nominated by the board of directors of the Corporation nor (ii) appointed
by directors so nominated; (c) any change in control (or similar event,
however denominated) with respect to the Corporation shall occur under and as
defined in any indenture or agreement in respect of Indebtedness for borrowed
money in excess of the aggregate principal amount of $10,000,000 to which any
Borrower (as such term is defined in the Credit Agreement as in effect on the
date of the Investment Agreement) or any Guarantor (as such term is defined
in the Credit Agreement as in effect on the date of the Investment Agreement)
is a party, other than the Existing Parent Borrower Notes Indenture (as such
term is defined in the Credit Agreement as in effect on the date of the
Investment Agreement) in connection with a Permitted CBHS Sale (as such term
is defined in the Credit Agreement as in effect on the date of the Investment
Agreement); or (d) a "Change in Control" or "Change of Control" (or similar
event) shall have occurred under the Credit Agreement or the Senior
Subordinated Notes, unless, in the case of a "Change of Control" under the
Indenture, the aggregate principal amount outstanding under the Senior
Subordinated Notes is less than $10,000,000. Notwithstanding the foregoing,
no event described above shall constitute a "Change of Control" if such event
resulted directly from any action taken by the Investor or any of its
Affiliates.
"CLOSING" shall have the meaning assigned to such term in
the Investment Agreement.
"CLOSING PRICE" with respect to a share of Common Stock on any
day means, subject to subsection (f) of Section B of Article IX if applicable,
the last reported sale price on that day or, in case no such reported sale takes
place on such day, the average of the last reported bid and asked prices,
regular way, on that day, in either case, as reported in the consolidated
transaction reporting system with respect to securities listed on the NYSE or,
if the shares of Common Stock are not listed on the NYSE, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Common Stock are listed or, if the shares of Common Stock are not listed on NYSE
and not listed on any national securities exchange, the last quoted price or, if
not so quoted, the average of the high bid and low asked prices on such other
nationally recognized quotation system then in use, or, if on any such day the
shares of Common Stock are not quoted on any such quotation system, the average
of the closing bid and asked prices as furnished by a professional market maker
selected by the Board of Directors in good faith making a market in the shares
of Common Stock. If the shares of Common Stock are not publicly held or so
listed, quoted or publicly traded, the "Closing Price" means the fair market
value of a share of Common Stock, as determined in good faith by the Board of
Directors.
"CONVERSION PRICE" shall mean $9.375, as adjusted from time
to time pursuant to Section B of Article IX hereof.
"CONVERSION SHARES" has the meaning set forth in the
Investment Agreement.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of
February 12, 1998, among the Corporation, the banks and other financial
institutions named therein, and The Chase Manhattan Bank, as Administrative
Agent, together with all other documents entered into pursuant to or in
connection with the Credit Agreement, in each case, as the same may be amended,
restated, supplemented, extended, renewed or increased from time to time,
replaced,
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substituted, refunded or refinanced or otherwise modified from time to time,
in whole or in part, and any successive replacements, substitutions,
refundings or refinancings.
"DESIGNATED PURCHASER" has the meaning set forth in the
Investment Agreement.
"DESIGNATED PURCHASER PERSON" has the meaning set forth in
the definition of "Affiliate."
"EQUITY SECURITIES" of any Person, means any and all common
stock, preferred stock and any other class of capital stock of, and any
partnership or limited liability company interests in, such Person or any other
similar interests of any Person that is not a corporation, partnership or
limited liability company.
"EXCHANGE ACT" means the U.S. Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder, from time to
time.
"45-TRADING DAY AVERAGE PRICE" means the average of the
Closing Prices per share of Common Stock for the Trading Days in any period of
45 consecutive Trading Days (a "45-TRADING DAY REFERENCE PERIOD"); PROVIDED,
HOWEVER, that in the event that an adjustment to the Conversion Price takes
effect pursuant to Section B of Article IX hereof during the period used to
compute such average, the Closing Prices used to compute such average for all
Trading Days ended prior to the time such adjustment takes effect shall be
similarly adjusted.
"45-TRADING DAY REFERENCE PERIOD" has the meaning set forth
in the definition of "45-Trading Day Average Price."
"GOVERNMENTAL ENTITY" means any government or political
subdivision or department thereof, any governmental or regulatory body,
commission, board, bureau, agency or instrumentality, or any court or arbitrator
or alternative dispute resolution body, in each case whether federal, state,
local or foreign.
"GROUP" has the meaning set forth in Rule 13d-5 under the
Exchange Act.
"GUARANTEE" means any direct or indirect obligation,
contingent or otherwise, to guarantee (or having the economic effect of
guaranteeing) Indebtedness in any manner, including, without limitation, any
monetary obligation to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness (whether arising by agreement to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise).
"INDEBTEDNESS" means, with respect to any Person, without
duplication, (i) all obligations of such Person for money borrowed, (ii) all
obligations of such Person evidenced by bonds, debentures, notes, or other
similar instruments, (iii) all obligations of such Person upon which interest
charges are customarily paid, (iv) all obligations of such Person under
conditional sale or other title retention agreements relating to property or
assets purchased by such Person, (v) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding (x)
trade accounts payable and accrued obligations incurred in the ordinary course
of business and (y) deferred earn-out and other performance-based payment
obligations
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incurred in connection with any Permitted Acquisition (as such term is
defined in the Credit Agreement as in effect on the date of the Investment
Agreement) or any similar transactions consummated prior to February 12,
1998), (vi) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (vii) all Guarantees
by such Person of Indebtedness of others, (viii) all capital lease
obligations of such Person, (ix) all obligations (determined on the basis of
actual, not notional, obligations) of such Person in respect of interest rate
protection agreements, foreign currency exchange agreements or other interest
or exchange rate hedging arrangements and (x) all obligations of such Person
as an account party in respect of letters of credit and bankers' acceptances
issued in support of obligations that constitute Indebtedness under any other
clause of this definition (unless such obligations are fully cash
collateralized), PROVIDED that all obligations in respect of letters of
credit shall be deemed Indebtedness to the extent drawings thereunder are
unreimbursed (after any applicable grace period) regardless of the purpose
for which such letter of credit was issued. The Indebtedness of any Person
shall include the recourse Indebtedness of any partnership in which such
Person is a general partner. Notwithstanding the foregoing, no portion of
Indebtedness that becomes the subject of a defeasance (whether a legal
defeasance or a "covenant" or "in substance" defeasance) shall, at any time
that such defeasance remains in effect, be treated as Indebtedness for
purposes hereof.
"INDENTURE" means the Indenture entered into between the
Corporation and the Marine Midland Bank, as Trustee, dated as of February 12,
1998, as the same may be amended, restated, supplemented, extended, renewed or
increased from time to time, replaced, substituted, refunded or refinanced or
otherwise modified from time to time, in whole or in part, and any successive
replacements, substitutions, refundings or refinancings.
"INVESTMENT AGREEMENT" means the Investment Agreement, dated
as of July 19, 1999, by and between the Investor and the Corporation, as
amended, supplemented or otherwise modified from time to time.
"INVESTOR" has the meaning set forth in the Investment
Agreement.
"INVESTOR GROUP" means, collectively, the Investor, the
Designated Purchasers, if any, and the respective Affiliates of such Persons.
"INVESTOR NOMINEE" means a person designated for election to
the Board of Directors by the Investor pursuant to the Investment Agreement.
"LAW" means any law, treaty, statute, ordinance, code, rule,
regulation, judgment, decree, order, writ, award, injunction or determination of
any Governmental Entity.
"LIEN" means any mortgage, pledge, lien, security interest,
claim, voting agreement, conditional sale agreement, title retention agreement,
restriction, option or encumbrance of any kind, character or description
whatsoever.
"MAKE-WHOLE PAYMENT" has the meaning set forth in the
Certificate of Designations with respect to the Series B Preferred Stock.
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"NYSE" means the New York Stock Exchange, Inc.
"180-DAY AVERAGE PRICE" means the average of the Closing
Prices per share of Common Stock for the Trading Days in any period of 180
consecutive calendar days (a "180-DAY REFERENCE PERIOD"); PROVIDED, HOWEVER,
that in the event that an adjustment to the Conversion Price takes effect
pursuant to Section B of Article IX hereof during the period used to compute
such average, the Closing Prices used to compute such average for all Trading
Days ended prior to the time such adjustment takes effect shall be similarly
adjusted.
"180-DAY REFERENCE PERIOD" has the meaning set forth in the
definition of "180-Day Average Price."
"ORGANIC CHANGE" means, with respect to the Corporation, any
transaction (including without limitation any recapitalization, capital
reorganization or reclassification of any class of capital stock, any
consolidation or amalgamation of the Corporation with, or merger of the
Corporation into, any other Person, any merger of another Person into the
Corporation (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of capital stock of
the Corporation), any sale or transfer or lease of all or substantially all of
the assets of the Corporation or any compulsory share exchange) pursuant to
which any class of capital stock of the Corporation is converted into the right
to receive other securities, cash or other property.
"PERSON" means any individual, corporation, company,
association, partnership, limited liability company, joint venture, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"REFERENCE PERIOD" means a 45-Trading Day Reference Period or
a 180-Day Reference Period, as the case may be.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of July 19, 1999, by and between the Investor and the
Corporation, as amended, supplemented or otherwise modified from time to time.
"REGULATORY APPROVALS" means any and all certificates,
permits, licenses, franchises, concessions, grants, consents, approvals, orders,
registrations, authorizations, waivers, variances or clearances from, or filings
or registrations with, Governmental Entities.
"SECURITIES ACT" means the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, from time to
time.
"SENIOR SUBORDINATED NOTES" means the Senior Subordinated
Notes of the Corporation issued pursuant to the Indenture.
"SHAREHOLDER APPROVAL" means the approval by the stockholders
of the Corporation, in accordance with the General Corporation Law of the State
of Delaware and in accordance with and in satisfaction of Paragraph 312.00 of
the NYSE's Listed Company Manual and the related NYSE Rules and interpretations
thereof, of (i) the issuance of Common Stock in respect of accrued and unpaid
dividend obligations on the Series A Preferred Stock and the
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Series B Preferred Stock, (ii) the issuance of Common Stock upon the
conversion or exchange of the Series B Preferred Stock, and (iii) and the
vesting of voting rights in respect of the Series B Preferred Stock as
contemplated by the terms thereof, in each case in accordance with the terms
hereof and the Investment Agreement.
"SUBSIDIARY" means as to any Person, any other Person of which
more than 50% of the shares of the voting stock or other voting interests are
owned or controlled, or the ability to select or elect more than 50% of the
directors or similar managers is held, directly or indirectly, by such first
Person or one or more of its Subsidiaries or by such first Person and one or
more of its Subsidiaries; PROVIDED, HOWEVER, that no Joint Venture (as such term
is defined in the Investment Agreement) shall be considered (i) a "Subsidiary"
of the Corporation or (ii) a "Subsidiary" of any Subsidiary of the Corporation.
"TPG PERSON" has the meaning set forth in the definition of
"Affiliate."
"TRADING DAY" means any day on which the NYSE is open for
trading, or if the shares of Common Stock are not quoted on the NYSE, any day on
which the principal national securities exchange or national quotation system on
which the shares of Common Stock are listed, admitted to trading or quoted is
open for trading, or if the shares of Common Stock are not so listed, admitted
to trading or quoted, any Business Day.
"TWO-WEEK AVERAGE PRICE" means the average of the Closing
Prices per share of Common Stock for the Trading Days in the two-calendar week
period ending on the last day of a Reference Period; PROVIDED, HOWEVER, that in
the event that an adjustment to the Conversion Price takes effect pursuant to
Section B of Article IX hereof during the period used to compute such average,
the Closing Prices used to compute such average for all Trading Days ended prior
to the time such adjustment takes effect shall be similarly adjusted.
"VOTING SECURITIES" means the shares of Common Stock and any
other securities of the Corporation entitled to vote generally for the election
of directors.
XI. MISCELLANEOUS
A. NOTICES. Any notice referred to herein shall be in writing
and, unless first-class mail shall be specifically permitted for such notices
under the terms hereof, shall be deemed to have been given upon personal
delivery thereof, upon transmittal of such notice by telecopy (with confirmation
of receipt by telecopy or telex) or five days after transmittal by registered or
certified mail, postage prepaid, addressed as follows:
(i) if to the Corporation, to its office at 6950 Columbia
Gateway Drive, Fourth Floor, Columbia, Maryland 21046 (Attention:
General Counsel) or to the transfer agent for the Series A Preferred
Stock;
(ii) if to a holder of the Series A Preferred Stock, to such
holder at the address of such holder as listed in the stock record
books of the Corporation (which may include the records of any transfer
agent for the Series A Preferred Stock); or
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(iii) to such other address as the Corporation or such holder,
as the case may be, shall have designated by notice similarly given.
B. REACQUIRED SHARES. Any shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation, directly or
indirectly, in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof (and shall not be deemed to be outstanding for any
purpose) and, if necessary to provide for the lawful redemption or purchase of
such shares, the capital represented by such shares shall be reduced in
accordance with the Delaware General Corporation Law. All such shares of Series
A Preferred Stock shall upon their cancellation and upon the filing of an
appropriate certificate with the Secretary of State of the State of Delaware,
become authorized but unissued shares of Preferred Stock, without par value, of
the Corporation and may be reissued as part of another series of Preferred
Stock, without par value, of the Corporation subject to the conditions or
restrictions on issuance set forth herein.
C. ENFORCEMENT. Any registered holder of shares of Series A
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 Designations or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
D. TRANSFER TAXES. Except as otherwise agreed upon pursuant to
the terms of this Certificate of Designations, the Corporation shall pay any and
all documentary, stamp or similar issue or transfer taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
any issue or delivery of Common Stock or Debentures on conversion or exchange
of, or other securities or property issued on account of, shares of Series A
Preferred Stock pursuant hereto or certificates representing such shares or
securities. The Corporation shall not, however, be required to pay any such tax
or other charge that may be imposed in connection with any transfer involved in
the issue or transfer and delivery of any certificate for Common Stock or
Debentures or other securities or property in a name other than that in which
the shares of Series A Preferred Stock so converted or exchanged, or on account
of which such securities were issued, were registered and no such issue or
delivery shall be made unless and until the Person requesting such issue has
paid to the Corporation the amount of any such tax or has established to the
satisfaction of the Corporation that such tax has been paid or is not payable.
E. TRANSFER AGENT. The Corporation may appoint, and from time
to time discharge and change, a transfer agent for the Series A Preferred Stock.
Upon any such appointment or discharge of a transfer agent, the Corporation
shall send notice thereof by first-class mail, postage prepaid, to each holder
of record of shares of Series A Preferred Stock.
F. RECORD DATES. In the event that the Series A Preferred
Stock shall be registered under either the Securities Act or the Exchange Act,
the Corporation shall establish appropriate record dates with respect to
payments and other actions to be made with respect to the Series A Preferred
Stock.
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G. SUBORDINATION TO SENIOR SUBORDINATED NOTES. By accepting a
share of Series A Preferred Stock or Debenture, the holder thereof shall be
deemed to have acknowledged and agreed that (a) such holder's right to receive
payments in respect of the Series A Preferred Stock or Debenture is subject and
subordinated in right of payment to the payment in full and discharge of all
amounts (however denominated) then due and payable under the Senior Subordinated
Notes, and (b) until payment in full of all such amounts (however denominated)
under the Senior Subordinated Notes has been made in cash, no payment, whether
directly or indirectly, by exercise of any right of set off or otherwise in
respect of the Series A Preferred Stock or Debenture shall be made by the
Corporation, and no deposit in respect of the Series A Preferred Stock or
Debenture shall be made pursuant to the terms hereof. In the event that any
payment by, or distribution of the assets of, the Corporation of any kind or
character (whether in cash, property or securities, whether directly or
indirectly, by exercise of any right of set-off or otherwise and whether as a
result of a bankruptcy proceeding with respect to the Corporation or otherwise)
shall be received by a holder of Series A Preferred Stock at any time when such
payment is prohibited by this paragraph, such payment shall be held in trust for
the benefit of, and shall be paid over to, the holders of Senior Subordinated
Notes as their interests may appear. The preceding two sentences address the
relative rights of holders of Series A Preferred Stock or Debentures, on the one
hand, and the holders of Senior Subordinated Notes, on the other hand, and
nothing in this Certificate of Designations shall impair, as between the
Corporation and the holders of Series A Preferred Stock or Debentures, the
obligation of the Corporation, which is absolute and unconditional, to pay
amounts due in respect of the Series A Preferred Stock and Debentures in
accordance with their terms. This Section G shall not be construed to limit in
any manner the subordination provisions set forth in Section D of Article V
hereof.
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IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Corporation by its Chief Financial Officer and
attested by its Assistant Secretary, this [ ] day of [ ], 1999.
MAGELLAN HEALTH SERVICES, INC.
By:_______________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
[Corporate Seal]
ATTEST:
_____________________________
A-33
EXHIBIT B
CERTIFICATE OF DESIGNATIONS
OF
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
MAGELLAN HEALTH SERVICES, INC.
(PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW)
--------------
Magellan Health Services, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"CORPORATION"), hereby certifies that the following resolutions were adopted by
the Board of Directors of the Corporation (the "BOARD OF DIRECTORS") pursuant to
authority of the Board of Directors as required by Section 151 of the General
Corporation Law of the State of Delaware:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors in accordance with the provisions of the Restated
Certificate of Incorporation of the Corporation, as amended (the "CERTIFICATE OF
INCORPORATION"), the Board of Directors hereby creates a series of the
Corporation's previously authorized preferred stock, without par value (the
"PREFERRED STOCK"), and hereby states the designation and number thereof, and
fixes the voting powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions
thereof, as follows:
Series B Cumulative Convertible Preferred Stock:
I. DESIGNATION AND AMOUNT
The designation of this series of shares shall be "Series B
Cumulative Convertible Preferred Stock" (the "SERIES B PREFERRED STOCK"); the
stated value per share shall be $1,000 (the "STATED VALUE"); and the number of
shares constituting such series shall be [_________]. The number of shares of
the Series B Preferred Stock may be decreased from time to time by a resolution
or resolutions of the Board of Directors; PROVIDED, HOWEVER, that such number
shall not be decreased below the aggregate number of shares of the Series B
Preferred Stock then outstanding.
II. RANK
A. With respect to dividend rights, the Series B Preferred
Stock shall rank (i) junior to each other class or series of Preferred Stock
which by its terms ranks senior to the Series B Preferred Stock as to payment of
dividends, (ii) on a parity with each other class or series of Preferred Stock
which by its terms ranks on a parity with the Series B Preferred Stock as to
payment of dividends, including the Series A Cumulative Convertible Preferred
Stock, without par value (the "SERIES A PREFERRED STOCK"), of the Corporation
and (iii) prior to the
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Corporation's Common Stock, par value $0.25 per share (the "COMMON STOCK"), and,
except as specified above, all other classes and series of capital stock of the
Corporation hereafter issued by the Corporation. With respect to dividends, all
equity securities of the Corporation to which the Series B Preferred Stock ranks
senior, including the Common Stock, are collectively referred to herein as the
"JUNIOR DIVIDEND SECURITIES"; all equity securities of the Corporation with
which the Series B Preferred Stock ranks on a parity, including the Series A
Preferred Stock, are collectively referred to herein as the "PARITY DIVIDEND
SECURITIES"; and all equity securities of the Corporation (other than
convertible debt securities) to which the Series B Preferred Stock ranks junior,
with respect to dividends, are collectively referred to herein as the "SENIOR
DIVIDEND SECURITIES."
B. With respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the Series B Preferred Stock shall rank (i) junior to each other
class or series of Preferred Stock which by its terms ranks senior to the Series
B Preferred Stock as to distribution of assets upon liquidation, dissolution or
winding up, (ii) on a parity with each other class or series of Preferred Stock
which by its terms ranks on a parity with the Series B Preferred Stock as to
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, including the Series A Preferred Stock, and (iii) prior to the
Common Stock, and, except as specified above, all other classes and series of
capital stock of the Corporation hereinafter issued by the Corporation. With
respect to the distribution of assets upon liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, all equity securities
of the Corporation to which the Series B Preferred Stock ranks senior, including
the Common Stock, are collectively referred to herein as "JUNIOR LIQUIDATION
SECURITIES" (and together with the Junior Dividend Securities are referred to
herein as the "JUNIOR SECURITIES"); all equity securities of the Corporation
(other than convertible debt securities) to which the Series B Preferred Stock
ranks on parity, including the Series A Preferred Stock, are collectively
referred to herein as "PARITY LIQUIDATION SECURITIES" (and together with the
Parity Dividend Securities are referred to herein as the "PARITY SECURITIES");
and all equity securities of the Corporation to which the Series B Preferred
Stock ranks junior are collectively referred to herein as "SENIOR LIQUIDATION
SECURITIES" (and together with the Senior Dividend Securities are referred to
herein as the "SENIOR SECURITIES").
III. DIVIDENDS
A. DIVIDENDS. Shares of Series B Preferred Stock shall
accumulate dividends at a rate of 6.50% PER ANNUM; PROVIDED, that in the event
that the Shareholder Approval has not been obtained by the Corporation on or
prior to March 5, 2000, shares of Series B Preferred Stock shall accumulate
dividends at a rate of 12.00% PER ANNUM from and after March 5, 2000 through the
Approval Date. After the Approval Date, shares of Series B Preferred Stock shall
accumulate dividends at a rate of 6.50% PER ANNUM. Payment of dividends shall be
made in cash except as otherwise provided in this Article III. Dividends shall
be paid in four equal quarterly installments on the last day of March, June,
September and December of each year, or if any such date is not a Business Day,
on the Business Day next preceding such day (each such date, regardless of
whether any dividends have been paid or declared and set aside for payment on
such date, a "DIVIDEND PAYMENT DATE"), to holders of record (the "REGISTERED
HOLDERS") as they appear on the stock record books of the Corporation on the
fifteenth day prior to the relevant Dividend Payment Date; PROVIDED, HOWEVER,
that the Corporation may elect not to make any
B-2
dividend payment due hereunder on any Dividend Payment Date (other than as
required in connection with any redemption or repurchase of shares of Series B
Preferred Stock or any liquidation, dissolution or winding up of the
Corporation), and any such amount then due in respect of dividends shall
constitute an Arrearage (as defined below). Dividends shall be paid only when,
as and if declared by the Board of Directors out of funds at the time legally
available for the payment of dividends. Dividends shall begin to accumulate on
outstanding shares of Series B Preferred Stock from the date of issuance and
shall be deemed to accumulate from day to day whether or not earned or declared
until paid; PROVIDED that dividends shall be deemed to have accumulated on
shares of Series B Preferred Stock issued on the date of the original issuance
of the Series B Preferred Stock from and after the date of the original issuance
of the Series A Preferred Stock (such dividends, the "PRE-ISSUANCE DIVIDENDS"),
and when such shares of Series B Preferred Stock are issued by the Corporation
such dividends shall be considered obligations of the Corporation with respect
to such shares of Series B Preferred Stock identical in all respects to
dividends that accumulate from and after the issuance of such shares of Series B
Preferred Stock. Pre-Issuance Dividends shall be deemed to accrue at the
dividend rate that would have been in effect pursuant to this Section A had the
original issuance of the Series B Preferred Stock occurred at the time of the
original issuance of the Series A Preferred Stock. Dividends shall accumulate on
the basis of a 360-day year consisting of twelve 30-day months (four 90-day
quarters) and the actual number of days elapsed in the period for which payable.
Dividends payable at more than one annual rate for any dividend period or
partial dividend period shall be pro rated on the basis of the number of days in
such dividend period or partial dividend period, calculated as aforesaid, and
the actual number of days elapsed for which dividends are payable at each such
annual rate. Notwithstanding anything in the foregoing to the contrary, the
Dividend Payment Date with respect to any Pre-Issuance Dividend shall be deemed
to be the Dividend Payment Date that would have been applicable had the original
issuance of the Series B Preferred Stock occurred at the time of the original
issuance of the Series A Preferred Stock, and if such Dividend Payment Date is
before the date of the original issuance of the Series B Preferred Stock, the
Corporation shall be deemed to have elected not to pay such dividend in
accordance with the proviso to the fourth sentence of this Section A.
B. ACCUMULATION. Dividends on the Series B Preferred Stock
shall be cumulative, and from and after any Dividend Payment Date on which any
dividend that has accumulated or been deemed to have accumulated through such
date has not been paid in full or any payment date set for a redemption or
repurchase on which such redemption or repurchase payment has not been paid in
full, additional dividends shall accumulate in respect of the amount of such
unpaid dividends or unpaid redemption or repurchase payment (such amount, the
"ARREARAGE") at the annual rate then in effect as provided in Section A of this
Article III (or such lesser rate as may be the maximum rate that is then
permitted by applicable law). Such additional dividends in respect of any
Arrearage shall be deemed to accumulate from day to day whether or not earned or
declared until the Arrearage is paid, shall be calculated as of such successive
Dividend Payment Date and shall constitute an additional Arrearage from and
after any Dividend Payment Date to the extent not paid on such Dividend Payment
Date. References in any Article herein to dividends that have accumulated or
that have been deemed to have accumulated with respect to the Series B Preferred
Stock shall include the amount, if any, of any Arrearage together with any
dividends accumulated or deemed to have accumulated on such Arrearage pursuant
to the immediately preceding two sentences. Additional dividends in respect of
any Arrearage may be declared and paid at any time, in whole or in part, without
reference to
B-3
any regular Dividend Payment Date, to Registered Holders as they appear on the
stock record books of the Corporation on such record date as may be fixed by the
Board of Directors (which record date shall be no less than 10 days prior to the
corresponding payment date).
C. PAYMENT IN COMMON STOCK. Notwithstanding the provisions of
Section A of this Article III, (i) any dividend payment (such payment, a
"NON-ARREARAGE PAYMENT") made in full on the first Dividend Payment Date on
which such payment is due (without taking into account the proviso to the fourth
sentence of Section A of this Article III but taking into account the last
sentence of Section A of this Article III in determining the first Dividend
Payment Date on which such payment is due) and (ii) any payment (such payment,
an "ARREARAGE PAYMENT") made at any time prior to the second anniversary of the
original issuance of the Series A Preferred Stock in respect of any Arrearage,
may be made in the form of shares of Common Stock; PROVIDED that:
(i) the Common Stock is then validly listed for trading on the
NYSE or other national securities exchange or quoted on a nationally
recognized quotation system;
(ii) such shares of Common Stock have been duly authorized and
when issued in connection with such payment, will be validly issued,
fully paid and non-assessable;
(iii) the issuance of such shares of Common Stock in
satisfaction of such payment does not: (a) violate any provision of the
Certificate of Incorporation or the Bylaws; (b) give rise to any
preemptive rights, rights of first refusal or other similar rights on
behalf of any Person under any applicable Law or any provision of the
Certificate of Incorporation or the Bylaws or any agreement or
instrument applicable to the Corporation or any of its Subsidiaries;
(c) conflict with, contravene or result in a breach or violation of any
of the terms or provisions of, or constitute a default (with or without
notice or the passage of time) under, or result in or give rise to a
right of termination, cancellation, acceleration or modification of any
right or obligation under, or give rise to a right to put or to compel
a tender offer for outstanding securities of the Corporation or any of
its Subsidiaries under, or require any consent, waiver or approval
under, any note, bond, debt instrument, indenture, mortgage, deed of
trust, lease, loan agreement, joint venture agreement, Regulatory
Approval, contract or any other agreement, instrument or obligation to
which the Corporation or any of its Subsidiaries is a party or by which
the Corporation or any of its Subsidiaries or any property of the
Corporation or any of its Subsidiaries is bound (assuming for the
purpose of this clause (c) that all conditions precedent to the
conversion of Series B Preferred Stock have been satisfied and that all
outstanding shares of the Series B Preferred Stock have been converted
into Common Stock); (d) result in the creation or imposition of any
Lien upon any assets or properties of the Corporation or any of its
Subsidiaries; or (e) violate any Law applicable to the Corporation or
any of its Subsidiaries;
(iv) (a) no default or event of default, or event that with
notice or the passage of time would constitute a default or event of
default, has occurred and is continuing (or will occur as a result of
the issuance of shares of Common Stock in satisfaction of such
payment), under any contract, agreement, indenture, mortgage, note,
lease or other instrument evidencing Indebtedness of the Corporation or
any of its Subsidiaries (other
B-4
than inter-company Indebtedness between the Corporation and any of its
Subsidiaries or between Subsidiaries of the Corporation) the
outstanding principal amount of which is in excess of $10,000,000 and
as a result of such default, event of default or event the holders
thereof have accelerated or have the right to accelerate (or would have
the right to accelerate with notice or the passage of time) the
maturity thereof, and (b) the Corporation has not been notified that a
breach of the Investment Agreement or the terms of the Series A
Preferred Stock or Series B Preferred Stock has occurred and is
continuing;
(v) (a) with respect to any Non-Arrearage Payment, the
Trailing Average Value (as defined below) is equal to or greater than
the product of (A) 0.40, multiplied by (B) the Conversion Price, and
(b) with respect to any Arrearage Payment, the Trailing Average Value
(as defined below) is equal to or greater than the product of (A) 0.60,
multiplied by (B) the Conversion Price;
(vi) (a) with respect to any Non-Arrearage Payment, the
average daily trading volume in the Common Stock during the period used
to calculate the Trailing Average Value is at least 50% of the average
daily trading volume in the Common Stock for the 180-day period ending
on the date of the Investment Agreement, and (b) with respect to any
Arrearage Payment, the average daily trading volume in the Common Stock
during the period used to calculate the Trailing Average Value is at
least 67% of the average daily trading volume in the Common Stock for
the 180-day period ending on the date of the Investment Agreement;
(vii) the issuance of such shares of Common Stock in
satisfaction of such payment does not require the approval or
affirmative vote of the holders of any class or series of the
Corporation's Equity Securities; and
(viii) as of the relevant Dividend Payment Date, the Shelf
Registration Statement (as such term is defined in the Registration
Rights Agreement) is effective under the Securities Act and is
available for use in connection with the offer and sale of such shares
of Common Stock by those holders of Series B Preferred Stock that have
such right under the Registration Rights Agreement (it being understood
that if a Shelf Suspension (as such term is defined in the Registration
Rights Agreement) is in effect, the Shelf Registration Statement shall
not be deemed effective or available for use); PROVIDED, HOWEVER, that
in the case of any Non-Arrearage Payment (and only in the case of a
Non-Arrearage Payment), this clause (viii) shall not prohibit the
issuance of shares of Common Stock in satisfaction of such payment if
the Shelf Registration Statement is not effective or not available for
use in accordance with Section 2.1(c) of the Registration Rights
Agreement.
For the purpose of this Section C, the value of a share of Common Stock used to
pay dividends on the Series B Preferred Stock shall equal (the "TRAILING AVERAGE
VALUE") the average of the Closing Prices per share of Common Stock for the
twenty consecutive Trading Days ending on the second Trading Day prior to the
relevant Dividend Payment Date; PROVIDED, HOWEVER, that in the event that an
adjustment to the Conversion Price takes effect pursuant to Section B of Article
IX hereof during the period used to compute
B-5
such average for all Trading Days ended prior to the time such adjustment
takes effect shall be similarly adjusted. Except as otherwise expressly
provided in this Section C, Common Stock may not be used to make any payment
in respect of any Arrearage.
D. METHOD OF PAYMENT. Dividends paid on the shares of Series B
Preferred Stock in an amount less than the total amount of such dividends at the
time accumulated and payable on all outstanding shares of Series B Preferred
Stock shall be allocated pro rata on a share-by-share basis among all such
shares then outstanding. Notwithstanding the provisions of Section C of this
Article III, any such partial payment shall be made in cash. Dividends that are
declared and paid in an amount less than the full amount of dividends
accumulated on the Series B Preferred Stock (and on any Arrearage) shall be
applied first to the earliest dividend which has not theretofore been paid. All
cash payments of dividends on the shares of Series B Preferred Stock shall be
made in such coin or currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
IV. LIQUIDATION PREFERENCE
In the event of a liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of
then-outstanding shares of Series B Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets are capital or surplus
of any nature, an amount per share equal to the sum of (i) the dividends, if
any, accumulated or deemed to have accumulated thereon to the date of final
distribution to such holders, whether or not such dividends are declared, and
(ii) the Stated Value thereof, and no more, before any payment shall be made or
any assets distributed to the holders of any Junior Liquidation Securities.
After any such payment in full, the holders of Series B Preferred Stock shall
not, as such, be entitled to any further participation in any distribution of
assets of the Corporation. All the assets of the Corporation available for
distribution to stockholders after the liquidation preferences of any Senior
Liquidation Securities shall be distributed ratably (in proportion to the full
distributable amounts to which holders of Series B Preferred Stock and Parity
Liquidation Securities, if any, are respectively entitled upon such dissolution,
liquidation or winding up) among the holders of the then-outstanding shares of
Series B Preferred Stock and Parity Liquidation Securities, if any, when such
assets are not sufficient to pay in full the aggregate amounts payable thereon.
Neither a consolidation or merger of the Corporation with or
into any other Person or Persons, nor a sale, conveyance, lease, exchange or
transfer of all or part of the Corporation's assets for cash, securities or
other property to a Person or Persons shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this Article IV,
but the holders of shares of Series B Preferred Stock shall nevertheless be
entitled from and after any such consolidation, merger or sale, conveyance,
lease, exchange or transfer of all or part of the Corporation's assets to the
rights provided by this Article IV following any such transaction. Notice of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when, and the place or places
where, the amounts distributable to each holder of shares of Series B Preferred
Stock in such circumstances shall be payable, shall be given by first-class
mail, postage prepaid, mailed not less than 45 days prior to any payment date
stated therein, to holders of record as they appear on the stock record books of
the Corporation as of the date such notices are first mailed.
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V. MANDATORY CONVERSION, REDEMPTION AND REPURCHASE
A. MANDATORY CONVERSION. (a) If the 180-Day Average Price and
the related Two-Week Average Price for any 180-Day Reference Period (which
Reference Period shall have ended no earlier than the first anniversary of the
original issuance of the Series A Preferred Stock and no later than the second
anniversary of the original issuance of the Series A Preferred Stock), both
exceed 200% of the Conversion Price, then the Corporation shall have the right,
at its option and election, to exchange the Series B Preferred Stock, in whole
and not in part, for shares of Common Stock, as if such shares of Series B
Preferred Stock had been converted by the holders thereof pursuant to Article IX
hereof on the date of such exchange.
(b) If the 45-Trading Day Average Price and the related
Two-Week Average Price for any 45-Trading Day Reference Period (which Reference
Period shall have ended no earlier than the second anniversary of the original
issuance of the Series A Preferred Stock), both exceed 200% of the Conversion
Price, then the Corporation shall have the right, at its option and election, to
exchange the Series B Preferred Stock, in whole and not in part, for shares of
Common Stock, as if such shares of Series B Preferred Stock had been converted
by the holders thereof pursuant to Article IX hereof on the date of such
exchange.
(c) Notwithstanding anything in this Section A to the
contrary, the Corporation shall not have the right to exchange the Series B
Preferred Stock for Common Stock pursuant to this Section A unless (i) the
Common Stock shall have been validly listed for trading on the NYSE or other
national securities exchange or quoted on a nationally recognized quotation
system on each day in the relevant Reference Period and as of the date of such
exchange, (ii) the average daily trading volume in the Common Stock during the
relevant Reference Period and during the two-week calendar period ending on the
last day of the relevant Reference Period is at least 50% of the average daily
trading volume in the Common Stock for the 180-day period ending on the date of
the Investment Agreement, (iii) the Corporation shall have obtained the
Shareholder Approval, (iv) as of the date of such exchange, the Shelf
Registration Statement (as such term is defined in the Registration Rights
Agreement) is effective under the Securities Act and is available for use in
connection with the offer and sale of such shares of Common Stock by those
holders that have such right under the Registration Rights Agreement (it being
understood that if a Shelf Suspension (as such term is defined in the
Registration Rights Agreement) is in effect, the Shelf Registration Statement
shall not be deemed effective or available for use), and (v) the Corporation
simultaneously exchanges the Series A Preferred Stock pursuant to subsection (a)
or (b) of Section A of Article V of the Certificate of Designations for the
Series A Preferred Stock. The Corporation may not effect any such exchange if
such exchange would: (a) violate any provision of the certificate of
incorporation or the bylaws of the Corporation; (b) conflict with, contravene or
result in a breach or violation of any of the terms or provisions of, or
constitute a default (with or without notice or the passage of time) under, or
result in or give rise to a right of termination, cancellation, acceleration or
modification of any right or obligation under, or give rise to a right to put or
to compel a tender offer for outstanding securities of the Corporation or any of
its Subsidiaries under, or require any consent, waiver or approval under, any
note, bond, debt instrument, indenture, mortgage, deed of trust, lease, loan
agreement, joint venture agreement, Regulatory Approval, contract or any other
agreement, instrument or obligation to which the Corporation or any of its
Subsidiaries is a party or by which the Corporation or any of its Subsidiaries
or any property of the Corporation or any of its
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Subsidiaries is bound; (c) result in the creation or imposition of any Lien
upon any assets or properties of the Corporation or any of its Subsidiaries;
or (d) violate any Law applicable to the Corporation or any of its
Subsidiaries.
(d) Notice of an exchange of shares of Series B Preferred
Stock pursuant to this Section A (a "NOTICE OF EXCHANGE") shall be sent to the
holders of record of the shares of Series B Preferred Stock by first class mail,
postage prepaid, at each such holder's address as it appears on the stock record
books of the Corporation, not more than 45 nor fewer than 15 days prior to the
last day of the relevant Reference Period. The Notice of Exchange shall set
forth the date fixed for the exchange (the "EXCHANGE DATE") and shall set forth
in reasonable detail the calculations and supporting data used by the
Corporation in its determination that it had the right to effect such exchange.
From and after the Exchange Date, all dividends on shares of Series B Preferred
Stock shall cease to accumulate and all rights of the holders thereof as holders
of Series B Preferred Stock shall cease and terminate, except if the Corporation
shall default in its obligation to deliver shares of Common Stock and cash in
lieu of fractional shares to holders on the Exchange Date, in which case all
such rights shall continue unless and until such shares are exchanged (or
redeemed, repurchased or converted) in accordance with the terms hereof. Prior
to the Exchange Date, each holder shall provide a written notice to the
Corporation specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. If no such
notice is delivered, such shares of Common Stock and cash in lieu of fractional
shares, if any, shall be delivered to such holder. In case such notice shall
specify a name or names other than that of such holder, such notice shall be
accompanied by payment of all transfer taxes payable upon the issuance of shares
of Common Stock in such name or names. Other than such taxes, the Corporation
will pay any and all issue and other taxes (other than taxes based on income)
that may be payable in respect of any issue or delivery of shares of Common
Stock on exchange of Series B Preferred Stock pursuant to this Section A. On or
after the Exchange Date, each holder of shares of Series B Preferred Stock shall
surrender the certificate evidencing shares of Series B Preferred Stock to the
Corporation at the place designated in the Notice of Exchange. As promptly as
practical, and in any event within three Business Days after the Exchange Date,
the Corporation shall deliver or cause to be delivered as directed by the holder
of shares of Series B Preferred Stock being exchanged (i) certificates
representing the number of validly issued, fully paid and nonassessable full
shares of Common Stock to which such holder shall be entitled and (ii) cash in
lieu of fractional shares, if any, to which such holder shall be entitled.
Except as otherwise specified in this Article V, for the purposes hereof, such
exchange shall be deemed a conversion effected pursuant to Article IX and the
terms and procedures set forth in Article IX shall apply. For such purpose, the
applicable Conversion Date shall be the Exchange Date.
(e) In the event the Corporation delivers a Notice of
Exchange, the Corporation shall be obligated to effect the exchange described
therein, PROVIDED that each of the conditions to such exchange set forth in
subsections (a), (b) and (c) above is (i) satisfied or (ii) waived by the
holders of a majority of the shares of Series B Preferred Stock then
outstanding.
(f) Notwithstanding anything to the contrary in the
Registration Rights Agreement, in the event the Corporation effects an exchange
pursuant to this Section A, the Corporation shall not exercise its right to
declare a Shelf Suspension (as such term is defined in the Registration Rights
Agreement) pursuant to Section 2.1(c) of the Registration Rights
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Agreement during the period beginning on the Exchange Date and ending 90 days
after the Exchange Date.
B. MANDATORY REDEMPTION. The Corporation shall not have any
right to redeem any shares of Series B Preferred Stock prior to the Mandatory
Redemption Date (as defined below). On the tenth anniversary of the original
issuance of the Series A Preferred Stock (the "MANDATORY REDEMPTION DATE"), the
Corporation shall redeem (the "MANDATORY REDEMPTION") all outstanding shares of
Series B Preferred Stock by paying the redemption price therefor in cash out of
funds legally available for such purpose. The redemption price for each share of
Series B Preferred Stock shall equal the sum of (i) the amount, if any, of all
unpaid dividends accumulated thereon to the date of actual payment of the
Redemption Price, whether or not such dividends have been declared, and (ii) the
Stated Value thereof ("REDEMPTION PRICE").
C. NOTICE AND REDEMPTION PROCEDURES. Notice of the redemption
of shares of Series B Preferred Stock pursuant to Section B of this Article V (a
"NOTICE OF REDEMPTION") shall be sent to the holders of record of the shares of
Series B Preferred Stock to be redeemed by first class mail, postage prepaid, at
each such holder's address as it appears on the stock record books of the
Corporation, not more than 100 nor fewer than 60 days prior to the date fixed
for redemption, which date shall be set forth in such notice (the "REDEMPTION
Date"); PROVIDED, HOWEVER, that failure to give such Notice of Redemption to any
holder, or any defect in such Notice of Redemption to any holder shall not
affect the validity of the proceedings for the redemption of any shares of
Series B Preferred Stock held by any other holder. In order to facilitate the
redemption of shares of Series B Preferred Stock, the Board of Directors may fix
a record date for the determination of the holders of shares of Series B
Preferred Stock to be redeemed, in each case, not more than 10 days prior to the
date the Notice of Redemption is mailed. On or after the Redemption Date, except
with respect to shares of Series B Preferred Stock for which the Conversion Date
has occurred on or prior to such Redemption Date, each holder of the shares
called for redemption shall surrender the certificate evidencing such shares to
the Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the Redemption Price. From and after the
Redemption Date, all dividends on shares of Series B Preferred Stock shall cease
to accumulate and all rights of the holders thereof as holders of Series B
Preferred Stock shall cease and terminate, except if the Corporation shall
default in payment of the Redemption Price on the Redemption Date in which case
all such rights shall continue unless and until such shares are redeemed and
such price is paid in accordance with the terms hereof.
D. CHANGE OF CONTROL. In the event there occurs a Change of
Control, any holder of record of shares of Series B Preferred Stock, in
accordance with the procedures set forth in Section E of this Article V, may
require the Corporation to redeem any or all of the shares of Series B Preferred
Stock held by such holder in an amount per share equal to the sum of (i) the
amount, if any, of all unpaid dividends accumulated thereon to the date of
actual payment thereof, whether or not such dividends have been declared, and
(ii) 101% of Stated Value (the "CHANGE OF CONTROL PRICE"). By accepting a share
of Series B Preferred Stock the holder thereof shall be deemed to have
acknowledged and agreed that (a) such holder's right, to receive payment of the
Change in Control Price is subject and subordinated in right of payment to the
payment in full and discharge of all amounts of principal, interest and fees
(however denominated) then outstanding under the Credit Agreement and the Senior
Subordinated Notes
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and (b) until payment in full of all such amounts (however denominated) under
the Credit Agreement and the Senior Subordinated Notes has been made in cash,
no payment, whether directly or indirectly, by exercise of any right of set
off or otherwise in respect of the Change of Control Price shall be made by
the Corporation, and, notwithstanding anything to the contrary in Section F
of this Article V, no deposit in respect of the Change of Control Price shall
be made pursuant to Section F of this Article V. In the event that any
payment by, or distribution of the assets of, the Corporation of any kind or
character (whether in cash, property or securities, whether directly or
indirectly, by exercise of any right of set-off or otherwise and whether as a
result of a bankruptcy proceeding with respect to the Corporation or
otherwise) shall be received by a holder of Series B Preferred Stock at any
time when such payment is prohibited by this paragraph, such payment shall be
held in trust for the benefit of, and shall be paid over to, the lenders
under the Credit Agreement or the holders of Senior Subordinated Notes, as
the case may be, as their interests may appear. The preceding two sentences
address the relative rights of holders of Series B Preferred Stock or
Debentures, on the one hand, and the lenders under the Credit Agreement or
the holders of Senior Subordinated Notes, as the case may be, on the other
hand, and nothing in this Certificate of Designations shall impair, as
between the Corporation and the holders of Series B Preferred Stock or
Debentures, the obligation of the Corporation, which is absolute and
unconditional, to pay amounts due in respect of the Series B Preferred Stock
and Debentures in accordance with their terms. Upon a Change of Control, the
Corporation shall pay all amounts outstanding under the Credit Agreement and
the Indenture to the extent necessary in order to permit the payment of the
Change of Control Price hereunder.
E. CHANGE OF CONTROL NOTICE AND REDEMPTION PROCEDURES. Notice
of any Change of Control shall be sent to the holders of record of the
outstanding shares of Series B Preferred Stock not more than five days following
a Change of Control, which notice (a "CHANGE OF CONTROL NOTICE") shall describe
the transaction or transactions constituting such Change of Control and set
forth each holder's right to require the Corporation to redeem any or all shares
of Series B Preferred Stock held by him or her out of funds legally available
therefor, the redemption date, which date shall be not less than 30 nor more
than 45 days from the date of such Change of Control Notice, (the "CHANGE OF
CONTROL REDEMPTION DATE") and the procedures to be followed by such holders in
exercising his or her right to cause such redemption; PROVIDED, HOWEVER, that if
shares of Series B Preferred Stock are owned by more than 50 holders or groups
of Affiliated holders and if the Series B Preferred Stock is listed on any
national securities exchange or quoted on any national quotation system, the
Corporation shall give such Change of Control Notice by publication in a
newspaper of general circulation in the Borough of Manhattan, The City of New
York, within 30 days following such Change of Control and, in any case, a
similar notice shall be mailed concurrently to each holder of shares of Series B
Preferred Stock. Failure by the Corporation to give the Change of Control Notice
as prescribed by the preceding sentence, or the formal insufficiency of any such
Change of Control Notice, shall not prejudice the rights of any holder of shares
of Series B Preferred Stock to cause the Corporation to redeem any such shares
held by him or her. In the event a holder of shares of Series B Preferred Stock
shall elect to require the Corporation to redeem any or all such shares of
Series B Preferred Stock pursuant to Section D hereof, such holder shall
deliver, prior to the Change of Control Redemption Date as set forth in the
Change of Control Notice, or, if the Change of Control Notice is not given as
required by this Section E, at any time following the last day the Corporation
was required to give the Change of Control Notice in accordance with this
Section E (in which case the Change of Control Redemption Date shall be the date
which is the later of (x)
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45 days following the last day the Corporation was required to give the Change
of Control Notice in accordance with this Section E and (y) 30 days following
the delivery of such election by such holder), a written notice, in the form
specified by the Corporation (if the Corporation did in fact give the notice
required by this Section E), to the Corporation so stating, and specifying the
number of shares to be redeemed pursuant to Section D of this Article V;
PROVIDED, HOWEVER, that if all of the shares of the Series B Preferred Stock are
owned by 50 or fewer holders or groups of affiliated holders, such holders or
groups may deliver a notice or an election to redeem at any time within 90 days
following the occurrence of a Change of Control without awaiting receipt of a
Change of Control Notice or the expiration of the time allowed for the delivery
of a Change of Control Notice hereunder. The Corporation shall redeem the number
of shares so specified on the Change of Control Redemption Date fixed by the
Corporation or as provided in the preceding sentence. The Corporation shall
comply with the requirements of Rules 13e-4 and 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the shares of
Series B Preferred Stock as a result of a Change of Control. From and after the
time the Change of Control Redemption Price is paid in accordance with the terms
hereof with respect to any share of Series B Preferred Stock, all dividends on
such share of Series B Preferred Stock shall cease to accumulate and all rights
of the holder thereof as a holder of Series B Preferred Stock shall cease and
terminate.
F. DEPOSIT OF FUNDS. The Corporation shall, no later than
11:00 a.m., New York City time, on any Redemption Date or Change of Control
Redemption Date pursuant to this Article V, deposit with its transfer agent or
other redemption agent in the Borough of Manhattan, The City of New York having
a capital and surplus of at least $500,000,000, as a trust fund for the benefit
of the holders of the shares of Series B Preferred Stock to be redeemed, cash
that is sufficient in amount to redeem the shares to be redeemed in accordance
with the Notice of Redemption or Change of Control Notice, with irrevocable
instructions and authority to such transfer agent or other redemption agent to
pay to the respective holders of such shares, as evidenced by a list of such
holders certified by an officer of the Corporation, the Redemption Price or
Change of Control Redemption Price, as the case may be, upon surrender of their
respective share certificates. Such deposit shall be deemed to constitute full
payment of such shares to the holders, and from and after the date of such
deposit, all rights of the holders of the shares of Series B Preferred Stock
that are to be redeemed as stockholders of the Corporation with respect to such
shares, except the right to receive the Redemption Price upon the surrender of
their respective certificates and all rights under Articles IX and XI hereof,
shall cease and terminate. In case holders of any shares of Series B Preferred
Stock called for redemption shall not, within two years after such deposit,
claim the cash deposited for redemption thereof, such transfer agent or other
redemption agent shall, upon demand, pay over to the Corporation the balance so
deposited. Thereupon, such transfer agent or other redemption agent shall be
relieved of all responsibility to the holders thereof and the sole right of such
holders, with respect to shares to be redeemed, shall be to receive the
Redemption Price as general creditors of the Corporation. Any interest accrued
on any funds so deposited shall belong to the Corporation, and shall be paid to
it from time to time on demand.
G. CERTAIN REPURCHASES. (a) If, at any time after March 5,
2002, one or more members of the Investor Group (collectively, the "SELLING
INVESTORS") sell shares of Series A Preferred Stock and/or Common Shares, in a
transaction or series of related transactions (such
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sale, an "INVESTOR SALE"), to any Person other than a member of the Investor
Group, the Corporation shall, if the Selling Investors so elect, repurchase (a
"CORPORATION REPURCHASE") from the Selling Investors, for cash, shares of Series
B Preferred Stock representing a number of Conversion Shares equal to the Sale
Number less the number of Make-Whole Conversion Shares with respect to such
Investor Sale. The price paid by the Corporation in any Corporation Repurchase
shall equal the Investor Sale Price per Conversion Share represented by the
securities purchased in such Corporation Repurchase. Subject to subsection (b)
of this Section G, in the event that the Selling Investors include shares of
Series B Preferred Stock in an Investor Sale, the Corporation shall pay the
Selling Investors, with respect to the Make-Whole Conversion Shares, an amount
per Make-Whole Conversion Share equal to the Investor Sale Price less the amount
per Make-Whole Conversion Share paid in such Investor Sale (such payment, the
"MAKE-WHOLE PAYMENT"). Notwithstanding the foregoing, the Corporation shall have
no obligation to effect a Corporation Repurchase or make a Make-Whole Payment
unless the Selling Investors afford the Corporation a reasonable opportunity to
include in the Investor Sale up to that number of shares of Common Stock that
would be sufficient to permit the Corporation to satisfy its obligations
pursuant to this Section G, and the Corporation shall have no obligation to
effect a Corporation Repurchase or make a Make-Whole Payment with respect to any
Investor Sale that is consummated after the Approval Date. Each Corporation
Repurchase and Make-Whole Payment shall be completed by the Corporation within
15 days of the consummation of the related Investor Sale.
(b) Prior to any sale by the Selling Investors of any shares
of Series B Preferred Stock in an Investor Sale, the Selling Investors shall
give written notice to the Corporation of the Selling Investors' desire to sell
such shares, which notice shall identify the number of such shares the Selling
Investors desire to sell (such notice, a "SERIES B SALE NOTICE"). The Series B
Sale Notice shall be given at least 10 Business Days prior to the consummation
of the related Investor Sale. The Selling Investors shall not include such
shares in such Investor Sale if, within 5 Business Days of the delivery of the
Series B Sale Notice, the Corporation delivers a written notice to the Selling
Investors to the effect that it will effect a Corporation Repurchase with
respect to such shares following the completion of such Investor Sale.
(c) Prior to the Approval Date, the Corporation shall not
effect any direct or indirect redemption or repurchase of Common Stock unless it
has complied with the procedures set forth in this subsection (c). In the event
the Corporation intends to effect any direct or indirect redemption or
repurchase of Common Stock, the Corporation shall first offer (a "REPURCHASE
OFFER") to repurchase shares of Series B Preferred Stock and Junior Preferred
Stock at the Repurchase Price (as defined below) per Conversion Share
represented by the shares of Series B Preferred Stock and Junior Preferred Stock
to be repurchased. The Corporation shall give written notice (a "PROPOSED
REPURCHASE NOTICE") of such offer to each holder of Series B Preferred Stock and
each holder of Junior Preferred Stock which notice shall specify (i) the
aggregate number (the "REPURCHASE NUMBER") of Conversion Shares represented by
shares of Series B Preferred Stock and Junior Preferred Stock that the
Corporation is willing to repurchase, and (ii) the proposed repurchase price for
each such Conversion Share (the "REPURCHASE PRICE"). The date on which such
Proposed Repurchase Notice is given is referred to herein as the "NOTICE DATE."
To accept a Repurchase Offer a holder must, within 20 days of the Notice Date,
notify the Corporation in writing of its acceptance of the Repurchase Offer and
the number of shares of Series B Preferred Stock and number of shares of Junior
Preferred Stock it wishes to have
B-12
repurchased by the Corporation. If a holder does not provide such notice to the
Corporation within such 20-day period, then such holder shall be deemed to have
rejected the Repurchase Offer. Within 5 days following the end of such 20-day
period, the Corporation shall repurchase the securities specified by each
accepting holder at the Repurchase Price per Conversion Share represented by
such securities. The date on which such repurchases are effected is referred to
herein as the "REPURCHASE DATE." If the aggregate number of Conversion Shares
represented by the shares of Series B Preferred Stock and Junior Preferred Stock
with respect to which holders have accepted the Repurchase Offer exceeds the
Repurchase Number, the Corporation shall repurchase such securities on a pro
rata basis based on the number of Conversion Shares with respect to which each
such holder accepted the Repurchase Offer. During the period commencing on the
Repurchase Date and ending on the 120th day after the Notice Date, the
Corporation may repurchase and redeem, at a price not in excess of the
Repurchase Price per share, up to an aggregate number of shares of its Common
Stock equal to the Repurchase Number less the number of Conversion Shares
represented by the shares of Series B Preferred Stock and Junior Preferred Stock
repurchased pursuant to the Repurchase Offer. After such 120th day, in order to
directly or indirectly repurchase or redeem shares of Common Stock, the
Corporation must again comply with the procedures set forth in this subsection
(c). Notwithstanding the foregoing, this paragraph shall not prohibit (i)
purchases of Equity Securities of the Corporation or any of its Subsidiaries
from executives and other management-level employees of the Corporation or any
of its Subsidiaries in connection with customary employment and severance
arrangements, or (ii) the acquisition, repurchase, exchange, conversion,
redemption or other retirement for value by the Corporation of any Junior
Dividend Securities by the Corporation in accordance with obligations in
existence at the time of original issuance of the Series A Preferred Stock.
(d) Until the Shareholder Approval is obtained, the
Corporation shall not (A) utilize amounts available under Section 6.06(a)(ii) of
the Credit Agreement (or any comparable provision of any Credit Agreement) for
any purpose except to effect repurchases or make payments in respect of the
Series B Preferred Stock as required pursuant to this Section G or to make
payments with respect to the Series A Preferred Stock, or (B) amend the Credit
Agreement in any manner so as to reduce the amounts available to effect
repurchases or make payments in respect of the Series B Preferred Stock as
required pursuant to this Section G under Section 6.06(a)(ii) of the Credit
Agreement (or any comparable provision of any Credit Agreement). Notwithstanding
the foregoing, this paragraph shall not prohibit (i) the acquisition,
repurchase, exchange, conversion, redemption or other retirement for value of
shares of Series B Preferred Stock or any Parity Dividend Security by the
Corporation in accordance with the terms of such securities, (ii) purchases of
Equity Securities of the Corporation or any of its Subsidiaries from executives
and other management-level employees of the Corporation or any of its
Subsidiaries in connection with customary employment and severance arrangements,
or (iii) the acquisition, repurchase, exchange, conversion, redemption or other
retirement for value by the Corporation of any Junior Dividend Securities by the
Corporation in accordance with obligations in existence at the time of original
issuance of the Series A Preferred Stock.
(e) If a Make-Whole Payment would result in an event of
default under the Credit Agreement or the Indenture, the Corporation shall not
be obligated to make such Make-Whole Payment until such time as the Make-Whole
Payment would not result in an event of default under the Credit Agreement or
the Indenture, as the case may be; PROVIDED that if the Make-Whole
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Payment would not result in such an event of default if made from the proceeds
of the sale of Equity Securities of the Corporation, the Corporation shall use
commercially reasonable efforts to effect a sale of Equity Securities to permit
it to make the Make-Whole Payment and avoid such an event of default. In the
event (i) the Corporation defaults with respect to its obligation to make a
Make-Whole Payment or (ii) a Make-Whole Payment is delayed pursuant to the
preceding sentence, a late-payment charge shall accrue with respect to the
Make-Whole Payment at a per annum rate equal to the dividend rate then in effect
pursuant to Section A of Article III hereof from (A) the time of such default in
the case of clause (i) above or (B) from the time such Make-Whole Payment would
have been due except for the operation of the preceding sentence in the case of
clause (ii) above, and shall accrue until such amount and such charge is paid.
VI. EXCHANGE OF SERIES B PREFERRED STOCK FOR DEBENTURES
A. The Series B Preferred Stock shall be exchangeable, at any
time, at the option of the Corporation and to the extent permitted by applicable
law and the terms of the instruments governing the Corporation's
then-outstanding Indebtedness, in whole but not in part, on any Dividend Payment
Date for unsecured Junior Subordinated Convertible Debentures (issued pursuant
to an indenture (the "SERIES B INDENTURE") prepared in accordance with the
Investment Agreement), in principal amount of $1,000 per share of Series B
Preferred Stock (a "DEBENTURE" and, collectively, the "DEBENTURES"), in
accordance with this Article VI:
(i) Each share of Series B Preferred Stock shall be
exchangeable at the offices of the Corporation and at such other place
or places, if any, as the Board of Directors may designate. Except with
the prior written consent of the holders of all outstanding shares of
Series B Preferred Stock, the Corporation may not exchange any shares
of Series B Preferred Stock if (a) full cumulative dividends through
the date of exchange, have not been paid, accrued or set aside for
payment on all outstanding shares of the Series B Preferred Stock, (b)
the Corporation has failed to amend its Certificate of Incorporation in
accordance with Delaware law to confer the power to vote upon holders
of the Debentures as shall be contemplated by the Series B Indenture or
(c) such exchange could result in any adverse tax consequence to any
such holder.
(ii) Prior to giving notice of its intention to exchange, the
Corporation shall execute and deliver to a bank or trust company and,
if required by applicable law, qualify under the Trust Indenture Act of
1939, as amended, the Series B Indenture.
(iii) The Corporation shall mail written notice of its
intention to exchange Series B Preferred Stock for Debentures (the
"EXCHANGE NOTICE") to each holder of record of shares of Series B
Preferred Stock not less than 60 nor more than 100 days prior to the
date fixed for exchange. The Exchange Notice shall notify holders of
their right to deliver an Objection Notice (as defined below) pursuant
to Section B of this Article VI.
(iv) Prior to effecting any exchange provided above, the
Corporation shall deliver to each holder of shares of Series B
Preferred Stock an opinion of nationally recognized legal counsel to
the effect that: (a) each of the Series B Indenture and the Debentures
have been duly authorized and executed by the Corporation and, when
delivered by the
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Corporation in exchange for shares of Series B Preferred Stock, will
constitute valid and legally binding obligations of the Corporation
enforceable against the Corporation in accordance with their terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principles of equity; (b)
the exchange of the Debentures for the shares of Series B Preferred
Stock will not violate the provisions of this Article VI or of the
Delaware General Corporation Law, including Section 221 thereof; and
(c) the exchange of the Debentures for the shares of Series B Preferred
Stock is exempt from the registration requirements of the Securities
Act or that the exchange of such Debentures has been duly registered
under the Securities Act.
(v) The Corporation may not effect any exchange provided above
if such exchange would: (a) violate any provision of the certificate of
incorporation or the bylaws of the Corporation; (b) conflict with,
contravene or result in a breach or violation of any of the terms or
provisions of, or constitute a default (with or without notice or the
passage of time) under, or result in or give rise to a right of
termination, cancellation, acceleration or modification of any right or
obligation under, or give rise to a right to put or to compel a tender
offer for outstanding securities of the Corporation or any of its
Subsidiaries under, or require any consent, waiver or approval that has
not been obtained or granted under, any note, bond, debt instrument,
indenture, mortgage, deed of trust, lease, loan agreement, joint
venture agreement, Regulatory Approval, contract or any other
agreement, instrument or obligation to which the Corporation or any of
its Subsidiaries is a party or by which the Corporation or any of its
Subsidiaries or any property of the Corporation or any of its
Subsidiaries is bound; (c) result in the creation or imposition of any
Lien upon any assets or properties of the Corporation or any of its
Subsidiaries; or (d) violate any Law applicable to the Corporation or
any of its Subsidiaries.
(vi) Upon the exchange of shares of Series B Preferred Stock
for Debentures, the rights of the holders of shares of Series B
Preferred Stock as stockholders of the Corporation shall terminate and
such shares shall no longer be deemed outstanding.
(vii) Before any holder of shares of Series B Preferred Stock
shall be entitled to receive Debentures, such holder shall surrender
the certificate or certificates therefor, at the office of the
Corporation or at such other place or places, if any, as the Board of
Directors shall have designated, and shall state in writing the name or
names (with addresses) in which he or she wishes the certificate or
certificates for the Debentures to be issued. The Corporation will, as
soon as practicable thereafter, issue and deliver at said office or
place to such holder of shares of Series B Preferred Stock, or to his
or her nominee or nominees, certificates for the Debentures to which he
or she shall be entitled as aforesaid. Shares of Series B Preferred
Stock shall be deemed to have been exchanged as of the close of
business on the date fixed for exchange as provided above, and the
Person or Persons entitled to receive the Debentures issuable upon such
exchange shall be treated for all purposes (including the accrual and
payment of interest) as the record holder or holders of such Debentures
as of the close of business on such date.
B. For purposes of clause (c) of paragraph (i) of Section A of
this Article VI, an exchange of shares of Series B Preferred Stock shall be
deemed to be an exchange that could
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result in a tax consequence to any holder which is materially adverse only if
such holder shall have delivered to the Corporation a written notice to such
effect on or before the fifteenth day after its receipt of the Exchange Notice
(an "OBJECTION NOTICE"), which Objection Notice shall specify in reasonable
detail the nature of such tax consequence which could result from the exchange.
If the Corporation receives an Objection Notice, then the Corporation shall not
exchange the shares of Series B Preferred Stock and the Corporation shall,
within 15 days after its receipt of the Objection Notice mail written notice to
the effect that it is canceling the proposed exchange of shares of Series B
Preferred Stock to each holder of record of shares of Series B Preferred Stock
to which it mailed the Exchange Notice. Notwithstanding the foregoing, if the
Corporation, based on the advice of nationally recognized tax counsel, believes
that the tax consequences described in an Objection Notice are incorrect, the
Corporation may contact the holder who delivered such notice to discuss the tax
consequences described therein. If such holder withdraws such notice within 15
days of its delivery, the Corporation shall be permitted to consummate the
proposed exchange.
VII. RESTRICTIONS ON DIVIDENDS
So long as any shares of the Series B Preferred Stock are
outstanding, the Board of Directors shall not declare, and the Corporation shall
not pay or set apart for payment any dividend on any Junior Securities or Parity
Securities or make any payment on account of, or set apart for payment money for
a sinking or other similar fund for, the repurchase, redemption or other
retirement of, any Junior Securities or Parity Securities or any warrants,
rights or options exercisable for or convertible into any Junior Securities or
Parity Securities (other than the repurchase, redemption or other retirement of
debentures or other debt securities that are convertible or exchangeable into
any Junior Securities or Parity Securities), or make any distribution in respect
of the Junior Securities or Parity Securities, either directly or indirectly,
and whether in cash, obligations or shares of the Corporation or other property
(other than distributions or dividends in Junior Securities to the holders of
Junior Securities), and shall not permit any Person directly or indirectly
controlled by the Corporation to purchase or redeem any Junior Securities or
Parity Securities or any warrants, rights, calls or options exercisable for or
convertible into any Junior Securities or Parity Securities (other than the
repurchase, redemption or other retirement of debentures or other debt
securities that are convertible or exchangeable into any Junior Securities or
Parity Securities) unless prior to or concurrently with such declaration,
payment, setting apart for payment, repurchase, redemption or other retirement
or distribution, as the case may be, all accumulated and unpaid dividends on
shares of the Series B Preferred Stock not paid on the dates provided for in
Section A of Article III hereof (including Arrearages and accumulated dividends
thereon and regardless of whether the Corporation shall have had the right to
elect to defer such payments as provided for in Article III hereof) shall have
been paid, except that when dividends are not paid in full as aforesaid upon the
shares of Series B Preferred Stock, all dividends declared on the Series B
Preferred Stock and any series of Parity Dividend Securities shall be declared
and paid pro rata so that the amount of dividends so declared and paid on Series
B Preferred Stock and such series of Parity Dividend Securities shall in all
cases bear to each other the same ratio that accumulated dividends (including
interest accrued on or additional dividends accumulated in respect of such
accumulated dividends) on the shares of Series B Preferred Stock and such Parity
Dividend Securities bear to each other. Notwithstanding the foregoing, this
paragraph shall not prohibit (i) the acquisition, repurchase, exchange,
conversion, redemption or other retirement for value of shares of Series B
Preferred
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Stock or any Parity Dividend Security by the Corporation in accordance with the
terms of such securities or (ii) the acquisition, repurchase, exchange,
conversion, redemption or other retirement for value by the Corporation of any
Junior Dividend Securities by the Corporation in accordance with obligations in
existence at the time of original issuance of the Series A Preferred Stock.
VIII. VOTING RIGHTS
A. The holders of shares of Series B Preferred Stock shall
have no voting rights except as set forth below or as otherwise from time to
time required by law.
B. Through the Approval Date, shares of Series B Preferred
Stock shall have no voting rights. After the Approval Date, so long as any
shares of the Series B Preferred Stock are outstanding, each share of Series B
Preferred Stock shall entitle the holder thereof to vote on all matters voted on
by holders of Common Stock, and the shares of Series B Preferred Stock shall
vote together with shares of Common Stock (and any shares of Series A Preferred
Stock entitled to vote) as a single class. With respect to any such vote, each
share of Series B Preferred Stock shall entitle its holder to a number of votes
equal to the number of shares of Common Stock into which such share of Series B
Preferred Stock is convertible at the time of the record date with respect to
such vote (assuming all conditions precedent to such conversion have been
satisfied and that such conversion had occurred as of the record date for such
vote).
C. If on any date after the Approval Date (i) dividends
payable on the Series A Preferred Stock or Series B Preferred Stock shall not
have been paid in full when required pursuant to the terms hereof or (ii) the
Corporation shall have failed to satisfy its obligation to redeem shares of
Series A Preferred Stock or Series B Preferred Stock pursuant to the terms of
the relevant Certificate of Designations (provided, that for the purpose of this
Section C, any obligation of the Corporation to repurchase shares of Series B
Preferred Stock pursuant to Section G of Article V of this Certificate of
Designations shall not be considered an obligation to redeem such shares), then
the number of directors constituting the Board of Directors shall, without
further action, be increased by two, or if the requisite increase in the number
of directors constituting the Board of Directors would require the approval of
the Corporation's stockholders or is prohibited by the Investment Agreement,
then the number of directors constituting the Board of Directors shall be
increased to the extent the approval of the Corporation's stockholders is not
required and the Investment Agreement would not be breached and a number of
directors (other than Investor Nominees) shall resign from the Board of
Directors so that the holders of shares of Series A Preferred Stock and Series B
Preferred Stock, voting together as a single class without regard to series, may
elect two directors to the Board of Directors, and the holders of a majority of
the outstanding shares of Series A Preferred Stock and Series B Preferred Stock,
voting together as a single class without regard to series, shall have, in
addition to the other voting rights set forth herein, the exclusive right to
elect two directors (the "ADDITIONAL DIRECTORS") of the Corporation to fill such
newly-created or vacated directorships. Additional Directors shall continue as
directors and such additional voting right shall continue until such time as (a)
all dividends accumulated on the Series A Preferred Stock and Series B Preferred
Stock shall have been paid in full as required pursuant to the terms hereof or
(b) any redemption obligation with respect to the Series A Preferred Stock or
Series B Preferred Stock that has become due shall have been satisfied or all
necessary funds shall have been set aside for
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payment, as the case may be, at which time such Additional Directors shall cease
to be directors and such additional voting right of the holders of shares of
Series A Preferred Stock and Series B Preferred Stock shall terminate subject to
revesting in the event of each and every subsequent event of the character
indicated above.
D. After the Approval Date, so long as members of the Investor
Group Beneficially Own a majority of the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock, if any default or event of default
has occurred and is continuing under any contract, agreement, indenture,
mortgage, note, lease or other instrument evidencing Indebtedness of the
Corporation or any of its Subsidiaries (other than inter-company Indebtedness
between the Corporation and any of its Subsidiaries or between Subsidiaries of
the Corporation) the outstanding principal amount of which is in excess of
$10,000,000, and as a result of such default, event of default or event the
holders thereof have accelerated or have the right to accelerate the maturity
thereof, and such default or event of default is not cured or waived within 75
days of the occurrence thereof, then the number of directors constituting the
Board of Directors shall, upon the request of members of the Investor Group who
Beneficially Own a majority of the outstanding shares of Series A Preferred
Stock and Series B Preferred Stock then Beneficially Owned by members of the
Investor Group delivered to the Corporation in writing, be increased by that
number that is necessary to enable the Investor Group to designate a majority of
the members of the Board of Directors (including the Investor Nominees), or if
such requisite increase in the number of directors constituting the Board of
Directors would require the approval of the Corporation's stockholders or is
prohibited by the Investment Agreement, then the number of directors
constituting the Board of Directors shall be increased to the extent the
approval of the Corporation's stockholders is not required and the Investment
Agreement would not be breached and a number of directors (other than Investor
Nominees) shall resign from the Board of Directors so as to enable the Investor
Group to designate a majority of the Board of Directors (including the Investor
Nominees), and the holders of a majority of the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock then held by the Investor Group,
voting together as a single class without regard to series, shall have, in
addition to the other voting rights set forth herein, the exclusive right,
voting separately as a class, to elect that number of directors (the "MAJORITY
DIRECTORS") of the Corporation necessary to fill such newly-created or vacated
directorships. Majority Directors shall continue as directors and such
additional voting right shall continue until such time as such default, event of
default or event is cured, at which time such Majority Directors shall cease to
be directors and such additional voting right of the Series A Preferred Stock
and Series B Preferred Stock shall terminate subject to revesting in the event
of each and every subsequent event of the character indicated above.
E. Reserved.
F. (a) The foregoing rights of holders of shares of Series B
Preferred Stock to take any action as provided in this Article VIII 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 by the written consent, delivered to the Secretary of the
Corporation, of the holders of the minimum number of shares required to take
such action. So long as such right to vote continues (and unless such right has
been exercised by written consent of the minimum number of shares required to
take such action), the Chairman of the
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Board of Directors may call, and upon the written request of holders of record
of 25% of the outstanding shares of Series B Preferred Stock, addressed to the
Secretary of the Corporation at the principal office of the Corporation, shall
call, a special meeting of the holders of shares entitled to vote as provided
herein. Such meeting shall be held as soon as reasonably practicable after
delivery of such request to the Secretary, at the place and upon the notice
provided by law and in the Bylaws for the holding of meetings of stockholders.
(b) Each director elected pursuant to Section C, D or E hereof
shall serve until the next annual meeting or until his or her successor shall be
elected and shall qualify, unless the director's term of office shall have
terminated pursuant to the provisions of Section C, D or E hereof, as the case
may be. In case any vacancy shall occur among the directors elected pursuant to
Section C, D or E hereof, such vacancy shall be filled for the unexpired portion
of the term by vote of the remaining director or directors theretofore elected
pursuant to the same Section (or such director's or directors' successor in
office), if any. If any such vacancy is not so filled within 20 days after the
creation thereof or if all of the directors so elected shall cease to serve as
directors before their term shall expire, the holders of the shares of Series B
Preferred Stock then outstanding and entitled to vote for such director pursuant
to the provisions of Section C, D or E hereof, as the case may be, may elect
successors to hold office for the unexpired terms of any vacant directorships,
by written consent as provided herein, or at a special meeting of such holders
called as provided herein. The holders of a majority of the shares entitled to
vote for directors pursuant to Section C, D or E hereof, as the case may be,
shall have the right to remove with or without cause at any time and replace any
directors such holders have elected pursuant to such section, by written consent
as herein provided, or at a special meeting of such holders called as provided
herein.
G. Without the consent or affirmative vote of the holders of
at least sixty-seven percent (67%) of the outstanding shares of Series B
Preferred Stock, voting separately as a class, the Corporation shall not: (i)
authorize, create or issue, or increase the authorized amount of, (a) any Senior
Securities or (b) any class or series of capital stock or any security
convertible into or exercisable for any class or series of capital stock, that
is redeemable mandatorily or redeemable at the option of the holder thereof at
any time on or prior to the Mandatory Redemption Date (whether or not only upon
the occurrence of a specified event); (ii) amend, alter or repeal any provision
of the Certificate of Incorporation or the Bylaws, if the amendment, alteration
or repeal alters or changes the powers, preferences or special rights of the
Series B Preferred Stock so as to affect them adversely; or (iii) authorize or
take any other action if such action alters or changes any of the rights of the
Series B Preferred Stock in any respect or otherwise would be inconsistent with
the provisions of this Certificate of Designations and the holders of any class
or series of the capital stock of the Corporation is entitled to vote thereon.
H. OTHER SECURITIES. The Corporation shall not, from and after
the date of original issuance of the Series A Preferred Stock, enter into any
agreement, amend or modify any existing agreement or obligation, or issue any
security that prohibits, conflicts or is inconsistent with, or would be breached
by, the Corporation's performance of its obligations hereunder.
B-19
IX. CONVERSION
A. CONVERSION. (a) At the option and election of the holder
thereof, each share of Series B Preferred Stock, including all unpaid dividends
accumulated thereon to the Conversion Date (as defined below), whether or not
such dividends have been declared, may be converted in the manner provided
herein, into (i) fully paid, duly authorized and nonassessable shares of Series
C Junior Participating Preferred Stock, without par value, of the Corporation
(the "JUNIOR PREFERRED STOCK"), on any Conversion Date occurring prior to the
Approval Date, and (ii) fully paid and nonassessable shares of Common Stock, on
any Conversion Date occurring on or after the Approval Date. As of the
Conversion Date with respect to a share of Series B Preferred Stock, subject to
subsections (d) and (e) of this Section A, such share shall be converted into
that number of Conversion Shares (as defined below) equal to the quotient of (i)
the sum of (A) the Stated Value thereof plus (B) all unpaid dividends
accumulated on such share of Series B Preferred Stock to the Conversion Date
whether or not such dividends have been declared, divided by (ii) the Conversion
Price in effect on the Conversion Date.
(b) Conversion of shares of the Series B Preferred Stock may
be effected by any holder thereof upon the surrender to the Corporation at the
principal office of the Corporation or at the office of any agent or agents of
the Corporation, as may be designated by the Board of Directors of the
Corporation and identified to the holders in writing upon such designation, of
the certificate for such shares of Series B Preferred Stock to be converted
accompanied by a written notice stating that such holder elects to convert all
or a specified whole number of shares represented by such certificate in
accordance with the provisions of this Section A and specifying the name or
names in which such holder wishes the certificate or certificates for Conversion
Shares to be issued. In case such notice shall specify a name or names other
than that of such holder, such notice shall be accompanied by payment of all
transfer taxes payable upon the issuance of Conversion Shares in such name or
names. Other than such taxes, the Corporation will pay any and all issue and
other taxes (other than taxes based on income) that may be payable in respect of
any issue or delivery of Conversion Shares on conversion of Series B Preferred
Stock pursuant hereto. As promptly as practical, and in any event within three
Business Days after the Conversion Date, the Corporation shall deliver or cause
to be delivered as directed by the holder of shares of Series B Preferred Stock
being converted (i) certificates representing the number of validly issued,
fully paid and nonassessable full Conversion Shares to which such holder shall
be entitled to, (ii) any cash that is required to be paid pursuant to
subsections (d) and (e) of this Section A, and (iii) if less than the full
number of shares of Series B Preferred Stock evidenced by the surrendered
certificate or certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares of Series B Preferred
Stock evidenced by such surrendered certificate or certificates less the number
of shares of Series B Preferred Stock being converted. Such conversion shall be
deemed to have occurred at the close of business on the date (the "CONVERSION
DATE") of the giving of such notice by the holder of the Series B Preferred
Stock to be converted and of such surrender of the certificate or certificates
representing the shares of Series B Preferred Stock to be converted so that as
of such time the rights of the holder thereof as to the shares being converted
shall cease except for the right to receive Conversion Shares and/or cash in
accordance herewith, and the person entitled to receive the Conversion Shares
issued as a result of such conversion shall be treated for all purposes as
having become the holder of such Conversion Shares at such time.
B-20
(c) In the event that the Series B Preferred Stock is to be
redeemed or repurchased pursuant to Article V hereof, from and after the
Redemption Date or the applicable repurchase date, the right of a holder to
convert shares of Series B Preferred Stock pursuant to this Section A shall
cease and terminate, except if the Corporation shall default in payment of the
Redemption Price on the Redemption Date or the repurchase price on the
applicable repurchase date, in which case all such rights shall continue unless
and until such shares are redeemed or repurchased and such redemption or
repurchase price is paid in full in accordance with the terms hereof.
Notwithstanding anything in the foregoing to the contrary, if the Conversion
Date shall occur with respect to any shares of Series B Preferred Stock on or
prior to any Redemption Date or repurchase date, such shares of Series B
Preferred Stock shall be converted by the Corporation into Conversion Shares in
the manner provided in this Section A.
(d) In connection with the conversion of any shares of Series
B Preferred Stock, no fractions of Conversion Shares shall be issued, but in
lieu thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Closing Price per share of Common Stock on the Conversion Date (or on the
Trading Day immediately preceding the Conversion Date, if the Conversion Date is
not a Trading Day). If more than one share of Series B Preferred Stock shall be
surrendered for conversion by the same holder on the same Conversion Date, the
number of full Conversion Shares issuable on conversion thereof shall be
computed on the basis of the total number of shares of Series B Preferred Stock
so surrendered.
(e) The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the Series B Preferred Stock in
accordance with the terms hereof, such number of its authorized but unissued
shares of Junior Preferred Stock and Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Series B
Preferred Stock, and shall take all action required to increase the authorized
number of shares of Junior Preferred Stock or Common Stock if necessary to
permit the conversion of all outstanding shares of Series B Preferred Stock,
except that from and after the Approval Date no shares of Junior Preferred Stock
shall be required to be so reserved.
B. ADJUSTMENT OF CONVERSION PRICE. Except in connection with
an Organic Change, which shall be subject to Section C below, the Conversion
Price shall be subject to adjustment from time to time as follows:
(a) STOCK DIVIDENDS. In case the Corporation after the date of
the original issuance of the Series A Preferred Stock shall pay a dividend or
make a distribution to all holders of shares of Common Stock in shares of Common
Stock, then in any such case the Conversion Price in effect at the opening of
business on the day following the record date for the determination of
stockholders entitled to receive such dividend or distribution shall be reduced
to a price obtained by multiplying such Conversion Price by a fraction of which
(x) the numerator shall be the number of shares of Common Stock outstanding at
the close of business on such record date and (y) the denominator shall be the
sum of such number of shares of Common Stock outstanding and the total number of
shares of Common Stock constituting such dividend or distribution, such
reduction to become effective immediately after the opening of business on the
day following such record date. For purposes of this subsection (a), the number
of shares of Common Stock at any time outstanding shall not include shares held
in the treasury of the
B-21
Corporation but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Corporation will not
pay any dividend or make any distribution on shares of Common Stock held in the
treasury of the Corporation.
(b) STOCK SPLITS AND REVERSE SPLITS. In case after the date of
the original issuance of the Series A Preferred Stock outstanding shares of
Common Stock shall be subdivided into a greater number of shares of Common
Stock, the Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall be
proportionately reduced, and, conversely, in case after the original issuance of
the Series A Preferred Stock outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Conversion Price
in effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately after
the opening of business on the day following the day upon which such subdivision
or combination becomes effective.
(c) ISSUANCES BELOW MARKET. In case the Corporation after the
date of the original issuance of the Series A Preferred Stock shall issue rights
or warrants to holders of shares of Common Stock entitling them to subscribe for
or purchase shares of Common Stock at a price per share less than the Closing
Price per share on the record date for the determination of stockholders
entitled to receive such rights or warrants, the Conversion Price in effect at
the opening of business on the day following such record date shall be adjusted
to a price obtained by multiplying such Conversion Price by a fraction of which
(x) the numerator shall be the number of shares of Common Stock outstanding at
the close of business on such record date PLUS the number of shares of Common
Stock that the aggregate offering price of the total number of shares so to be
offered would purchase at such Closing Price and (y) the denominator shall be
the number of shares of Common Stock outstanding at the close of business on
such record date PLUS the number of additional shares of Common Stock so to be
offered for subscription or purchase, such adjustment to become effective
immediately after the opening of business on the day following such record date;
PROVIDED, HOWEVER, that no adjustment shall be made if the Corporation issues or
distributes to each holder of Series B Preferred Stock the rights or warrants
that each such holder would have been entitled to receive had the Series B
Preferred Stock held by such holder been converted prior to such record date.
For purposes of this subsection (c), the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the
Corporation but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Corporation shall not
issue any rights or warrants in respect of shares of Common Stock held in the
treasury of the Corporation. Rights or warrants issued by the Corporation to all
holders of Common Stock entitling the holders thereof to subscribe for or
purchase Equity Securities, which rights or warrants (i) are deemed to be
transferred with such shares of Common Stock, (ii) are not exercisable and (iii)
are also issued in respect of future issuances of Common Stock, including shares
of Common Stock issued upon conversion of shares of Series B Preferred Stock, in
each case in clauses (i) through (iii) until the occurrence of a specified event
or events (a "TRIGGER EVENT"), shall for purposes of this subsection (c) not be
deemed issued until the occurrence of the earliest Trigger Event.
(d) SPECIAL DIVIDENDS. In case the Corporation after the date
of the original issuance of the Series A Preferred Stock shall distribute to all
holders of shares of Common
B-22
Stock evidences of its indebtedness or assets (excluding any regular periodic
cash dividend but including any extraordinary cash dividend), Equity Securities
(other than Common Stock) or rights to subscribe (excluding those referred to in
subsection (c) above) for Equity Securities other than Common Stock, in each
such case the Conversion Price in effect immediately prior to the close of
business on the record date for the determination of stockholders entitled to
receive such distribution shall be adjusted to a price obtained by multiplying
such Conversion Price by a fraction of which (x) the numerator shall be the
Closing Price per share of Common Stock on such record date, LESS the
then-current fair market value as of such record date (as determined by the
Board of Directors in its good faith judgment) of the portion of assets or
evidences of indebtedness or Equity Securities or subscription rights so
distributed applicable to one share of Common Stock, and (y) the denominator
shall be such Closing Price, such adjustment to become effective immediately
prior to the opening of business on the day following such record date;
PROVIDED, HOWEVER, that no adjustment shall be made (1) if the Corporation
issues or distributes to each holder of Series B Preferred Stock the
subscription rights referred to above that each such holder would have been
entitled to receive had the Series B Preferred Stock held by such holder been
converted prior to such record date or (2) if the Corporation grants to each
such holder the right to receive, upon the conversion of the Series B Preferred
Stock held by such holder at any time after the distribution of the evidences of
indebtedness or assets or Equity Securities referred to above, the evidences of
indebtedness or assets or Equity Securities that such holder would have been
entitled to receive had such Series B Preferred Stock been converted prior to
such record date. The Corporation shall provide any holder of Series B Preferred
Stock, upon receipt of a written request therefor, with any indenture or other
instrument defining the rights of the holders of any indebtedness, assets,
subscription rights or Equity Securities referred to in this subsection (d).
Rights or warrants issued by the Corporation to all holders of Common Stock
entitling the holders thereof to subscribe for or purchase Equity Securities,
which rights or warrants (i) are deemed to be transferred with such shares of
Common Stock, (ii) are not exercisable and (iii) are also issued in respect of
future issuances of Common Stock, including shares of Common Stock issued upon
conversion of shares of Series B Preferred Stock, in each case in clauses (i)
through (iii) until the occurrence of a Trigger Event, shall for purposes of
this subsection (d) not be deemed issued until the occurrence of the earliest
Trigger Event.
(e) TENDER OR EXCHANGE OFFER. In case a tender or exchange
offer made by the Corporation or any subsidiary of the Corporation for all or
any portion of the Common Stock shall be consummated at any time after the
original issuance of the Series A Preferred Stock and such tender offer shall
involve an aggregate consideration having a fair market value (as determined by
the Board of Directors in its good faith judgment) at the last time (the "OFFER
TIME") tenders may be made pursuant to such tender or exchange offer (as it may
be amended) that, together with the aggregate of the cash plus the fair market
value (as determined by the Board of Directors in its good faith judgment), as
of the Offer Time, of consideration payable in respect of any tender or exchange
offer by the Corporation or any such subsidiary for all or any portion of the
Common Stock consummated preceding the Offer Time and in respect of which no
Conversion Price adjustment pursuant to this subsection (e) has been made,
exceeds 5% of the product of the Closing Price of the Common Stock at the
Offer Time multiplied by the number of shares of Common Stock outstanding
(including any tendered shares) at the Offer Time, the Conversion Price shall
be reduced so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the Offer Time by a
fraction of which (x) the numerator shall be (i) the product of the Closing
Price of the Common Stock at the
B-23
Offer Time multiplied by the number of shares of Common Stock outstanding
(including any tendered shares) at the Offer Time minus (ii) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the
terms of the tender or exchange offer) of all shares validly tendered and not
withdrawn as of the Offer Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "PURCHASED SHARES") and (y) the denominator
shall be the product of (i) such Closing Price at the Offer Time multiplied
by (ii) such number of outstanding shares at the Offer Time minus the number
of Purchased Shares, such reduction to become effective immediately prior to
the opening of business on the day following the Offer Time. For purposes of
this subsection (e), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Corporation
but shall include shares issuable in respect of scrip certificates issued in
lieu of fractions of shares of Common Stock.
(f) CLOSING PRICE DETERMINATION. For the purpose of any
computation under subsections (c) and (d) of this Section B, the Closing Price
of Common Stock on any date shall be deemed to be the average of the Closing
Prices for the five consecutive Trading Days ending on the day in question (or
if such day is not a Trading Day, the next preceding Trading Day), PROVIDED,
HOWEVER, that (i) if the "ex" date for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Conversion Price pursuant to this Section occurs on or after the 20th Trading
Day prior to the day in question and prior to the "ex" date for the issuance or
distribution requiring such computation, the Closing Price for each Trading Day
prior to the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction which the Conversion Price is so
required to be adjusted as a result of such other event, (ii) if the "ex" date
for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
this Section occurs on or after the "ex" date for the issuance or distribution
requiring such computation and on or prior to the day in question, the Closing
Price for each Trading Day on and after the "ex" date for such other event shall
be adjusted by multiplying such Closing Price by the reciprocal of the fraction
by which the Conversion Price is so required to be adjusted as a result of such
other event, and (iii) if the "ex" date for the issuance or distribution
requiring such computation is on or prior to the day in question, after taking
into account any adjustment required pursuant to clause (ii) of this proviso,
the Closing Price for each Trading Day on or after such "ex" date shall be
adjusted by adding thereto the fair market value on the day in question (as
determined by the Board of Directors in a manner consistent with any
determination of such value for the purposes of subsection (d) of this Section
B) of the assets, evidences of indebtedness, Equity Securities or subscription
rights being distributed applicable to one share of Common Stock as of the close
of business on the day before such "ex" date. For the purposes of any
computation under subsection (e) of this Section B, the Closing Price on any
date shall be deemed to be the average of the daily Closing Prices for the five
consecutive Trading Days ending at the Offer Time; PROVIDED, HOWEVER, that if
the "ex" date for any event (other than the tender or exchange offer requiring
such computation) that requires an adjustment to the Conversion Price pursuant
to this Section occurs on or after the date of commencement of such tender or
exchange offer and prior to the Offer Time for such tender or exchange offer,
the Closing Price for each Trading Day prior to the "ex" date for such other
event shall be adjusted by multiplying such Closing Price by the same fraction
by which the Conversion Price is so required to be adjusted as a result of such
other event. For purposes of this subsection (f), the term "ex" date, (i) when
used with respect to any issuance or distribution, means the first date on
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which the Common Stock trades regular way on the NYSE or on the relevant
exchange or in the relevant market from which the Closing Price was obtained
without the right to receive such issuance or distribution, (ii) when used with
respect to any subdivision or combination of shares of Common Stock, means the
first date on which the Common Stock trades regular way on the NYSE or such
exchange or in such market after the time at which such subdivision or
combination becomes effective, and (iii) when used with respect to any tender or
exchange offer means the first date on which the Common Stock trades regular way
on the NYSE or such exchange or in such market after the Offer Time of such
tender or exchange offer.
(g) The Corporation may make such reductions in the Conversion
Price, in addition to those required by clauses (a), (b), (c), (d), (e) and (f)
of this Section B, as it considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock or from any event treated
as such for income tax purposes. Whenever the Conversion Price is reduced
pursuant to the preceding sentence, the Corporation shall mail to the holders of
then-outstanding shares of Series B Preferred Stock a notice of the reduction at
least fifteen (15) days prior to the date the reduced Conversion Price takes
effect, and such notice shall state the reduced Conversion Price and the period
it will be in effect.
(h) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Conversion Price; PROVIDED, HOWEVER, that any adjustments
which by reason of this subsection (h) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
(i) Notwithstanding any other provision of this Section B, no
adjustment to the Conversion Price shall reduce the Conversion Price below
$0.25, and any such purported adjustment shall instead reduce the Conversion
Price to $0.25. The Corporation hereby covenants not to take any action that
would or does result in any adjustment in the Conversion Price that, if made
without giving effect to the previous sentence, would cause the Conversion Price
to be less than $0.25.
(j) Whenever the Conversion Price is adjusted as herein
provided, a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall promptly be mailed by the
Corporation to the holders of the Series B Preferred Stock.
C. ORGANIC CHANGE.
(a) CORPORATION SURVIVES. Upon the consummation of an Organic
Change (other than a transaction in which the Corporation is not the surviving
entity), then lawful provision shall be made as part of the terms of such
transaction whereby the terms hereof shall be modified, without payment of any
additional consideration by any holder, so as to provide that upon the
conversion of shares of Series B Preferred Stock following the consummation of
such Organic Change, the holder of Series B Preferred Stock shall have the right
to acquire and receive (in lieu of or in addition to the Conversion Shares
acquirable and receivable prior to the Organic Change), without payment of
additional consideration therefor, such securities, cash and other property as
such holder would have received if such holder had converted such shares of
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Series B Preferred Stock into Common Stock immediately prior to such Organic
Change. Lawful provision also shall be made as part of the terms of the Organic
Change so that all other terms hereof shall remain in full force and effect
following such an Organic Change. The provisions of this subsection (a) shall
similarly apply to successive Organic Changes of the character described in this
subsection (a).
(b) CORPORATION DOES NOT SURVIVE. The Corporation shall not
enter into an Organic Change that is a transaction in which the Corporation is
not the surviving entity unless lawful provision shall be made as part of the
terms of such transaction whereby the surviving entity shall issue new
securities to each holder of Series B Preferred Stock, without payment of any
additional consideration by such holder, with terms that provide that upon the
conversion of such securities, the holder of such securities shall have the
right to acquire and receive (in lieu of or in addition to the Conversion Shares
acquirable and receivable prior to the Organic Change), without payment of
additional consideration therefor, such securities, cash and other property (the
"NEW SECURITIES") as such holder would have received if such holder had
converted such shares of Series B Preferred Stock into Common Stock immediately
prior to such Organic Change. The certificate or articles of incorporation or
other constituent document of the surviving entity shall provide for such
adjustments which, for events subsequent to the effective date of such
certificate or articles of incorporation or other constituent document, shall be
equivalent to the adjustments provided for in Section B of this Article IX. All
other terms of such New Securities shall be substantially equivalent to the
terms provided herein. The provisions of this subsection (b) shall similarly
apply to successive Organic Changes of the character described in of this
subsection (b).
D. CERTAIN EVENTS. If any event similar to or of the type
contemplated by the provisions of Section B or Section C of this Article IX, but
not expressly provided for by such provisions, occurs, then the Board of
Directors of the Corporation, will make an appropriate and equitable adjustment
in the Conversion Price so as to protect the rights of the holders of Series B
Preferred Stock; PROVIDED, that no such adjustment will decrease the number of
Conversion Shares issuable upon conversion of the Series B Preferred Stock.
E. RESTRICTION ON ACTIONS RELATING TO JUNIOR PREFERRED STOCK.
No action shall be taken by the Corporation with respect to the Junior Preferred
Stock, including without limitation stock splits, stock dividends, stock
combinations, issuances below market and special dividends, which would require
an adjustment to the Conversion Price if such action were taken with respect to
the Common Stock, except pursuant to, and in accordance with, Section B or C of
this Article IX.
F. NOTICE OF APPROVAL DATE. When and if the Approval Date
shall occur, the Corporation shall promptly mail or cause to be mailed a notice
of such occurrence to each holder of Series B Preferred Stock and Junior
Preferred Stock.
X. ADDITIONAL DEFINITIONS
For the purposes of this Certificate of Designations of Series
B Preferred Stock, the following terms shall have the meanings indicated:
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"AFFILIATE" has the meaning set forth in Rule 12b-2 under the
Exchange Act as in effect on the date of the Investment Agreement. The term
"Affiliated" has a correlative meaning. Notwithstanding the foregoing, for all
purposes hereof, the Investor, and each Person controlled by, controlling or
under common control with the Investor (each, a "TPG PERSON"), shall not be
deemed an "Affiliate" of any Designated Purchaser Person (as defined below), and
no Designated Purchaser, and no Person controlled by, controlling or under
common control with such Designated Purchaser (each, a "DESIGNATED PURCHASER
PERSON"), shall be deemed an "Affiliate" of any TPG Person or any other
Designated Purchaser Person, in any such case solely as a consequence of this
Agreement or the transactions contemplated hereby.
"APPROVAL DATE" means the date, if any, on which the
Corporation obtains the Shareholder Approval.
"BENEFICIALLY OWN" with respect to any securities means having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act as in effect on the date of the Investment Agreement,
except that a Person shall be deemed to Beneficially Own all such securities
that such Person has the right to acquire whether such right is exercisable
immediately or after the passage of time). The terms "Beneficial Ownership" and
"Beneficial Owner" have correlative meanings. Notwithstanding the foregoing, for
all purposes hereof, no TPG Person shall be deemed to Beneficially Own any
securities that are held by any Designated Purchaser Person, and no Designated
Purchaser Person shall be deemed to Beneficially Own any securities that are
held by any TPG Person or any other Designated Purchaser Person, in any such
case solely as a consequence of the Investment Agreement or the transactions
contemplated thereby.
"BUSINESS DAY" means 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.
"BYLAWS" means the Bylaws of the Corporation, as amended from
time to time.
"CHANGE OF CONTROL" shall be deemed to have occurred if (a)
any person or group (within the meaning of Rule 13d-5 under the Exchange Act as
in effect on February 12, 1998) shall own directly or indirectly, beneficially
or of record, shares representing more than 35% of the aggregate ordinary voting
power represented by the issued and outstanding Equity Securities of the
Corporation, other than any Person or Group that owned at least 5% of such
Equity Securities on the Closing Date (as such term is defined in the Credit
Agreement as in effect on the date of the Investment Agreement); (b) a majority
of the seats (other than vacant seats) on the board of directors of the
Corporation shall at any time be occupied by persons who were neither (i)
nominated by the board of directors of the Corporation nor (ii) appointed by
directors so nominated; (c) any change in control (or similar event, however
denominated) with respect to the Corporation shall occur under and as defined in
any indenture or agreement in respect of Indebtedness for borrowed money in
excess of the aggregate principal amount of $10,000,000 to which any Borrower
(as such term is defined in the Credit Agreement as in effect on the
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date of the Investment Agreement) or any Guarantor (as such term is defined in
the Credit Agreement as in effect on the date of the Investment Agreement) is a
party, other than the Existing Parent Borrower Notes Indenture (as such term is
defined in the Credit Agreement as in effect on the date of the Investment
Agreement) in connection with a Permitted CBHS Sale (as such term is defined in
the Credit Agreement as in effect on the date of the Investment Agreement); or
(d) a "Change in Control" or "Change of Control" (or similar event) shall have
occurred under the Credit Agreement or the Senior Subordinated Notes, unless, in
the case of a "Change of Control" under the Indenture, the aggregate principal
amount outstanding under the Senior Subordinated Notes is less than $10,000,000.
Notwithstanding the foregoing, no event described above shall constitute a
"Change of Control" if such event resulted directly from any action taken by the
Investor or any of its Affiliates.
"CLOSING" shall have the meaning assigned to such term in the
Investment Agreement.
"CLOSING PRICE" with respect to a share of Common Stock on any
day means, subject to subsection (f) of Section B of Article IX if applicable,
the last reported sale price on that day or, in case no such reported sale takes
place on such day, the average of the last reported bid and asked prices,
regular way, on that day, in either case, as reported in the consolidated
transaction reporting system with respect to securities listed on the NYSE or,
if the shares of Common Stock are not listed on the NYSE, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Common Stock are listed or, if the shares of Common Stock are not listed on NYSE
and not listed on any national securities exchange, the last quoted price or, if
not so quoted, the average of the high bid and low asked prices on such other
nationally recognized quotation system then in use, or, if on any such day the
shares of Common Stock are not quoted on any such quotation system, the average
of the closing bid and asked prices as furnished by a professional market maker
selected by the Board of Directors in good faith making a market in the shares
of Common Stock. If the shares of Common Stock are not publicly held or so
listed, quoted or publicly traded, the "Closing Price" means the fair market
value of a share of Common Stock, as determined in good faith by the Board of
Directors.
"COMMON SHARES" means shares of Common Stock (or any successor
security) issued or issuable in respect of dividends on, or upon conversion of,
shares of Series A Preferred Stock.
"CONVERSION PRICE" shall mean $9.375, as adjusted from time to
time pursuant to Section B of Article IX hereof; PROVIDED, that in the event (A)
the Shareholder Approval is obtained by the Corporation on or prior to March 5,
2000, as of the day after the Approval Date, the Conversion Price shall equal
the product of (i) the Conversion Price in effect on the Approval Date, and (ii)
1.026666666667, or (B) the Shareholder Approval is not obtained by the
Corporation on or prior to March 5, 2000, as of March 6, 2000, the Conversion
Price shall equal the product of (i) the Conversion Price in effect on March 5,
2000 or in effect as of such later date, as the case may be, and (ii)
0.9733333333333, in each case as adjusted from time to time pursuant to Section
B of Article IX hereof.
"CONVERSION SHARES" means (i) prior to the Approval Date,
shares of Junior Preferred Stock, and (ii) on and after the Approval Date,
shares of Common Stock, in each case, issued, or issuable upon, conversion of
the Series B Preferred Stock.
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"CREDIT AGREEMENT" means the Credit Agreement, dated as of
February 12, 1998, among the Corporation, the banks and other financial
institutions named therein, and The Chase Manhattan Bank, as Administrative
Agent, together with all other documents entered into pursuant to or in
connection with the Credit Agreement, in each case, as the same may be amended,
restated, supplemented, extended, renewed or increased from time to time,
replaced, substituted, refunded or refinanced or otherwise modified from time to
time, in whole or in part, and any successive replacements, substitutions,
refundings or refinancings.
"DESIGNATED PURCHASER" has the meaning set forth in the
Investment Agreement.
"DESIGNATED PURCHASER PERSON" has the meaning set forth in the
definition of "Affiliate."
"EQUITY SECURITIES" of any Person, means any and all common
stock, preferred stock and any other class of capital stock of, and any
partnership or limited liability company interests in, such Person or any other
similar interests of any Person that is not a corporation, partnership or
limited liability company.
"EXCHANGE ACT" means the U.S. Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder, from
time to time.
"45-TRADING DAY AVERAGE PRICE" means the average of the
Closing Prices per share of Common Stock for the Trading Days in any period of
45 consecutive Trading Days (a "45-TRADING DAY REFERENCE PERIOD"); PROVIDED,
HOWEVER, that in the event that an adjustment to the Conversion Price takes
effect pursuant to Section B of Article IX hereof during the period used to
compute such average, the Closing Prices used to compute such average for all
Trading Days ended prior to the time such adjustment takes effect shall be
similarly adjusted.
"45-TRADING DAY REFERENCE PERIOD" has the meaning set forth in
the definition of "45-Trading Day Average Price."
"GOVERNMENTAL ENTITY" means any government or political
subdivision or department thereof, any governmental or regulatory body,
commission, board, bureau, agency or instrumentality, or any court or arbitrator
or alternative dispute resolution body, in each case whether federal, state,
local or foreign.
"GROUP" has the meaning set forth in Rule 13d-5 under the
Exchange Act.
"GUARANTEE" means any direct or indirect obligation,
contingent or otherwise, to guarantee (or having the economic effect of
guaranteeing) Indebtedness in any manner, including, without limitation, any
monetary obligation to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness (whether arising by agreement to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise).
"INDEBTEDNESS" means, with respect to any Person, without
duplication, (i) all obligations of such Person for money borrowed, (ii) all
obligations of such Person evidenced by bonds, debentures, notes, or other
similar instruments, (iii) all obligations of such Person upon
B-29
which interest charges are customarily paid, (iv) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (v) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding (x)
trade accounts payable and accrued obligations incurred in the ordinary course
of business and (y) deferred earn-out and other performance-based payment
obligations incurred in connection with any Permitted Acquisition (as such term
is defined in the Credit Agreement as in effect on the date of the Investment
Agreement) or any similar transactions consummated prior to February 12, 1998),
(vi) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (vii) all Guarantees by such
Person of Indebtedness of others, (viii) all capital lease obligations of such
Person, (ix) all obligations (determined on the basis of actual, not notional,
obligations) of such Person in respect of interest rate protection agreements,
foreign currency exchange agreements or other interest or exchange rate hedging
arrangements and (x) all obligations of such Person as an account party in
respect of letters of credit and bankers' acceptances issued in support of
obligations that constitute Indebtedness under any other clause of this
definition (unless such obligations are fully cash collateralized), PROVIDED
that all obligations in respect of letters of credit shall be deemed
Indebtedness to the extent drawings thereunder are unreimbursed (after any
applicable grace period) regardless of the purpose for which such letter of
credit was issued. The Indebtedness of any Person shall include the recourse
Indebtedness of any partnership in which such Person is a general partner.
Notwithstanding the foregoing, no portion of Indebtedness that becomes the
subject of a defeasance (whether a legal defeasance or a "covenant" or "in
substance" defeasance) shall, at any time that such defeasance remains in
effect, be treated as Indebtedness for purposes hereof.
"INDENTURE" means the Indenture entered into between the
Corporation and the Marine Midland Bank, as Trustee, dated as of February 12,
1998, as the same may be amended, restated, supplemented, extended, renewed or
increased from time to time, replaced, substituted, refunded or refinanced or
otherwise modified from time to time, in whole or in part, and any successive
replacements, substitutions, refundings or refinancings.
"INVESTMENT AGREEMENT" means the Investment Agreement, dated
as of July 19, 1999, by and between the Investor and the Corporation, as
amended, supplemented or otherwise modified from time to time.
"INVESTOR" has the meaning set forth in the Investment
Agreement.
"INVESTOR GROUP" means, collectively, the Investor, the
Designated Purchasers, if any, and the respective Affiliates of such Persons.
"INVESTOR NOMINEE" means a person designated for election to
the Board of Directors by the Investor pursuant to the Investment Agreement.
"INVESTOR SALE PRICE" means with respect to any Investor Sale,
the price per Common Share paid in such sale; PROVIDED, that in the event shares
of Series A Preferred Stock are sold in such Investor Sale, the Investor Sale
Price shall equal the quotient of (A) the price per
B-30
share of Series A Preferred Stock paid in such Investor Sale, and (B) the number
of Common Shares into which such share of Series A Preferred Stock is
convertible at the time of such sale.
"LAW" means any law, treaty, statute, ordinance, code, rule,
regulation, judgment, decree, order, writ, award, injunction or determination of
any Governmental Entity.
"LIEN" means any mortgage, pledge, lien , security interest,
claim, voting agreement, conditional sale agreement, title retention agreement,
restriction, option or encumbrance of any kind, character or description
whatsoever.
"MAKE-WHOLE CONVERSION SHARES" means, with respect to any
Investor Sale, the Conversion Shares represented by the shares of Series B
Preferred Stock and shares of Junior Preferred Stock included in such Investor
Sale; PROVIDED, that aggregate number of Make-Whole Conversion Shares with
respect to such Investor Sale shall not exceed the Sale Number with respect to
such Investor Sale.
"NYSE" means the New York Stock Exchange, Inc.
"180-DAY AVERAGE PRICE" means the average of the Closing
Prices per share of Common Stock for the Trading Days in any period of 180
consecutive calendar days (a "180-DAY REFERENCE PERIOD"); PROVIDED, however,
that in the event that an adjustment to the Conversion Price takes effect
pursuant to Section B of Article IX hereof during the period used to compute
such average, the Closing Prices used to compute such average for all Trading
Days ended prior to the time such adjustment takes effect shall be similarly
adjusted.
"180-DAY REFERENCE PERIOD" has the meaning set forth in the
definition of "180-Day Average Price."
"ORGANIC CHANGE" means, with respect to the Corporation, any
transaction (including without limitation any recapitalization, capital
reorganization or reclassification of any class of capital stock, any
consolidation or amalgamation of the Corporation with, or merger of the
Corporation into, any other Person, any merger of another Person into the
Corporation (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of capital stock of
the Corporation), any sale or transfer or lease of all or substantially all of
the assets of the Corporation or any compulsory share exchange) pursuant to
which any class of capital stock of the Corporation is converted into the right
to receive other securities, cash or other property.
"PERSON" means any individual, corporation, company,
association, partnership, limited liability company, joint venture, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"REFERENCE PERIOD" means a 45-Trading Day Reference Period or
a 180-Day Reference Period, as the case may be.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of July 19, 1999, by and between the Investor and the
Corporation, as amended, supplemented or otherwise modified from time to time.
B-31
"REGULATORY APPROVALS" means any and all certificates,
permits, licenses, franchises, concessions, grants, consents, approvals, orders,
registrations, authorizations, waivers, variances or clearances from, or filings
or registrations with, Governmental Entities.
"SALE NUMBER" means, with respect to any Investor Sale, the
aggregate number of Conversion Shares Beneficially Owned by the Selling Members
prior to such Investor Sale, multiplied by a fraction, the numerator of which is
the sum of (A) the aggregate number of Common Shares included in such Investor
Sale, plus (B) the aggregate number of Common Shares into which the shares of
Series A Preferred Stock included in such sale are convertible at the time of
such sale, and the denominator is the aggregate number of Common Shares
Beneficially Owned by the Selling Members prior to such Investor Sale.
"SECURITIES ACT" means the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, from time to
time.
"SENIOR SUBORDINATED NOTES" means the Senior Subordinated
Notes of the Corporation issued pursuant to the Indenture.
"SHAREHOLDER APPROVAL" means the approval by the stockholders
of the Corporation, in accordance with the General Corporation Law of the State
of Delaware and in accordance with and in satisfaction of Paragraph 312.00 of
the NYSE's Listed Company Manual and the related NYSE Rules and interpretations
thereof, of (i) the issuance of Common Stock in respect of accrued and unpaid
dividend obligations on the Series A Preferred Stock and Series B Preferred
Stock, (ii) the issuance of Common Stock upon the conversion or exchange of the
Series B Preferred Stock, and (iii) the vesting of voting rights in respect of
the Series B Preferred Stock, in each case in accordance with the terms hereof
and the Investment Agreement.
"SUBSIDIARY" means as to any Person, any other Person of which
more than 50% of the shares of the voting stock or other voting interests are
owned or controlled, or the ability to select or elect more than 50% of the
directors or similar managers is held, directly or indirectly, by such first
Person or one or more of its Subsidiaries or by such first Person and one or
more of its Subsidiaries; PROVIDED, HOWEVER, that no Joint Venture (as such term
is defined in the Investment Agreement) shall be considered (i) a "Subsidiary"
of the Corporation or (ii) a "Subsidiary" of any Subsidiary of the Corporation.
"TPG PERSON" has the meaning set forth in the definition of
"Affiliate."
"TRADING DAY" means any day on which the NYSE is open for
trading, or if the shares of Common Stock are not quoted on the NYSE, any day on
which the principal national securities exchange or national quotation system on
which the shares of Common Stock are listed, admitted to trading or quoted is
open for trading, or if the shares of Common Stock are not so listed, admitted
to trading or quoted, any Business Day.
"TWO-WEEK AVERAGE PRICE" means the average of the Closing
Prices per share of Common Stock for the Trading Days in the two-calendar week
period ending on the last day of a Reference Period; PROVIDED, HOWEVER, that in
the event that an adjustment to the Conversion Price takes effect pursuant to
Section B of Article IX hereof during the period used to compute
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such average, the Closing Prices used to compute such average for all Trading
Days ended prior to the time such adjustment takes effect shall be similarly
adjusted.
"VOTING SECURITIES" means the shares of Common Stock and any
other securities of the Corporation entitled to vote generally for the election
of directors.
XI. MISCELLANEOUS
A. NOTICES. Any notice referred to herein shall be in writing
and, unless first-class mail shall be specifically permitted for such notices
under the terms hereof, shall be deemed to have been given upon personal
delivery thereof, upon transmittal of such notice by telecopy (with confirmation
of receipt by telecopy or telex) or five days after transmittal by registered or
certified mail, postage prepaid, addressed as follows:
(i) if to the Corporation, to its office at 6950 Columbia
Gateway Drive, Fourth Floor, Columbia, Maryland 21046 (Attention:
General Counsel) or to the transfer agent for the Series B Preferred
Stock;
(ii) if to a holder of the Series B Preferred Stock, to such
holder at the address of such holder as listed in the stock record
books of the Corporation (which may include the records of any transfer
agent for the Series B Preferred Stock); or
(iii) to such other address as the Corporation or such holder,
as the case may be, shall have designated by notice similarly given.
B. REACQUIRED SHARES. Any shares of Series B Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation, directly or
indirectly, in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof (and shall not be deemed to be outstanding for any
purpose) and, if necessary to provide for the lawful redemption or purchase of
such shares, the capital represented by such shares shall be reduced in
accordance with the Delaware General Corporation Law. All such shares of Series
B Preferred Stock shall upon their cancellation and upon the filing of an
appropriate certificate with the Secretary of State of the State of Delaware,
become authorized but unissued shares of Preferred Stock, without par value, of
the Corporation and may be reissued as part of another series of Preferred
Stock, without par value, of the Corporation subject to the conditions or
restrictions on issuance set forth herein.
C. ENFORCEMENT. Any registered holder of shares of Series B
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 Designations or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
D. TRANSFER TAXES. Except as otherwise agreed upon pursuant to
the terms of this Certificate of Designations, the Corporation shall pay any and
all documentary, stamp or similar issue or transfer taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
any issue or delivery of Common Stock or Debentures on conversion or exchange
of,
B-33
or other securities or property issued on account of, shares of Series B
Preferred Stock pursuant hereto or certificates representing such shares or
securities. The Corporation shall not, however, be required to pay any such tax
or other charge that may be imposed in connection with any transfer involved in
the issue or transfer and delivery of any certificate for Common Stock or
Debentures or other securities or property in a name other than that in which
the shares of Series B Preferred Stock so converted or exchanged, or on account
of which such securities were issued, were registered and no such issue or
delivery shall be made unless and until the Person requesting such issue has
paid to the Corporation the amount of any such tax or has established to the
satisfaction of the Corporation that such tax has been paid or is not payable.
E. TRANSFER AGENT. The Corporation may appoint, and from time
to time discharge and change, a transfer agent for the Series B Preferred Stock.
Upon any such appointment or discharge of a transfer agent, the Corporation
shall send notice thereof by first-class mail, postage prepaid, to each holder
of record of shares of Series B Preferred Stock.
F. RECORD DATES. In the event that the Series B Preferred
Stock shall be registered under either the Securities Act or the Exchange Act,
the Corporation shall establish appropriate record dates with respect to
payments and other actions to be made with respect to the Series B Preferred
Stock.
G. SUBORDINATION TO SENIOR SUBORDINATED NOTES. By accepting a
share of Series B Preferred Stock or Debenture, the holder thereof shall be
deemed to have acknowledged and agreed that (a) such holder's right to receive
payments in respect of the Series B Preferred Stock or Debenture is subject and
subordinated in right of payment to the payment in full and discharge of all
amounts (however denominated) then due and payable under the Senior Subordinated
Notes, and (b) until payment in full of all such amounts (however denominated)
under the Senior Subordinated Notes has been made, no payment, whether directly
or indirectly, by exercise of any right of set off or otherwise in respect of
the Series B Preferred Stock or Debenture shall be made by the Corporation, and
no deposit in respect of the Series B Preferred Stock or Debenture shall be made
pursuant to the terms hereof. In the event that any payment by, or distribution
of the assets of, the Corporation of any kind or character (whether in cash,
property or securities, whether directly or indirectly, by exercise of any right
of set-off or otherwise and whether as a result of a bankruptcy proceeding with
respect to the Corporation or otherwise) shall be received by a holder of Series
B Preferred Stock at any time when such payment is prohibited by this paragraph,
such payment shall be held in trust for the benefit of, and shall be paid over
to, the holders of Senior Subordinated Notes as their interests may appear. The
preceding two sentences address the relative rights of holders of Series B
Preferred Stock or Debentures, on the one hand, and the holders of Senior
Subordinated Notes, on the other hand, and nothing in this Certificate of
Designations shall impair, as between the Corporation and the holders of Series
B Preferred Stock or Debentures, the obligation of the Corporation, which is
absolute and unconditional, to pay amounts due in respect of the Series B
Preferred Stock and Debentures in accordance with their terms. This Section G
shall not be construed to limit in any manner the subordination provisions set
forth in Section D of Article V hereof.
B-34
IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Corporation by its Chief Financial Officer and
attested by its Assistant Secretary, this [___] day of [____________], 1999.
MAGELLAN HEALTH SERVICES, INC.
By:
----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
[Corporate Seal]
ATTEST:
--------------------
EXHIBIT C
FORM OF JUNIOR CERTIFICATE
OF DESIGNATIONS
CERTIFICATE OF DESIGNATIONS
OF
SERIES C JUNIOR PARTICIPATING PREFERRED STOCK
OF
MAGELLAN HEALTH SERVICES, INC.
(PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE)
-----------------------------
Magellan Health Services, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"CORPORATION"), hereby certifies that the following resolutions were adopted by
the Board of Directors (the "BOARD OF DIRECTORS") of the Corporation as required
by Section 151 of the General Corporation Law of the State of Delaware.
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of the Corporation in accordance with the provisions
of the Restated Certificate of Incorporation of the Corporation, as amended (the
"CERTIFICATE OF INCORPORATION"), the Board of Directors hereby creates a series
of preferred stock, without par value, of the Corporation, and hereby states the
designation and number thereof, and fixes the voting powers, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof, as follows:
Series C Junior Participating Preferred Stock:
Section 1. DESIGNATION AND AMOUNT.
The designation of this series of shares shall be "Series C
Junior Participating Preferred Stock" (the "SERIES C PREFERRED STOCK"), and
the number of shares constituting such series shall be . The number of
shares of the Series C Preferred Stock may be increased or decreased by
resolution of the Board of Directors; PROVIDED, HOWEVER, that no decrease
shall reduce the number of shares of Series C Preferred Stock to a number
less than the aggregate number of such shares then outstanding.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the rights of the holders of any shares of any
series of preferred stock of the Corporation (the "PREFERRED STOCK") (or any
similar stock) ranking prior and superior to the Series C Preferred Stock with
respect to dividends, the holders of shares of Series C Preferred Stock, in
preference to the holders of the common stock, par value $0.25 per share (the
"COMMON STOCK"), of the Corporation, and of any other class of stock of the
Corporation ranking junior to the Series C Preferred Stock, shall be entitled to
receive, when, as and if declared by the
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Board of Directors out of funds legally available for the purpose, dividends and
other distributions, in an amount per share (rounded to the nearest cent) equal
to, subject to the provision for adjustment hereinafter set forth, the amount of
all cash dividends, and the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock, declared on the Common Stock since the immediately
preceding dividend or distribution declared on the Series C Preferred Stock. In
the event the Corporation shall declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount per share to which holders of shares of Series C Preferred Stock were
entitled immediately prior to such event under the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately after such event
and the denominator of which shall be the number of shares of Common Stock that
were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution
on the Series C Preferred Stock as provided in paragraph (a) of this Section 2
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(c) The Board of Directors may fix a record date for the
determination of holders of shares of Series C Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 30 days prior to the date fixed for the payment
thereof.
Section 3. VOTING RIGHTS. Except as set forth in Section 10
hereof, or as otherwise from time to time required by law, holders of Series C
Preferred Stock shall have no voting rights and their consent shall not be
required for taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever dividends or distributions payable on the Series
C Preferred Stock as provided in Section 2 are in arrears, thereafter and until
all unpaid dividends and distributions, whether or not declared, on outstanding
shares of Series C Preferred Stock shall have been paid in full, the Corporation
shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (as to
dividends) to the Series C Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (as
to dividends) with the Series C Preferred Stock, except
dividends paid ratably on the Series C Preferred Stock and all
such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or
C-2
winding up of the Corporation) to the Series C Preferred
Stock, PROVIDED, HOWEVER, that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the
Corporation ranking junior (as to dividends and upon
dissolution, liquidation or winding up of the Corporation) to
the Series C Preferred Stock or rights, warrants or options to
acquire such junior stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series C Preferred Stock, or any
shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up of the
Corporation) with the Series C Preferred Stock, except in
accordance with a purchase offer made in writing to all
holders of such shares of Series C Preferred Stock, or shares
of Series C Preferred Stock and parity stock, as the case may
be, upon such terms as the Board of Directors, after
consideration of the respective dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(b) The Corporation shall not redeem or purchase or otherwise
acquire shares of Common Stock unless, in each case, within five days of such
transaction, the Corporation makes a purchase offer in writing to all holders of
shares of Series C Preferred Stock offering to purchase a number of shares of
Series C Preferred Stock equal to the number of shares of Common Stock redeemed
or purchased or otherwise acquired in such transaction at a price per share
equal to the amount of consideration paid for one share of Common Stock in such
transaction and otherwise on terms and conditions no less favorable to the
holders of Series C Preferred Stock than those applicable in such transaction
(as determined by the Board of Directors in good faith). In the event the
Corporation shall declare or pay any dividend on Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case (i) the number of shares of
Series C Preferred Stock which holders thereof were entitled to have the
Corporation offer to purchase immediately prior to such event under the
preceding sentence shall be adjusted by multiplying such number by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately after such event and the denominator of which shall be the number of
shares of Common Stock that were outstanding immediately prior to such event,
and (ii) the amount per share to which holders of shares of Series C Preferred
Stock were entitled immediately prior to such event under the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock that were outstanding immediately after such event.
(c) The Corporation shall not, and shall not permit any
Subsidiary of the Corporation to, enter into any agreement with any Person
providing for the purchase or other acquisition by such Person (or any other
Person) of shares of Common Stock from any Person (other than the Corporation),
whether pursuant to tender offer, exchange offer or otherwise, unless, in each
case, within five days of the commencement of such transaction, such Person
C-3
promptly makes a purchase offer in writing to all holders of shares of Series C
Preferred Stock offering to purchase a number of shares of Series C Preferred
Stock equal to the number of shares of Common Stock purchased or otherwise
acquired in such transaction at a price per share equal to the amount of
consideration paid for one share of Common Stock in such transaction and
otherwise on terms and conditions no less favorable to the holders of Series C
Preferred Stock than those applicable in such transaction (as determined by the
Board of Directors in good faith). In the event the Corporation shall declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case (i) the number of shares of Series C Preferred
Stock which holders thereof were entitled to have redeemed or purchased or
otherwise acquired immediately prior to such event under the preceding sentence
shall be adjusted by multiplying such number by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
after such event and the denominator of which shall be the number of shares of
Common Stock that were outstanding immediately prior to such event, and (ii) the
amount per share to which holders of shares of Series C Preferred Stock were
entitled immediately prior to such event under the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
event and the denominator of which shall be the number of shares of Common Stock
that were outstanding immediately after such event.
(d) The Corporation shall not permit any Subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) or,
(b) or (c) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
(e) Notwithstanding the foregoing, this Section 4 shall not
prohibit (i) purchases of Equity Securities of the Corporation or any of its
Subsidiaries from executives and other management-level employees of the
Corporation or any of its Subsidiaries in connection with customary employment
and severance arrangements, or (ii) the acquisition, repurchase, exchange,
conversion, redemption or other retirement for value by the Corporation of any
Equity Securities of the Corporation in accordance with obligations in existence
at the time of original issuance of the Series A Preferred Stock.
Section 5. REACQUIRED SHARES. Any shares of Series C Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of the preferred stock of the Corporation and may be reissued as
part of a new series of the preferred stock of the Corporation, subject to the
conditions and restrictions on issuance set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (a) to the holders of the Common Stock or of shares of any other stock
of the Corporation ranking junior, upon liquidation, dissolution or winding up
of the Corporation, to the Series C Preferred Stock unless, prior thereto, the
holders of shares of Series C Preferred Stock shall have received per share of
C-4
Series C Preferred Stock (i) an amount equal to declared and unpaid dividends
and distributions thereon, to the date of such payment, plus (ii) an aggregate
amount, subject to the provision for adjustment hereinafter set forth, equal to
the aggregate amount to be distributed per share to holders of shares of Common
Stock, or (b) to the holders of shares of stock ranking on a parity upon
liquidation, dissolution or winding up of the Corporation with the Series C
Preferred Stock, except distributions made ratably on the Series C Preferred
Stock and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount per share to which holders of shares of Series C
Preferred Stock were entitled immediately prior to such event under clause
(a)(ii) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which shall be the number of shares of Common
Stock outstanding immediately after such event and the denominator of which
shall the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation
shall enter into any consolidation, merger, combination, recapitalization or
other transaction in which shares of Common Stock are converted into, exchanged
for or changed into other stock or securities, cash and/or any other property,
then in any such case each share of Series C Preferred Stock shall at the same
time be similarly converted into, exchanged for or changed into an amount per
share (subject to the provision for adjustment hereinafter set forth) equal to
the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is converted, exchanged or changed. In the event the Corporation
shall declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the conversion, exchange or change of shares
of Series C Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately after such event and the denominator of which shall be
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 8. NO REDEMPTION. The shares of Series C Preferred
Stock shall not be redeemable by the Corporation.
Section 9. RANK. The Series C Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, junior to all other
series of Preferred Stock (unless the terms of any such series shall provide
otherwise) and senior to the Common Stock.
Section 10. AMENDMENT. Without the consent or affirmative vote
of the holders of at least a majority of the outstanding shares of Series C
Preferred Stock, voting separately as a class, the Corporation shall not (i)
amend, alter or repeal any provision of the Certificate of
C-5
Incorporation or the Bylaws, if the amendment, alteration or repeal alters or
changes the powers, preferences or special rights of the Series C Preferred
Stock so as to affect them adversely, or (ii) authorize or take any other action
if such action alters or changes any of the rights of the Series C Preferred
Stock in any respect or otherwise would be inconsistent with the provisions of
this Certificate of Designations and the holders of any class or series of the
capital stock of the Corporation is entitled to vote thereon.
Section 11. FRACTIONAL SHARES. Series C Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series C Preferred Stock.
Section 12. DEFINITIONS. The following terms shall have the
following definitions:
"EQUITY SECURITIES" of any Person, means any and all common
stock, preferred stock and any other class of capital stock of, and any
partnership or limited liability company interests in, such Person or
any other similar interests of any Person that is not a corporation,
partnership or limited liability company.
"INVESTMENT AGREEMENT" means the Investment Agreement, dated
as of July 19, 1999, by and between the Investor and the Corporation,
as amended, supplemented or otherwise modified from time to time.
"SERIES A PREFERRED STOCK" the Series A Cumulative Convertible
Preferred Stock, without par value, of the Corporation.
"SUBSIDIARY" means as to any Person, any other Person of
which more than 50% of the shares of the voting stock or other voting
interests are owned or controlled, or the ability to select or elect
more than 50% of the directors or similar managers is held, directly or
indirectly, by such first Person or one or more of its Subsidiaries or
by such first Person and one or more of its Subsidiaries; PROVIDED,
HOWEVER, that no Joint Venture (as such term is defined in the
Investment Agreement) shall be considered (i) a "Subsidiary" of the
Corporation or (ii) a "Subsidiary" of any Subsidiary of the
Corporation.
"PERSON" means any individual, corporation, company,
association, partnership, limited liability company, joint venture,
trust, unincorporated organization, or governmental entity.
IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Corporation by its Chief Financial Officer and
attested by its Secretary this [ ] day of [_____], 1999.
C-6
MAGELLAN HEALTH SERVICES, INC.
By:
---------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
[Corporate Seal]
ATTEST:
------------------------------------
C-7
EXHIBIT D
Form of King & Spalding Opinion
____________, 1999
TPG Magellan LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Re: Investment Agreement dated as of July 19, 1999, between TPG
Magellan LLC and Magellan Health Services, Inc. (the
"Investment Agreement")
We have acted as counsel to Magellan Health Services, Inc., a Delaware
corporation (the "Company") in connection with the execution and delivery of the
Investment Agreement and the closing of the purchase by the Investor from the
Company of 59,063 shares of Series A Preferred Stock and 16,362 shares of Series
B Preferred Stock (collectively, the "Preferred Stock") as provided therein.
Capitalized terms used but not defined herein shall have the meanings assigned
to such terms in the Investment Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Investment
Agreement, the Registration Rights Agreement, the Series A and the Series B
Certificates of Designations (the "Certificates of Designations"), and such
other agreements, instruments, records, and other documents, and have made such
other investigations, as we have deemed necessary for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures, the legal
capacity of natural persons, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies, and the authenticities of the originals
of such copies.
With your permission, we have also assumed that each of the Transaction
Agreements has been duly authorized, executed and delivered by, and is a valid,
binding and enforceable obligation of, the Investor. As to any facts material to
the opinions expressed below, we have not made any independent inquiry into such
matters, and have relied on representations, statements and certificates of
officers of the Company as to such matters, including, without limitation, the
Officer's Certificate executed and delivered to us on behalf of the Company as
of the date hereof.
Except as specifically set forth in this paragraph, we express no
opinions as to the laws of any jurisdiction other than the laws of the states of
Georgia and New York, the Delaware General Corporation Law, and applicable
federal laws of the United States of America, or the effect any such other laws
may have on the matters set forth in this opinion letter. With respect to the
opinions contained in paragraphs 1, 2 and 3 of this opinion letter:
(a) Insofar as such opinions pertain to matters dependent upon
the laws of states other than Georgia or New York, or the Delaware
General Corporation Law, we
D-1
have based such opinions solely on a review of the corporation and
limited liability company statutes of such jurisdictions as set forth
in the official printed statutory compilations of such states, as
supplemented by their respective supplements most recently available in
the reference libraries in which we have conducted our review, and have
not undertaken any review of case law or administrative or regulatory
actions or proceedings in respect thereof;
(b) Insofar as such opinions pertain to the organizational
power and authority of the Company and the Significant Subsidiaries, we
have based such opinions solely on a review of the certificates or
articles of incorporation, by-laws, certificates of formation, articles
of organization or membership or operating agreements, as the case may
be, of such Persons, as the same have been certified and delivered to
us on behalf of the Company and the Significant Subsidiaries; and
(c) Insofar as such opinions pertain to the valid existence,
good standing and qualification to do business of the Company and the
Significant Subsidiaries, we have based such opinions solely on a
review of the certificates of public officials delivered to you on the
date hereof, and we have assumed the same to have been properly given
and to be accurate as of the date hereof.
Finally, we express no opinion as to any matters arising under any
applicable federal or state tax laws, securities laws, or laws relating to
licenses, permits, approvals, certificates of need, or similar matters
applicable to the businesses and activities of the Company or any of its
Significant Subsidiaries. We note that, with respect to certain matters relating
to Regulatory Approvals, you have received the opinion letters dated as of the
date hereof from ____________, regulatory counsel to the Company and certain of
its Subsidiaries.
Based upon and subject to the foregoing, and the additional assumptions
and qualifications set forth below, we are of the opinion that:
1. Each of the Company and the Significant Subsidiaries is a corporation
or limited liability company, as the case may be, duly organized,
validly existing and in good standing under the laws of its
jurisdiction of organization and has all requisite organizational power
and authority to own or lease and operate its properties and to conduct
its business as currently being conducted.
2. Each of the Company and the Significant Subsidiaries is duly authorized
or qualified as a foreign corporation or limited liability company, as
the case may be, for the transaction of business and is in good
standing under the laws of the jurisdictions set forth on SCHEDULE A
attached to this opinion letter, which jurisdictions are the only
jurisdictions identified to us in the Officer's Certificate as being
those jurisdictions where the ownership, lease, or operation of
property or conduct of business requires such qualification, except
where the failure to be so licensed, authorized or qualified and in
good standing would not, individually or in the aggregate, have a
Material Adverse Effect.
3. The Company (i) has all requisite corporate power and authority to
execute and delivery the Transaction Agreements and to perform its
obligations under the Transaction
D-2
Agreements and the Certificates of Designations, and (ii) has duly
authorized by all necessary corporate action on its part the execution
and delivery of the Transaction Agreements and the performance by the
Company of its obligations under the Transaction Agreements and the
Certificates of Designations.
4. Each of the Transaction Agreements has been duly executed and delivered
by the Company and constitutes a valid and legally binding obligation
of the Company enforceable against the Company in accordance with its
terms under the laws of the state of New York, except (i) as may be
limited by bankruptcy, insolvency, fraudulent transfer or conveyance,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights and remedies, and by general principles of equity
(including, without limitation, concepts of materiality, good faith,
reasonableness and fair dealing), whether in a proceeding in equity or
at law, (ii) as rights to indemnification may be limited by federal or
state securities laws or regulations or the public policy underlying
such laws or regulations, and (iii) that the enforcement of the
obligations under Section 8.12 of the Investment Agreement is subject
to the fiduciary obligations of the Board of Directors of the Company.
5. The shares of Series A Preferred Stock have been duly and validly
authorized and validly issued by the Company and are fully paid and
non-assessable. The shares of Series B Preferred Stock and the shares
of Common Stock into which the Preferred Stock is convertible have been
duly and validly authorized and validly reserved for issuance and, when
issued in accordance with the terms of the Certificates of Designations
and the Investment Agreement, as the case may be, will have been
validly issued and will be fully paid and non-assessable.
6. No consent or approval of the Company's stockholders is required by Law
or the Company's certificate of incorporation or by-laws for the
execution, delivery or performance by the Company of the Transaction
Agreements, other than as expressly provided in the Investment
Agreement.
7. The execution and delivery of each of the Transaction Agreements does
not, and the performance by the Company of its obligations as set forth
in the Transaction Agreements and the Certificates of Designations and
the consummation of the transactions contemplated by the Transaction
Agreements will not, (i) violate any provision of the certificate of
incorporation or by-laws of the Company or the comparable
organizational documents of any of the Significant Subsidiaries, (ii)
give rise to any pre-emptive rights, rights of first refusal or other
similar rights on behalf of any Person under any applicable law or any
provision of the certificate of incorporation or by-laws of the
Company, or any agreement or instrument applicable to the Company and
identified to us in the Officer's Certificate, other than as described
in the Investment Agreement or the Schedules thereto, or (iii) conflict
with, contravene or result in a breach or violation of any of the terms
or provisions of, or constitute a default (with or without notice or
the passage of time) under, or result in or give rise to a right of
termination, cancellation, acceleration or modification of any right or
obligation under, or give rise to a right to put or to compel a tender
offer for outstanding securities of the Company or any of the
Significant Subsidiaries under, or require any consent, waiver or
approval under, any
D-3
Specified Agreements (as hereinafter defined), other than such as has
been obtained. As used herein, "Specified Agreements" shall mean those
notes, bonds, debt instruments, indentures, mortgages, deeds of trust,
leases, loan agreements, joint venture agreements, contracts and other
agreements and instruments to which the Company or any of the
Significant Subsidiaries is a party or by which the Company or any of
the Significant Subsidiaries or any property of the Company or any of
the Significant Subsidiaries is bound, in each case that has been
identified to us in the Officer's Certificate as being material to the
Company and the Significant Subsidiaries and which purports to address
obligations of the Company under the Transaction Agreements.
In rendering the foregoing opinion, we (i) have assumed the accuracy of
the statement in the Officer's Certificate as to the satisfaction of
the applicable requirements in Section 4.03(a) of the Indenture in
connection with the execution, delivery and performance of the
Transaction Agreements and the Certificates of Designations, and (ii)
call to your attention that the Indenture and the Credit Agreement
impose limitations on the declaration and payment of dividends and
other distributions on the capital stock of the Company, and on the
redemption, purchase, retirement, or other acquisition for value of any
shares of any class of the capital stock of the Company.
This opinion is being furnished to you in connection with the execution
and delivery of Transaction Agreements and is solely for your benefit. This
opinion may not be relied upon for any other purpose or by any other Person
without our prior written consent. This opinion is limited to the matters
expressly stated herein, and no other opinions may be implied or inferred. This
opinion is rendered as of the date hereof, and we make no undertaking to
supplement this opinion if, after the date hereof, facts or circumstances come
to our attention or changes in law occur that could affect the matters addressed
herein.
Yours very truly,
KING & ▇▇▇▇▇▇▇▇
▇-▇
EXHIBIT E
Form of Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Opinion
Opinion substantially to the effect that:
1. Investor is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware.
2. Investor has all requisite company power as a limited liability company and
authority to execute, deliver and perform its obligations under the
Agreement and the Registration Rights Agreement. The execution, delivery
and performance of the Agreement and the Registration Rights Agreement have
been duly authorized by all other necessary action on the part of Investor.
3. Each of the Agreement and the Registration Rights Agreement has been duly
executed and delivered by Investor and, assuming due execution and delivery
by each other party thereto, each such agreement constitutes a valid and
legally binding obligation of Investor enforceable against Investor in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity.
E-1
EXHIBIT F
Form of Escrow Agreement
F-1
EXHIBIT F
FORM OF
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT, dated as of the _________ day of _______________,
1999 (this "Agreement"), by and among MAGELLAN HEALTH SERVICES, INC., a
Delaware corporation (the "Company"); TPG MAGELLAN LLC, a Delaware limited
liability company (the "Investor"); and SUNTRUST BANK, ATLANTA, a Georgia
banking corporation, as escrow agent (the "Escrow Agent");
BACKGROUND
----------
A. The Company and the Investor have entered into an Investment
Agreement, dated as of July 19, 1999 (the "Investment Agreement"), pursuant
to which the Investor has agreed to purchase from the Company, and the
Company has agreed to issue and sell to the Investor, the shares of the
Company's capital stock referred to therein. The shares of the Company's
capital stock to be sold to the Investor pursuant to the Investment Agreement
include 16,362 shares (which number of shares is subject to adjustment as
described in the Investment Agreement) of the Company's Series B Cumulative
Convertible Preferred Stock, without par value (the "Series B Preferred
Stock"). Pursuant to the terms of the Investment Agreement, the issuance of
shares of Series B Preferred Stock to the Investor is dependent upon the
satisfaction of certain conditions set forth in the Investment Agreement.
B. Pursuant to the Investment Agreement, the Investor has agreed to
deposit the purchase price for the Series B Preferred Stock into escrow
pending the Company's issuance of such shares pursuant to the terms of the
Investment Agreement and the Company has agreed that such proceeds shall be
held in escrow pursuant to the terms of this Agreement.
C. The Escrow Agent is willing to act as escrow agent under this
Agreement and to hold and distribute the Escrow Fund in accordance with the
terms and conditions set forth herein.
AGREEMENT
---------
In consideration of the premises and the mutual promises and agreements
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. APPOINTMENT OF ESCROW AGENT. The Company and the Investor hereby
designate and appoint Escrow Agent to serve as escrow agent hereunder. The
Escrow Agent hereby confirms its
F-2
agreement to act as escrow agent under the specific terms, conditions and
provisions of this Agreement and no additional duties or obligations shall be
implied hereunder.
2. DEFINITIONS.
The Company, the Investor and the Escrow Agent are each referred
to herein as a "Party" and collectively as the "Parties." Capitalized terms
used but not otherwise defined in this Agreement shall have the meanings
ascribed to such terms in the Investment Agreement.
3. ESCROW FUND.
3.1 ESCROW FUND. Simultaneously with the execution of this Agreement,
the Investor has delivered to the Escrow Agent SIXTEEN MILLION
THREE HUNDRED SIXTY TWO THOUSAND FIVE HUNDRED DOLLARS
($16,362,500) by wire transfer of immediately available funds (the
"Escrow Fund"). The Escrow Agent shall invest the Escrow Fund as
instructed by the Company in writing from time to time in
[LIST OF PERMITTED INVESTMENTS SUBJECT TO DISCUSSION-- (a) direct
obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of
America or by any agency, instrumentality or sponsored corporation
thereof to the extent such obligations are rated at least A or the
equivalent thereof by Standard & Poor's Ratings Group ("S&P") or
at least A-2 or the equivalent thereof by ▇▇▇▇▇'▇ Investors
Service, Inc. ("Moody's"), in each case maturing within one year
from the date of acquisition thereof; (b) investments in
commercial paper maturing within 360 days from the date of
acquisition thereof and (i) having, at such date of acquisition, a
rating from S&P of A-1 or from Moody's of P-1 or (ii)
unconditionally guaranteed by any industrial or financial company
having, at such date of acquisition, (A) a short-term commercial
paper rating of at least A-1 or the equivalent thereof by S&P or
at least P-1 or the equivalent thereof by Moody's or (B) a
long-term debt rating of at least A or the equivalent thereof by
S&P or at least A2 or the equivalent thereof by Moody's; (c)
investments in certificates of deposit, banker's acceptances and
demand and time deposits maturing within one year from the date of
acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts or overnight bank deposits issued,
sponsored or offered by, any domestic office of any commercial
bank organized under the laws of the United States of America or
any State thereof that has a combined capital and surplus and
undivided profits of not less than $250,000,000; (d) repurchase
obligations with a term of not more than 92 days for, and secured
by, underlying securities of the types described in clauses (a)
through (c) above entered into with a bank meeting the
qualifications described in clause (c) above; or (e) readily
marketable direct obligations issued by any state of the United
States of America or any political subdivision thereof having one
of the two highest rating categories obtainable from either
Moody's or S&P, in each case maturing within one year from the
date of acquisition thereof, with the income and investment
earnings from such invested cash being held by the Escrow Agent as
part of the Escrow Fund. The
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Parties agree that the income from such invested cash shall be
recognized as income for federal, state and local tax purposes by
the entity that receives the income.
3.2 DISBURSEMENT OF THE ESCROW FUND. The Escrow Fund shall secure the
obligation of the Investor to consummate the purchase of shares of
the Series B Preferred Stock pursuant to the Investment Agreement
and the obligation of the Company to return the Escrow Fund in the
event that the shares of Series B Preferred Stock are not issued in
accordance with the Investment Agreement. Accordingly, the Escrow
Agent shall disburse the Escrow Fund (including any interest
income or investment earnings thereon) (i) to the Company by wire
transfer of immediately available funds to the Company's account
at First Union National Bank, ABA No. ▇▇▇▇▇▇▇▇▇, for credit to
Account No. 2080000077640, within one business day following
receipt of a notice signed by both the Company and the Investor
stating that one of the conditions to the issuance of the Series B
Preferred Stock set forth in the third sentence of Section 2.01(b)
of the Investment Agreement has been satisfied and that the
Company has issued such shares of Series B Preferred Stock to the
Investor or (ii) to the Investor by wire transfer of immediately
available funds to the Investor's account at __________________,
ABA No. __________________, for credit to Account No. ___________
within one business day following receipt of a notice signed by
both the Company and the Investor stating that the conditions for
the delivery of the Escrow Fund to the Company set forth in the
first sentence of Section 2.01(b) of the Investment Agreement have
not been satisfied and that, therefore, the Series B Preferred
Stock will not be issued to the Investor pursuant to the
Investment Agreement.
3.3 TERMINATION OF ESCROW FUND. The escrow provided for hereunder
shall terminate upon the disbursement of the Escrow Fund pursuant
to Section 3.2.
4. ESCROW AGENT.
4.1 DUTIES. In performing its duties under this Agreement or upon the
claimed failure to perform its duties hereunder, the Escrow Agent
shall have no liability except for the Escrow Agent's willful
misconduct or gross negligence. The Escrow Agent's sole
responsibility shall be for the safekeeping and disbursement of
the Escrow Fund in accordance with the terms of this Agreement.
The Escrow Agent shall have no implied duties or obligations and
shall not be charged with knowledge or notice of any fact or
circumstance not specifically set forth herein. The Escrow Agent
shall be entitled to rely upon and shall be protected in acting
upon any request, instructions, statement or other instrument, not
only as to its due execution, validity and effectiveness, but also
as to the truth and accurancy of any information contained therein,
which the Escrow Agent shall in good faith believe to be genuine,
to have been signed or presented by the person or parties
purporting to sign the same and to conform to the provisions of
this Agreement. In no event shall the Escrow Agent be liable for
incidental, indirect, special, consequential or punitive damages.
The
F-4
Escrow Agent shall not be obligated to take any legal action or to
commence any proceeding in connection with the Escrow Fund, any
account in which the Escrow Fund is deposited, this Agreement, or
to appear in, prosecute or defend any such legal action or
proceedings. The Escrow Agent may consult outside legal counsel
selected by it in the event of any dispute or question as to the
construction of any of the provisions hereof or of any other
agreement or of its duties hereunder, and shall incur no liability
and shall be fully protected from any liability whatsoever in
acting in accordance with the written opinion or instruction of
such counsel. The Company shall promptly pay, upon demand, the
reasonable fees and expenses of any such counsel. The Escrow Agent
shall have no obligations or responsibilities in connection with
the Investment Agreement, the transactions contemplated by the
Investment Agreement or any other agreement between the parties,
other than as set forth in this Agreement.
5. INDEMNIFICATION.
5.1 GENERALLY. From and at all times after the date of this Escrow
Agreement, the Company shall, to the fullest extent permitted by
law and to the extent provided herein, indemnify and hold harmless
the Escrow Agent and each director, officer, employee, attorney,
agent and affiliate of the Escrow Agent (collectively, the
"Indemnified Parties") against any and all actions, claims
(whether or not valid), losses, damages, liabilities, costs and
expenses of any kind or nature whatsoever (including, without
limitation, reasonable attorneys' fees, costs and expenses)
incurred by or asserted against any of the Indemnified Parties
from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way
relating to any claim, demand, suit, action or proceeding
(including any inquiry or investigation) by any person, whether
threatened or initiated, asserting a claim for any legal or
equitable remedy against any person under any statute or
regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or
otherwise, arising from or in connection with the negotiation,
preparation, execution, performance or failure of performance of
this Escrow Agreement or any transactions contemplated herein,
whether or not any such Indemnified Party is a party to any such
action, proceeding, suit or the target of any such inquiry or
investigation; PROVIDED, HOWEVER, that no Indemnified Party shall
have the right to be indemnified hereunder for any liability
finally determined by a court of competent jurisdiction, subject
to no further appeal, to have resulted solely from the gross
negligence or willful misconduct of such Indemnified Party. If any
such action or claim shall be brought or asserted against any
Indemnified Party, such Indemnified Party shall promptly notify
the Company in writing, and the Company shall assume the defense
thereof, including the employment of counsel and the payment of
all expenses. Such Indemnified Party shall, in its sole
discretion, have the right to employ separate counsel in any such
action and to participate in the defense thereof, and the fees and
expenses of such counsel shall be paid by such Indemnified Party
unless (i) the Company agrees to pay such fees and expenses, or
F-5
(ii) the Company shall fail to assume the defense of such action
or proceeding or shall fail, in the reasonable discretion of such
Indemnified Party, to employ counsel reasonably satisfactory to
the Indemnified Party in any such action or proceeding, or (iii)
the named parties to any such action or proceeding (including any
impleaded parties) include both the Indemnified Party and the
Company, and the Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to
it which are different from or additional to those available to
the Company. All such fees and expenses payable by the Company
pursuant to the foregoing sentence shall be paid from time to time
as incurred, both in advance of and after the final disposition
of such action or claim. All of the foregoing losses, damages,
costs and expenses of the Indemnified Parties shall be payable by
the Company upon demand by such Indemnified Party. The obligations
of the Company under this Section 5.1 shall survive any
termination of this Agreement and the resignation or removal of the
Escrow Agent.
The Parties agree that neither the payment by the Company of any
claim by the Escrow Agent for indemnification hereunder nor the disbursement
of any amounts to the Escrow Agent from the Escrow Fund in respect of a claim
by the Escrow Agent for the indemnification shall impair, limit, modify, or
affect, as between the Company and the Investor, the respective rights and
obligations of the Company, on the one hand, and the Investor, on the other
hand, under this Agreement. The Company and the Investor agree among
themselves that any obligation for indemnification under this Section 5.1
shall be borne by the Company unless the loss, damage, liability, cost or
expense against which the Escrow Agent is entitled to indemnification, was
caused by the gross negligence or willful misconduct of the Investor or by
actions taken by the Investor that constitute a breach of or default under
the Investment Agreement or the other Transaction Agreements, in which event
the Investor shall be responsible for such loss, damage, liability, cost or
expense, to the extent so caused by the Investor. The causation of any loss,
damage, liability, cost or expense shall be determined by mutual agreement,
arbitration (if both the Company and the Investor agree in writing to submit
the dispute to arbitration) or litigation.
5.2 DISPUTES. If, at any time, there shall exist any dispute between
the Company and the Investor with respect to the holding or
disposition of any portion of the Escrow Fund or any other
obligations of the Escrow Agent hereunder, or if at any time the
Escrow Agent is unable to determine, to the Escrow Agent's sole
satisfaction, the proper disposition of any portion of the Escrow
Fund or the Escrow Agent's proper actions with respect to its
obligations hereunder, or if the Company and the Investor have
not, within 30 days of the furnishing by the Escrow Agent of a
notice of resignation pursuant to Section 5.3 below, appointed a
successor escrow agent to act hereunder, then the Escrow Agent
may, in its sole discretion, take either or both of the following
actions:
(i) suspend the performance of any of its obligations under its
Agreement until such dispute or uncertainty shall be
resolved to the sole satisfaction of the
F-6
Escrow Agent or until a successor escrow agent shall have
been appointed (as the case may be);
(ii) petition (by means of an interpleader action or any other
appropriate method) any court of competent jurisdiction in
New York City, for instructions with respect to such
dispute or uncertainty, and pay into or deposit with such
court all disputed Escrow Funds held by it in the Escrow
Fund for holding and disposition in accordance with the
instructions of such court.
The Escrow Agent shall have no liability to the Company or the
Investor or any other person with respect to any such suspension of
performance or disbursement into court, specifically including any liability
that may arise, or be alleged to have arisen, out of or as a result of any
delay in the disbursement of funds held in the Escrow Fund or any delay in or
with respect to any other action required or requested of the Escrow Agent.
5.3 RESIGNATION OF ESCROW AGENT. The Escrow Agent may resign from the
performance of its duties hereunder at any time by giving ten
days' prior written notice to the Company and the Investor or may
be removed, with or without cause, by the Company and the
Investor, acting jointly, at any time by the giving of ten days'
prior written notice to the Escrow Agent. Such resignation or
removal shall take effect upon the appointment of a successor
escrow agent as provided herein. Upon any such notice of
resignation or removal, the Company and the Investor, acting
jointly, shall appoint a successor escrow agent hereunder, which
shall be a commercial bank, trust company or other financial
institution with a combined capital and surplus in excess of
$100,000,000. Upon the acceptance in writing of any appointment as
Escrow Agent hereunder by a successor escrow agent, such successor
escrow agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Escrow
Agent, and the retiring Escrow Agent shall be discharged from its
duties and obligations under its Escrow Agreement, but shall not be
discharged from any liability for actions taken as Escrow Agent
hereunder prior to such succession. After any retiring Escrow
Agent's resignation or removal, the provisions of this Escrow
Agreement shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Escrow Agent under this
Escrow Agreement.
5.4 RECEIPT. By its execution and delivery of this Agreement, the
Escrow Agent acknowledges receipt of the Escrow Fund.
5.5 FEES. The Company shall compensate the Escrow Agent for all its
services hereunder in accordance with SCHEDULE I attached hereto
and, in addition, shall reimburse the Escrow Agent for all of its
reasonable out-of-pocket expenses, including attorneys' fees,
travel expenses, telephone and facsimile transmission costs,
postage (including express mail and overnight delivery charges),
copying charges and the like. All of the compensation and
reimbursement obligations set forth in this
F-7
Section 5.5 shall be payable upon demand by the Escrow Agent and,
with respect to the Escrow Agent, shall be an obligation of the
Company. The obligations of the Company under this Section 5.5
shall survive any termination of this Agreement and the
resignation or removal of the Escrow Agent.
6. MISCELLANEOUS.
6.1 NOTICES. All notices, communications and deliveries hereunder
shall be made in writing signed by or on behalf of the party
making the same and shall be delivered personally or by telecopy
transmission or sent by registered or certified mail (return
receipt requested) or by any national overnight courier service
(with postage and other fees prepaid) as follows:
If to the Company Magellan Health Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Attn: General Counsel
Telephone No. 410/▇▇▇-▇▇▇▇
Facsimile No. 410/953-5215
EIN: 58-107693
with a copy (which shall not constitute notice) to:
King & Spalding
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone No. 404/▇▇▇-▇▇▇▇
Facsimile No. 404/572-5147
If to the Investor to: TPG Magellan LLC.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
Telephone No. 415/▇▇▇-▇▇▇▇
Facsimile No. 415/743-1501
EIN: _______________________
with a copy (which shall not constitute notice) to:
▇-▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Telephone No. 212/▇▇▇-▇▇▇▇
Facsimile No. 212/225-3999
To Escrow Agent: SunTrust Bank, Atlanta
Corporate Trust Department
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone No.: 404/▇▇▇-▇▇▇▇
Telecopy No.: 404/240-2030
or to such other representative or at such other address of a Party as such
Party hereto may furnish to the other Parties in writing. Any such notice,
communication or delivery shall be deemed given or made (a) on the date of
delivery if delivered in person (by courier service or otherwise), (b) upon
transmission by facsimile if successful transmission is confirmed by the
facsimile machine of the party sending the notice and if the transmission is
made during regular business hours, or if not, the next business day, (c) on
the fifth (5th) business day after it is mailed by registered or certified
mail, or(d) on the next day if sent for next day delivery to a domestic
address by a recognized overnight delivery service.
6.2 TIME OF THE ESSENCE; COMPUTATION OF TIME. Time is of the essence
for each and every provision of this Agreement. Whenever the last
day for the exercise of any privilege or the discharge of any duty
under this Agreement shall fall upon a Saturday, Sunday or any
date on which banks in Georgia are closed, the Party having such
privilege or duty may exercise such privilege or discharge such
duty on the next succeeding day which is a regular business day.
6.3 BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective
successors and assigns.
6.4 HEADINGS. The headings of the Sections of this Agreement are
inserted for reference purposes only and shall not affect the
meaning or interpretation of any provisions of this Agreement.
6.5 WAIVER. Any party may, at its option, waive in writing any or all
of the conditions herein contained to which its obligations
hereunder are subject. No waiver of any provision of this
Agreement, however, shall constitute a waiver of any other
provision (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
F-9
6.6 CONSTRUCTION. The provisions of this Agreement shall be construed
according to their fair meaning and neither for nor against any
party hereto irrespective of which Party caused such provisions to
be drafted. Each of the Parties acknowledge that it has been
represented by an attorney in connection with the preparation and
execution of this Agreement.
6.7 NO LIMITATION. The Parties agree that the rights and remedies of
any Party under this Agreement shall not operate to limit any
other rights and remedies otherwise available to any Party under
the Investment Agreement.
6.8 RELIANCE ON COUNSEL AND OTHER ADVISORS. Each Party has consulted
such legal, financial, technical or other expert as it deems
necessary or desirable before entering into this Agreement. Each
Party represents and warrants that it has read, knows, understands
and agrees with the terms and conditions of this Agreement. No
Party has relied upon any oral representation of any other Party
in entering into this Agreement.
6.9 COUNTERPARTS. This agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
6.10 SEVERABILITY. It is the desire and intent of the Parties hereto
that the provisions of this Agreement be enforced to the fullest
extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. Accordingly, if
any particular provision of this Agreement shall be adjudicated by
a court of competent jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the
remaining provisions of this Agreement or affecting the validity
or enforceability of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more
narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity
or enforceability of such provision in any other jurisdiction.
6.11 GOVERNING LAW AND CHOICE OF FORUM. THIS AGREEMENT WILL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE
OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK TO BE APPLIED. IN
FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE
▇-▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ WILL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S
CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF
SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
The Parties hereto agree that the appropriate and exclusive forum
for any disputes arising out of this Agreement shall be the United
States District court for the Southern District of New York, and,
if such court will not hear any such suit, the courts of the state
of the Company's incorporation, and the parties hereto irrevocably
consent to the exclusive jurisdiction of such courts, and agree to
comply with all requirements necessary to give such courts
jurisdiction. The Parties hereto further agree that the Parties
will not bring suite with respect to any dispute arising out of
this Agreement except as expressly set forth below for the
execution or enforcement of judgment, in any jurisdiction other
than the above specified courts. Each of the Parties hereto
irrevocably consents to the service of process in any action or
proceeding hereunder by the mailing of copies thereof by
registered or certified airmail, postage prepaid, to the address
specified in Section 6.1 hereof The foregoing shall not limit the
rights of any Party hereto to serve process in any other manner
permitted by the law or to obtain execution of judgment in any
other jurisdiction. The Parties further agree, to the extent
permitted by law, that final and unappealable judgment against any
of them in any action or proceeding contemplated above shall be
conclusive and may be enforced in any other jurisdiction within or
outside the United States by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the fact
and the amount of indebtedness. The Parties agree to waive any and
all rights that they may have to a jury trial with respect to
disputes arising out of this Agreement.
6.12 PURCHASE OF SECURITIES. The Escrow Agent and any stockholder,
director, officer or employee of the Escrow Agent may buy, sell,
and deal in any of the securities of the Company or the Investor
and become pecuniarily interested in any transaction in which the
Company or the Investor may be interested, and contract and lend
money to the Company or the Investor and otherwise act as fully
and freely as though it were not Escrow Agent under this
Agreement. Nothing herein shall preclude the Escrow Agent from
acting in any other capacity for the Company or the Investor or
for any other entity.
F-11
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the date first above written.
MAGELLAN HEALTH SERVICES, INC.
By:
------------------------------------
Name:
Title:
TPG MAGELLAN LLC
By:
------------------------------------
Name:
Title:
SUNTRUST BANK, ATLANTA
as Escrow Agent
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
F-12
SCHEDULE I
----------
MAGELLAN HEALTH SERVICES, INC.,
TPG MAGELLAN LLC, AND
SUNTRUST BANK, ATLANTA, AS ESCROW AGENT
ESCROW AGENT FEES
Annual Escrow Agent Fee: $3,000.00
The escrow agent fee for the term of this Escrow Agreement is due at signing.
Out of pocket expenses such as, but not limited to, postage, courier,
insurance, long distance telephone, stationery, travel, legal or accounting,
etc., will be billed at cost.
These fees do not include extraordinary services which will be priced
according to time and scope of duties.
It is acknowledged that the schedule of fees shown above are acceptable for
the services mutually agreed upon and the undersigned authorizes SunTrust
Bank, Atlanta to perform these services.
All escrow agent fees and expense reimbursements shall be paid by the Company.
F-13